Six steps for consultants to establish their fee structure and rates

21 June 2016 Consultancy.uk

For consulting firms and consultants across the globe it is one of the chief operating decisions to be taken: establishing pricing structures and hourly rates. Consultants typically struggle with striking the right balance between value-added and remaining competitive – ask for too much and advisers may lose out to cheaper competitors, ask for too little and clients may take advantage of their services or see them as inferior. Sona Jepsen, Global Head of Consultant Relations at Fidelity National Information Services (FIS), provides her take on steps consultants should take in order to establish an optimal fee structure.

Discovering what other firms charge and how they structure their contracts can be difficult. Most of our assumptions are based on hearsay: “Firm X charges $600 an hour and sends in junior consultants” or “Consultant Y is absurdly expensive.” This second-hand knowledge is often outdated – if it was ever true in the first place – muddying the waters of compensation even further.

Not only that, but for many of us, asking people for money just feels wrong, even if our work merits every cent. America has been built on a culture where discussing money feels taboo – even bringing up compensation out loud is a violation of trust. These conversations are critical for consultants, however, and the sooner they’re over, the more quickly the awkwardness passes and the real work can begin.

I have learned a few things in my time as a consultant that don’t remove the anxiety of this process entirely, but they do help me put one foot in front of the other and ask for appropriate compensation without putting off prospective clients.

Fees for consultants

Establishing a consultancy
I have worked with consultants who use sites like Salary.com to estimate compensation, as well as others who believe that their title of “founder/CEO” means they can ask for whatever they want and have people lining up to pay. Unsurprisingly, neither approach works all that well. Despite all the data we now have available online regarding compensation and salaries, generic sites are an unreliable method of determining your rate. Consultants are driven not only by what the market is paying, but also by the wide variety of contributions they make to their companies and clients. Two similar consultants working for similar companies can command very different rates, depending on their projects and roles.

Flexibility is key for consultants establishing compensation, just like it is in any other aspect of the job. Sometimes, reducing a fee makes sense to get valuable experience or land a valuable client. In other cases, doing so would devalue your services and set you back in building a reputation. It’s all about finding the right balance.

Just like in a regular job interview, however, consultants shouldn’t lowball themselves from the beginning. The rate should cover necessary expenses first, then take time and experience into account – with some wiggle room to match what the client is willing to spend on the service. Balance fairness with attainability to find the sweet spot between the number of clients demanding your services and the price you’re willing to accept.

Clients are often willing to negotiate on things besides price, so learn to get creative if the client’s budget doesn’t match what your service commands. The more flexible you can be, the more clients you will have, but don’t sacrifice your reputation or pricing just to land one more client.

How to determine your consulting rate
Once you feel confident in the services you provide, it’s time to determine your actual asking price. Follow these six steps to determine what your professional time is worth: 

Six steps for consultants to establish their rates

1. Walk through the particulars of each job.
What is the client asking you to do? What daily work will this entail? What are the final deliverables? Who are the decision makers? Evaluate everything about what you’re being asked to do, determine whether the requests match your strengths, and seek assistance or training for any demands you may need help meeting.

2. Assess the current life stage of your business.
Are you just starting out and looking to establish your name and brand? Are you growing and hiring? Or are you preparing to sell? Each of these stages changes how you should price your services and position yourself, both within your firm and in the marketplace. Someone just starting out shouldn’t charge premium rates to find her first few clients, while someone experiencing rapid growth shouldn’t accept low-paying contracts and eat the opportunity cost of taking on bigger clients with that time.

3.Study the trends more carefully.
Do your research, even if scouring online resources on others’ rates is more of an art than a science. What are other consultants advertising? Can you discover what similar clients have paid for consulting work in the past? You might discover pricing tiers in your search, which do you feel you belong in?

4. Be flexible, within reason.
If a client is willing to keep you on for a long period of time, it might make sense to be more flexible on your rate in order to benefit from the length of the contract. Some companies could surprise you with creative compensation plans beyond pricing. Listen to what they have to offer, but don’t let perks or nonmonetary compensation take the place of actual payment.

5. Aim a little higher.
Most of my clients come back to me with a counterproposal after my initial offer, so don’t be afraid to put out a number you feel might be too high. If the client believes you are the right person for the job and recognizes the value your services provide, it’s fine to negotiate. The more jobs you take, the clearer the understanding you will have of how much to charge for each contract.

6. Be open to unconventional offers.
Early in my career, I had a client company offer introductions to its association members and let me come speak to them. In return, the company paid less than my asking rate, but the networking opportunity it offered led to seven additional contracts that year and made me significantly more than that single contract would have provided on its own.

Follow these steps to determine your fee, and remember to make adjustments from time to time as your business grows.

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Accenture's push into the creative sector is an identity crisis

18 April 2019 Consultancy.uk

In its latest push into the creative sector, Accenture Interactive acquired New York and London-based ad agency Droga5 earlier this month, adding illustrious clients such as HBO, Amazon and The New York Times to its roster of clients. With the latest in a long line of similar purchases, Accenture Interactive further demonstrated its ambition of becoming the globe’s leading trusted advisor to chief marketing officers. Yet according to Ben Langdon, Chairman of Class35, Accenture’s strategy may be heading in the wrong direction.

A press release on Accenture’s website announcing the acquisition sits next to a quote stating that “brands aren’t built through advertising” – a huge contradiction from a consultancy firm hell-bent on becoming the ‘CMO agency of choice’. It’s not alone of course. The entire consulting industry wants a piece of the creative pie right now. In addition to Accenture Interactive, recent acquisitions by PwC Digital, IBM iX, and Deloitte Digital meant that in 2017, for the first time ever, four of the world’s ten largest creative agencies were consultancies.

So just what it is that Accenture wants to achieve from this? For one thing, it’s clearly trying to be a digital transformation business. A one-stop creative shop rivalling more traditional models, it wants to lure CMOs in with the promise of lower ad spend and a “more impactful customer experience”. At the same time, though, it’s still in thrall to those same slinky, shiny branding and advertising agencies it’s attempting to disrupt. The Droga5 acquisition and that of Karmarama a few years before are both testament to this.

There’s a fundamental problem with this, though. Digital transformation businesses don’t sell to CMOs. These people have enough on their plates trying to transform their own marketing skills in order to keep up with an ever-changing market – they just don’t have the time or the energy to concern themselves with digitally transforming a whole business. If Accenture’s purpose is digital transformation, then going after creative agencies is barking up the wrong tree.Is Accenture's push into the creative sector an identity crisis?

Worlds apart

Perhaps more importantly, these two industries are worlds apart in terms of the way they think. Creative agencies are all about ideas, campaigns and consumers. Digital businesses, on the other hand, are customer-driven – they think in terms such as lifetime value, measurement, and efficiency. Customer-led thinking is an entirely different beast to consumer-led thinking.

The reality is that the arrival of digital and an all-encompassing obsession with technology, measurement and social has led to the death of agencies in a reductive, zero-sum, efficiency-focused battle with brands. Indeed, agencies have become so obsessed with the latest tech fads, they’re beginning to forget how brands work. Worse still, they’re beginning to forget how brands are built. And, by forgetting, they’re destroying their own values.

Killing creativity

All things considered, it really feels to me as though Accenture is a chip leader in a game it doesn’t understand. Expensive acquisitions like these show that they’ve got the big money, but they don’t appear to have any idea what they’re doing with it. Take talent, for example. The best talent in the creative industry right now is out in the market; it’s not tied to any one agency. Both agencies might well be at the top of their game, but why would a consulting firm waste so much money on buying them when they could hire high-quality creative talent on a contingent basis instead?

As their presence in the top 10 creative agencies shows, there is a growing trend in which Accenture, like many of the other big players, are buying up agencies as if they were nothing more than keywords. What they’re really buying, though, is a collection of credentials, clients and IP. Unfortunately, the talent that created those credentials aren’t going to stay at the business, the clients that hired the agency in the first place won’t be interested in buying what is basically just another part of Accenture, and the IP never really existed to begin with.

Droga5, for example, was one of the few agencies that did great brand work the old-fashioned way – undoubtedly something that made it attractive to Accenture in the first place. The irony, though, is that by leading it further away from the way of working that made it so special, the consulting giant will kill its creativity.

“Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record…. But, in flashing its cash, it is spending millions on acquiring nothing of any value.”

If pressed, the recently acquired agency staff at Accenture will tell you just how dysfunctional the new arrangement is. They’re largely unfulfilled. Rarely do they feel their work has any sort of meaning or purpose. What’s more, the different disciplines have found little or no common ground, and find it hard to work together as a cohesive whole. It’s not surprising, then, to see talented people leaving in droves.

Beyond the window dressing 

It’s clear, then, that consulting firms and creative agencies are no easy bedfellows. But in his company’s defence, Accenture Interactive’s Senior Managing Director for North America, Glen Hartman, described its culture as being “far, far away from what a stereotypical consulting firm would look like. Our office and studios look a lot like Droga5’s.”

In demonstrating a belief that office design equates to workplace culture, this statement serves as an illustration of how confused Accenture is right now. It wants to justify its new strategy so badly, it’s started dressing like a creative agency. But if you look beyond the window dressing and see that you and your partners are speaking a different language with a different purpose, selling to different people in a different market, there’s no getting away from the fact that you’re different.

Accenture Interactive has been dazzled by its ambitions to become the CMO agency of record, and it wants to dazzle others with its new direction. But, in flashing its cash, it is spending millions on acquiring nothing of any value.

Related: Space between consulting firms and creative agencies is converging.