For years and years I have been doing my telecommunications consulting business on the side. It’s been a lot of fun, I get to meet great people and help save them money and by doing that, I was able to generate a little money for myself.
But I never made too much money doing it hence why it never became anything more than a “side business or a hobby”. The way I made money was by finding an alternate telephone service carrier that was cheaper than the customer’s current carrier. If the customer switched, the new carrier would pay me a small commission. Very similar to affiliate sales.
Sounds pretty sweet but there really isn’t a lot of money in it if you are working with small businesses and there were many times when I put quite a bit of time into a consulting project, made a proposal and then never heard from the customer again. In this scenario, not only did I not make money, I LOST money.
I finally learned an important principle. For every minute you spend on a project or any type of work for that matter, if you are not getting paid for that time, you are LOSING MONEY.
Several people (accountants, mentors, customers-yeah customers) told me that I should start charging some type of consulting fee for my services. Plus, all the books and information I read about freelancing and consulting said that you need to charge a fair price for your services….but I still didn’t listen!
The thought of charging a consulting fee always made me uneasy. I thought it would be easier to win business if I provided my services for free and I didn’t want to ruin my chance of getting business by asking for money.
Plus I thought that by going the “free” route, customers would think “This is a no brainer!” and not only go with my recommendation but then tell a bunch of their friends to call me and have me help them too. Nope! Didn’t happen.
Well, it finally took a certain “event” to make me wise up and make a change. A couple of months ago I received a referral from a friend. This customer was a very nice opportunity, after meeting with them and discussing their needs and challenges, I realized there were lots of potential ways I could help them out.
I was so excited to work with them and show them all the wonderful things I could do that I immediately got started working for them-for FREE. I spent approximately 60 hours of work including numerous phone calls, emails, several proposals with detailed analysis and an immediate ROI.
Approximately 2 months later I presented my final proposal to the customer which would save them thousands of dollars immediately and cost them NOTHING. A couple days goes by and I got the email of death. You know, the kind that starts with “First I want to thank you….”. It never ends well when it starts off like that.
So I lost the deal and had NOTHING to show for it, not 1 cent.
That really pissed me off….not because I lost the deal but because once again I worked on an opportunity with the false notion that putting in tremendous value for someone would result in them appreciating the value and thus, I would earn their business. Wrong again!
Unfortunately, this isn’t the way it works and if I ever make this mistake again, I want someone to punch me in the face.
As frustrating as this was, it was the best thing that could have happened to me. I needed to STOP doing work for free. I needed to learn this lesson and apparently I wasn’t going to learn my lesson until it walked up and smacked me in the face.
So I made the decision that for now on, no matter what, I am going to charge a consulting fee for every project…..no excuses.
Shortly thereafter, I had 2 new opportunities that presented themselves to me. The temptation to work for free was there in a big way. These were customers referred to me from a friend and someone that they both trusted. There’s no way they’ll shaft me!
But, I decided it was time to do it. Time to bite the bullet and ask for a payment for my services but first I had to figure out exactly how and how much I would charge.
After spending a little too much time trying to figure out the perfect way to charge, I remembered some business advice I’ve heard time and time again….make a decision now, even if it’s not perfect. You can always tweak things and make them better.
In the words of General George S. Patton:
“A good plan, violently executed now, is better than a perfect plan next week.”
Got it George! I gotta make a decision and run with it.
The bottom line is, in business (and in life), decisions need to be made quickly and it’s better to use the information you have now and make a good decision now than to waste time waiting for more information or trying to make a perfect decision. Why? Because more than likely, by the time you figure out the perfect decision…it’s already too late.
So I made my decision to charge a flat fee upfront. I went with the flat fee upfront for a couple of reasons. I wanted to make sure that I didn’t put in a minute of work without being compensated for that minute (upfront) and a flat fee was really just to make it easy for the customer to make a decision. I didn’t want to waste time explaining some other more complicated payment structure.
I knew there would be some inherent “downsides” with this type of model but it was a place to start. I knew I could end of working so many hours for a customer that in the end, I may make very few dollars per hour but I had to get comfortable asking for money for the work that I would do. That was the BIG first step I had to take.
Charging for my services up-front made me realize some very important business lessons such as….
(1) : It Tells You Who the Decision Maker Is
By charging a fee up front before you do any work, you immediately determine if this person you are dealing with is the decision maker. If your contact needs to get approval from someone else to spend money with you, then that person you are dealing with is NOT the decision maker.
This is HUGE! In sales, your goal is to figure out who the decision maker is and sell to that person. Why? Because non-decision makers don’t make decisions and typically (not always) they waste your time. Rocket science right? No, but still so many of us try to sell to non-decision makers.
If the person you are dealing with is NOT the decision maker, you MUST get the decision maker involved. I will go as far to say that if you do NOT involved the decision maker in your process YOU WILL LOSE THE DEAL.
(2) It “Pre-Qualifies” the customer
This is an awesome way to weed out the customers you don’t want….before they become customers! This alone will save me TONS of time and money and therefore help my business run more profitably.
If a customer doesn’t want to pay a fee, they are probably not serious and would probably end up wasting my time. Remember, time = money. Spending time that you are not compensated for is like taking your money and throwing it out the window.
“If the customer doesn’t want to pay, they are not the customer you want anyway.” -Tim Murphy
I just Googled that line and no results came up so it’s mine!
(2) Perception is Reality
Charging a fee shows that your services are valuable. Yes sir, I expect to be paid for the time I spend working FOR YOU. If you provide someone with something of value, you should receive value back and in business that means money.
(3) It removes skepticism
People EXPECT to pay for services and products. If you offer to provide a product or service to a customer and then you tell them it’s free, they look at you funny because they are now skeptical about how you are making your money.
For example, I’ve had these guys come to my house offering to put in the latest and great security system for free…all they want to do is put their little sign on my lawn when they are done. A free security system sounds good but I still think it’s a little weird….I wonder, how are they going to make money from this? There’s gotta be some long term objective to get you to spend money with them.
(4) The customer now has a vested interest in the project
This is really nice because now that the customer has spent some of their hard earned money, you can bet your ass that they want to help you get what you need to get the work done for them.
So they become more responsive because your project is now a priority for them. If you offer to do something for free, it’s really easy for them to push you aside and find time for all of the other stuff they do during the course of the day. Again, a big time waster and therefore money waster for you.
(5) No Collections
It sucks to do work and then try to collect money after the fact. Talk about a complete money drain!
So bottom line, don’t work for free. It’s a BAD idea and it will cost you more than you think. Get Paid A Fair Price and Provide A Valuable Product Or Service.
