IT Employment

Help prospective clients justify hiring you

When a consulting prospect wants to hire you for a job but knows he'll receive resistance from upper management, here are three things you can do to help seal the deal.

 

After trading emails with a CIO (we'll call him Fred), he calls you to discuss a project. The technology is right up your alley -- in fact, you can't think of a better qualified person for the job than yourself. You discuss the technical options for a while, asking a few questions that Fred had never even considered and offering some possible answers. Fred is unmistakably impressed -- you can almost hear him drooling on the other end of the line as he anticipates getting you involved. He asks, "So, what do we need to do next?"

"I'll send you my standard contract. As soon as I get that back from you, we can start." Then you tell him your consulting fee.

Fred's giddiness gives way to a sudden silence.

"Oh," he replies at last. "Uh, I'll have to get back to you on that."

If at this point you reply, "Okay, talk to you later," you won't speak to Fred again. Obviously, your prospect is suffering from sticker shock, so what should you do? You definitely don't want to offer to lower your rate. But does that mean either letting Fred get over it on his own or kissing him goodbye?

Sometimes when consultants encounter a new prospect, we think of them as monothelemic (okay, that's such an obscure word that not even Google can help you -- it means "having one will"). In other words, the initial contact person represents the entire company in our eyes; so if price is an issue, we tend to assume that everyone in the company has the same mindset. But it ain't necessarily so.

I often find that Fred still wants you to work on the project, but he knows that he's going to face a ton of resistance from his boss and the budget office over bringing in a "high-priced consultant," especially during these uncertain economic times. Fred can already hear the CEO's reaction: "You know we lost almost a million last quarter and prospects for this quarter don't look any better. Why can't you get one of the interns to work on it in his spare time? You know, 'do more with less.'"

Fred knows that handing off the project to an intern would be disastrous. Nobody in the organization, including himself, would have a clue as to where to begin. He knows that you're the right person for the project, but how can he justify it to the rest of the organization? You need to give him a better reason than "because I'm worth it." Here are three approaches that all basically come down to one thing: money.

Three tips for getting the consulting job

The strongest argument you can make is that hiring you will actually save them money. Fred may have only a vague idea about why you're right for the job -- something along the lines of "he really knows his stuff and we don't." You need to crystallize that into "because he knows his stuff, this project will get done right and in a timely fashion." Back that up with some client success stories and references. Contrast it with the general state of industry-wide knowledge in this field, and paint a vivid picture of the many false starts and permanent mistakes that will likely result from trying to wing it by Google and error. The more you can boil that down to hard bottom-line numbers, the better. "I know a company that attempted something similar without the proper background knowledge -- they spent five million dollars over three years and eventually had to scrap the project entirely."

Second, try to ground the shock of that sticker. Remind the prospect that you won't be an employee, relieving the client of the costs of health insurance, retirement, disability, workers comp, paid vacations, sick leave, and a ton of overhead. They can scale your monthly activities to meet their budget, and they can drop you at their whim without severance. You provide all your own training, equipment, software, and office expenses. Unlike an employee, you only bill for time in which you're actually working. When you figure in all of those factors, your rate is effectively about half the same hourly rate for an employee, if that much.

Third, you don't have to do all the work. It wouldn't make sense for the client to pay your consulting rate for typing "public static YetAnotherFrakkinClass yetAnotherFrakkinClassFactory()" all day long for months; some lesser code deity could occupy themselves with that task. Offer to take one or more of their employees under your wing to mentor. This will not only allow them to achieve part of the project at a lower rate, but it can also yield huge long-term benefits in employee productivity and job satisfaction. You'll be focusing your attention on making sure the design is right (hint: ditch most of those factories) and that the employees know how to implement it correctly. That's worth every penny they pay you.

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About

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

14 comments
Harry.Hiles
Harry.Hiles

An hourly rate alone is not shocking as long as it's reasonable. The shock comes from the unknown number of hours involved in the project. It might be that Fred is multiplying your rate times a huge number of hours and coming up with a shockingly high price. Quite a few clients these days are asking for fixed price quotes as a way to better predict and manage project costs. However, this has the affect of shifting the risk of cost overruns to the consultant. To mitigate this risk, consider a 2-part proposal process. Part one is a short (1-2 week) study phase to discover all you can about the project scope, risks and constraints. This first part can easily be done for a fixed price. The outcome of part one is a well-defined statement of work or project charter and plan with a fairly accurate fixed price estimate for the actual project work. The SOW or project plan should define how to manage changes to the project scope and cost, identify key project team members like the executive sponsor, and give you a good feel for the probability of successful project completion. It might be easier for the client to justify a small discovery project that gives them an opportunity to make an informed decision before going forward with the project.

hong3971
hong3971

First of all, what's the idea with using that big word? We're in IT, ya know... :-) Secondly, er, it's NOT 'monothelemic' (and Google was able to point that out), it is 'monotheletic'. But! Thanks for a perfectly grandiose word I can use to beat over my peers' head next time I get cornered by some project issue I have no clue about.

PMPsicle
PMPsicle

NOT! I've been doing a lot of copywriting lately. One of the things you need to do in static sales (i.e. copywriting sales letters) is to brainstorm the possible objections to buying. Then determine a technique to overcome the objection. You then lay out the letter in a fairly predictable way ... Hook, problem, story, solution, objection, response, social proof, call to action. In reality, personal sales is no different. The problem is that most of us are so uncomfortable doing it, that we barely bother to do any work at it. Combine that with the fact that much of our sales is a variation on the job interview and we have some heavy influence against doing the most important part of the sales process. And that just won't cut it. We really, really need to spend time predicting objections and then incorporating our techniques for overcoming them into our sales pitch. Then we need to remember to give our sales pitch while answering the interview questions. So kudos once again Chip for asking questions that we, as independent consultants, need to answer about our own business. Glen Ford, PMP http://www.trainingnow.ca http://apps.learningcreators.com/blog

ahakman
ahakman

Obviously fees during these times are a touchy subject when dealing with a new customer, but just starting out in consulting, how does one best determine the fee?

reisen55
reisen55

Raymond Eisenhardt & Son was a packaging consulting company that worked for domestic and international firms bringing in an outside view to internal packaging solutions. Our concept was that we would not compete with internal staff and support, but a two year venture augment and compliment their own considerable expertise. As an outsider now myself, I remember this argument and it is effective when and where it can be used. Outside consultants are non-biased and carry no extra costs such as health care and employment documentation expense.

Sterling chip Camden
Sterling chip Camden

... came from my wife. I don't know, I think she wants more money or something.

thomas_w_bowman
thomas_w_bowman

To survive even a Fixed bid for an investigation phase, scope must be defined very clearly in advance - " out of scope " ideas and specs must be able to be 'put aside' to be dealt with at an Hourly Rate... Most clients I've worked with understand this and also know that I WILL document scope and scope creep - and not take it on 'for free'. They also know that I can 'phase' various components of scope creep to asssure that they can stop at some point and use what they have until they are comfortable that the added scope has a reasonable payback.

Sterling chip Camden
Sterling chip Camden

I think either form works. Monotheletic was used for the Early Church controversy about the will of the godhead. I prefer monothelemic because it preserves the Greek noun form thelema (the will) instead of the verb thelo (I will).

PMPsicle
PMPsicle

Chip has several long discussions on this topic. But to simplify.... Start with your salary as an employee (or desired salary). Then divide by 1000. That's your cost of labour per billable hour. (Note -- not including overheads.) Multiply by 1.5. That's your basic rate. Multiply by 1.2 and that's your retail rate. All of which is there to tell you if you should be in the business at all. Now, go out and talk to some of your competition. If you have clients or past employers that use consultants talk to them and find out how much they normally pay. Beware of hidden agendas and apples and oranges. You'll now have a good idea of what is a fair market rate -- either retail or wholesale or better still both. Look at the numbers you've calculated as your costs. If the wholesale rate is below your labour cost per billable hour, you know that there's no point in being a contractor. If the retail rate is above your basic rate then there is value in being truly independent (i.e. getting your own clients). Now you know what your market is paying and the key rates. At this point you need to personalize it. If you are worth less than your competition, charge less. If you are worth more -- and can get more -- charge more. Also look at other charging schemes. $500/hr too much for your clients? Try charging $500/mo for two 1/2 hour phone calls per month. And so on. Glen Ford, PMP http://www.trainingnow.ca http://apps.learningcreators.com/blog

PMPsicle
PMPsicle

It could be worse ... she could just spend as if she already had the money and not complain! :D

Sterling chip Camden
Sterling chip Camden

Mitigating risk on the discovery project will be more likely to get the engagement, but as thomas said you have to make sure you don't mitigate the risk by taking too much on yourself -- even for the discovery. It's absolutely essential that any fixed-price bid (even if it's one hour's work) be well-defined in terms of scope and responsibilities.

Sterling chip Camden
Sterling chip Camden

Fortunately, we've got that under control now. Cutting up the credit cards helped a lot.

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