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Day rates

 
#1 Day rates
13/05/2013 09:54

Bushy Eyebrow Partner

Hi guys. Any advice on the following would be appreciated.

Increasingly, I'm finding myself having to sell projects to tight-fisted clients. I'm pretty experienced at that but it's all just becoming a drag, a constant uphill fight. All is fundamentally well and nothing that can't be dealt with, but I'd appreciate any tips you lot might have for dealing effectively with the following:

1. Clients who constantly want "more". They get you on a fixed price contract, and rather than trying to screw you on the scope, they constantly want "more detail" or say that they "expected they would have got more". I'm well aware of scope creep and trying to work on day rates rather than fixed prices and also the need to manage expectations and make any assumptions clear in proposals and so on. But, there seems to be a militant streak out there whereby some clients, no matter what you give them, always say they had expected "more detail". As in, one client that we did a 2-day piece of work for. Yes, that's right, 2 day. A very quick little thing. They got a 20 page report back. Yes, 20 pages of high-quality bespoke work! What was their feedback, "we expected more". And they were talking about quantity of report rather than "more" in the way of "better recommendations".

2. The proposal time-wasters. Yes, that old chestnut. The ones who want a proposal just so they can satisfy an internal procurement process for a decision they've already made to work with another consultant. I'm all aware of the need to quality leads, check there's an existing relationship and all that - but it is happening more frequently. Writing proposals that go nowhere has got to be the number 1 example of totally wasted time. Any ideas how to deal with this, guys? The "old logic" about qualifying leads and such like doesn't seem to apply as well any more, no matter how robustly one does it!

3. The "selection panels". Yes, that situation where you respond to an ITT and then get a meeting with the "selection panel" which consists of a dozen half-wits who themselves don't even know what the brief is.

4. The meeting time wasters. They want one meeting, then another, then another... but you can never quite get them to commit to the chargeable work itself. They are experts at making you really believe that you're virtually right there on the brink of getting the work... but alas, it never happens.

5. The cherry-pickers. Now I don't mind a bit of cherry picking, in fact I think it's healthy to have discerning clients. But they get you in to do the crap work. You win a decent project and weigh up the good with the bad to agree a price. Then, partway through, they decide they only want you to do the bad stuff. But it's never handled as a contractual change as such, where you could renegotiate the price. Instead, the meetings just dry up once you've done the donkey work and it sort of fizzles in a way that makes it very difficult indeed just to post out the full invoice (after all, you've not done all the work...) and you end up getting, effectively, slightly shafted.

6. The out-of-this-world'ers. The ones who, I think, genuinely actually think £100/day is a lot of money. 6 months full-time work? Oh that should be about £10K. A 10-day project? Guess we're looking at around £1,500. I can usually qualify these sort out very early on... but increasingly we're talking here about people who just have no idea whatsoever about daily rates. They think that if they're spending £1,000 a day with you then they should be getting BIG value. And I mean BIG. They don't seem to realise that £1,000/day is barely even a break-even rate! And we've got LOW fixed costs!

Anyway, that's my rant over. Thoughts/suggestions? :)

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#2 RE: Day rates
13/05/2013 19:41

Arby the Manager to Bushy Eyebrow Partner (#1)

Hi BEP

Over the past few years (and I do speak with some experience - I'm fortunate to be rather more Senior than my username and childish posts might suggest) I have developed a growing frustration with the commoditization of our industry. It seems more and more that we are stonewalled by a faceless Procurement organization who are either ticking boxes, as you said below to meet their internal exigences, or simply trying to play one supplier off against another to bring down the average price. The result? Mistrust, misgivings, cutting of costs and resultant quality issues. I do have an opinion on each of your points, based upon my own personal experience:

1) I suspect trying to maximimize utility and minimize costs has always been a human trait - and in Consulting, as many years as I have led pricing negotiations, I have seen this. I would suspect the reason why it's becoming more prevalent now is exactly what I mentioned above - the commoditization of our industry. We're no longer seen as opaque or mystical. We're now being perceived (rightly or wrongly) as transational. Couple this with the growing attitude to externalize inherent in many organizations and you have a recipe for discomfort for all concerned.

2) For the proposal time wasters - you need to be realistic. If you feel you're being wasted (and typically the signs are there if you have the right internal intelligence - or even external intelligence if you have the right dinner table discussions with your partners) then simply do not participate unless you have a strategic intent to do so. There is a growing culture in Consultancy that if you throw enough darts at the board, you'll hit bullseye and this translates into wasted efforts, endless loss reviews and a demotivated deal team. I have previously withdrawn from a competitive Rfx process simply because I knew the incumbent was so strategically well positioned, and ultra-price competitive, that it was simply impossible to do so

3) For me, a selection panel for an Rfx who do not understand the value a supplier is bringing is a good indicator that either the client is not serious about the project, does not consider the project strategic or important enough or does not consider YOU as strategic or important enough.

4) There is a near universal perception that it's bad to say to a client "if you want us to complete this work for you, then you need to pay us". Worded politically, but firmly, you'd be surprised how many clients will baulk and re-consider whether the relationship is really as equal as they would like to think it is. Of course this depends at what level the discussion is. If you're job is business development - you're always going to have discussions - it's life - however if you're staffing people, putting in hours, producing deliverables, then it's time to make the call about whether the relationship is really worth the time. If they are not biting, walk away, bring different faces, examine your game to see whether you really understood the issues.

5) Here I think YOU need to be stronger. Change in scope = change in contract = change in price. I'm afraid that if you're not covering your ass contractually, and the relationship is not sustaining you, then it's human nature you will be shafted.

6) If you're wasting time discussing the merits of 100 GBP per day, you're talking to the wrong people or - maybe - the wrong client.

Just my two cents in any case...

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#3 RE: Day rates
13/05/2013 20:23

Bushy Eyebrow Partner to Arby the Manager (#2)

Thanks Arby, it's good to know I'm not alone in this. The £100/day thing was an exaggeration to make the point, but more truthfully it seems that defending £1,000/day is becoming quite difficult whereas in years gone by I could effortlessly get projects with day rates of £1,500+ (which was obviously worth more back then because of inflation). This sort of pressure on day rates is becoming really problematic.

Contractually we do cover ourselves but it's always difficult to say to a client that something hsa changed therefore you need to renegotiate the price. I'm actually just fine with talking about price and that sort of thing - no problem at all being tough with it - but clients seem to be getting far, far FAR more clever these days about how they go about cherry picking. They are becoming extremely slick at positioning things so that, by the time you know they've been cherry-picking, the project is, in effect, "over", and you don't stand a chance of getting anywhere if you go back and say "hey you owe us £XXXX because you didn't do the proposal in full". It sounds so easy to deal with when I write it like this, but in reality it's becoming extraordinarily difficult.

I hugely like your comment that "Worded politically, but firmly, you'd be surprised how many clients will baulk and re-consider whether the relationship is really as equal as they would like to think it is." I think I've gotta start doing more of that - calling time on the time-wasters.

As for the proposal time wasters, you're right, I just have to get better at filtering them out. But these chameleons are experts at disguising their intentions. The problem is, I often don't know I've been duped into making up numbers for an RFP exercise until I get the dear john letter. Business is OK but we're more in "survival" than "thriving" mode right now, and as you know it is VERY difficult to turn down an ITT/RFP when it comes along... even though, hand on heart, you know you're not going to win it. After all, there's always that 2% chance that you might win it...

But my main problem is the ones that just want more more more. They kick and scream blue murder and start firing off in all directions, trashing reputations and everything in their way, just because you "only" fulfilled your brief and your 10-day assignment "only" generated about 200 pages worth of extremely high quality deliverables. It's like, in those 10 days, they expect you to actually turn the business around, as opposed to recommending how they might go about doing it. Do you see what I mean? It's like we might recommend to a company how they could enter a new market... and then the client will complain that they're disappointed because all we did was make recommendations and we haven't got them into that market (as in, like, actually set up in there and generating sales!!!!) so they'll settle for us giving them a bit more detail and redrafting the report a few more times! It's becoming dire, things never used to be this way. I'm seeing it in other companies as well as our own, clients are becoming so expensive to service that they're actually starting to become non-viable.

Whatever happened to the good days when you could make a decent profit in this line of business? Many moons ago, consultancy used to be compared alongside banking when it came to profitability; there was serious money to be made. Now, increasingly, we find ourselves squabbling over minutia with clients that earn more than our own staff do.

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#4 RE: Day rates
14/05/2013 10:16

Anon MCs to Bushy Eyebrow Partner (#3)

Hi Bushy,

Without wanting to dabble too much into my own past, my dad ran his own company for many many years until his retirement.

I also have worked in areas of banks where I am in close working relationship with the boys and girls who serve clients worth £20+

The fact of the matter is that ALL businesses have been forced to tighten their belts. All of them. You talk to any Relationship Manager in the banks and they will tell you the same, clients on average are having to work that much harder for the same £1 as pre2008 or the 1980s/1990s. Moveover, cost:incomes are so tight that invariably the pressure put on Senior Managers will flow down to you guys and others. When you are having to let go some good people (and to be fair, some not so good ones) it becomes that much more critical to get more from those £1k a day consultants.

I have helped the business side on the decision making for MCs of choice and I have been an MC myself, hence can see it from both sides

Anyway, rant over

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