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SP500: Five Tips To Act Like A High-Priced Consultant

Solution providers should charge based on value, not volume, to protect their margins, said consultant David Stelzl at the Solution Provider 500 conference.

Do your salespeople know what ROI is? Can they explain how to compute P&L?

Many business owners assume their employees know more than they probably do, and as a result those companies don't run as productively or as efficiently as they should, said David Stelzl, owner and founder of Stelzl Visionary Learning Concepts, during a general session at CRN's Solution Provider 500 conference in Charlotte, N.C., Wednesday.

"One [business owner] told me some of his people think there's an 'N' in the middle of P&L," Stelzl told the audience of solution providers.

[Related: SP500: Social Media Changing The Way IT Is Consumed, Says IBM ]

Stelzl offered attendees five tips on how to unlock the secrets of high-priced consultants, in essence, helping them get their companies over some hurdles to success.

First, you need to realize you sell one of four things to customers: ROI, competitive advantage, operational efficiency or risk mitigation, he said.

He cited one example of a business owner trying to get into a new account, a national fast food chain. The owner went into a local franchise and asked to work there for two weeks, for free, in order to learn the business.

"He starts unloading trucks at 6 a.m.," Stelzl said. Two weeks he had documentation of several areas where operational improvements could be made.

"He calls up headquarter and says, 'I need 15 minutes of your executives' time and shows them some amazing things. The truck sits there for an hour every morning and cars can't get into the parking lot. Half your team is not serving customers for that hour. I can show you how to get it done in 15 minutes,'" Stelzl said. The company won the deal, he said.

Second, solution providers should look at new marketing roles such as educational marketing and demand generation, Stelzl said. Offer assessments and workshops that can help customers in their business. "You can set up your own event, but it can't be about a product. It has to be about value," Stelzl said.

Third, make sure your discovery process works. You can't just go in and discover issues in a customer's business, you have to show value on how to remedy them, he said. As an example, he noted a company he worked with that won a paid assessment project but was not expected to win the implementation.

"They sent in an engineer to start gathering data. I said you don't want an engineer in there yet. You want you [the CEO] in there. The assessment shouldn't be technology; it should be workflow, efficiency, risks. Figure out where the big issues are going to be, then send the tech guy in to validate it," Stelzl said.

NEXT: Charge Customers Based On Value


Fourth, solution providers should charge based on value, not volume, he said. For example, if you quote a customer $100 an hour with an eight-hour projection, you would gross $800. But if the client talks you down 20 percent, the discount comes out of your gross margin, even though your cost is not discounted. Assuming your costs are $50 per hour, your profit would drop 40 percent, from $400 to $240. And if you have a good engineer that finishes in six hours instead of eight, then you can only charge the customer $480, and your profit drops to $80, because those two saved hours are not likely to be billable, he said.

"That is bad. You have to look at value pricing. What is this thing worth to the client," he said.

Finally, your proposals should target results, Stelzl said.

It's a waste of time to simply propose that you can make a customer more efficient if they sign up for managed services and they can cut half their staff to save the company money. Too many VARs tell clients, if you do X, the impact is Y or if you don't do A, then B will happen.

"Your competition is selling impact. It's about finding the likelihood. Bring a deliverable back to an executive that says you told me if this goes down, you'd lose this. We've assessed the likelihood of that based on our experience. If the likelihood is high and we can show it to you, you're going to buy. Or, if you're likely to experience this gain, and I could demonstrate it to you in a way that's credible, you're going to buy," he said. "Annuity sales are based on trust. If you don't establish trust, it's difficult to sell."


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