How to evaluate the added value of a consultancy?

One of the most difficult things about having a company is to do pricing. Whatever you are selling, setting up the price (or investment) is extremely difficult, therefore the long thread of endless discussions and opinions about it.

When it comes to a consultancy, though, it is even more challenging to figure out how much to charge, as a retainer or even a percentage. That is because of the intangibility of the service. According to Merriam-Webster, something tangible is:

1a : capable of being perceived especially by the sense of touch : palpable

b : substantially real : material

2 : capable of being precisely identified or realized by the mind her grief was tangible

3 : capable of being appraised at an actual or approximate value tangible assets

On the other hand, intangible is:

: something intangible: such as

a : an asset (such as goodwill) that is not corporeal

b : an abstract quality or attribute

As per the dictionary, something abstract, not corporeal. It means that a consultancy generates value, intelligence, strategy (and even actual monetary results), but everything that is tactile from a consultancy service is a byproduct, since the challenge in pricing those services.

I’ve been pricing things right and wrong, and learning a lot for a long time, and for 6 years as not only a consultant, but as the owner of a consultancy. I try my best to be fair – meaning that I tend to price stuff at a level any company can invest, regardless. More, let me go public on one of my pricing strategies, especially when it comes to indie developers. My though, after analyzing the effort, usually goes into this question: how much would that company pay, monthly of for the duration of the contract, per ONE of the professionals needed to do whatever needs to be done?

Well, that would make sense, right? You get a team of experts, who definitively know what they are doing, in exchange for not opening a new position, with all the costs, overhead, risk and of course, the limitation of the amount of work one person can contribute.

Guess what – I have used this strategy a few times recently, and what did I heard? That my cost was craziness (yes, the guy actually told me I was crazy) – and he has a marketing agency(???). I wonder how much he pays his team, oh well. Another anecdotal sample comes from another indie developer that, instead of discussing price, started to discuss how original our BI techniques were. Seriously? This is the same of taking a different brand of chocolate to check out and start an argument on how that brand was able to make chocolate as well. WTH?

My take from these experiences is that, per the intangibility, people imagine that a consultancy should be free. That decades of collective knowledge, tools and experience are worth nothing. I wonder if they ask this same question to themselves. Is your knowledge worthless? Of course, not – so why mine needs to be? That is a quite hard cookie.

Thankfully, we are able to find fair negotiations with most of our prospects (although I’m still bugged what these people, I mentioned think – I’m open to suggestions). I’d say any pricing is hard, but putting an amount on collective knowledge and effort is way harder than anything I’ve done before.