Poor Pricing Equals Poor Profits

The Money Side

In consulting, perhaps one of the most recurrent reasons for poor profits is undercharging. It's unfortunate, because it has less to do with not understanding what should be charged and more to do with the consultant's lack of confidence, insecurity, or most commonly desperation.

Let me share the story of a friend of mine named John Butler. John was a seven-figure management consultant in Dublin, Ireland, and he had been a client of mine before he passed away. John attended a conference I was hosting in Germany some years back, and over beers one night we got to talking about this vexing issue, and how so many other consultants we knew suffered from it.

John had indeed built a very profitable practice years earlier, but he had grown tired of working so hard and was considering retiring from the 80-hour-a-week job he'd built for himself. He wanted to pull the throttle back and relax a bit.

He struggled with the thought of having to let clients go, so he figured the best way to avoid that confrontation was to get the clients to voluntarily leave him instead. He decided that if he raised his prices significantly, enough clients would walk away, and if he did keep some small percentage of his clients the addition in fees would cover the losses. Near the end of one year John informed all of his clients that he would be quadrupling his fees!

Thinking that this move would surely thin out his client base, imagine the shock when he found ...

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