Welcome to episode 175 of the Grow Your Independent Consulting Business Podcast. This is Melissa Lieberman. And today we're here to talk about how to quantify the value of your expertise. And we talk about this so often in terms of value based pricing. But today I want to focus this episode on how How to quantify the value of your expertise using a case study so you can really see it in practice.
Okay. So before we dive into the case study, I just wanted to first walk you through the agenda for today, which is first, we're going to talk about What I see to be the common challenges with value based pricing that so many consultants hit up against, and then we're just going to dive straight into this case study. You'll see why I'm telling you it's a really fascinating case study, here in a minute.
I'll give you a little teaser, so that you, stay tuned, stay tuned because the case study is really a different look at this than you might normally see. And then finally, I will wrap up the episode with, I'm going to share with you three specific questions that you want to be asking yourself so that you can enhance your sales and your pricing process to better elicit the Ultimate value of the outcomes you're delivering for your clients and your potential clients.
So that's what we're here for today. I'm excited for you to really hear this full case study and see how it applies to you and your business. But before we dive into the case study, I first want to touch on a companion resource that you can download that goes along perfectly with this episode, and it is the book that I released earlier this year, Grow Your Consulting Business, The 14 Step Roadmap to Make Your Independent Consulting Goals a Reality.
You can download the book for free at Consulting business book.com or melissa book.com for shorts and you'll find in chapter seven, it's fully dedicated to your consulting pricing so it goes perfectly as a compliment and companion to this episode. And you can go download that for free [email protected]. Of course, you can also buy the hard. Copy here on Amazon if you want the hard copy, which I always love having hard copies. My office is filled with books. Yours might be too.
Okay. So with that, let's talk about really just taking a step back and asking you if this sounds familiar or not. For so many consultants, one of the pushbacks that I often hear is, Melissa, I really want to move into value based pricing. I really want to disconnect pricing based off of the time that I'm spending working on, the clients and the client deliverables. But I just have a hard time quantifying the value of my expertise. Does that sound familiar to you?
Because If you're like many consultants, you may not be sure where to start as it relates to value based pricing. You might be worried that you're underpricing yourself and will get yourself into a situation where you are. Implementing value based pricing, but then you're actually making less money than you would had you charged by the hour. Another common worry is that you might build up a whole business case based on the value that you know the work that you do would be worth.
Result in for your client, but you're worried the client won't agree and it's going to be challenging to walk them through that whole process. And then finally, you might also be worried that even if you got to the place where you were able to quantify and build up the value, you're not sure how to justify it. So all of those worries might be swirling in your head plus a few more, but those are so common. And I love starting out this episode, just really normalizing.
The type of concerns that consultants commonly have, because likely you have some or all of those. And the first thing that's so important is you just knowing that you're not the only one who has a challenge with these types of concerns about value based pricing in this instance, but that we can start to overcome them by dissecting down each one of them. And really through this case study that I'm going to share with you here today.
So before we dive into the case study though, what I do want to point out to you, and this might be the scenario that you're in right now, is that most of the time, if you're facing some of those concerns that I just shared, like you just feel like you don't know where to start with value based pricing, or you don't know how to do it correctly, or you don't know how to sell it correctly, um, Oftentimes the fix that I hear, and you may be in the same boat, is
essentially to stick with some version of time based pricing, which quite frankly isn't necessarily a fix. It's an alternative of course, but it's not really the fix to the challenge. What I want to share with you today is a very detailed way of looking at value based pricing. So that you can start to unravel this and start applying some of these techniques in your business.
Now, whether that means you shift entirely from time based pricing to value based pricing, or whether you do that incrementally, maybe you just test it out on the next engagement. That's for example, more of a strategy type engagement versus an execution type engagement. Go pick starting point and apply what I'm about to share with you here today. Okay. So with that, now we're just going to dive straight into this case study.
And the reason why I'm telling you that it's a really unique way of looking at this that you might not have thought of before or heard of before is because I was actually working with a corporate client who engaged me as a consultant to help them hire The right consultant, if that makes sense. So I was hired, brought on for a project by my corporate clients who just engaged me for the sheer and sole purpose of helping them choose a consultant to work with.
And so why it's so fascinating is I got to see behind the scenes of the way they were thinking about The problem that they had, the way they thought they should solve the problem, and how they value the resolution of that problem, and what thought errors they had as they were thinking about the value of the work that they wanted to complete, and then ultimately how we redirected that and completely shifted their approach.
So that's why this is really exciting because I wasn't actually the consultant who ended up delivering the work. I didn't have the capacity for it. But what I did do is help them to select the consultants, which as an aside, this is a great, if you're running up against, if you've got clients and you've got too more demand than you can handle, like Abby was talking about on last week's episode, this can be a great solution as well for you to agree with the client that you'll help them.
through a paid engagement to choose the right provider and solution for them. And then ultimately you get to see behind the scenes of how a client thinks, how they choose who to work with, how they choose what kind of solution makes the most sense for them, and how they might be thinking about things in a way that doesn't necessarily get them to where they want to be.
So that's why this case study is, I think, really, so fascinating because we're able to really look behind the cover for example, for me, I wasn't the consultant they were choosing. So they were so much more transparent with me and so much more open about their concerns and objections and where they weren't fully sold on things. So that's why I'm so excited to share this with you here today. So with that, let's dive into this case study.
And I'll just share first, just the basics of the situation so that we're kind of all on the same page about what the scenario is here. So I had a corporate client who hired me, engaged me as a consultant to help them find a solution to the problem that they were facing. And here is what the problem was. they're a mid-size company.
They had recently uncovered a series of problems with the way they were charging their own clients, their end customers, and realized that they had been leaving a lot of revenue on the table. not only that, but this problem had happened previously a year or so, earlier, and they thought they had fixed it. So they had encountered this problem where they weren't charging their clients the correct amount.
Of course they were undercharging their clients because if they're overcharging their clients, their clients would have said something most likely. So they were undercharging their clients. The clients didn't say anything, whether they knew and didn't say anything or just didn't even know. It's kind of a complex scenario of way the charges are calculated in this particular business. And, so they were a year or so ago, they noticed a problem. They thought they had it resolved.
They went through all the change that was required to let their customers know there had been a problem. They weren't going to retroactively charge. They were just going to fix it moving forward. And, And so then for maybe six or eight months, they were operating, thinking everything was working correctly when it wasn't. And so now they're at the second spot where they realize they have a revenue leak and it's bigger than what they imagined.
And they were really at a crossroads to figure out what to do about this. They knew they needed to hire someone to help them solve this problem because of capacity in some, um, Respects and because lacking skills in another sense, they were not hitting the mark, the current staff. So this particular client engaged me to help them figure out what type of expert they needed to bring on to fix this problem for them. So hopefully that sets the stage for you. this is what the case study is about.
And so as I started, peeling back the onion here, peeling back the layers to understand the problem at a greater detail and what they thought the solution should be, what I started to uncover is that they had figured out the issue. They had figured out the issue of what had caused the erroneous billing.
They had even started putting in some fixes to not do, make that mistake moving forward, but they hadn't really figured out the full root cause, whether it was software related or process related or both. And quite frankly, They felt pretty confident that they had found the only problem, but I knew from, that the fact that this was the second round of this problem, that that was probably not the case.
There were probably other opportunities for them lingering in their operation, given the right expert coming in could figure out what those are and be able to help them even beyond this, initial set of fixes that they needed to make. So as we started off this engagement, the engagement, which was to find a consultant or someone That wasn't a stopgap like I was to help them choose a consultant.
what I started really understanding from them is the problem, but also what they thought the solution was. And their concept of the solution was they knew they needed to have someone to clean up their back office operations. Manage some of the client changes moving forward.
So again, their end clients, those, customers that that company had, and help through change management of, yet another change to billing, for example, and they realized that they needed someone that was really flexible and figuring out all of the different nuances to their billing and make sure that everything was, being done properly, being calculated properly, any software changes that needed to be identified were identified and, um, into the software roadmap, those kinds of things.
So as we were talking through it, their initial solution was really, came down to In their mind, just someone who is well versed in pricing, in well versed in systems that calculate, consumer, bills and invoices. and because they felt like they had such a good handle on that, they had quote, unquote, found the last person. situation.
They felt that they could find a generalist who really understood pricing and dynamic pricing in this type of business that could come in and really learn their systems and provide some oversight, provide some advisory type work to their existing team and help the existing team to learn what they needed to learn to be more effective and not make the mistakes.
But what I saw when I was really looking at their problem is that they would be most served by bringing on a fractional COO, someone who's an expert who could look at their systems holistically and who could Really roll up their sleeves and do some of this work, but also uncover other problems that this particular, company hadn't identified yet. They were kidding themselves that they had found the last problem and all they needed was someone to come in and clean up the issues.
And so as we started digging into this and I made my recommendation to this client, I said, look, I know that you're thinking you need, maybe it was probably a bookkeeper type of a resource or maybe a staff accountant type of a resource that had some experience with dynamic type pricing that could come in and clean up the latest problem, I'll say that they had gotten covered and that could help the team operate moving forward.
I said, I hear that that's what you think you need, but really what I see is that you need a fractional COO who can look at this full picture, who's got dynamic pricing experience, but can also look at this full picture and uncover other opportunities for you. that you've most likely overlooked. And this can be a really challenging thing to sell because you're selling to someone or, to your own end client, a problem that we don't yet know exists.
And so as they were thinking about the recommendations that I was making, which to be honest with you, in some respects were a little bit easier to make because they knew that I wasn't the one going to be doing the work moving forward, that I was just recommending to them. what the best solution would be for their own, challenges, they were really hesitant and resistant at first. They were thinking, you know what, I don't need to spend this amount of money.
I don't want to bring on a quote unquote, expensive fractional COO, because really at the end of the day, spending that amount of money isn't going to make sense. We could get by with a staff accountant. Or maybe even a bookkeeper that's got the right type of corporate experience to solve this problem.
And so that's where it got really fun for me because I got to really work with them and figure out how do we get them over the hump how do I help them to see that the ultimate value of what it is that they want to buy can be so much greater if they look at this problem from a completely opposite perspective. And here's what I mean by that. They were thinking that whomever they brought on or, or whatever company they brought on as a consultant would be a cost to them.
So when they were thinking about it, they were thinking, well, I can get by with paying two grand a month, three grand a month, maybe for a staff accountant type of a part time staff accountant type of a consultant who can come in, clean up all the transactions. And problem isn't going to cost me any more than it already had. That was their way of thinking, right? They're thinking to themselves, this problem has already cost millions and millions, if not multiple millions of dollars.
And so they don't want to throw any more money at the problem because it's already cost them so much money. And so their thought was, how can I fix this in the cheapest way possible? possible. That was their thinking. And for you, sometimes your clients may be thinking the same type of thing, especially if you're not in a position, which I wasn't either. we didn't have a tangible, you know what, I know that this problem exists for sure. And also likely these other three or four problems exist.
I just had a very strong inkling, let's say. That they did have those problems, but I had nothing to put my finger on because no one had done the work yet. And so that may be something that you're facing as well as you're selling consulting work to your clients. What you are selling them is In a lot of times is an outcome that you figuring out what the outcome is as you go versus knowing up front. And so sometimes you're battling against a very tangible outcome.
Like in this example, their tangible outcome was let's hire a staff accountant or even bookkeeper, keep the cost to a minimum, go solve the problem that we had, with a thought error that it's the last problem. Everything just needs to be cleaned up. so they're thinking maybe two to three grand a month, this is going to cost us until we get it cleaned up and then we'll be back on the right track.
And what I said to them and showed to them is that they were thinking about the cost and focused on the cost and the compounding cost of the problem itself and not thinking ahead to the benefit, not thinking about the ROI when they're thinking about the type of resource. consultant or expert to bring on.
And so I started going down the path with them of, listen, the first part of this process was, do you agree that it's possible that there are other issues out there that you haven't yet recognized? And I say that to you because we've already gone down this road two times where you think the problem is fully known, um, Fully understood and that all that needs to happen is cleanup and you've been wrong two times now.
And so is it possible that there are more opportunities out there, more errors out there, more challenges out there, both by way of fixing things, but also upside that you haven't yet considered because you don't have the right expertise. or talent in your current team. And so they begrudgingly agreed that that was, probably more likely than not as we were talking through it.
And so from that vantage point, what then it opened up for me to start helping them to calculate was, okay, let's look at this in a few different buckets. Let's quantify the potential value of further unrecognized errors. And of course, that's a challenging thing to calculate, right? So you just have to make some educated guesses. So for example, we, we took the last two instances that they had experienced, the errors that they had experienced, and looked at the ultimate impact of those errors.
And then we just made a guess, it could be that those errors, that there could be another third error lurking out there or four or five more errors lurking out there that are worth, in this example, we quantified them back of the envelope type math of hundreds of thousands of dollars of potential unrecognized errors. That they hadn't yet found. So that was the first part of the business case. Then we moved on to really thinking about the value add of further optimization.
So now if we move away from the errors that they were wanting to fix and thinking about, if you bring in an expert who's a fractional COO, as opposed to bringing on, a staff accountant or even bookkeeper, what further optimizations are possible for you and your business process. And as we dug into I was just working with them on what could they be and, what kinds of optimizations have they, experienced in the past?
What do they already know are available optimizations out there that they haven't yet had time or capacity to implement? And I layered on my own experience in this particular situation to suggest optimizations that they hadn't yet considered. And then we got into the millions of dollars in terms of value add I wasn't going down the path of. It should be a staff accountant or a fractional COO at this point.
I was just going down the path of if you uncover additional unrecognized errors, that's worth hundreds of thousands of dollars, if not millions to your business. And then we've got upside in terms of additional value add through further optimization, that's worth hundreds of thousands, if not millions of dollars. And if we add all of that together, Then we've got a business case that's likely, in this example, it was over 50 million of upside to this particular organization.
So now they're looking at really an apple and an orange instead of really two apples, right? When we first started this conversation, it was almost as if they were comparing two apples. The apple of a staff accountant or bookkeeper to an Apple of a fractional COO. And of course they would want the cheaper Apple. But when we were able to parse these things out, which is their solution, which was really putting a Band Aid on the problem was the Apple.
And the orange was, let's look at optimizing this and finding the upside that you haven't yet, been able to, implement because of lack of capacity and lack of expertise. Let's look at high likelihood of potential further unrecognized errors. Then we get into a business case that's bringing on this type of resource is worth multiple millions of dollars. And so then when you come down to the fact of, should I choose an apple or an orange?
They know that choosing the orange is ultimately the best business case for them by far. And attaching a cost of 20K or 30K per month for a fractional COO becomes a no brainer. So you see in this example, where Selling a fractional COO at a 20k or 30k per month price tag is so much more attractive than selling a 2k or 3k per month fractional staff accountant or bookkeeper. One is much more expensive than the other. But the value is so much higher that it becomes a no brainer.
And so that's what I want to share with you here today is this concept of really thinking about if you take yourself out of the equation, and you don't have the benefit that I did most of the time of, really being hired to go find another consultant, obviously. So you can't. Fully take yourself out of the equation, but do it as much as you can. Borrow my example, think of yourself as kind of two consultants, one, which is helping them to really figure out what the best option is for themselves.
What the best solution is. Think about what they might be considering as the alternative and why that, that might be centered around a lot of thought errors where they're thinking about, Contain the cost because it's already cost me so much money. I don't want to pay so much more versus really looking at the return on investment and the upside and the benefit that you get from hiring someone like you who has the level of expertise that you have.
So as we pull this episode together and you're thinking about. Implementing or optimizing your own value based pricing structure.
Think about it in the sense of you as two separate consultants, one who is walking them through the process to choose a solution that works best for them, and helping them to see that they're in the way that they're choosing that consultant might be more about cost containment versus upside and what questions that you might ask them to really help them to quantify the upside so that it then it becomes a no brainer to engage you and your expertise. So thank you.
That's the case study that I have for you think about how this applies to you and your business. And as we wrap up this episode, I want to give you those three questions that I promise you to help you think about your own sales process and how you either initially embed or further optimize value based pricing in this way. So the three questions are, how could your potential clients be looking at what you provide as a cost, as opposed to a benefit?
Number two, in what ways could you help your ideal clients recognize and quantify the impact of your services? And then number three, how is engaging you a no brainer for your ideal clients? Really thinking about that at a high level, I would suggest really thinking about it in two different ways.
Think about it as your the context of your sales cycle and your standard process for selling your consulting services and the questions you're asking as you're qualifying clients and the questions you're asking during the discovery process and the way that you're presenting your proposal and dialoguing with the client around all of that. And then Also apply that. So we're applying that at a high level for your process.
And then specifically with each individual sales opportunity that you have, go back and ask yourself these specific questions that I shared with you. And we'll also put those specific questions in the show notes. So you can click on the link, wherever you're listening to this podcast to go to the show notes and you'll have those questions there as well. And then finally, as we're wrapping up, listen, hire your own expert.
Be a consumer of the things that you are selling, the concepts that you are selling. And by that, I mean, you're not an expert most likely in lead generation or sales. You're not an expert yet in how to value based price your work. And so I strongly encourage you to hire your own expert, just like you would encourage your clients to hire an expert. And if you think that I might be the expert for you, contact me. Then reach out and we can schedule a call.
You can find a time on my calendar at consultmelissa. com. Apply for an exploratory call and then we'll have a call. I'll ask you a lot of questions to get a good sense of what your goals are. If I believe we would be a good fit. We'll talk about what coaching would look like, and you can decide if you agree it would be a good fit. And if it's not a good fit, I'll give you a recommendation on what might be the next best step for you.
and if I'm not the right expert for you, then go find one who is. Find yourself an expert, just like you encourage your own clients to find experts. It will also help you to really think about, The buying process from the opposite angle. Like I was just sharing with you today, how to be your own client so that you can continuously improve. All right. Thank you for tuning in today and I will see you again next week. Take care.