Starting hourly when you're not clear on your value makes a lot of sense, maintaining hourly for more than your first couple of clients does not.
I've found establishing the sweet spot from a product offering perspective to be a constant work in progress for longer than I imagined. But like building any company, I'm comfortable with that, it's about establishing PMF before truly leaning into it.
Determining whether one focuses on fractional (low volume, high value) vs coaching (high volume, lower value), something in between or all of them is the PMF challenge. I'm finding that doing all 3 is some kind of product/startup maturity evolutionary funnel.
Coach the super early stage founder, build out first sales playbooks and motions with said founder post an initial seed round, consult and fractional post the series A...
Feb 11, 2023·edited Feb 11, 2023Liked by Blake Harber
I'm finding that an hourly-based model, outside of simple advisory hours, is too impractical, as one can invest a lot of time and energy in setting up a deal just to get to a point where the client wants to skimp on hours, which will also results in poorer outcomes, lower satisfaction -- and lower margins for me.
The fee or project-based model is better, but involves more risk to both parties. (Will the consultant actually deliver enough to make it worth the price? Will the client continuously push the scope and risk the consultants' margins?)
So I've recently started shifting my mindset toward a "value-based" model, where I try to understand the desired, measurable business impact of the work upfront as part of scoping. For example, if a project aims to improve a company's revenue retention rate over a 6 month period, and we agree that a 2% increase (equalling, hypothetically, $200K ARR), my project price should be a percent of that expected result. (No, I haven't figured out what percent is reasonable yet.)
Calling your shots is hard, of course, but I'm betting that if I can make this approach work I can build a reputation for delivering business impact every single time I work with a client, making pricing a much easier conversation as clients will have greater assurance of the value of the work. This will also, I hope, help both myself and my clients focus my energy on only the high-impact practices that can lead to measurable business results.
Starting hourly when you're not clear on your value makes a lot of sense, maintaining hourly for more than your first couple of clients does not.
I've found establishing the sweet spot from a product offering perspective to be a constant work in progress for longer than I imagined. But like building any company, I'm comfortable with that, it's about establishing PMF before truly leaning into it.
Determining whether one focuses on fractional (low volume, high value) vs coaching (high volume, lower value), something in between or all of them is the PMF challenge. I'm finding that doing all 3 is some kind of product/startup maturity evolutionary funnel.
Coach the super early stage founder, build out first sales playbooks and motions with said founder post an initial seed round, consult and fractional post the series A...
I'm finding that an hourly-based model, outside of simple advisory hours, is too impractical, as one can invest a lot of time and energy in setting up a deal just to get to a point where the client wants to skimp on hours, which will also results in poorer outcomes, lower satisfaction -- and lower margins for me.
The fee or project-based model is better, but involves more risk to both parties. (Will the consultant actually deliver enough to make it worth the price? Will the client continuously push the scope and risk the consultants' margins?)
So I've recently started shifting my mindset toward a "value-based" model, where I try to understand the desired, measurable business impact of the work upfront as part of scoping. For example, if a project aims to improve a company's revenue retention rate over a 6 month period, and we agree that a 2% increase (equalling, hypothetically, $200K ARR), my project price should be a percent of that expected result. (No, I haven't figured out what percent is reasonable yet.)
Calling your shots is hard, of course, but I'm betting that if I can make this approach work I can build a reputation for delivering business impact every single time I work with a client, making pricing a much easier conversation as clients will have greater assurance of the value of the work. This will also, I hope, help both myself and my clients focus my energy on only the high-impact practices that can lead to measurable business results.
Super helpful stuff here, much appreciated!