The driving force behind what we do is not usually money — at least not for the most successful IT consultants. If money is always your motivating factor, then you’re likely doing one or more of the following activities:
- Getting bogged down with too much work.
- Pricing yourself too low just to get work.
- Losing power in the negotiation dance.
- Accepting work that doesn’t interest you.
- Taking on work that doesn’t fit your qualifications.
All of these behaviors can be dangerous to your consulting practice. Taking on too much work, work that doesn’t interest you, or work you’re not really qualified to perform can cause you to fail on one or more engagements. Not only will that mean no more repeat business from that client, but word travels fast and your reputation as a skilled consultant may be irreparably damaged. You also don’t want to short change your skills by pricing yourself too low or constantly making concessions during negotiations. Once you lower your fees, it’s really hard to raise them, especially in this economy.
So how do you know what clients to take on and which ones to turn down? How do you know when to stand firm to your goals and when to bend for a customer just to get their business? And how do you know how much to bend without hurting your consulting practice and reputation? I don’t believe there’s a pat answer for each of these questions — you need to weigh each opportunity separately, while still remembering the overall focus of your consulting practice.
I recommend that you ask yourself the following questions when you’re considering new clients and projects.
Do I have the ability to take on more work right now?
This should always be your first consideration. Taking on too much work may seem enticing from a pure revenue standpoint, but like any business that grows too fast and collapses, the same could happen to your consultancy. Taking on too much work could cause you to fail with one or more clients and that can be disastrous. Studies have shown that one failed client can affect on average three potential engagements due to word-of-mouth and lost follow-on work. If too much work causes you to fail with two or more clients at the same time… well, you do the math. The results can be devastating.
Am I comfortable with this technology or niche?
It’s tempting to take on a new client that will have you work in a niche or cause you to use a technology that you’ve wanted to try but don’t have the experience with yet. There are three ways you can go with this one:
- Take on the new work, learn on your feet, and hope for the best.
- Explain your experience concerns and give the client a deal on your rate.
- Skip this client and move on.
The path you take may depend on the project. If the project has a slow ramp up, you may have time up-front to familiarize yourself with the technology as the project is getting started. It’s not likely, but it’s possible.
My recommendation is to choose either the second or third option. I’m not a believer in fee reductions just to gain work — it can cheapen your consulting practice. However, when you explain that you’re doing it because you know you can do the work successfully, but you know there may be a learning curve and therefore you’re reducing your price for them by x%, then I feel that is an acceptable route to take. (Also read: Should you charge more when you don’t know what you’re doing?) As for option three, it’s your call.
Is price an issue?
If you know the customer can’t afford your regular rate, then you have a tough decision to make. I don’t condone cutting rates just to get a client on board; however, if cutting your rate could lead to an opportunity for long-term, repeat business, or to acquire some new, marketable skills, the project may be worth considering. Be sure to explain to the client your reasoning for lowering your rate for them.
Is there a potential for repeat business with this client or their partners?
I briefly discussed this under the pricing question, but the topic warrants a closer look.
I once took on a consulting role with an organization that needed help getting a handle on their resource management issues. I could see that I was walking into a situation where the customer really didn’t know what they wanted and may be slow to move along on the engagement. I prepared my proposal and estimate for them and set it up on a retainer payment basis. It was a bit of a risk, but it paid off for me in several ways:
- I worked quickly on what they needed at any given time, but they were slow to move forward.
- They paid me every two weeks (in advance) no matter what.
- I was able to take that extra time to suggest new processes that I could help them with, which extended the engagement.
In the end, I had a long-term engagement with the client that was essentially a well-paid part-time gig; the client got everything they needed out of me and then some; and they were completely satisfied and have been a periodic repeat customer.
Conclusion
It takes some time to read clients, but the key is to assess each engagement for what it is and look for what it could be at the same time — this will give you some insight into the possibilities for repeat business. Then you can weigh price, current commitments, and the client’s overall needs to see if it’s work you should take on.