Value-Based Fees: How to Charge—and Get—What You're Worth: A Guide for Consultants, Second Edition

4.5. SOME FORMULAS FOR THE FAINT OF HEART

I'm always being asked, "Well, you must really estimate days, right?" Wrong. I only estimate client value and my contribution to it.

I'm aware, however, that many of you will prefer help in the form of analytical science until the more intuitive art kicks in. (Don't forget that there is nothing wrong or unethical about the art form of value-based fees so long as the client believes that the resultant value more than justifies the investment in your help in gaining it.)

So for the first time anywhere, here are a formula and some other criteria for establishing value-based fees. While the engineers in the audience won't be pleased ("What's after the fourth decimal place?") and the lawyers will be discomfited ("What, exactly, do you mean by a 'fee'?"), I think the rest of you will at least be happy with the framework.

The Step-by-Step Choice of Yeses

Step 1:

Establish the value with the economic buyer in the conceptual agreement phase, after ascertaining objectives to be achieved and the measures of progress. (Questions to ask for the conceptual agreement components appear in the appendixes.)

Step 2:

Establish your own value based on your uniqueness (why you, why now, why in this manner).

Step 3:

Create your options, clearly delineated by increasing value. They may be cumulative or mutually exclusive.

Step 4:

Given the value of the project, estimate a profound and significant return on the investment, working backward. In other words, if ...