There have been many discussions about what is necessary to “engage" a client. Engaging a client becomes even more critical for a consulting firm which is just establishing itself, especially since the firm probably does not have many (or any) prior clients to use as a reference.
A firm should perform preliminary research to identify the types of services capable of being offered. They should then perform a comparative analysis of these services in relationship to the services being offered by competitive firms (if any), and they should also review the current needs of identified target markets.
A consulting firm sells professional services. The consulting firm must ascertain the value of the professional qualifications which they are bringing to the market place. The consulting firm must also assess the perceived value of these services from the perspective of the target market. If the consulting firm has a valuable service to offer, then this service is what they should be marketing to potential clients.
For start-up consulting firms, the fact that they probably do not have a long list of previous clients poses numerous problems. Since they can't identify what they've done with previous clients, they sometimes tend to reduce the value of the professional services capable of being provided by reducing the dollar value of services proposed. This is definitely a flaw on the part of the consulting firm, and every effort should be made to prevent this type of “negotiating tactic" to be used when engaging preliminary clients.
Reduction of fees to engage initial clients should not be a device which is used to obtain a client base necessary to substantiate the value of services offered. In other words, if the firm is not convinced in its’ own mind that the professional services they bring to market are valuable to potential clients, a reduction in the consultant fees to engage clients will do very little to validate the actual value of the professional services offered.
Another way to view this dilemma would be: Does the actual value of professional services offered increase as the firm's client base increases? It may be true that a firm's experience and proficiency may increase over time, but are the professional services minimal at the outset, or, is the level of client experience the only thing which a firm lacks when it first starts out.
A firm may chose to take certain steps to address the lack of client experience, but it does not seem prudent to reduce the value of the professional services offered merely due to the fact that the firm has minimal client experience.
A firm may chose to provide certain fixed services on a pro-bono basis, separate and aside from the proposed work they are performing. These pro-bono services may reduce the total cost of services provided to the client, but the for fee services are still being provided at the normal rate. Reducing the fee creates numerous potential problems with the fee vs. value of services offered. Providing additional services at no charge avoids this problem, and also addresses some of the needs which start-up firms experience in their attempt to engage new clients. Charging $120. /hr and providing some additional pro-bono work is definitely different than doing all of the work for $100. /hr. , although the net cost to the client may be the same.
It should be easier to refuse to do something for free, than it would be to convince a client that the value of your services have increased by $20. /hr!
A firm should determine how to adjust for a lack of previous client experience, and this should be something which is addressed in their operating and marketing procedures. It is another operational responsibility (similar to managing the firm, accounting, human resources) which is required to be dealt with in order to maintain a successful firm.
Finally, if a firm does reduce the value of professional services offered, at what time will they feel confident enough to place an accurate value on these services, and how will this be accomplished with existing clients, and potential clients who are aware of existing fee structures?
Cam Forbes, founder and Managing Partner of Opus One Ventures has been speaking, training and coaching business owners, entrepreneurs, and sales people around the world. For more information about Forbes’ “Consulting Solution Toolkit" and how to get started in Consulting, visit Consulting Startup Kit or get his his free report about getting started in consulting.