Everyone is always dying to know whether they need the latest app, tool, or software in their tech stack. But they never want to hear how much it will cost them–and that’s why scoping and quoting is such an important step in the tech advisory process.
But just because they heard it mentioned in a meeting or saw it on LinkedIn (or TikTok) doesn’t mean it’s right for your clients.
Tech advisors can have a huge impact on the businesses they work with, who rely on them as experts providing guidance, support, and training on new and emerging technologies–but it can be risky to put a price on that. Are you charging enough to reflect the value you are providing without charging so much as to lose the client?
In this article, you’ll learn why scoping and quoting are so important, as well as tips and best practices to drive revenue, foster long-term relationships, and keep clients happy.
(Note: This is part 3 of our ongoing series on the tech advisory process. Find out how to find the right clients in part 1 and see part 2 to learn how to speed up the discovery process.)
Scoping and Quoting: Find Where You Both Win
Pricing is a frequent challenge for tech advisors because it can play such a critical role in whether you get that handshake or not. However, it’s important to remember that charging for tech advisory is not a zero-sum game. Instead, it’s about getting a better understanding of what your client needs and forging a relationship where you both win–and that’s why scoping and quoting are so important.
Scoping and quoting are an integral part of the tech advisory process because tech advisors can’t take a one-size-fits-all approach. Each client has their own set of software, jobs-to-be-done, users, challenges, goals, and expectations.
Scoping out projects before negotiating pricing helps you quickly get on the same page as your client. It also helps tech advisors identify areas where significant value will be created or serious problems will be removed. Some tech advisors even see scoping as a continuation of the discovery process, where you get to know your client on a deeper level as you figure out exactly how and where you can help them.
Quoting Tech Advisory Services: What to Include
The two main components of a tech advisory quote are:
- Systems Audit: This is where you evaluate the client’s current tech stack to identify inefficiencies and other areas for improvement.
- Solution Design: This is where you create a custom solution for the client based on the findings in the system audit.
It’s imperative to include both of these components during the scoping and quoting process or else you risk missing out on key context and information.
Implementation: The Next Phase
Also, keep in mind that after the audit and solution design phases are complete, the next step is implementation, which usually comes with its own quote where you’ll price in things such as software, labor, support, and maintenance costs.
Implementation is beyond the scope of this article (see what we did there?), but it’s important to keep it in mind as another opportunity to work with the client as the project continues to evolve.
Fixed-Fee vs. Value-based Pricing
The two most common pricing models for a tech advisory pricing strategy are fixed-fee and value-based pricing. Let’s quickly compare the two pricing models.
Fixed-Fee: Simpler and More Common
Fixed-fee pricing–also known as ‘cost plus’ pricing– is where the client pays a fixed fee per project. With fixed-fee pricing, you’d typically calculate the time and effort required, and then apply a markup (this is where the ‘cost plus’ comes from) that is dependent on your skills, expertise, and financial goals.
This markup can be anywhere from 1.5x to 2.5x on the lower end to as high as 5x or more for senior advisors and firms.
Tech advisors working for themselves usually have lower overhead, so they can typically charge a lower markup while senior advisors and firms generally charge at the higher end of the spectrum. At the same time, self-employed tech advisors need to consider other things such as healthcare costs, a lack of job security, and fewer benefits compared to salaried employees at a firm, and their markup should reflect these hidden costs as well.
Value-based Pricing: Trickier but More Rewarding Tech Advisory Pricing
Value-based pricing can be trickier to get right than a simple fixed fee, but it can be very rewarding when successful. Basically, it’s pricing based on the value you bring to a client.
But just as it can be challenging to put a price on your services, putting a price on the value you bring can be even harder–which is why some tech advisors avoid this pricing model entirely.
What many tech advisors don’t realize is that by doing this, they may actually be underestimating their value because they’re scared that charging what they’re truly worth could lead to sticker shock that scares away potential clients.
However, undercharging also comes with its own set of issues, as pricing yourself too low may give the impression that you’re not as knowledgeable or experienced.
If you’re new to value-based pricing, a very general rule of thumb is to charge 10% of the value you’re bringing in. For example, if your client has a problem that’s costing them $500k per year, then you could charge somewhere in the ballpark of $50k.
Keeping the Door Open: 7 Strategies for Scoping and Quoting
Here are some of the most effective strategies and best practices to follow when scoping and quoting in tech advisory.
1. Gather critical information before you start negotiating
Too often tech advisors lose clients by giving pricing estimates too early.
In contrast, the most successful and profitable tech advisors probe for essential information about the client very early in the conversation with questions like:
- What software is most important to your business operations?
- How many people have user access to this system?
- How many software programs does your business use?
- How much does all of your software cost your business a year?
- How many users, employees, customers, and consultants need user privileges to your software systems?
Once they know a business is spending $250,000 a year on software and $100,000 on professional services to manage the software for their 10, 50, or 100 employees, the tech advisors has a strong sense of the complexity of the business (higher complexity = more cost to deliver services) and the size of the client’s operating budget (large budgets = greater opportunity to charge more and still fit within the budget by displacing other vendors).
Fortunately, there are new tools like AppVentory provide advisors with concrete, accurate answers to these questions in minutes.
2. The quote sets the tone for the client relationship
Whatever you do, don’t underestimate the power of a well-structured quote. Not only can it lay the foundation for your relationship with the client, but it can also go a long way in allaying your client’s fears of change while at the same time giving them more confidence in you and your skills.
It’s very important to remember that your quote is your first consulting deliverable to your prospective clients.
They will evaluate and predict the quality of the work you would deliver based upon how well presented and how thoughtful your quote is.
If your quotes look like they were put together in a rush, they will predict your consulting deliverables will be similarly rushed and of low quality, Moreover, change is scary–and for some clients, it can be downright terrifying.
They’re relying on you to be an agent of change, yes, but they also need to be able to trust that you’ll be there to help them adapt in the easiest and smoothest ways possible.
Providing a well-structured quote lets clients breathe a bit easier as it helps demystify the whole tech advisory process by giving clients a better idea of what to expect. It can also make the relationship feel more collaborative from the start, especially when the client sees their challenges and expectations clearly addressed in your quote.
A good quote can also prevent, or at the very least ease, any potential sticker shock the client might have.
3. Get everything in writing
You’ll thank us later for this one because getting everything in writing beforehand can solve so many potential problems–to the point where it proactively prevents certain issues from even happening in the first place!
Once you finish your tech advisory negotiation and come to an agreement with the client, document it in a signed Scope of Work, or SoW, for short–you’ll be glad you did because it will serve as a critical document that literally keeps everyone (you, your client, and all stakeholders) on the same page.
4. Don’t be a creep: scoping and underquoting
Scope creep is one of the most dreaded issues in not only tech advisory, but project management as a whole. It refers to how the scope of a project tends to increase over time, where one deliverable can become 3 or 4 as the project grows, or even worse, sometimes it means starting over from scratch if the client changes their mind halfway through.
One of the best ways to manage or prevent scope creep is through a well-structured quote, followed by a Scope of Work and then getting it signed by all involved parties (as mentioned in the previous section). That way, you can refer back to it and seek clarification if scope creep begins to rear its ugly head.
Underquoting can also contribute to scope creep and tech advisors should do their best to avoid this at all costs. It’s bad for you, as it negatively impacts your rates if a project ends up taking more time than you initially thought. It can also make the client feel like they were deceived, like you baited them with a lower price, only to switch it to a higher price once the project has already started–even if it wasn’t intentional.
Underquoting and scope creep only emphasize how important scoping and quoting are, as so many issues can be avoided through a well-structured, transparent quote.
5. Transparent pricing means less ghosting
Charging for tech advisory is such a big issue partly because pricing isn’t very transparent, which makes it harder to gauge how much you should charge if you’re not sure how much everyone else charges.
For clients, this means they often find themselves having to subscribe to a newsletter or book an appointment before they can even get a chance to talk pricing.
So if you’re a tech advisor who’s transparent about pricing, that can immediately make you stand out from the crowd. You don’t have to provide exact numbers, either, as even providing a general price range can help clients get a better feel for what they’re getting into.
This Tech Advisor directory breaks the mold when it comes to pricing. It encourages tech advisors to post their rates–simply scroll down to the “Services” section for prices for training, system migrations, and software selection.
For further transparency, you can provide detailed breakdowns in phases with estimated timelines in your quotes. It’s even better if you can list out the deliverables with a price attached.
6. The output is only as good as the input
The success of your solution design (i.e. the output) heavily depends on what you uncovered during the systems audit (i.e. the input), so make sure you have a solid understanding of not only the software/tech you’ll be working with, but also the tech you’ll be replacing.
7. The two sets of eyes and 24-hour rule
We’re all human and everyone makes errors of omission or simplistic typing errors.
The most profitable and successful tech advisors always follow this rule.
The rule dictates that at least 2 people need to thoroughly review the quote before it is shared with the prospective client. And, at least 24 hours has to elapse between the final edits to substantive content and sharing the quote.
This means that you should write the quote, give it to someone you trust to read, and give yourself until the next day to send it out. Why wait and not send it immediately?
By waiting overnight or for a few hours, you gain the opportunity to re-read the quote anew with fresh ‘eyes’. When you do so, you will inevitably find a couple things you should change before sharing it.
Set the Scope, Give the Quote,
Scoping and quoting are key components in the tech advisory process that are important for not only profitability but also creating lasting relationships with clients.
AppVentory integrates with cloud accounting solutions like Xero and Quickbooks, and Google and Microsoft cloud workspaces to let you analyze client tech stacks to streamline scoping for easier auditing, quoting, and implementation.
Here’s how AppVentory helps:
- Gathers data on app subscriptions and expenditure so you can see how much is being spent and where.
- Shows which apps are being used and by whom with usage details in a live dashboard.
- Identifies adoption gaps in the stack for new apps and integrations.
- Gauge user satisfaction with built-in surveys tools.
