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Guest Post: Avoiding the free advice trap

Posted by Colleen Wainwright on

Colleen's note: I met guest blogger Donna Gordon via the Ask Liz Ryan
group  on Yahoo. She is a
shining example of how to use social media well—i.e. be brilliant and
helpful, and people will come to you. She's also a smart cookie when it comes to business in general. As with her previous guest post on networking etiquette, Donna's tips on good consulting practices were so awesome, I asked if she'd elaborate for our readers on the blog. Here are the (fantastic! awesome! thorough!) results.

Okay all of you self employed and small business owners, you’ve got that hot prospect at the table, and you’d love to get the project.  Then comes the question, “What do you charge?”  Seems like a simple question, but one fraught with landmines.  At what point does a meeting to pick your brain for ideas turn into a paying assignment?  Are you seeing lots of tire-kickers these days?  Do initial meetings turn into non-paid consulting sessions?  If you’ve been in business for any length of time, you have wrestled with this problem.  

My ‘aha’ moment came after tracking every 15 minute block of ‘work time’ for almost 2 months.  I was astounded at how much non billable time was spent on prospecting, meetings, and other things that did not produce a check.  It was then that I had to re-assess my service offerings and the kind of clients I was pursuing.  Here is my list of best practices:

1. I state in my marketing material and in my initial contact that the first hour is no charge, after that my hourly rate applies. If you are not doing that, start now.

2.  Meetings with clients is part of the service you provide.  Clients are not only paying you for your work, they are paying you for your advice and experience. When you are quoting them on a project, have a discussion about how frequently and how often correspondence needs to occur.  Some clients just want an occasional email update, others prefer face time with each step of the process.

3.  If I could have my way, everyone would be charged by the hour.  This eliminates the problem of ‘scope creep’ where you start in one direction, and the client/project changes direction in mid-stream.  However, most clients want to know what a project is going to cost before it begins and often insist on a package price.  A detailed scope of work is essential to both client satisfaction and fair compensation for you.  Each step of the project should be lined out in a spreadsheet, with start and end date, estimated hours, and rate.  Whether you share this with the client or not depends on the circumstances, but it does get you in the ‘time as money’ mindset.

4.  It’s okay to say, ‘I can’t quote you a price at this stage.’  If your client cannot clearly articulate the scope needed, consider a trial hourly basis.  Offer to spend 5-10 hours at an hourly rate, preferably paid up front, (a good litmus test as to how serious they are) with a completed detailed scope of work once the initial research indicates the preferred path.

5. Consider how much time you spend getting a client vs. how much you are paid.  These meetings and working out the scope of work in detail is time consuming, and may land you with a, ‘never mind thanks for the advice’, or ‘can’t afford it right now’ response.  This was my issue, and as a result, I have a general policy of not taking on projects of less than 20 hours.  Any less than that does not fairly recoup my time getting familiar with the client, the industry, the problem to be solved and my proposed responses.  I will take on occasional smaller projects, but at a premium hourly rate.

6. Ask for advance materials before an initial meeting, when applicable. This forces the prospect to put some thoughts in writing, and while it adds to the 'free hour' it gives a good idea where they are in a process and allows you to spend that free hour talking about how you can help them vs an hour hearing their story.

Finally, be sure to communicate the value you are providing the client each step of the way.  Always shoot an email summary of the discussion with your action items after any ‘meeting’ whether a 10 min phone call or 2 hour session.  This reduces the possibility of misunderstanding and serves as a reminder of why you are valuable to them. (and serve as a reminder come billing time how many times you communicated with that client if you are not writing everything down every time!)

Do all of the above steps guarantee you will never have a billing issue?  Sadly, no, they come with the territory.  But working through these steps should get you thinking about how you present your business to your clients, and how you get paid for ALL of the value you are providing!   Additional comments and advice on how to avoid the free advice traps are welcome!

For more than 10 years, Donna Gordon has been dedicated to helping
entrepreneurs. As founder and president of Investment Resources, she
taps her vast network of contacts and information sources to help
businesses start, grow, expand and acquire. She's counseled hundreds of
clients in industries ranging from banking to life sciences and is
often invited to speak on the topics of profitability and Internet

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