Experts Don't Charge Low Fees

Professional services firms are often hesitant to raise their fees in a challenging economic environment.

But consider your firm’s growth in expertise and value to your clients as a proportion of the movement in fees you charge – you will often find that fee growth is lagging behind.

Increasingly, firms are pricing their services too modestly for the value they provide and perpetuate the problem by promoting themselves as the leader in their field with a “reasonable” price.

Top clients don’t expect low fees for the services of real experts – you get what you pay for.

If it’s been more than a year since you last reviewed your professional fees, then this blog post is for you.

Fee strategy: Business development tips for professional services firms

To decide if you need to rethink your fee strategy, ask yourself:

• Is the value you bring to your business keeping pace with the value you’re delivering to your clients?

• How are we better this year than last when it comes to delivering value to our client?

You may worry about compromising your competitive position by changing your fees in a tight market. But remember, the state of the economy won’t impact clients’ perceived value of your services assuming you’ve done a good job expressing that value.

Value vs Price

The secret of human psychology in consumer spending: if you can show real value, then price does not become the pivotal component in the decision making process.

All things being equal, if two people offer the same service without a clear distinction between them, then price will be the ultimate consideration. So in order to justify charging a higher price (which you will as an expert), you need to distinguish your service from your competitors and be good at expressing your value to your clients.

Which type of clients do you have?

Your clients may fall into one of three groups:

• Price-only shoppers – These clients will never spend more than the bare minimum and will drive across town to save three cents on a litre of petrol. They are frugal and unless you have the lowest price, you will not win their business.

• Top-quality shoppers – This group will never settle for less than the best and they can usually afford it. Quality is number one and they know they’ll pay more for it. Low prices will chase them away.

• Value shoppers – This group will spend more for something proven to be superior. When no proof is evident, price again, becomes the deciding factor.

Business development advice

If you are still struggling to justify a fee change or what you can do different to avoid becoming seen as a ‘commodity product’, contact Professional Services Business Development to see how we can help you.

10 Questions to assess your current situation and target your future efforts

Let’s start this fresh calendar year with some tricky and difficult questions.

When asking these business development questions, challenge yourself to take a frank and realistic approach to evaluating the progress, success or otherwise, of your business.

Thrashing out answers to these questions will also help you highlight achievements, identify gaps and shortfalls, and focus your efforts (time and money) for the financial year.

Use the following list to stimulate debate and (ideally) garner consensus with key players within your firm.

Agenda – 10 questions to assess your current situation and target your future efforts

1. What is our largest business development challenge?

2. How are we dealing with it?

3. How long have we had the problem?

4. What have we done to address it?

5. How is it impacting the firm?

6. What is it costing us?

7. If it continues, what will the effect on the business be?

8. What are we good at and should do more of?

9. What are we poor at and must stop doing?

10. What will we do differently tomorrow to ensure we hit our business development, financial and wider goals?

Don’t underestimate the power of work-shopping these issues as a group. These questions will help you focus, prioritise, and get back on the rails. Simple questions can be a great catalyst for clarity and change.

Business development advice and help

As ever, if you need help to run the session, do get in touch.

12 Critical Performance Indicators in addition to the Billable Hour

What gets measured gets improved. Many professional services firms fail to measure critical performance indicators for their business, clients, and staff, and are therefore failing to track the behaviours and strategies which correlate with future financial and strategic success.

It’s common for firms to focus only on individual billable hours as a success measure. While on the surface this seems to make commercial sense, it actually drives attitudes and behaviours that are detrimental to the firm’s future success.

Although fees are important – and relatively easy to interpret – looking at fee generation in isolation can hide or disguise important realities and encourage short-term focus on the single behaviour being measured (fee generation now).

It also only represents a quantitative and not a qualitative measure of the business.

Create incentives and motivation for staff to concentrate on critical performance metrics that generate sustainable growth and development in the long-term. Qualitative performance measures, formalised and communicated, can enhance quantitative measures such as fee-revenue.

For some firms and practice groups, two or three simple metrics are sufficient. But in many areas, a wider range of contributions is worth measuring.

Alternative success measures: What to consider

Change the culture of your organisation by challenging the status quo with these alternative success measures for your business, clients, and team.

Your business

1. Revenue growth rate – what is the pace at which you are growing firm income, compared with:

   • last year?

   • this year’s target/budget?

   • the overall marketplace?

2. Net profit (billings minus expenses) – what is your 3 year net profit trend?

3. Gross profit margin – what is the percentage of margin that is gross profit?

4. Utilisation rate – what spare capacity do you have to service new clients?

Your clients

1. Net promoter/satisfaction score – how likely is it that your clients will recommend you to someone else? Do you deliver more than they expect?

2. Customer profitability score – what profit do individual clients bring to the business after taking into consideration the cost of attracting and keeping them.

3. Sales conversion rate – how well do you turn referrals, telephone calls, face to face meetings and web page views into paying work? No point spending more on lead generation if you cannot close the leads you have.

4. Relative market share – how big is your share of total client spend when it comes to comparing with the competition?

Your team

1. Staff advocacy score – how likely are your staff to recommend you as a firm to work for? Remember, clients will not fall in love with your firm until the staff do!

2. Employee engagement level – how does staff behaviour contribute to the goals of the business?

3. 360-degree feedback score – how do staff rate each other, as well as themselves?

4. Absenteeism factor – how much is staff absenteeism costing the business?

This is far from an exhaustive list of critical performance indicators. But if you regularly review your performance in just a few of these areas, you will build a firm of motivated and focussed staff, happy clients, and ultimately see more profitability than firms who insist that billable hours are the only metric worth measuring.

If you need some help to work out if you are winning or losing, or know you need some assistance on how to grow your practice, do get in touch.

Does your firm have a marketing problem or a sales problem?

In my work, I come across many professional services firms that lump marketing and sales together under the heading of ‘business development’ (BD), though they are each very different disciplines.

And when they come to me for help to improve their BD function, they don’t know whether they have a sales problem or a marketing problem. And misdiagnosis can lead to wasted time, effort, and money.

In fairness, there are many firms with unsophisticated BD functions who indeed suffer from both marketing and sales problems.

MARKETING VS. SALES

The two disciplines are mutually dependent: it is very difficult to sell your services unless you have first resourced time, money, and effort to the marketing function; and why spend money on generating more leads and enquiries if you have not yet mastered your conversion tactics?

How your BD problems are defined (marketing or sales) will determine how you should tackle them. Let’s look at some typical examples which cause confusion.

1. Not enough of our target clients know who we are, and we struggle to attract enough new business leads

It’s a marketing problem.

You need to raise visibility of your firm and/or your personal brand in the target market place. The best options involve speaking, writing, and networking which require little or no financial investment. Most firms waste inordinate amounts of cash on advertising, sponsorship, and hospitality without accurately measuring any return on investment.

Changing attitudes and behaviour of decision-makers in your firm towards business development is likely to ensure sufficient non-billable time is committed to the cause. Remember, only what gets measured gets done and can be managed. If you only measure billable hours, you will really struggle to succeed.

2. We convert fewer than 50% of the new business enquiries we receive

Probably a sales problem.

You need to raise your credibility. You also need to be able to close, and ask for the business. How well educated and trained are the people who deal with the enquiries?

But it’s also likely to be a marketing problem.

The marketing problem starts with taking the wrong message to the wrong people. For example, telling everyone you can do everything. Nobody wants to hire the generalist anymore, only the specialist. You cannot just tell people you are an expert without having tangible evidence to support your claim.

3. We rely on word of mouth referrals, but don’t get as many as we used to or as many as we would like

It’s a marketing problem, if you’re not worth referring.

Whilst referrals from joint venture partners are the quickest route to exponential growth, it’s also very dangerous to rely on other people talking about you as the main route to maintaining a sustainable and profitable business.

It’s a sales problem, if you never ask for referrals.

I’ve found that humans are inherently greedy, so incentives for both staff and intermediaries often work well. The process starts with really understanding where your value lies to a specific client in specific situations, and being able to articulate the value you offer both verbally and in writing – which goes back to being a marketing problem.

4. The aspiration to cross-sell departments, individuals, and services remains exactly that: an aspiration

It’s a marketing problem and a sales problem.

Cross-selling still remains the Achilles heel of many professional services firms, and is a missed golden opportunity. Cross-selling is often the path of least resistance to generating new revenues.

Four key factors need to be in place to maximise results:

• compensation for the achievers

• control of the client relationship is agreed in advance

• competence of individuals to do the technical work is not in doubt

• communication between colleagues and sharing of information.

5. We struggle to raise our prices in line with delivery costs, and clients are continually insisting on discounts

It’s a marketing problem.

Your clients don’t ‘get’ your value because you’re seen as a commodity supplier. Remember, technical ability no longer guarantees financial success. You must be able to explain the value in your service offering by talking results rather than process.

Experts don’t charge low fees. There are numerous ways to charge clients and remain profitable without reverting back to the billable hour.

You can’t do today’s job with yesterday’s methods and still be in business tomorrow.

Growing a business is not a spectator sport, and hope is not a strategy. Make tough decisions, take responsibility, and make yourself accountable.

Should any of these scenarios sound familiar, do get in touch.

WHY? – The Most Powerful Question in Business development

In many of my recent client reviews it has become alarmingly apparent that very basic business analysis is not being performed on a regular basis.

To get you started on this critical process, get your major decision makers together for a meeting and challenge yourselves with the following business development questions.

11 key business development questions for professional services firms

• Why have we/have we not reached our revenue goals?

• Why is our marketing/Business Development budget set at its current level, and is it producing results?

• Why haven’t we been able to implement a business development culture, even though we keep saying it’s a priority?

• Why hasn’t our marketing and business development effort worked as well as we might have liked?

• Why aren’t we launching/specialising in specific industry sectors?

• Why is it that only the management team or a few staff members attract new business?

• Why haven’t we been able to win our target accounts, though we believe we can and should have?

• Why don’t we seem able to charge more for our products/services?

• Why is it we don’t get enough repeat business?

• Why have we lost that big client to the competition?

• Why are we unable to work out on our own what action to take?

Business development support & expertise

Winners make it happen, losers let it happen.

Unfortunately politics and procrastination can hold you back from finding the answers to these necessary questions. If you need some assistance or external accountability to help you do what you need to do, make sure you get in touch.