(A short commentary on one of the problems faced by start-up consulting firms)
by: Mark S. Deion
Deion Associates & Strategies, Inc.
There have been many discussions about what is necessary to "engage" a client. Engaging
a client becomes even more critical for a consulting firm which is just establishing itself, especially since
the firm probably does not have many (or any) prior clients to use as a reference.
A firm should perform preliminary research to identify the types of services capable of being offered. They
should then perform a comparative analysis of these services in relationship to the services being offered
by competitive firms (if any), and they should also review the current needs of identified target markets.
A consulting firm sells professional services. The consulting firm must ascertain the value of the professional
qualifications which they are bringing to the market place. The consulting firm must also assess the perceived
value of these services from the perspective of the target market. If the consulting firm has a valuable service
to offer, then this service is what they should be marketing to potential clients.
For start-up consulting firms, the fact that they probably do not have a long list of previous clients poses
numerous problems. Since they can't identify what they've done with previous clients, they sometimes
tend to reduce the value of the professional services capable of being provided by reducing the dollar
value of services proposed. This is definitely a flaw on the part of the consulting firm, and every effort
should be made to prevent this type of "negotiating tactic" to be used when engaging preliminary clients.
Reduction of fees to engage initial clients should not be a device which is used to obtain a client base
necessary to substantiate the value of services offered. In other words, if the firm is not convinced in its'
own mind that the professional services they bring to market are valuable to potential clients, a reduction
in the consultant fees to engage clients will do very little to validate the actual value of the professional
Another way to view this dilemma would be: Does the actual value of professional services offered
increase as the firm's client base increases? It may be true that a firm's experience and proficiency
may increase over time, but are the professional services minimal at the outset, or, is the level of
client experience the only thing which a firm lacks when it first starts out.
A firm may chose to take certain steps to address the lack of client experience, but it does not seem
prudent to reduce the value of the professional services offered merely due to the fact that the firm
has minimal client experience.
A firm may chose to provide certain fixed services on a pro-bono basis, separate and aside from
the proposed work they are performing. These pro-bono services may reduce the total cost of
services provided to the client, but the for fee services are still being provided at the normal rate.
Reducing the fee creates numerous potential problems with the fee vs. value of services offered.
Providing additional services at no charge avoids this problem, and also addresses some of the
needs which start-up firms experience in their attempt to engage new clients. Charging $100./hr
and providing some additional pro-bono work is definitely different than doing all of the work for
$80./hr., although the net cost to the client may be the same.
It should be easier to refuse to do something for free, than it would be to convince a client that
the value of your services have increased by $20./hr!
A firm should determine how to adjust for a lack of previous client experience, and this should
be something which is addressed in their operating and marketing procedures. It is another
operational responsibility (similar to managing the firm, accounting, human resources) which is
required to be dealt with in order to maintain a successful firm.
Finally, if a firm does reduce the value of professional services offered, at what time will they
feel confident enough to place an accurate value on these services, and how will this be
accomplished with existing clients, and potential clients who are aware of existing fee structures?