In a prior post, I decided to come up with the “final” answer as to how consulting firms come up with the prices we charge.
I now have an addition to that final answer, which makes it even more “final”.
As a professional, I charge my clients for the results they want produced, rather than the time it takes to produce the result.
Employees, on the other hand, get paid regardless of how long results take to come (for the most part, and up to a limit.)
Executives have the luxury of delaying projects, and altering the timing of activities and deliverables on projects when they are working with consultants, at no additional cost to the bottom line. This works well in uncertain conditions, when the timing of sensitive work is critical. A delay of several months is expected to be absorbed by the consultant as part of the cost of doing business.
A group of employees, on the other hand, will incur salary and overhead costs whether there is a project delay or not. Executives sometimes feel pressured to get people busy when they know that the clock is ticking, and costs are being incurred on a daily basis.
Consulting costs tend to be significantly higher, therefore, because the consultant or firm is giving the executive more flexibility and choices as to when project activities are executed. This can sometimes make the difference between success and failure, especially when projects are of high-impact.
My experience working in the Caribbean is one of high uncertainty, in the sense that business is frequently disrupted and plans are forced to change. The source could range from a hurricane to a devaluation.
What is helpful for consultants is to remember that they have a business to run, and their pricing must reflect that fact. “Having a business to run” is very different from “getting paid to do some work,” which is a trap that I fell headlong into in the my early days in this business.