Friday, August 10, 2012

The Price of Free Advice

I've been running my Negotiation Services for quite some time now, and it's been very interesting (and rewarding emotionally) to help engineers raise their compensation when negotiating with startups or even large corporations. It turns out that while sales types, managers, and product types negotiate almost all the time, engineers do not negotiate as a matter of course, and I truly add quite a bit of value to engineers who call me.

One interesting thing I've noticed is that there's a certain group of people who call me or ask me informally for advice, either as long-time acquaintances or friends. I don't feel good about charging these people, so I usually just provide advice for free. However, what I've noticed is that these free advisees by and large do much worse than the people who pay for my services up front. Given that I by and large provide the same advice either way, I attribute the difference to two factors:
  1. Those who don't pay feel bad about interrupting me and hence don't ask as many questions or talk to me at as many critical junctures during their negotiation process. By contrast, the people who do pay call or send me e-mail after every interaction with the corporations they are negotiating with. The ability to provide feedback and response in nearly real time helps a lot.
  2. People who pay for my advise are much more likely to take it! This is huge. Taking half my advise is occasionally much worse than not having my advise at all. This is a lot like taking a doctor's prescriptions: don't expect great outcomes from talking to me if you're not prepared to take what I say seriously. While $360 is not a huge amount of money, it's enough that the people who pay it think hard before doing so, and then actually followup with tough action.

In any case, one thing I've definitely discovered is that I've been pricing my services too low. Almost all my clients have realized at least $5,000 worth of additional compensation due to my advice. If you could find an investment with an average ROI of 10X, you'd be jumping at any opportunity to invest. The average ROI I'm providing for most of my clients is well over 100X. The flip side of pricing my service so low is that some smart folks have realized that I'm cheaper than the typical investment adviser, and so have paid me by the hour to do that sort of work. Well, that's not really why I set up my business, so I'm going to try to curtail that.

As a result, I'm raising my price to $1,000 per hour. This is still a bargain for those job hunters, but is no longer a screaming deal compared to an hourly financial adviser. If you're an existing customer, I'll grandfather you in at the old $360 rate provided you pay me at least this much every year (i.e., keep me current with regards to what's going on). Obviously, if $1,000 still feels like a bargain to you feel free to pay me at my new rates.
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