It’s the moment you always dread. Up to this point, the presentation’s been going well—the potential clients loved the demo and nodded quietly to each other during your PowerPoint. Even the CFO seems to be impressed with your client list. What you’re proposing seems a perfect match for their needs.
Then they get to the last page of your presentation and see what it’s going to cost. Suddenly the room gets very quiet, and everyone’s eyes turn to see how the CFO reacts. The CFO’s smile is gone. Tension seeps into the room.
Here is where many consultants make a mistake. They naturally assume that the would-be client’s CFO is bowled over by the proposed cost. It’s a reasonable assumption, but as they say in Porgy and Bess, it ain’t necessarily so. Believe it or not, it’s not generally the stark figure you present that causes the problem.
To understand why this is so, you need to know the difference between sticker shock and Rusher’s Gap.
Everyone understands the concept of sticker shock. It’s what happens when you go into a car dealership and see how much a Navigator or a Jaguar is going to cost you. If you really want the car, that initial blow when you see the price tag can take your breath away.
Clearly, this can happen when you bid on certain projects. The client loves your proposal, likes your references, and wants to work with you. That makes it all the more difficult when the client sees the price tag.
Sometimes, the price tag is so clearly out of a company’s budget range that there’s nothing more to say. However, I’d venture to guess that isn’t usually the case. Generally, a CFO or (particularly) an IT executive has done enough outsourcing to have a decent feel for how much a project costs.
That’s where Rusher’s Gap comes in.
Rusher’s Gap is named for the former magazine publisher William Rusher. It’s easiest to explain the concept behind it with an example.
Suppose you want to build an in-ground pool on your property. You call a contractor out, and he submits an estimate of $35,000 for the entire project. You look at the estimate, and you say to yourself, “I’ve been around the block before, and I know how these things work. If he says it’s going to cost $35,000, I know it’s going to cost $50,000.”
Therefore, you budget $50,000 for the project and tell the contractor to go ahead.
When the pool is finished, you get a bill for $62,000.
Rusher’s Gap is the difference between the extra amount you figured it would cost and what it actually did cost. In this case, Rusher’s Gap would be $12,000.
Why it matters
Besides being a clever way to explain that things always cost more than you had thought they would, Rusher’s Gap also helps explain a common mistake made by consultants.
Let’s go back to that presentation you were making, where the CFO turns to the last page of your proposal and sees the project cost. At that point, a lot of consultants spend time explaining why the project is that expensive and how they could reduce the cost by taking out some “bells and whistles” and marginal functionality.
Those consultants are assuming that the CFO is suffering from sticker shock, but in fact, the CFO may be pondering Rusher’s Gap. The CFO is probably thinking: if my consultant says it will cost x, then it will actually cost 1.4*x, and then some.
It’s the “and then some” that will kill you every time. If the CFO is wondering how big Rusher’s Gap is going to be, then your arguments about cutting costs just aren’t going to work.
What should you do?
If you’re dealing with a situation involving Rusher’s Gap and not sticker shock, your approach should be different. Rather than spending your time defending the cost you quoted or speculating how you can save money at the margins by cutting out features, what you need to do is convince the would-be client that the number you quoted, no matter how high, isn’t going to go significantly higher.
In other words, instead of trying to defend x, you need to explain why it’s going to cost x, and not 1.4*x, and then some.
How do you do that? Well, here are some suggestions (and there are plenty more):
- Make sure that your numbers are right before you walk into the room.
- Provide milestones on the project path that break down the expenses by project phase.
- Perhaps most importantly, provide references that can attest to your firm’s ability to accurately forecast project costs.
Of course, projects often change over the course of design and implementation, and you can’t accurately predict the exact cost of every feature. But by realizing that you’re confronted by Rusher’s Gap and not simple sticker shock, you’ve got a fighting chance to close the deal.
Bob Artner is vice president for content at TechRepublic.Are your potential clients suffering from Rusher’s Gap? What do you do to soften the blow of a big sticker price? Give us your thoughts by posting a comment below. If you have an idea for an article, send us an e-mail.