I’m often asked this question by prospects and even now customers. How much does sales consultancy cost?
I wanted to go above and beyond the classic answer of “it depends”. And give you and others in the market an idea of what the pricing framework looks like. We already discussed in a previous blog entry “The 3 Most Common Consultancy Models Used At Technology Companies To Grow Sales”. I’d like to give an overview of what are the costs associated to enlisting sales support.
There are different ways in which sales consultancies charge technology companies, here are the different frameworks:
- Time – Hourly/Day Rate
- Recurring – Monthly Retainer
- Project – Fixed Fee
- Availability – Retainer Model
- Risk v Reward – Performance Fee
Some of these are similar in their nature and can be referred to differently by consultants but they normally boil down to these key five elements.
Time – Hourly/Daily Rate
Range = £60-180 p/h OR £500-£1,500 per day
This how many consultants charge their clients. They think how much would I like to earn, how many days would I like to work, what is fair in the market. Then they go and pick that number. Moreover, the rate has normally either been charged to them or someone in their network has charged this amount. It’s network-pricing in essence.
The variation in rate is dependent on experience, output and desired results. A lot of consultants will charge higher fees as they have run a similar business in the past as a Sales Director or Non Executive Director. It is important to really understand the personal motives of the consultant as this will dictate the pricing. Costs can certainly rack up using this pricing method as the consultant is incentivised to do less and higher rate, or to garner more days of work and charge more. The benefit of this approach is within 1 week you can call it quits and end the relationship without massive financial risk.
Recurring – Monthly Retainer
Range = £3,000-£6,000 per month
A monthly retainer is commonly based on amount of time that a consultant will spend working with and focusing on your business. Mostly this is a negotiation default of both consultant and client to keep costs low and at a fixed amount. This is contrasted with the daily and hourly rate where costs can fluctuate on a weekly and certainly monthly basis.
The range is dependent mainly on time and to a degree the experience of the individual. There are some nuances, which could mean that there might be additional resources provided like plans, templates, videos or training sessions. Additionally, some marketing and lead generation agencies have started blurring the lines between sales and marketing. Often this means that they say they’ll help you generate and close deals. These are two very different skills, beware of this approach.
The benefit of this approach is that you limit your exposure and know your monthly outgoings and committed time. A reduced monthly retainer is normally obtained when you agree to an initial 3 months with a 1-month notice period.
Project – Fixed Fee
Range = £25,000-£50,000 per project
This is where a sales consulting company is typically looking at a 8-9 month engagement. This could include the analysis, review and recommendations, the plan and the execution all within this period. An approach like this works well when there are specific and set outcomes to be achieved in a short period. Often the consultant will know the business already and be confident that they can drive growth quickly. They might have worked in a similar company, completed an identical project or they already know the route to extreme growth.
A fixed fee arrangement means that you do have an outcome-based arrangement rather than time-focused one. I would encourage you not to confuse these cost arrangements. Often clients think that because they have agreed a fixed fee, whatever time is needed will be given to them. This is backward thinking as you are paying someone to get results for your company.
The fixed fee model would require a payment up front, either 33% or 50% depending on the size of the financial commitment and resources needed from both sides. Additionally beware that a fixed fee model is not a results-based model. Therefore just because you pay in installments it doesn’t mean that you don’t pay them the extra 50% if they don’t hit the KPIs.
Availability – Retainer Model
Range = £1,500-£4,500 per month
An availability-based retainer model is one where the sales consultant will give you allocated time in their diary. This can be a set day(s) or it can be the equivalent total hours over a month or quarter. I’ve often seen this with sales training and Non Executive Directors. It can work well when there is a support-based arrangement after a sales transformation has taken place too. Hence the sales consultant is coaching and supporting the CEO long-term.
In contrast in the early parts of the relationship this is seen as too early by clients as they need you right now. They want results and they want them quickly.
Risk v Reward – Performance Fee
Range = 5% – 30%
A Risk v Reward model is a contingency based model. It’s cost is dependent on achieving set outcomes or goals in a specific period. There are two main types of performance fee:
a) Set Reward Fees
b) Set Percentile Fees
Set Reward Fees are those where you charge the client a set fee based on the results. Therefore you could charge them £25,000 for a 50% increase in sales, £50,000 for a 100% increase in sales and £125,000 for a 200% increase in sales.
Set Percentile Fees are those where you agree to take a percentage of the new increase in sales. It’s similar to a commission. Therefore if you increased the sales by £500,000 you would agree 5% cost. if it was £1,000,000 you’d take 10% and if it was £1,000,000+ you’d take 20% of all those monies over £1,000,000. This is only an example and there are many variations of this arrangement.
There are a lot different pricing models available out there for those looking to buy sales support. As you can see the ranges can be quite large and the costs are dependent on many factors. My advice to Tech CEOs would be to review what you want the individual to achieve, what your current situation is and what arrangement will bring the best behaviours. To create a win-win relationship you have to understand what’s important to both parties and look forward continuously.
What other types of pricing models have you seen?
I wanted to write this article as many customers and prospective customers have asked me about consultancy models and the differences between them.
It is often challenging to find a sales consultant that knows your company, your industry and your problems inside out. The interesting thing is that sales consultants attack the challenge of growing a technology company in different ways. Some I’ve heard don’t have a methodology, although in practice they do and hence sharing that with you.
What are the three consultancy models?
- Low-Touch Model: Analyse and Support.
- ‘Let’s Go’ Model: Analyse and Execute.
- 5-Step Framework: Analyse, Plan, Execute, Review and Support.
Each of these models have their advantages and disadvantages. The model also reveals the goals and ambitions of the consultant when talking to your company. Every consultancy is trying to balance having both regular, profitable and non time-intensive work.
The choice for a tech company of each model can come down to a couple of factors:
- The sales skills of the consultant
- The available budget and cashflow position of the tech company
- The size and state of the sales team and their results
- The financial position of the consultancy
- The view of sales consultancy by the CEO and board.
The Low-Touch Model
The low-touch model is kicked off with an analysis of the company. This is normally 2-3 days of workshops for a tech company. The workshops will be classroom based with the tech company providing limited materials for the consultant to prepare. An agenda will be loosely outlined, sent and followed. The deliverables include a word document or pdf with some of the observations bullet-pointed and maybe some overarching descriptions of needed improvements in each of the section of the report.
The outcome that the sales consultant wants from the low-touch model is normally a 2-4 days per month to support the company with some of the previously outlined challenges. This means that they can run several projects at once as an adviser rather than an implementer.
This can work well if it’s a mentor relationship that the company wants initially. This will then result in small incremental changes being made over time to reach its desired goals.
There is not enough output to really cause long-lasting change. The tech company doesn’t really see the individual in action, leading and coaching the team and seeing their analytical skills. The Tech CEO often feels at a loss and sometimes is resentful when they seemingly seem to “swoon in” and offer some “off-the-cuff advice”.
The Let’s Go Model
The Let’s Go Model is quite similar to the low-touch model to begin with. It often starts with an analysis of the company which includes interviews with the various team members and departments, a product demo and a strategy conversation with the CEO and senior leadership. This probably includes some classroom based workshop and informal interviews with the various team members. They will often create a powerpoint/slide deck on the state of the company which includes their observations and targeted improvements.
The sales consultant wants is to act as an Interim Sales Manager or Interim Sales Director. They know the company needs results and some direction and they have the experience and know-how to begin. This would normally result in the consultant proposing a retained agreement for a set number of days per month.
The company will immediately feel after the sales consultant has concluded the analysis that they want to get going and implement some of the necessary changes. The experienced professional can spot things quickly and keenly wants to make changes.
The sales consultant is really searching for a job-type arrangement at this point. They balance their eagerness with a need for regular retained income with the company’s necessary requirement to grow. Often the sales consultant will first attack the challenges that they are most familiar with and have most experience in dealing with. This is often not the most strategically important issues. Secondly, you are not really given a view into the consultant’s mind and what they’ll do in month 2 or month 3.
The 5-Step Framework
This is a strategic way of looking at the relationship from analysis and insight to sales execution. After sales increasing, there is an eagerness to improve the relationship and become a long-term mentor to the CEO.
In terms of the analysis, we see consultants ask for CRM access, financial reports, invoice reports, and marketing collateral to analyse the company. This is not really a commercial or sales analysis. I know that at Sales for Startups, we call it a Sales MOT but really it’s more than that it’s a Business MOT. Sales interacts with so many other departments and has some many dependencies within your organisation and workflow to flourish consistently.
The consultant is really keen to understand what is going on with your customers, your pipeline, your revenue and activity trends. They’re looking at the interplay between all the vital parts of a sales operation and analysing how they function in your company.
The deliverable is a write-up in either a long-form report or one on a software like Trello or Asana. This will be mostly bullet-pointed and can be easily shared and commented on within your organisation. To accompany the report there will be a statistical review of the key vital trends in your business. Therefore this will give the Tech CEO a real commercial picture for the first time.
The consultant has analysed your business by reviewing nuanced and statistical data. They are then in a position to give recommendations to you based on evidence and a clear understanding of your business.
The analysis needs to be deeper as they are onselling a plan. Secondly, even if you elect to skip the plan stage, you can go straight to the plan as the analysis will have gone much deeper than you first anticipated. It may even surprise you on what information that they request from you. On a long-term view the 5-step framework outlines the model to the Tech CEO upfront saying that we’ll transform your results, review our work and support you long-term as an adviser. You earn your right to be an adviser, you don’t ask for it without knowledge, experience or a trusting relationship between both the Tech CEO and the sales consultant.
Tech CEOs can see this as rather cumbersome or fear that they don’t have the data available to make a statistical analysis relevant. After all someone is looking at your whole business and pulling out insights that weren’t immediately apparent. For creators like Tech CEOs this can be a little challenging at times, as after all it is their creation. Besides, we are all eager to increase our sales results and hence a Tech CEO’s impatience sometimes is seen at this point, as they just want you to get going. Although this does remind me of the unhelpful chant in football of “do something, do something”. Not always the most constructive approach!
In summary, the three models do differ due to the incentives of each party and what they are looking to do as their next step. The Low-Touch model is looking at holding an initial workshop for a one-off fee then supporting you as an adviser straight off the bat. The Let’s Go model has an improved analysis model and builds relationships quickly and then jumps into action straight away on the things that they feel comfortable on doing and what has worked in their past roles, often corporate sales roles. The third model the 5-Step model is started with deep analysis, a plan and then timely execution.
Above all this model informs the client of what’s happening right from the start. Moreover, they are making an investment in a long-term relationship rather than a knee-jerk reaction to their circumstances.
From all its trials and tribulations at Sales for Startups we have decided to go with the 5-Step framework as it puts an emphasis on a long-term relationship based on evidence and fact-based knowledge and ultimately earning the right to be an adviser after a sales transformation. It does have its challenges as sometimes it can appear cumbersome and too long-winded for the revenue-eager Tech CEO. But there are many ways to grow a company and when it’s someone else’s livelihood and passion always err on the side of caution. That’s my personal opinion.
Certainly I’d be keen to hear what business models or practices have you experienced with other sales consultancies? Please connect with me and share your insight in often this challenging and for many confusing field, as too many overcomplicate matters and neglect simplicity.