ROI Model

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business model pricing strategy

New answer on Dec 05, 2021

3 Answers

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Patrick asked on Dec 01, 2021

I have been experimenting with ROI model of consulting. I just can not figure out how to implement it. I provide a service to business owners where I propose potential savings. These savings may or may not be a fit for the owner. It could also be 12-18 months before the owner decides to use my suggested savings. My clients are all across the United States. Aside from going to each site and inspecting, I can not figure out an unobtrusive way that allows me to verify from my office. I am open to any and all suggestions.

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Answer 1

Best answer

Hagen

Expert

Content Creator

replied on Dec 02, 2021

#1 Bain coach | >95% success rate | interviewer for 8+ years | mentor and coach for 7+ years

Hi Patrick,

This is indeed an interesting question, so I am happy to provide my perspective on it:

In case I understand you correctly, you are asking about the right way to do value-based consulting.
The way it normally works is that you, jointly with the client, decide on the dimensions to assess, the underlying KPIs and the time frame. It is then the obligation of the client (which is fixated in the contract) that he/ she will provide information on the defined KPIs and the level of achievement. Based on this, you would then calculate and provide information on the final receipt to be paid.

In case you want a more detailed discussion on how to best monetize your consulting engagements, please feel free to contact me directly.

I hope this helps,

Hagen

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Answer 2

Pedro

Expert

replied on Dec 05, 2021

Bain | EY-Parthenon | Roland Berger |Former Head Recruiter | Market Sizing

Option 1: you define a set of KPIs that would be closely related to the potential savings

Option 2: you include a 12-month checkup, where you go to the client's site and check if there any additional savings opportunities. This way you confirm the savings that happened before, and can have some repeat business

Option 3: You actually ask the customer to agree on X number of savings they will implement and sign off right there after the recommendation. This of course assumes good faith. Well, to be honest, all of them do.

You want to be careful on how you design the ROI. In theory the model looks great, in practice, if the % you get is high, they will avoid paying for it, as they feel it is not fair. To be honest, the model works better when the absolute value you can receive is capped. You should have a retainer (covers basic cost), a % based on savings, but a cap on how much you get.

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Patrick on Dec 07, 2021

Pedro, Thank you so much for your insight. I feel like you best understood what I was trying to achieve. I will definitely be coming to you in the future.

Pedro on Dec 07, 2021

Sure, feel free to reach out!

Answer 3

Ian

Expert

Content Creator

replied on Dec 02, 2021

MBB | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi Patrick,

I'm sorry but I really can't figure out what you're saying/asking here.

What exactly is your question?

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ROI Model

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