The 'Zero In' Technique: The Best Way To Establish Consultancy Fees In 2024
The 'Zero In' Technique: The Best Way To Establish Consultancy Fees In 2024
Don't leave yourself or your prospective clients in the dark about what you charge. Update them on every step of the journey and avoid wasting time on projects which would never succeed.
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How Not To Set Fees
Stop trying to guess the maximum a client is willing to pay.
I read a LinkedIn post where a consultant explained that she had recently sent a proposal to a prospective client. She wasn’t sure what to charge, so she nervously named the highest figure she dared and clicked send.
Her message was ‘don’t undersell yourself’.
I applaud the sentiment but disagree with the tactics.
We should be past the point of guessing the maximum a client will pay.
This kind of mentality comes from an outdated world of in-person selling. A salesperson would ‘call’ on a prospective client in person. The prospect would express interest, and the salesperson would name the highest figure they dared and then be quiet because ‘whoever speaks first loses’.
The logic is that you might be tempted to say, ‘But if that’s too high, we can reduce the fee.’ The prospect would obviously take you up on that unsolicited offer. So it’s better to be quiet and let the prospect give their VIEW before you ‘leave money on the table’.
Let’s tackle why this is a problematic mindset.
Don’t Waste Your Time (Or Theirs)
If you’re just naming the highest figure you dare, the chance of you wasting your time or theirs is high.
This approach is riddled with problems. The most obvious is you can waste everyone’s time.
You can go through a full discovery process with a prospect where you both get excited about the work - only to discover you weren’t remotely in the right ballpark on fees. That’s a waste of everyone’s time — and will ensure they never refer you to others in the future.
The other problem is should charge the maximum a client is willing to pay?
Really? Is that what’s best for them (or you)? People keep believing you’re ‘leaving money on the table’ if you’re not charging the absolute maximum a client is willing to pay, ignoring the simple fact that goods and services have a fair value.
Is your goal to take as much money from your clients as possible? Remember that higher fees entail higher expectations. And sometimes it’s better to charge less than the absolute maximum and build a longer-term relationship with a client.
Remember, your fees should reflect your strategy. If you’re not sure what to charge, you don’t have a ‘fee-setting’ problem, you often have a strategy problem.
Fortunately, there’s a better approach.
Zeroing In On Fees
Begin with a broad range and then ‘zero in’ as you learn more.
A far better approach is to begin with a broad range and then, with each additional step of the discovery process, increasingly ‘zero in’ on the right fees.
You can see this in the diagram below.
Phase One: The Broad Range
Trust me, everyone wants to have a rough idea of your fees before contacting you
You begin with a clear range that checks people are in the right ballpark. We do by listing a broad range on our ‘Contact Us’ page, for example.
If people contact us through another channel, I check that they’ve read our ‘contact us’ page first to know if we’re compatible. This filters out many people who wouldn’t be the right match for us.
While it’s possible we might be able to help an organisation increase its budget for our services, in practice, it can be tricky. We would rather lose out on these projects than hit 1 in 10.
A good question is why do we give a maximum and a minimum on this page?
Wouldn’t a maximum potentially leave money on the table from client projects where they would have happily paid more?
Possibly, but the bigger danger is anchoring visitors to the minimum figure and surprising them later. A range makes the ballpark easier to understand.
Phase Two: Clearly Defined Problem
Once you’ve clearly defined the problem, update your broad range
After the first discussion or two, we should have a clear idea of the scope and our possible approach to solving the client’s problem(s). This would enable us to update our likely range.
See: Defining The Scope Of Work
Once you’ve clearly defined the problem, you will already have some ideas of the solutions and be able to give a narrower estimate. At this stage, we usually aim to give a range of $10k to $15k between the lowest and highest options.
Again, we ensure the client understands the figure and is okay with it before proceeding to the next phase.
This again ensures the client is prepared for the final quote.
Phase Three: Agreed Solution(s)
Now you know the possible solutions, give a more precise figure
In the third phase, you run different potential solutions past the client and collaborate to determine precisely what would work best in their situation.
Make sure you agree on the solution(s) to the problem you’re trying to solve.
Sometimes, there is more than one solution; other times, it’s clear there is one solution, but you might customise it to your specific client.
See: Solution Design - The Art Of Crafting The Right Solutions To Client Problems
This might take several iterations, and you will usually need to bring in several stakeholders to ensure everyone is on board.
At this point, you can usually give a narrow range—or sometimes even a precise range—based on the solution presented. Generally, you should be able to give a range of $3k to $5k.
Phase Four: Create The Proposal
Give either a single fixed figure or options for working with you
The final phase is when you’ve put together the complete proposal.
As part of this, you will have researched the solution's implications, determined its time frame, and created a detailed timeline.
In the proposal, you will give a specific figure or a range of options based on the potential solutions you’ve discussed.
Remember that proposals (or good proposals at least) take a long time to create. A major part of this process is optimising the proposal to conversion success rate so both you and your client avoid wasting time on projects that never had any opportunity for success.
See: How To Sell Consultancy Services.
Save Time, Improve Success With The ‘Zero In’ Technique
Take a more open and transparent approach to setting fees
A quick summary of the above.
Open Range. When a client first approaches you, begin with a broad range to ensure you’re in the right ballpark.
Problem Definition. Once you’ve defined the problem, you can give an updated estimate to ensure the client has the resources you want.
Solution Agreement. Once you agree on the solutions, you can zero in further to avoid any final cost shock.
Proposal. Give a precise figure or a range of options.
One more key point here. If the prospect ever says they need to check with someone else that the fee is okay, invite that person on a call with you. It’s always better than you can speak to them directly. Most importantly, don’t proceed to the next step until you get an okay on the figure from the previous step.
If you get this right, you shouldn’t have to hit the ‘send’ button and pray the client accepts your inflated fee. Instead, you will know they have already approved the estimate, and you can work on making sure the proposal is right for them.
Good luck
Some relevant pricing and negotiation folks to follow:
Thanks for reading.
showing a ballpark of the fees on the website works well. A lot of times as service business owners, we aren't sure what the clients will ask for, so we don't dare to be too transparent about pricing.
I agree that it's all about strategy and what we see on some competitor's websites aren't just lucky numbers plucked from the sky.
It's the financial calculations and forecast we do behind the scenes. The numbers and confidence come from there.
You can give a range, or you can productize your services and put a fixed price tag on them so that your clients know exactly what you are offering and how much. No negotiations of quotes and afraid of wasting time.
At the same time, you know that you are setting up the prices within agreed boundaries. What you see is what you get.