Guerrilla Tactic Put Price to Rest

Once pricing is decided for a project and the contract signed, it's best for all concerned if the issue of price can be put aside and not revisited. Your goal should be to agree with the client on a price that will not need to be renegotiated down the line. Your relationship with the client can't develop if you are in a continuing tug-of-war about money.

Under a fixed-fee arrangement, the client pays the consultant a set price for a project. Often, a fixed fee is calculated by multiplying the consultant's hourly or daily rate by the length of time the client expects the project to last, but other formulas are also used. The critical point is that the fee amount is fixed no matter what happens or how long the project takes.

Clients love fixed-fee projects. Their costs are predictable, and the financial risks are shifted to the consultant. If a project schedule is delayed or the objectives change in the middle of the project, the consultant may have to perform more work than originally budgeted, at the fixed price. Most clients will recognize the need to renegotiate fees in this situation, but they have also been known to refuse to pay more.

The most effective way to use fixed-fee pricing is for small, discrete projects or for short phases of large projects for trusted clients. You can't eliminate the impact of unforeseen risk, but limiting the scope of a fixed-fee project will reduce your exposure. Make sure fixed-fee agreements include precisely defined objectives and measures of success that are agreeable to both the consultant and client.

It's also essential to define the role of the client's team in meeting the project schedule. In one case, a client's team members were pulled off a fixed-fee project after the first two weeks because the client needed them to analyze a potential company acquisition. The assignment of the new client team slowed the project down so much that it took several weeks longer to complete the work. The consultant and the client ended up in heated argument about the additional costs that the consultant incurred shuffling the team and orienting the new team members.

â–º Contingency Pricing

Consultants have torn a page from the personal injury lawyers' handbook by adopting contingency pricing methods. Under these

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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