102 ◾ Odyssey—The Business of Consulting
Sales and Marketing Profitability
Money spent on sales and marketing is often perceived as a cost. The reality
is that sales and marketing is an investment, and as such, you need to know
the impact not just on revenues but on profits.
A proven sales and marketing investment is the delivery of well-thought
out, well-organized, and well-executed Executive Briefings.
In a small consulting practice, it is relatively easy to track spending to
arrive at that ROI figure. For example, you can measure the direct costs
involved in organizing four Executive Briefings per year, which will involve
targeting some 300 Ideal Clients or prospects in your locality. The key ques-
tions then are all about your markets:
◾ What markets do you need to exit?
◾ What market research is required to identify your Ideal Clients?
◾ What markets should you enter immediately?
Portfolio of Solutions Profitability
When your product, service, or solution has annuity, it can then yield and
be measured for its own profit contribution. If you have several products
in your portfolio of solutions—training programs, assessment tools and so
on—each will yield its own profit margin. You can then apply an ROI for-
mula to each one.
Average consultants often tend to fall in love with particular solutions.
This can be a significant factor in keeping them in the mediocre perfor-
mance category. It is important to note that many consultants at Levels 1
and 2 may have established solution–annuity relationships with clients; for
example, regular purchases of assessment tools for the HR department. A
thorough assessment of the profitability contribution of each of your solu-
tions can help free you up to join the top 5% to 10% of consultant earners.
A consultant commented, “I didn’t raise the prices of the assessment tools
I provide for three years. Now I have to condition my client for sticker shock
this year. This is going to take a lot of my time because the organization
requires three sign-offs. In retrospect I might have built in a cost escalator
into the first agreement. I also need to find support; we have a high volume
of assessment orders which is taking away from my valuable time.”
Remember, your most valuable asset is your time plus your expertise
(merged to become your earning capacity), so be sure to include the costs of
The Business Behind Consulting ◾ 103
your own time in supporting and administering your portfolio of solutions,
including the cost of developing new solutions.
◾ Which of your services are low profit generators?
◾ How are you managing solution annuity relationships to minimize your
time commitment?
◾ How can you double or triple your charge-out rates for your premium
solutions?
◾ How are you evaluating new solutions?
Niche Market Profitability
Niche marketing for the Odyssey Consultant allows you to identify and work
with your Ideal Clients more easily and more often. Some markets just do
not fit, or will not pay the kind of fees you need to reach the top echelons
of consulting.
One of the major reasons average consultants stay average is because
they work in the wrong markets, where it is difficult for a small consult-
ing firm to maximize its positioning and to charge the value-based fees it
deserves.
As you change your psychological paradigm, examine your most and
least profitable markets more closely. Are they profitable? Are they fun?
Are they both profitable and fun? Keep the sunk cost fallacy in mind. Just
because you have already put resources into an area where they cannot
yield a good return, that should not stop you from changing your meth-
odologies and diverting your efforts to areas where the potential return is
greater.
◾ Are there markets that you could nurture within a stone’s throw of your
home or office?
◾ Are you clinging to markets that no longer yield high returns?
It may be helpful to engage a marketing expert to assist in the research
and segmentation of market opportunities. For example, one consultant
recognised that new CEOs are acutely aware of the need for executive
bench strength to execute strategic initiatives. He therefore commissioned
research to discover all new CEO appointments to companies in the
$25million category to offer leadership development and coaching services
to thoseCEOs.
104 ◾ Odyssey—The Business of Consulting
Setting Client Fees and Value Billing
Why is it that one consultant can generate fees of $95,000 per annum,
another can generate $250,000, another $500,000, and yet another $1 million
plus? Breaking out of old ways of thinking and conventional ways of doing
business is the key.
There are two steps in moving into the top echelons of consulting. First,
you need to make the decision to become totally committed to achieving
this objective. Second, ask yourself the basic question, Has anybody ever
done this before? If the answer is yes, then you must learn how they did
it and copy the principles and best practices they have used, adding your
own nuances. That process is a Level 3 Trusted Advisor leap; it is the grand
paradigm shift that captures the essence of the Odyssey process. The long
list of consultants who have gone through the Odyssey process and applied
these principles to their lives, and their businesses are living proof that this
process works.
Your primary objective with regard to fees is to achieve value-based bill-
ing compiled on the worth of the talent you deliver.
The core challenge at this juncture centers on your ability to demonstrate
to your client that the higher fees you charge are a drop in the ocean com-
pared with the value-added results you can bring. Your overarching objec-
tive is to show that your consulting contribution will make or save five, ten,
or twenty times your cost to the client. Bringing clarity and meaning to the
implication and outcome of a successful execution and implementation is
where the full Odyssey process converges. Truly, it is hand, head, heart, and
soul consulting. Nowhere does consulting embody the spirit of entrepre-
neurship and service more than at this point.
To stand firm on your fees, it is important to know the worth of the tal-
ent that you deliver. When you say, “My fees are easily justified,” you have to
know what “easily justified” looks like, and you do this by focusing on the
metrics questions throughout the M1 conversation as well as in any further
interactions with the client. We will look at this issue more closely when we
discuss the talent-driven consulting model.
“Back from the result” thinking involves bringing absolute clarity and
focus to the outcome that you will deliver to the client as a result of your
talent. The test of how well you have done comes when you discuss fees.
If the client says, “I can get it cheaper,” then you have done your job badly.
Following the Odyssey Arrow process builds incremental value in the mind
of the client and offsets the client’s bargaining chip of “getting it cheaper.”
The Business Behind Consulting ◾ 105
The correct application of the Odyssey Arrow eliminates fee negotiations
further along the process, while allowing you ample opportunity to demon-
strate talent and define value.
It seems counterintuitive, but when you do not charge enough, people
tend not to believe you. Imagine going to two heart surgeons for the most
important operation of your life. The first says that he will do the job for
$100. The second surgeon says it will cost $5,000.
Would you risk open-heart surgery for $100? Would you be suspicious
about the credentials of this surgeon? Credibility comes from the Latin
word credo, which means to believe. What you will find is that when the
price is higher, the client will tend not to negotiate. In fact, the number
one reason consultants lose business is that they do not believe in their
own numbers and abilities, and they betray this lack of conviction to the
client.
When you buy something cheap, you tend to treat it with less respect.
When you invest a large amount of money on something, its perceived value
grows exponentially, and you treat it with great care and respect.
A second point: Suppose by working through the metrics of a project you
have demonstrated to your client that it will save them $500,000. The client
then asks, “How much are you going to charge for this?”
If you respond by saying “$800 per day,” you have immediately weak-
ened your credibility by breaking the link between your talent and its value
to the client. By relating your fee directly to your value to the client, you are
creating an unassailable argument in your favor.
Consider this story. A machine in a factory produces $250,000 of goods
every day. Then one day, the machine breaks down. The factory owner
calls in the supervisors, the mechanics, and the engineers, but nobody can
set it working again. Then they call Joe, an external consultant, a Master
Practitioner in the area.
Joe comes in, asks many pertinent questions, and examines the machine
meticulously. Finally, he takes a piece of chalk from his pocket, goes over to
a pipe, and makes a mark. He calls down the engineer and says, “Drill here.”
They drill there, let out some air, then seal the pipe back up and hit the
start button. The machine starts working again, perfectly.
The factory owner is delighted. “Thank you, Joe, now what is your fee?”
“Fifty thousand dollars,” Joe replies, and the factory owner says, “Joe,
you’ve only been here for half an hour, that’s a mighty large fee!”
“Yes,” says Joe. “It’s $1 for the chalk and $49,999 to know where to put
the chalk mark.”
106 ◾ Odyssey—The Business of Consulting
Joe’s value is based not on the time he spent fixing the problem but on
the value that he contributed to the organization. When this is pointed out
to the factory owner, he does not hesitate. The bill is paid, and the owner
saves $200,000 with Joe’s intervention.
Four Basic Categories of Fee Setting
Time
I was reviewing a proposal with a colleague recently. It looked great. It was
really well put together and focused on diagnosis and collaboration with the
client to identify solutions. However, at the end, it had the following state-
ment: “This project will require 20 days at $800 per day.”
My heart sank. In charging $16,000, he was leaving about $40,000 on the
table. Charging an hourly or a daily rate for short-term assignments is the
standard course of action in the business. This is not what Odyssey consul-
tants do. Do not follow the crowd. Be different.
Fixed Fee
Clients rightly fear the time-based approach to fee setting, particularly for
longer-term assignments because of the risk that they will remain open ended,
leading to spiraling costs. In a fixed fee arrangement of course, the risk is
wholly transferred to you, the consultant. With an Odyssey mind-set, you will
ensure that the fixed fee is in line with your talent and the value you deliver.
Retainer
In this model, you agree on a retainer fee and remain on call to the client
throughout the contracted period. This kind of arrangement can work out
very well, depending on the nature of the relationship and the form of client
engagement. It is important to define client expectations, your deliverables,
and the scope of work included in the retainer agreement.
Contingency Fees
These fall into the “no results, no fee” category. They are unprofessional and
should never be considered by an Odyssey consultant. Imagine suggesting
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