As a business activity that includes services, communication consulting firms are constantly faced with uncertainty. Because what is offered is a service and not a real object. Pricing must be based on clear and fixed references, so that variations in contract prices can be accounted for.
In the case of work for a long period of time and the relatively little variation in nature of the work, the general form of contract is a retainer. This type of contract has a fixed size and payment period. For example, media monitoring and issue management. For non-repetitive and large-scale work, payment is made in terms. Down payment is paid before work begins. Furthermore, payments are made during work. The benchmarks are agreed milestones. Then the final payment before or after the work is completed. This kind of work is called project-based consulting, for example training, campaigns or advocacy.
For jobs that are difficult to set in advance and also hard to predict the scale, such as crisis management, payments are usually set at a certain hourly rate. Billing is done weekly based on the hours used. Consultants usually split the two types of clients. For a new client whose reputation is unknown, an advance payment is required. Conversely, if the client is known and has a good reputation, the prepayment can be ignored.
There are also jobs that are high in complexity or large in scale. This job demands a variety of types of work. The contract can include several types of invoices. A job like this is certainly coveted by a consulting company. The company views that about two-thirds of its revenue comes from retainers as ideal conditions. Fixed costs for running the company can be covered from this post because of the fixed amount of income. Meanwhile, variable costs and profits are derived from payments for project-based and time-based consulting.
From the brief description above, it is clear that projects that combine retainers and project-based consulting have the potential to provide greater benefits. On the other hand, when the project ends, it will directly impact the company’s operations. What should we do? How to find reasons to extend the life of the contract so that the income for the company continues?
Honest and Open
At the age of 13, Kiroyan Partners has faced this dilemma several times. Even so, the decisions we make always refer to business ethics. Once upon a time there was a big project and for quite a long time. The retainer obtained from this client is a major component, approximately 30 percent of the company’s revenue during the project period. We could find reasons to extend the contract. But at that point, we decided to remain honest and open with clients.
When sending the final invoice to the client, we include a note that the task for the project has been completed. We did not forget to thank and express readiness to work together again in the future. The client really appreciates our ethical attitude. The relationship is still good until now.
On another occasion, a client provided additional work in the form of a research and training project. However, some of the recommendations we gave were not implemented. According to our belief, the company’s efforts to improve its reputation must be preceded by several internal changes. As the contract was nearing its end, the client wanted to renew the contract, while we knew the steps needed to be taken had not yet been implemented by the company. In this case the choice is very clear, we are not willing to extend the contract. We believe the consultation will not be successful without changes.
Ultimately, as consultants who uphold ethics and principles, we should not hesitate in doing our job. If we believe that there are steps to be taken based on the data collected, we must not compromise on principles. Even if it will result in the loss of a contract. The company’s reputation and sustainability are at stake.
Chairman & Chief Consultant, Kiroyan Partners
This article has been published in PR Indonesia magazine 54th Edition, issued on September 2019, page 49.
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