Making priceless interactions pay off

I’ve been thinking about the work I do for authors — and the work lots of other service people and consultants do, too. Our most valuable work rarely gets compensated in a way that aligns with the value it creates. And that’s okay — so long as you understand why it works that way.

For example, yesterday I was working with an author at the very start of a book project. He’d created a bunch of excellent draft content, but it didn’t hang together, and more importantly, didn’t match the objective he wanted to the book to accomplish for him.

After about an hour of back and forth, we figured out what his book was really about and how, after a significant course correction, it could be far more valuable for him.

What’s the value of that interaction? If the book was going to generate half a million dollars of value for him and his company, redirecting it appropriately might be worth $50,000 or more. But there’s no way he’s going to pay $50,000 for our first one-hour meeting.

It’s not just me. Lots of advisors give priceless advice:

• The business strategy expert who helps you see the fatal flaws in your product plan and how the market is likely to reject it.
• The therapist who helps you to a breakthrough that leads to a decade of misery avoided or leads you to the best way to save your marriage.
• The plumber who identifies and fixes a problem that, if it were left untreated, would cost tens of thousands of dollars in damage.

These people may be getting paid high hourly rates, but they’re certainly not getting paid in alignment with the priceless value they’re creating.

Why not?

In the end, you and I are not going to get paid based on the value of our priceless advice. The reasons are simple. First off, we may know the value of what we just delivered, but the client can’t see that yet. Second, on an hourly basis, such compensation like that would seem like highway robbery. And lastly, a lot is going to depend on how the client implements the advice — whether they actually write a good book, create a good product, or work through their problems with their romantic partner. It’s pretty arrogant to say “Pay me for the advice, and if it goes bad, it’s your fault.”

How to get compensated for priceless advice

It may sound like I’m whining about this. I promise I’m not. Because in the end, giving valuable advice usually works out.

One way to make it pay off is to create contingent compensation. If I help you write a book proposal, I may ask for a share of your book advance. An startup advisor may take some compensation in stock options. If you’re setting up a company to be acquired, you can get a share of the value of the deal. Clients are often open to such arrangements, because the consultant only gets paid if the deal makes money. (If you make a deal like this, you should still get some traditional compensation as well, since a lot can go wrong along the way.)

You can also charge more for interactions that you know will generate more value. I get a far higher hourly rate for idea development than I do for editing, because the clients know that getting their book started is valuable. You don’t need to change the same price for every hour of advice, even if you can’t capture the full value of that priceless interaction.

But in the end, the great advice you give is going to compensated a different way.

The client is going to love you and give you more of your business. If I get to ghostwrite or edit a whole book, that’s tens of thousands of dollars of compensation for useful work. The same applies to any service person or consultant — you’ll get paid in loyalty and steady work.

Ultimately, though, the most valuable compensation comes from referrals. Do a great job for this client, and your next client may be big and rich. That’s how you build your business.

And that’s more valuable to you than any piece of advice you give.