November 18, 2017
How much would you charge for $1M In savings?
Yesterday in Slack, one of my buddies told us he spotted $1M in annual saving on a client’s hosting bill.
So here’s the question:
How much should he charge?
On one end of the spectrum, he could charge them a million dollars and they’d break even after the first year
On the other end, he could charge them a couple hundred bucks for the hour or so of time it took him to identity the savings.
This is obviously a massive range. A number that is equitable to both parties lies somewhere in the middle.
Here are a few things I would recommend you consider if you find yourself in a similar situation:
- What is the nature of the relationship? Are you currently in an advisory retainer relationship? Did you make this discovery during a paid road-mapping engagement? Or did it pop-up during a Why Conversation before they were even a paid client?
- How hard would it be for the client to capture these saving? Is it as simple as toggling a checkbox? Or will they have to rearchitect the solution over the course of months.
- How much risk is involved in the change required to capture the savings? Is this an e-commence site that could go down during the biggest sales day of the year? Or is this an internal system used by the HR department to handle insurance enrollments that can be down for days at a time with minimal business impact?
- How much trust does the client have in the accuracy of your findings? Are they 100% sure your numbers are accurate? Are you 100% sure your numbers are accurate?
All of these considerations can factor into calculating a price for the recommendations that will be considered fair by both you and your client.
If this sounds complex, that’s because it is. I would understand if it seemed overwhelming.
But my hope is that even if you erred way on the low end of the spectrum, you’d at least not bill them hourly for such a valuable application of your expertise.
Yours,
—J