Client Selection, Plan and Fees

Client Selection, Coaching Plan, Fee Structure and Fee Comparison

The preliminary exploratory meeting (there may be more than one) treats three CAPs, as outlined below.

I. Client Acceptance Process (the selection CAP)
--- leadership attitudes
            - openness to change
            - commitment to strategic initiatives
--- business prospects
            - product/service innovation
            - market (niche) opportunities
--- available resources
            - human capital
            - production, technological and financial wherewithal

II. Coaching Action Plan (the engagement CAP)
--- Discovery: where your business is, and where you want it to be
            - problems (perceived vs. actual)
            - opportunities
--- Deliberation: on closing the gap between what is, and what could be
            - strategy: what to do where
           - tactics: who does it how
            - execution: doing it – making it happen

III. Commitment And Performance (the fee CAP)
--- initial commitment fee
--- milestone fees
            - % of revenues earned
            - % of savings realized
--- performance fee
            - tied to results, to meeting agreed upon objectives
            - the majority of the fees

Examples

1) Start-up or SMB: A successful outcome for a start-up or SMB is determined to warrant total remuneration of 20,000€. A commitment fee of 1,000€ (5%) is paid upon initiation. As milestones are reached, a further 3,000€ (15%) is disbursed. Upon successful completion, goals achieved, the remaining 16,000€ (80%) is paid.

2) Multinational: Alternatively, an engagement for a multinational is valued at 600,000€. A commitment fee of 12,000€ (2%) is paid and as milestones are reached a further 198,000€ (33%). Upon achieving the goals, the remaining 390,000€ (65%) is paid. Other scenarios include equity participation, stock appreciation rights, a seat on the board of a new or joint venture or the provision of company goods or services. An hourly fee, for instance on a 40%/60% contingency basis, may also be negotiated.

IV. Fee Comparison

The premier consulting firms (McKinsey, Bain and BCG as the "big three" in strategy) charge significant fees. Walter Kiechel III writes in The Lords of Strategy about the "price creep" of strategy consulting from its early days. Some of the consulting pioneers have hit the C-suites of the Fortune 500. They are now on the other side of the fence, hiring their old firms for consulting engagements. "It will cost you $150,000 a week to get in a team from BCG or McKinsey," one incredulous pioneer told me. "Four or five million dollars for a six-month project!" another marveled."*

Given these prices, one should choose strategy services carefully. Implicit to that is to negotiate win/win engagement terms. The selection process is discussed further at "Don´t Be This Person! Selecting a Coach." Its subpage "And other advisors" also applies to management consultants. Yes, they will also work on a performance basis, sometimes more, sometimes less grudgingly, if you properly negotiate! The negotiation process is treated at "Negotiation Strategy."

* Walter Kiechel III, The Lords of Strategy, Harvard Business Press, 2010, Note 5 to Chapter 14, p. 330.

Client Selection, Coaching Plan, Fee Structure and Fee Comparison

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