Have you ever stopped to think about how your consulting fees affect your earnings? A while ago, I asked "How often do you increase your rates?" I mentioned that, if you increased your fees by 5% a year for 10 years, you could go from $50 an hour to $81.

How does that affect your annual earnings? Let's say you were billing 20 hours a week for 48 weeks a year. So you started at $48,000 a year. And you increased your rate at 5% a year. Now you'd be earning $77,000 a year -- for working the same number of hours.

And what if you'd increased your rate 6% a year? Now you'd be earning about $86,000 a year. (And you would have enjoyed thousands in increased earnings over the years.)

Have you been afraid to raise your consulting fees? Stop leaving money on the table!

Related

• Consulting Fees Guide

Several times a day, I chat with friends, family and partners via instant messenger services. I sometimes even chat with clients. But, as a general rule, I don't give my IM account info to clients.

Instant messaging makes you seem within a client's arm reach. Whereas they have no idea what you're doing when you don't immediately answer a call or email, instant messaging services make you look like you're *right there*. And that's a little too close for comfort when I'm juggling multiple clients and trying to get work done.

Still, for my best and most trusted clients, I make exceptions. These are the people who've been working with me for years and who've shown an ability to respect my time and privacy. They're the clients for whom I'd wake up in the middle of the night and go help them jumpstart their car. In other words, they're much more like close friends than clients now.

How about you? Do you instant message with clients? If so, do you "go offline" to avoid interruptions at certain times?

Heed the tale of the troublesome client. The one who:

• starts off with a demanding email, saying that they desperately need help by this weekend
• tries to lock you into an hour-long "interview" on the phone, once you respond to that email
• insists that the project is a five alarm fire
• but can't afford to pay you what you're quoting and asks for a discount
• tries to get you to tell them what to do before they sign a contract
• says they can't possibly get you a deposit in time
• tells you they've already interview half a dozen consultants and "no one seems to know enough to handle this"

If a client seems like trouble at the beginning, there's a very good chance that they'll turn out to be a major pain later. Over the years, I've learned to turn and run at the first sign of trouble. I know to trust my gut. Most of my clients are dreams to work with. But every once in a while, I meet a prospective client who gets my spider senses tingling. And that's when I say, "No thanks. It's not a good fit" -- and move on.

In my next post, I'll explain how the last "troublesome" client helped me create a new policy that has spiked my earning power.

When you leave the world of paid employment and become a consultant, you need to change the way you think. That means no more Mr. Yes Man. (Or Ms. Yes Woman, as the case may be.) Upon becoming a paid expert -- a consultant -- you need to start standing up for your own beliefs. And you won't be credible unless you stand your ground.

Over the course of your independent consulting career, you're going to run into people who:

• Knock your consulting fees
• Question the approach you're taking
• Tell you you're wrong
• Argue that they've got a better idea
  
• Decide not to implement your recommendations

Sometimes, it makes sense to listen to your clients. But, other times, it's better to stand your ground. If no one every disagrees with you, you either have superhuman sales abilities or you're doing something wrong. Consultants are experts and experts should, in theory, know more than the rest of us. So if people always agree with you, you might want to check over your work.

Related

• Managing client behavior

Via Adverbatims, a real gem of a site, I found this quote:

#381- "If I give you approval, what can I still change?"
(Client, Marketing Manager)

Clients aren't the only people who say funny things, but the above quote cracked me up. I've run into clients who've made some pretty interesting demands over the years.

Once, when I delivered a new ad for a struggling restaurant, the chef/owner changed the copy at the production site. Although he was facing his second bankruptcy with the same restaurant and he was paying me big bucks to come up with a new advertising campaign, he insisted on changing the text at the last minute.

The restaurant went bankrupt a short while later.

Via Fast Company's Innovation blog, I found the top 5 ways to thank your customers. I'd like to draw your attention to #3:

3. Use your data base for them, not against them. Select a loyal customer at random and surprise them with a free gift or a discount. Refrain from congratulating your customers for being loyal with yet another sales pitch. Just send the gift.

Fantastic. My phone company recently used a similar ploy. They called and discounted my monthly bill by $8, simply because I'd been loyal. This outbound loyalty campaign made me feel better about being their customer -- and likely ensured that I wouldn't feel the need to shop around.

You're in the middle of a meeting with a prospective client. You want this client's business so bad it hurts. But the prospect has asked the million dollar question: "Who are your clients and what have you done for them?"

It's tempting to rattle off the names of your clients, the problems they faced and the things you've achieved for them. But providing too much detail may put you in ethical, if not legal, hot water.

If you're under a non-disclosure agreement, you can't identify your client or provide identifying information about their business problems. Even if you're not under NDA, it's not really right to talk behind your clients' backs. So what can you do about this?

How to win clients while respecting client confidentiality

• Describe the client, not their name. "I worked on a project for a major brand name beverage company".
• Deflect requests for the client's name. Say "I'm under NDA and I need to respect my client's confidentiality" or "I'm not in a position to name the client, but I can provide some examples of what I did for them...."
• Collect testimonials from existing clients.
• Ask your existing clients to provide references -- but rotate them, so that you don't end up with annoyed clients.
• Stick to your guns. If you're protecting a client's privacy, you shouldn't reveal details, no matter what the means of communication. If you wouldn't write it in an email or proposal, you shouldn't be willing to divulge it in person either.

Related

• Marketing & lead generation
• Sales skills

Via Christopher Hawkins, I found this post on firing 11 different kinds of clients. I especially liked his advice about the "Slow Pay" client who doesn't pay on time.

As I've mentioned before, I don't tolerate clients who miss payment deadlines. I have a pretty strict process that I follow when a client doesn't pay. I really think far too many consultants are generous with payment terms. It doesn't make sense. When you go to McDonald's, can you walk away with a $3.99 combo without paying? No. And the kind of stuff they serve up at McDonald's require very little materials input or time. So what's with all the consultants who shrug off clients who are slow to pay on projects that involve tens or hundreds of hours and even thousands of dollars in consulting fees?

Don't tolerage late-paying clients. Sure, you might get the odd client who's gone into labour unexpectedly, had a death in the family or otherwise suffered a trauma. You can use your discretion then. But don't, as a general rule, put up with late-paying clients. Don't be a chump.

At any given time, consultants face a ton of deadlines. These range from the minor to the major:

• Answering a ringing telephone
• Responding to incoming emails
• Sending out replies to requests for information
• Putting together quotes and RFPs
• Meeting project milestones
• and so on

When you're dealing with a client, though, is it ever okay to miss a real deadline, such as a date set for delivery of a project?

As with all things, it depends. If you're going to miss a deadline because you've planned poorly, you're going to suffer. If this happens to you on even an occasional basis, you really need to look at your management style. But, if you're going to miss a deadline because of actions on the part of your client, you may need to loosen up a little. Don't beat yourself up. If you've been following up with the client -- by phone and email -- and you lack information you need to miss a deadline, it isn't really your fault. Do take the time to warn the client about deadlines ahead of time.

I actually have a clause in my contracts that says that, to complete deliverables on time, I need to have access to the client's employees, information resources and key decision makers. You might want to look into adding something like this.

Firing your customers can be the most freeing and profitable decision you ever make. If you haven't seen some of the real life comments in "Have you ever fired a client?", take a look now.

According to a comment from Bob the Builder (cute nickname, Bob):

You can usually tell at the outset who's going to drive you crazy. You should just go with your gut. The people who seem picky and annoying are the ones who always end up being picky and annoying. I've been a construction consultant for a while now and it never fails.

The customer isn't always right. Pick and choose your battles. Sometimes, it makes sense to go out of your way for a customer. In other cases, it's a waste of time. You're in business to make money. Remember to consider your long-term profitability.

Consultants rarely get paid 100% upfront. In most cases, consultants take a small deposit, then invoice at key milestones. But what do you do if a client doesn't pay?

Tips for managing deadbeat clients

• Send the invoice again with a reminder. It's possible someone lost track of it.
• Charge interest on overdue accounts -- for best results, mention that in your contract.
• Refuse to deliver further work until you're paid.
• Send a demand letter, giving the client a chance to pay. Note that you'll take further action if the invoice is not paid.
• If the demand letter is ignored, file in small claims court. It's inexpensive and relatively simple.

Remember that, regardless of whether they want to use your work, the client still needs to pay you.

For all the tips on how to become a consultant, there's nothing,quite like a story from someone who's actually made the leap. Dan Lockton has a field report from his recent time in the trenches as a consultant in industrial design.  

In his report, he notes a key reason that many clients turn to an independent consultant, as opposed to a bigger consultancy:

Unless the client genuinely thinks you are wonderful, or are likely to come up with stunning insights or innovation which someone else wouldn’t, the reason is probably because you’re cheap, or the client thinks you’ll be cheap.

That's often true. Clients often assume independents will charge lower consulting fees because they have lower overhead. No admin staff, fancy office equipment, corner offices or the like. However, if you aim to carve out a niche, you can push clients to hire you because they think you're wonderful. And then you can command market prices. Still, if you haven't niche-marketed yourself, you may see clients come to you in search of lower fees. Then again, if you're happy with what you're charging and the client is happy to pay, everybody's happy.

Yesterday, I mentioned that keeping on task is easier when you have something to motivate you. Another trick you can use is artificial deadlines. Even when you have your month stretching out before you, put deadlines in your proposals. Tell clients when they can expect work from you. This helps in two ways. First, it ensures that you finish work by the deadline, so you can collect those precious consulting fees. Second, it makes you look a lot more professional. Would you want to drop off your clothes at the drycleaners' if they said they had no idea when they'd be ready? Would you stand in line at the movie theatre if you had no idea when the movie would start? Would you pay money for anything without any indication of when it might arrive? Probably not. So respect your clients (and yourself) and include deadlines in your proposals.

Following this week's posts on negotiating, I stumbled across a post from Tom Chandler, at the Copywriter Underground. He wrote about how to negotiate your freelance fees without turning into a jerk. (Okay, he didn't say jerk, but I don't want some of my more conservative readers to give up at the headline.)

Of all the points in the post, #5 is my favourite:

Never Give Up Anything Without Getting Something

If you're not getting something out of the negotiation process, you're just submitting to pressure. Don't give up when you're negotiating.

See also consulting fee negotiation.

Negotiating makes up one of the most essential skills in consulting. If you hone your negotiation skills, you may actually wind up with a more successful practice than someone who's brilliant in their work. Consulting fee negotiation may be the most obvious (and financially rewarding) skill to pick up, but it's far from the only thing you can negotiate.

As a consultant, you may be negotiating every time you talk to a client. Typical candidates include:

• project deadline changes
• scope creep
• credit terms
• revisions
• project details
• requests for information (from either side)
• responses to phone calls and email messages
• your availability (especially when you get calls from clients at night or on weekends and don't want to talk)

Some of these points can be handled up front, through consulting contracts. The more you put in writing at the start, the less you'll need to negotiate later. Of course, putting together a contract involves as lot of negotiation too. But there may be less pressure at that point.

Via Daniel Miessler's blog, I found this humorous story about how he once offended a client:

I was at a client recently who’s (sic) business is providing electricity to a local city. We were trying to figure out what caused a piece of hardware to fail and as I was going over options in my head I asked him, “Hmm…perhaps a power surge?”

Ouch. Clients don't like to be told that their core business may have flaws. But I can see how Daniel got into that situation. I've put my foot in my mouth a few too many times. You see, I was always one of those "shoot from the hip" people -- that's how my old boss used to describe me. I always told it straight, although I did try to use some padding to soften what I said. When I was starting out, I thought people were paying me to tell them what was wrong and how to fix it. It took me a few years to realize that sometimes it's better to get your clients to tell you what's wrong and then propose a solution. Sometimes, you can make that solution address some of the problems they still don't want to talk about!

Choosing a CRM (customer relationship management system) for a small business can be a daunting task. Small business CRM systems can be off-the-shelf, customized, hosted or hybrid.

 Mid-market companies tend to choose hosted CRM systems so they can get best-of-breed systems at an affordable price, without the tech support headaches. But, for smaller businesses, such systems may be too expensive.

 Off-the-shelf shrinkwrapped CRM packages may be tempting. Simply install a package, set up the licenses and you’re ready to go….or so it seems. Suddenly, you and your users are faced with a new technology, no real direction and lots of different approaches to using the system. Before you know it, you may have a nightmare on your hands.

 Fearing the worst, some companies hire a technical consultant to do a custom CRM implementation. The techie takes care of all the IT details and integrates the system with existing systems and applications. This consultant may also train staff and help set up business processes. But an IT consultant may not provide a complete solution either.

 What’s really important for small businesses setting up CRMs is that they start with the end in mind. Put together a plan before you buy an application or hire a consultant. You can work with a CRM implementation consultant, if you want, but, even then, it’s helpful to have thought through the CRM process. With careful planning, you can make your CRM work – whether you do it yourself with an off-the-shelf solution, opt for a hosted solution or get a consultant to customize a package for you.

 Some questions to answer before you choose a CRM:

• Why are you doing this? What do envision a CRM doing for you?
• What business processes do you want your CRM to manage?
• What contacts and relationships do you want your CRM to look after?
• Who will provide tech support? An outsourced consultant, an in-house resource or someone else?
• Who will use this CRM? What abilities do they have?
• What’s your budget? Include both initial and ongoing budgets.
• How will this CRM fit into your overall IT strategy and infrastructure?

Those are just a few questions to get you started. Choosing a CRM for small business is a multistep process. If you find it overwhelming, consider turning to a CRM consultant to help you with both the business and IT issues.

This article was originally published on Suite101 by Andrea Coutu of Become a Consultant at ConsultantJournal.com.

Like anyone else, I have some flaws. And one of my biggest consulting flaws is my struggle with turning down work. Even when I'm buried in projects, I have a hard time saying no to more work.

Why it's hard to turn down work:

• Consultants tend to run through feast or famine work cycles. Since it's hard to predict what your earnings will be for the rest of the year, it's hard to say no to jobs, even when you're flush with projects.
• Finding new clients takes work. When you've gone to all that trouble to find a new client, it's hard to turn them away.
• Although hanging out at Starbucks in your off time is fun, it can be exhilerating to be managing several projects.
• Money is nice. When someone calls or emails with a project that will earn me $2,000 for a few hours of work, it's pretty darn hard to resist.

How to turn away work

• Be polite. Don't brush off someone who's gone to the trouble to contact you.
• Ask about scheduling. The client may be able to wait a week or two. I once had a client who waited three months.
• Note the positive side of being busy. I regularly point out to prospective clients that consultants who can take them on immediately may not have much of a track record.
• Network. I've built relationships with other people who can take on projects when I'm busy. And they send me work, too. One sent me work for an entire year, while she was on maternity leave.
• Hire someone. Find someone who can take on all or part of the job. (My Consulting Fees Guide discusses this in the section on making more without raising your rates.)
• Relax. If this client found you, it means your marketing and past performance are good.

"Turning down a job" from Become a Consultant at ConsultantJournal.com.

Ready for New Year's Eve yet? I'm still taking a break. To help next year get off to the right start, take a look at my post on managing client behavior.

Also check out my posts on starting your own consulting business and why you should become a consultant.

"Featured article: managing client behavior" from Become a Consultant at ConsultantJournal.com.