Ralph Williams was a middle-aged father who lived
in the suburbs. His neighborhood and home were
very nice and he had a fenced-in backyard. Ralph
really enjoyed doing yard work and maintaining the
property. He liked the exercise he got from using a
push lawnmower.
There was only one problem...there was a portion of
Ralph’s back yard that resided beyond his fence
(affectionately called “the outlands”). This
didn’t
present a problem except when it came time to mow
the lawn.
The only way Ralph could get his lawn mower to the
outlands was to drag it around the front of the
house, cut through two neighbors’ yards and circle
back behind his fence. Once he was to the outlands,
it only took about 15 minutes to cut this portion of
the lawn. However, getting the lawnmower there
and back was a royal pain!
It required a lot of energy because the mower had to
be pulled without the motor running (no self-
propelling advantage) over hills and through bushes.
Additionally, Ralph was slightly embarrassed cutting
through his neighbors’ yards. The joy of yardwork
had become a chore that Ralph dreaded.
One day, Ralph had ingenious idea. There was a
teenage boy two doors down whose property
actually backed up to the outlands. It would be
easy for the teenager to take care of this – he had
easy access to the outlands. And it would be a great
relief for Ralph – he would actually enjoy yardwork
again.
So Ralph went over to his neighbor’s and saw the
teenager outside. He said, “Tommy, how would you
like to make some extra money?”
“Sure, that would be great!”
“Here’s what I need. I need you to mow the area of
my lawn behind my fence once each week. I’ll pay
you $5 each week. Sound good?”
Tommy thought about it and then said, “With all due
respect, Mr. Williams, I can’t do it for $5, but I can
do it for $15 a cut.”
Ralph was taken aback, “But, Tommy, this can’t take
you more than 15 minutes. So I’m paying you
$20/hour! Where else can you make $20/hour?”
Tommy paused thoughtfully and then asked the
million dollar question: “Mr. Williams, what is it
worth
to you to have this problem taken care of each
week?”
Tommy turned out to be a very savvy business man
(putting aside any feelings you might have that he
should have just helped his neighbor). He avoided the
trap that most consultants and business owners fall
into: underpricing the value of their
services.
If your potential clients are focused on your hourly
fees, you’re in trouble. They are trying to evaluate
whether it’s worth it to hire you based on what it will
cost them without considering what they will get in
return. So they don’t have a context for your fees.
As a result they may see a fee such as $500 / hour
as expensive. Is it? The answer is: we don’t
know.
First, how many hours will it take? The true cost
is “hours x time.” If my competitor has a rate of
$250/hour, but it takes them 3 times longer to
achieve the result, the client will pay more using
them.
More importantly, we need to help our clients see
the value of what they’re getting so they can
accurately determine if hiring us makes sense.
So back to the question, “Is $500/hour expensive?”
Let’s say that this engagement will take 1,000 hours –
so the client will pay $500,000. Sounds like a lot of
money. And it is, if the client is only going to realize
a small benefit.
What if, instead, the client realizes a $2 million
increase to the bottom line each year as a result of
your work? Sounds like a great deal to me. Context
makes a big difference.
Tommy skillfully redirected Ralph’s focus away
from “time and materials” and on to “the value of the
result.” Tommy knew that taking care of the
outlands was worth far more than $5 per cut to
Ralph.
Your job as a consultant is to help your clients see
the true value of your services. This is the way to
get paid what your worth.
Make sure you aren’t underpricing yourself, especially
when you’re helping clients in their “outlands”.
