The ERP Lifestyle Consultant

There’s a lot of talk about value based (aka fixed fee) fees. Listen to this three part series from a practioner who took his practice from waiting 180 days to be paid, not making money and wanting to give away his clients because they were so unprofitable.

Today this participants greatest fear? That he hasn’t priced himself high enough.

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In the consulting world there’s no shortage of people claiming to bill $150, $175 or $225 per hour. To talk with them you’d think they were invoicing an average of 40 hours  every week with no slack in their schedule.

What I’ve found is that one portion of the story is true – they have no slack in their schedule.

They probably don’t sleep much either.

That’s because they’re working 120 hours – and billing for 40.

Are they really collecting $150 an hour (or pick your favorite rate) for EVERY hour that they work?

No.

There’s one big part of the story that you’re never told though. Their average rate is somewhat closer to $50 (or less per hour). Why?

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There are two ugly trends in the world of consulting. I’m counteracting them today by more than doubling my “rack” rate to $400 per hour.

I think you should too.

The two trends ?:

1. Customers searching the web compiling spreadsheets of what random consultants charge per hour  -with little apparent regard for whether the consultant is good,  has the capability to solve the problem or even has recent relevant experience with similar companies.

   Think I’m kidding? On an average day we’re receiving two calls that are nothing more than companies (or IT consultants who work for them) checking on our rates and “how many hours would it take” to [fill in random project here].

2. Consultants who,  desperate for work, have slashed rates to an unsustainable $125 per hour (billed in quarter hour increments) and below.

And if word-of-mouth is to be believed those eye-popping rates of $125 are appearing in large cities like New York and Boston.

We bill our time for support and consulting as a fixed guaranteed fee.

So  for me -  quoting an hourly rate is meaningless. It does nothing but lower my perceived value to the same – or less -  of the consulting morons firms who are underbidding,  under-serving (and ultimately losing)  their customers.

Some other thoughts.

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I’m 100% certain that in the ERP support business that phone support agreements are the way to go.

I don’t run into all the problems people say that you’re supposed to with an agreement. In other words I’m not constantly on the phone with specific customers, they’re not calling every minute of the day, etc.

Yes, it does result in an increase in call volume. It also results in an increase in customer loyalty — and recurring revenue.

I’ve not had to staff any extra people to meet the call volume – though I hear that other VARS do.

We also don’t specifically designate someone to “sit in a chair and wait for a call” (most other VARS don’t either though some consultants are permanently assigned to office work/projects).

I think if you’re talking any more than 150 customers on a phone support plan that you probably would have to (we have about half that number). Read the rest of this entry »

Here’s an interesting article from Gary Boomer that I spotted online at WebCPA. About halfway down he argues that CPA firms should be offering value and fixed fee billings to their clients.

Gary’s a pretty widely used technology consultants. One of my prior employers used him to come in and make all sorts of recommendations regarding their technology.

It’s interesting that he previously touted what was termed “hotel billing” and that most fo the CPA firms he serviced naturally built their technology to deliver based on his recommendations. Read the rest of this entry »

Fixed fee consulting is the hottest new trend in the ERP world.

You’ll see it used with new deals – and you can see it in the post-sale consulting world where upgrade, projects and other services are increasingly offered for one fixed price.

Consulting based upon a pre-set (fixed) fee has advantages for both the customer and the consultant. The biggest customer advantage is the lack of any surprise costs and the removal of any motivation for the consultant to drag out an engagement for the purpose of billing hourly.

For the consulting firm there’s an opportunity to make more money – but to do so you must enter the fixed fee world with a plan.

After having worked for a while on several fixed fee engagements with my clients – here are what I found to be the top 10 secrets of making money on a fixed fee ERP project. Read the rest of this entry »

This morning I’m off to see a long time client. Truth be told these guys are high maintenance and are much more aggressive users of my unlimited support plan than almost any other client.

Many of their questions end with a promise that they want me to perform more work – a promise that somehow never materializes.

Yet today I’m going to turn what for most consultants would have been a $100 fee into $1,500.

When I leave the client not only will I be paid – but the client won’t stop talking about the great value  they’ve received.

Unless I miss my guess this will  turn into repeat business – albeit probably only once or twice a year.

Given the choice between earning  $100 and $1,500 – which would you take? I though so. Want to know how I’m doing this?

The answer to how I’m going to earn this larger fee is contained in one word from above –  value. Read the rest of this entry »

The best way to assure that you never make any money on support is to promise  you’ll create a prepaid annual support plan for your clients — some day.

That mythical  ”some day” never seems to arrive for most of us.

Because we’re busy putting out other client forest fires. Then for a while the “pay as you go” support works pretty well.  Since you’re busy – no need to worry about changing the way you bill.

Suddenly as the economy ebbs and flows your billable support calls trail off. Clients stop calling. Without incoming phone calls you have no reliable source of income. Yet you still have the expense of paying staff to sit by the phone and wait for calls.

Think of how crazy the pay-as-you-go support model is.

For absolutely no money (unless a client calls) you staff a call center with people who will respond to a client call on a moment’s notice. If you’re not offering a support plan – clients pay you nothing for setting up this support center.

See a problem yet?

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The approaching end of the year represents a time when we should all start to come into the busier time of our business.

The last half of the year is traditionally when companies are upgrading their accounting systems or thinking of starting projects that are intended to improve their reporting.

Now is the  time when you should review the rates you’re charging to clients and consider changes – in advance of the busier and hopefully more billable year end. Since all of our costs tend to rise from year to year – it is only fair that your rates should rise as well.

With that in mind, I have several suggestions about billing that have worked exceptionally well for me (aka clients don’t complain or question).

Implement these today and I’d be surprised if you could not start increasing your bottom line $20,000 or more next year.  I’ve implemented these tips myself each of the last several years. I don’t recommend you make a big deal out of it or spend days writing an apologetic letter about how the economy sucks and you’re “forced” to make a “small” adjustment to rates.

Just “man or woman up” and get in there and adjust your billing practices. In this economy there’s no room for bashful billers. Here’s my four tips that will work for you – because they’ve worked for me! Read the rest of this entry »

One of the best sources of recurring revenues that any consulting firm has is support revenue.

Unfortunately for most firms they interpret recurring revenues as follows:

“We will bill you for technical support only when you call. If you dispute the call as ‘quick’ then we’ll remove the charge because after all you’re a good client. Because we’re bashful about billing we’re only going to charge you in 6 minute increments — and only when you call. Half the time our consultants will forget to bill that 6 minutes because it was ‘ so quick ‘. We’ll fully staff our support department with $80,000 to $100,000 trained consultants who sit idle waiting for your calls. When you decide not to call – you don’t pay a dime.”

See a problem with this? Read the rest of this entry »