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The Benefits of Diagnosis Fees and Fixed Pricing

Making the transition is better for consultant and customer

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As a consultant, billing on a fixed fee basis the best thing you can do is have options prepared ahead of time, rather than “just come out and fix this hourly.”

For nearly 20 years I chased this type of work and can say that 100 percent of it was non-recurring and mostly non-pleasurable. What works wonders for me -- not because it brings in all sorts of business (it does not), but because it keeps me from falling into the hourly rates business -- is the concept of a diagnosis fee.

For example, I just had a Sage 100 user call with a technical inquiry and the company this person works at had been asking for quotes for support and the like over the past two years, but never purchased a thing. These are the type of people who love to call and ask about costs.

My most recent call was from a new IT director who somehow was not able to get MAS 200 up and running after "changing some drive mappings. His first question was if we could come out and fix the problem for them…like right now.

It’s important to have a response prepared to these types of inquiries before you get the call. If you don't have a response you almost always wind up fixing problems hourly - at way less than what you should be paid (assuming you even collect from the people which in most cases is not assured).

Here are two ideas I've used:

  • Sell diagnosis, not solutions. It’s important not to sell the solution to the problem, although nothing says you cannot fix the problem while you are diagnosing. Why only diagnose? There are many companies who have hidden issues (data damage, etc.) that they'd love for you to fix for a nice, low fixed fee, but don't fall for it. Terming the work as a diagnosis then allows you to propose additional work once you've done some analyzing of their situation.
  • Make the price be different depending upon how quickly they want you to diagnose the issue. For a response with in a day or two the diagnosis fee might be $200. For a response within the hour it might be $1,000. Remember that in most cases the customer asking you for help had options and in fact could have joined your support plan, but declined and wanted to pay they go.

The bottom line here is don’t let a standby flyer suddenly become first class without also getting first class pricing. It’s all an option, they can catch a later flight for less money if they want but it’s their choice.

Wayne Schulz is the founder of Schulz Consulting. He began his career working for two professional service organizations and managing their consulting divisions. He has been active not only with the implementation of Sage 100 ERP software(formerly  MAS 90 and MAS 200), but often is engaged to help clients design or evaluate their current accounting procedures.

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