This is one of the most common questions I hear from coaches and consultants when they think about working with corporate clients.
They can’t find an easy baseline rate of what others are charging in their niche to compare themselves to (and in any case, this is a terrible idea because it opens you up to a race to the bottom pricing).
I always tell my 1:1 paying clients to charge based on the problem they solve.
This is different from the advice of many sales gurus who will tell you to charge based on the value you bring.
Because by itself, the statement “the value you bring” is too vague and too nebulous to give clear direction.
What value is a 1-day workshop? Or a 6-months executive coaching program? Is it the value to the individuals you will work with, their teams, or the wider business? Who establishes what the value is? How is it calculated? What is included and what is not in assessing the value? Where will this value manifest itself and how can it be tracked?
False assumptions around pricing your work
And of course, saying “price based on the value you bring” still doesn’t tell you what figure to actually quote to a prospective client.
This kind of nebulous thinking about value leads to fuzzy statements by even large consultancies. In my field, employee engagement, I frequently see things like “we encourage engagement and user uptake for any change transformation projects, particularly around culture and engagement. Employees can share ideas, opinions, and feedback to embrace the art of true co-design and feel enabled.” What on earth does this mean, what does it look like on the ground and what value does this have to the business and the employees? (*This is a direct quote from one of the world’s largest consulting firms, proving that size does not equate to the clarity of communication or quality of the offer*).
What I suggest instead
My approach instead looks at the problem you solve for your client and establishes how much solving this problem is worth to the client. Based on this, you can calculate a price that gives them a return on their investment anywhere from 1:8 to 1: 25-ish (greater than that and your offer becomes too good to be believable).
Let’s break this approach down into its component parts.
The Meta – Level: The problem you solve for your client
The first part is the problem you solve.
Most people look at the problem they solve on a meta-level. They say things like “improve leadership communication”, “empower new leaders to make difficult decisions”, “help women leaders have a better work/life balance”, “support employees to resolve conflict at home with their teenage kids”, “help employees avoid stress and burnout”.
The value of resolving these problems varies significantly from company to company (and even from team to team within one company – I call that the horizontal variance).
Taking the example of a wellness coach specializing in stress reduction. If this expert works with a business with 100 mildly stressed employees, their work on reducing stress will probably be welcomed but also but not necessarily valued very highly. The employees were not that stressed to start with, so you are solving a problem that wasn’t terribly pressing. Thus they are probably less willing to pay top dollar (of course, there are great companies that invest top dollar in preventative measures to e.g. keep their employees from ever getting very stressed).
If the same coach works with an organization with 100 highly stressed and hard-to-replace employees, most of whom are thinking of quitting their job, the business will see the value of that work in a very different light. They have a very pressing problem, they know the impact of their people being stressed on productivity and are worried about losing these valuable employees. They are likely to pay top fees to get help with reducing stress in their business.
So the circumstances in which you offer your work matter.
But before we get into setting out how to calculate your fees, you also need to consider what specific, detailed results you can bring on a micro-level.
The Micro – Level: The results you bring to your client
This is the second component.
How can the big solution (improve leadership communication, reduce stress, etc) be translated into explicit, observable results and what is the hierarchy of how you resolve them?
Continuing with the example above, the first result the company might see when working with the wellness coach is a reduction in the self-reported feelings of stress by their employees.
They might then notice a reduction in sickness absence. Over time, they should see an increase in productivity (for example more targets are being met) and a reduction in people leaving their jobs. They even in time notice a positive change in their company culture, though that is harder to prove.
Taking the second component, delivering the results on a micro level, you can work out what level of work you need to do with a client to get them there. A one-day stress-busting session is not, for example, going to resolve all stress-related issues in a business in the long term. A longer engagement is more likely to be needed. However, a one-day stress-busting session could give attendees the tools they need to reduce their daily feeling of stress by say 3-5%.
Putting this into practice
Now, this might not sound like a great deal (and actual stress coaches might tell me that much more can be achieved) but for the sake of calculating some numbers, let’s stick with conservative figures.
In the case of the wellness manager focusing on stress reduction, let’s assume you work with the employees of a technology company whose 100 highly skilled senior software developers are stressed and nearing burn-out.
Statistics show that being stressed reduces productivity by 34%-40% on average. At an average salary of $50,000, stress-induced productivity losses alone cost the business $17,000 – $20,000 per employee per year. That does not even include the cost of healthcare or having to replace those who leave.
If your one-day stress reduces the self-reported feelings of stress by say 5%, this would mean the business could save around $250,000 per year in productivity losses alone.
However, you might say that the results from a one-day session without follow-up work might only last for a shorter time period, like 3 months. In this case, the savings for the company would come down to $62,500 for the year.
What outcomes can you expect to see?
Your actual pricing for the one day would depend on the results you can achieve.
If you are confident that your results are lasting, you can easily charge $15,000 for your 1-day session (I have students that do this) and the business would see a healthy return of 1:16 for every dollar invested.
On the other hand, if you want to be more conservative in your estimate of the results or are just starting out, you could charge $5,000 and even with an improvement for just 3 months, the organization will see a healthy ROI of 11.5:1! (I typically recommend students start off with offers that range from $5,000 – $15,000 for a one-day equivalent piece of work).
Of course, you can apply the same logic to longer pieces of engagement, which by the way, come very easy once you impress them with your initial work.
Not only does this approach take away the confusion around what “value” you bring and how to calculate the fees for your offer, but it also provides you with a simple yet effective way of communicating that value in a way that is specific and detailed for your prospective client so that saying yes to your offer becomes a no brainer.
What I can offer you
In my 3 months of 1:1 work with paying students, I hold your hand to work out exactly each of the components: the meta-problem, the micro problem, and the value to the business of the results you deliver. Once we have this established, I help you determine the best price to put on your actual offers so that you get a fast yes (and most of the time, that is NOT the lowest option!).
I also help you determine which niche is best for you to get started straight away, I work with you on your marketing message so that you attract only those prospects who are right for you, guide you on how to leverage your network without ever worrying about being sales-y or desperate so that your diary is always filled with exciting prospects and teach you how to have simple but effective sales conversations and create proposals that convert at approximately 80% of the time.
Following my program you should be able to generate 2-3 conversations with prospects per week, typically starting with email/LinkedIn messenger, then moving to discovery calls and closing 1-2 new clients per month @$5k-$15k while delivering repeat work at $8k-$25k+.