Mark Wainwright 0:00

There comes a point in most client-consultant relationships when the consultant needs to ask for more money, and it can be tricky. How do we navigate these conversations? Let's talk about it in the podcast

John Tyreman 0:32

All right. Welcome doer-sellers, marketers, firm owners, consultants of all stripes to another episode of "Breaking Biz Dev." I'm John, he's Mark, and today we're going to talk about how to ask for price increases. This is gonna be a fun episode, Mark.

Mark Wainwright 0:48

Yeah, I have multiple immediate situations in my consulting work. I deal with this all the time. there's a ton of energy, a lot of focus that goes into the original proposal. Sometimes there's these big documents, sometimes there's interviews, strenuous sort of intense negotiation around price and scope and all that kind of stuff, and there's so much energy that's put on that. But, you know, fast-forward six months down the road or so, and everybody looks around and says, "Oh, shoot, we have to go sort of, kind of do that all over again." And they, they don't put near the amount of energy and attention to it, and it doesn't go well.

John Tyreman 1:30

Asking for more. So what does that look like, Mark? I mean, there's a few different, like, uh, you can ask for more in a few different ways, and we've got a couple of kinda like different scenarios here. So why don't you paint a picture for our audience? What are we talking about?

Mark Wainwright 1:42

different industries have, different situations, maybe project-based firms, you know, engineering firms, architecture firms, you know, all that kind of stuff, right? It's, it's they'll have these things called, uh, additional service requests or additional service agreements, it's some, some amount of work that, that was maybe unexpected, maybe outside of the scope, they have a, a process that they use to, go ask for more, maybe there's change. These are also called change orders, you know, that are driven by changes in scope. that's a term that, people use. we're also talking about annual increases, and I have worked with wealth management firms in the past, and, you know, they'll charge their clients a, percentage based on their assets under management. And at some point, those relationships, you know, could be early on, it could be a years-old relationship. Sometimes they have to go back to their clients and make an adjustment in that, in that percentage. Um, and I, I've experienced this in the work that, that I do. We've talked a little bit about, how I structure my business. I'm based on a, on a set monthly amount that is, agreed to with my clients. And if I work with clients long enough, I start looking at that number, and I say, "Hey, we might need to change that." I don't know what's... You're, you're, you've done a similar thing, yeah?

John Tyreman 3:07

Yeah. Just recently actually I've, uh, my business has grown to the point where I've had needed to increase my overheads, bring on an accounting firm, um, start to hire some folks to help support service delivery. So I've, I've had to recently go through this, and I think that's one of the reasons why I think this was top of mind in bringing this up in our conversations. But yeah, this is a, this is a tricky situation. It's really tough to navigate, can be very stressful. and then it's a challenge in communications and expectation setting. So yeah, this is, this is definitely top of mind for me.

Mark Wainwright 3:40

for sure. And, and then there's just one last little example that, I frown upon, that whole hourly billing thing. a ton of organizations and professional services, have hourly rates that they base, you know, when they're selling themselves, 60 minutes at a time, And a lot of times those, those rates are impacted by cost of living increases, you know, just regular annual increases to kind of keep pace with inflation or, you know, promotions or whatever else. and you could be an individual that's been working with a particular client for a long time, and you've had a particular hourly rate, and they're fine with that and everything else. And then, it's like, "Hey, it's Bob. Same wonderful relationship. We love working with you guys. By the way, I've got an increase in my hourly rate." And they'll say, "Wait, so we're gonna get the exact same thing from you this year that we got last year, but we're gonna have to pay more for it?" And Bob says, "Oh, yeah. Yep.

John Tyreman 4:28

Sorry.

Mark Wainwright 4:29

Sorry."

John Tyreman 4:30

It's really uncomfortable for everyone. So the-- I guess, Mark, like w- how have you approached this in the past? And maybe I can share how I've approached this in the past too.

Mark Wainwright 4:41

sure, the fundamental problem here is that it's like you said, it's just uncomfortable. It's hard, one of the initial things that kind of happens is people get emotional. Uh, they get defensive. You know, they, uh, if you're a consultant, you try to rationalize, this, this extra amount. If you're a client on the other end of it, you know, you're dealing with constrained budgets. You're dealing with, results that are still slightly beyond your, your reach. You know, you're, you're trying to work towards this thing, and then, you know, you get hit on the side of the head with some random price increase that was kind of unexpected, right? So that's... The, the, the problem is that it oftentimes catches everyone off guard. It's oftentimes kind of just, just unexpected. We haven't, we haven't prepped well enough for it, so it's kind of unexpected and n- it's, it's nobody likes it, right? That's the fundamental problem is that actually the consultants don't like asking for more money. They're like, they just wanna deliver the work and get paid for what the original amount was, and we're fine. The clients don't like to get this. So it's just a bad situation, right? That is the fundamental problem is that nobody's happy about it,

John Tyreman 5:47

I suppose like, at least in my experience, what happened in my, my case where I needed to go out and, and ask for more for a price increase was because I'm bringing on overhead. Um, but there's also the scenario that has happened to me in the past where we agree on an, in a, a scope of work, but then that scope of work just kind of like balloons a little bit. You know, it, it, it expands in areas we didn't anticipate at the onset. And like you, Mark, I operate on a fixed monthly fee as well. And so the-- if the scope increases to a certain point, you know, there's natural breaks where it makes sense to like come together and have that conversation. So that's kind of how I approached it was w- after that 12-month contract, "Hey, let's take a look at the work we've done. This is what, this is what we're gonna need to do moving forward. Here's a couple options," and we'll get into that down the road. But that, that's kind of how I approached it.

Mark Wainwright 6:43

sure, sure, sure. Things change, right? There's the, the, the scope changes. We were doing A, B, C originally in this first period of time, month, year, whatever it was. Now we're doing B, C, and D, and D's more complex where we're doing A, B, C, and D, or we've added that, you know. So it's, they're shifting situations. So, so it happens because the scope kind of changes.

John Tyreman 7:10

And w- what's fr- what's frustrating to me-- Hold on, Mark. Before we go on, I just, I just, I, I just gotta get it, get this off my chest. What's frustrating is, is I've had this, this one client and, um, we agreed on a scope of work, started down that, down that path, everyone's happy, and then a month later, "Oh, w- w- let-- we need to do this. Let's do this. Let's do this," from the client. And it's like, we just talked about this. We just talked-- That's, that's out of scope.

Mark Wainwright 7:35

And that can be driven by an, bunch of different things. And, and one is, a word that we touch on quite frequently is, assumptions. if you are not clear enough up front, the client can have some assumptions that certain, certain elements, certain things were just part of the deal. You know, they were just included. And it takes a little bit of time, I think, for everyone to get more and more clear that, oh, in fact, it was not. So now you're wrestling with this as a consultant, you're wrestling with it and you're saying, "Oh man, I want to keep this client happy, so maybe I just wrap that in." consultant's looking at it going, "Wow, that's a good bit of work. I don't know if I can. I want to keep those folks happy." So there's a little bit of wrestling there. So it brings some added tension to it as well. another driver of this, I kind of touched on this before, is that, you know, just annual increases, in some situations, this can be sort of, there can be like a multiplier effect in that maybe there's a team of consultants, and a lot of times if people are familiar with this, like in the world of, you know, large engineering projects or architecture projects, whatever else, you'll have a, sort of a central consultant, you know, they'll refer to it as the, the, the prime consultant who is sort of the lead consultant, and then those folks will need to go and hire a bunch of sub-consultants, other people who have other expertise that need, need to, to, to be brought to bear on the, on, on, on the project. And the multiplier effect is, like it's not just you, it's not just your organization, right? All of those people who are working underneath you as collaborators or sub-consultants, you know, come knocking, right? So it's not just you having to go. It's like you have to go on behalf of like a team of a dozen other consultants who are like, "Yeah, we're all asking for a little bit more," and everything rolls up, and all of a sudden the client's like, "Wait, what?

John Tyreman 9:22

I've definitely experienced

Mark Wainwright 9:23

yeah. So it's, so, so, so all of that, that's, that's what happens, right? So, um, that is the biggest challenge. So

John Tyreman 9:32

I do wanna call out inflation being one. And I kn- uh, and I know that it's, it's kind of a, a footnote, but, you know, a dollar today only buys about 72 cents of what it did just 10 years ago

Mark Wainwright 9:45

particularly in these longer term relationships, we will underestimate or underprice this sort of inflation, right? We will, we will under- So if we're involved with a client for five years, 10 years, whatever else it is, that's a long-term relationship, right? maybe for the first five years of the relationship, we've completely underestimated, maybe not even asked for an increase or just underestimated this. So now we're at a point where it's, there's a painful situation where the delta is huge. if we'd have actually just kind of gone back every single year and sort of had that conversation, things would be better. But now there's a big gap,

John Tyreman 10:19

right, so let's navigate. How do, how do we get through this?

Mark Wainwright 10:22

you and I deal on the, sales and marketing end of things, John, so obviously we're hyper-focused on the front end, like what's happening upfront, you know, upstream of all this stuff, clearly we're gonna, you know, shine a light on that. We're gonna, we're gonna highlight that. So just like with the original sale, we have to use great discovery even while we're under contract, as we're developing these new scopes, added scopes, expanded, you know, whatever else. Things are gonna lead to these, conversations where you need to ask for more. We need to use good discovery, and discovery involves understanding what is most important to the client so that we can then price those things. And then we have to use great three-option proposals with, this spectrum of recommendations when we go ask for more money. We cannot default back to the same old behaviors, even if the original contract was done well. Good discovery, good understanding led to s- you know, three-option proposals with great recommendations. The client picked option B, you know, everybody was happy, but now at some point in the future, we're needing to ask for more 'cause things have changed, things have grown, whatever else. We can't default back to that, "Oh, I'm just gonna give them one number and have them say yes." What happens when we give them the one number and we're sort of, you know, un- you know, we're in a relationship now, we're under contract, right? If we give them one number, we-- I mean, even to a, to a more severe degree than previously, they feel like we're forcing their hand because we're already under contract, that we've got sort of one arm behind, we've got their arm twisted behind their back, and we're the consultants and we're just gonna come in and we're gonna work them over again with one number, we're gonna push them, and they're, they don't have any options. Like we've already done whatever, 50% of the work already. We can't change now, and now they're asking for more. So ugh, that just, that just erodes trust and just beats up the relationship.

John Tyreman 12:40

I think you bring up a, a really good point about, and I just wanna highlight this for our listeners, is that price increases, expanding scopes, redefining that, setting those expectations is, should be treated just like a new business development opportunity, a new sales opportunity

Mark Wainwright 12:56

even before we have to go ask for more, if we're doing these great three-option proposals ahead of time, we're foreshadowing the future properly with our three options, everything else, we will find ourselves in these sticky situations less and less. And then when, you know, the situation comes up where we have to ask more, you know, we've got that information to, to, you know, kind of fall back on. We've talked about this in the past, is that if we do great three-option proposals ahead of time, a lot of times our high priced option, the third option, whatever you want to call it, sometimes it's the first option, but the high priced all-in option is the, is the tool that we use to foreshadow the future, right? So if we've ha- if, if we've put that in front of the client and they opted for, you know, option B, but they looked at that high priced option like, "Wow, there's no way we're gonna end up spending that much," you have that tool that, that everybody looked at together a year ago or whatever it was, and now you're gonna sit down and review things and you're like, "You know what? We picked option B, but we f- lo and behold, we found ourselves wandering towards, you know, this, this high option." So we're there right now, right? We're at this high option because we had these two or three things that weren't gonna be incorporated into that high priced option that you opted out of, you explicitly opted out of, and now here we are, right?

John Tyreman 14:15

I, I wanna link this to specialization and having a process, a delivery process, because if you have past experience and you are specialized in a specific industry or delivering a specific kind of result, then you're in a better position to be able to anticipate what those changes are or what those new levels are, what that option C is. So, there's another benefit of specialization and being hyper-focused on a specific slice of the market

Mark Wainwright 14:43

No, it's great. That's a good point to interject right there for sure. You're super in tune with the work you do, the results your clients get, and any deviation from that, you know, you're immediately aware of, right? Like, "Oh, we're headed off track here," right? We're not-- We're, we're, we're, we're veering to the left slightly, so not, not

John Tyreman 15:01

Been there before, totally. I wanted to add another kind of bullet point to how you can navigate price increases, and one of them is to sell that higher price offering to new opportunities. So if you found yourself in a position where... I'll speak to my own experience. I priced my services a few years ago around me, myself being a solo consultant. But as the business has grown, as I've gathered more experience, I've been able to realize that, you know, I need to increase my prices. One thing that I can do is replace old clients with new ones at that higher price point.

Mark Wainwright 15:41

You're listening to breaking biz dev

John Tyreman 15:43

the podcast that beats up, breaks down, and redefines business development for the professional services firms of tomorrow. Your hosts are John Tyerman, founder of Red Cedar Marketing, the podcast marketing company for experts and professional services firms,

Mark Wainwright 15:57

And Mark Wainwright, principal consultant and founder of Wainwright Insight, the fractional sales manager and sales consultant to professional services firms.

John Tyreman 16:07

If you find this podcast helpful, please help us by following the show and leaving a review on Apple podcasts

Mark Wainwright 16:12

and now back to the show. let's get slightly more specific on this, and I want to kind of talk through sort of a scenario,

John Tyreman 16:21

Are you gonna quiz me, Mark?

Mark Wainwright 16:22

Sure. I'll cr- I'll quiz you a little bit, John. All right. So if we're gonna, if we're gonna give them some, give them three options at this point, And just say we're gonna give them like a low option, a high option, and then sort of a, a middle option. what would the low option be?

John Tyreman 16:38

I would look at that as redefining the scope of work at a lower price point. And I would... It, it's a total lower dollar amount, but it's total, it's a less l- less of value that they're receiving, but it's a way to recalibrate the scope of work to something that's manageable on the delivery end, but also satisfies the need for a, you know, a lower price point on the client's end.

Mark Wainwright 17:05

Good. A-plus for sure. Gold stars. So, so yeah, just to dig a layer deeper into that, and maybe this example applies more to sort of a longer-term engagement where we're just sort of walking alongside the organization and we're, you know, whether it's a retainer or whether it's just sort of a, consistent relationship we have So our low option is we're gonna carve out a bunch of stuff that we were doing before, pull out some scope, and then we're going to reintroduce a lower price that doesn't include some stuff we were doing before, and maybe some of that stuff was high value and maybe it wasn't. You know, maybe we were just spinning our wheels doing, you know, a fewer, a, a, a handful of different things with this client that really wasn't making much of an impact. So maybe we can carve that out, refocus on something that is of high value and high importance to them. Lo and behold, we end up with a slightly lower, lower dollar point here. So in this scenario, there's our, there's our low option. Now let's swing the pendulum to the other side. What is the high option,

John Tyreman 18:08

yeah, and this is kind of what I was alluding to earlier in, um, having that specialization and being able to anticipate what the maturity of your clients looks like. So I can speak to in, in my world of helping clients with podcasts, I know that there's certain levels that can be unlocked as the, a media brand grows. So audience engagement becoming more and more like you need to spend more time engaging with your audiences on the high end, right? Or you start to develop sponsorship opportunities that take bandwidth to be able to manage. So those are like a couple examples, and then so th- that's what I would do is on that high end, let's take a look at what mile markers are we hitting, what mile markers do we anticipate hitting in the next six to 12 months, and then how would the scope of work change if we hit those milestones?

Mark Wainwright 19:01

Got

John Tyreman 19:02

That's kind of how I would approach it.

Mark Wainwright 19:03

Yeah. Good, I have a, a second alternative to that. Like the-- so, so, so the first option was this carve out, you know, carve out a bunch of scope, offer up for a lower dollar amount. This high option when we swung to the o-other end, and maybe this is a relationship, maybe it's a project-based, may-may-maybe it's just a long-term, long-term relationship, whatever else it is. So from the get-go, we have, from the time we signed the original contract, we have noticed that the client is, you know, pushing the edge of the scope, right? And things have kind of almost, you know, almost un- you know, subconsciously sort of expanded with time, right? So the high option at this point, now that we're at this inflection point and we say, "Okay, we need to have a conversation," the high option can be sort of a worst-case scenario that says, "Look, over the last 12 months, the trajectory of our work together has taken a, you know, a completely different tack than, you know, what we originally expected," right? We're just, we're 10% over here, we're 20% over here. We're just, like, it's just const- like the, the line is not headed the way we all thought it would. It's, you know, it's increased, and the line is steeper, right? You're looking at our graph here. Um, if this continues, here's where I see us kind of ending up, right? Here we are, year one. Year two, if we continue along this path that we've been on with things expanding, here's where we could, here's where we could end up. And lo and behold, that's a big number, And a lot of times you won't. A lot of, a lot of consultants will just freak out. They're just like, "No way that I, I am gonna put that big number in front of these guys because they're just gonna freak out," right? No way. But that's our high option, Okay, John, here's where you bring it all home, right? So, we've given them the low option where we carved out just this little chunk of scope, lower dollar thing. The high option is like, "Look, we've had so many changes," whatever else, "the tra- the, the, where we're headed is really expensive." And then we come back to our wonderful Goldilocks, our middle option, which is the thing that says, "Look, if we both make better decisions, manage budgets, manage schedules, everything else, all that stuff, here's where I think we can be in this next 12 months." And maybe it, may-maybe, you know, it's an increase, but it's reasonable, it's understandable For both parties. And, that is a fantastic option, right? It lets you control the price conversation that we talked about in the past. It lets you give them, offer up this low dollar amount thing, but it's a pretty small scope. It shows them worst case, and then you end up in the middle

John Tyreman 21:38

And it's, it's an exercise in the client understanding the service provider and their, their business model. I think i- in the, the high option is really a, a tool in this scenario to make sure that the client understands where the boundaries are in the existing scope

Mark Wainwright 21:57

For sure, right? This is, this is f- this is the, we talk about framing a lot when we talk about, price and scope and everything else with these three options. Like, this is, this is your tool to frame the conversation, to control the price conversation. It's like this is the low end, but it's missing out on a bunch of stuff. This is the high end that basically says, "Look, if, if we can't get our stuff together and continue to let things sort of expand and grow, um, with no constraints, we're gonna end up here," and then we snap back to the, to the middle option. So that's where we're presenting the client the ability to choose the three options. We give them a really nice, attractive central option that says with some discipline, with some good decision-making, there's gonna be some increases, but it's not gonna be that, that high end. Nor do we have to sacrifice a whole bunch of things that maybe you want in this low option, right? So there you go. All right. That's one sort of, you know, low, high, medium sort of a situation. And frankly, I think that, that example that we just provided there applies to a ton of different situations, because inevitably we run across things in the work that we do as consultants that are unexpected, and it drives increases in work, increases of scope, and lo and behold, increases in the dollars. And when we frame it properly, here's the low thing we could do, here's the high thing, really expensive, but there's a nice middle. I think that's a fantastic way to approach these, these changes. Okay. So we have got some, just some, you know, bullet point here. So now what? What's everybody go and do now?

John Tyreman 23:31

the number one takeaway from me is looking at your existing client portfolio and doing your, doing some discovery, listening, learning, looking at each engagement and thinking to yourself is, how far off a scope is this? where did we see this relationship heading? What's changed in terms of the value of the client when we first started working together? What do they value now? What's changed? and I think just going through that exercise of intentionally doing a discovery exercise with the client, um, but independently as well

Mark Wainwright 24:08

you know, just the foundational understanding across the board that asking for money is, is, is undesirable for everybody, right? Client, consultant, the whole thing. Nobody, nobody wants to get into that. That's it. Nobody wants to be asked for more. Nobody wants to go and ask for more. So it's just not, not good for, for anybody. It's not good for the relationship. The other big thing for me, like, you need to treat these things exactly the same way as you did the original proposal, provided you did a, you know, provided you did what we say you need to do in the first proposal, right? Do some options, do good discovery, present really strong understanding, align your u- align the options you present with the understanding that you developed through great discovery. That exact same thing needs to happen now. And frankly, it's gonna be a little bit easier because now you know them. You've worked with them for a period of time. You understand them more. You understand how they like to work. You understand what their, their pain points are. You understand what they, the things they place a lot of value and importance on, vice versa. So now you're armed with a e- an even deeper understanding so that you can come into these conversations really well-equipped to present some really strong, strong options. So we gotta treat this the exact same way first time around. We gotta include those options. And, you know, this is kind of whether this is worth being explicit or not, John, it's like we gotta take this seriously, right? So many folks approach these sort of additional service requests asking for more way too casually, I don't know if you have or not

John Tyreman 25:39

No, it's anxiety filled, sweating bullets. It's like,

Mark Wainwright 25:43

it's probably the opposite is like I have so much stress up, you know, kind of in this thing as I just, I just don't do it. And sometimes that happens, right? Is like we're so anxious about it, we never do it. We just n- we, we need to ask, For sure. And we don't wanna rationalize, we don't wanna get defensive or emotional or whatever else. It's, this is an, this is an opportunity to be emotionally intelligent, to work through some recommendations and some options. frame these options appropriately so that when we sign this next go-round, when we head off on, you know, part two, then everybody's happy with the relationship and we've got good trust, good working relationship, and we're frankly even more focused on the results that the client wants to get out of this. So, John, we've, we've hammered this enough. I would love for people to have, you know, a nice, rich conversation online with us, whatever else, you know, about this topic.

John Tyreman 26:36

Hit us up on LinkedIn and tell us how you've navigated price increases with your clients along the way. We'd love to hear, hear from you.

Mark Wainwright 26:43

Good. Until next time

John Tyreman 26:45

Until next time