Executive Summary
- This article covers how we price our research.
Introduction
Our pricing is based upon milestones. We create a milestone for each research topic or question that you want to be answered. Usually, our engagements will have multiple milestones.
Once we have completed the research in a top area, and we have provided the write up to you, we will then go and invoice the work.
Developing the Milestones
The milestones are developed during the pre-research phase before the contract is agreed to.
A typical project might look like this.
- Milestone #1: Is ABC true?
- Milestone #2: How much does ABC cost?
- Milestone #3: How does ABC compare to XYZ?
Each of these milestones will have a price in the contract for the research contract.
How Pricing is Developed
Pricing for a research area or topic is never what we think the appropriate amount of research should be. All of our clients have stopped short at what we would budget, or the amount of work we would do. This is why we ceased creating estimates without first receiving the budget from our clients. Therefore, we don’t merely develop estimates without knowing the budget, because the request is invariably to reduce the budget. This wastes time in developing the estimate in the first place.
So all of our interactions begin with “what is your budget?” We then fit the research into that budget, which then means reducing the scope or breadth of the research.
However, there are budgets that we don’t work within.
Minimum Budgets
We receive requests to answer questions for say four or five thousand dollars. We can’t justify going through the work to create the milestones, scope the work, and get a contract signed and to interact with a client for small-dollar contracts.
Furthermore, a second problem with these small-dollar contracts is they are often an attempt to simply skim off of our pre-existing research by extracting just the research conclusions.
Pre Existing Research
When we sell pre-existing research, that falls under our Brightwork Licensed Research. This allowed a customer to share the research that is hosted at the Brightwork website and which has a set number of named users. This is desirable when the customer wants to share the research with multiple parties that are outside of their company.
Not Supporting Consulting, Analyst Firms or Hedge Funds
We don’t do research for IT analyst firms or consulting firms, hedge funds, or Private Equity.
The reason is that the temptation is too strong for them to resist, taking the research, and then remove our logo and present the study as their own. Having seen this several times, we stopped working with any of these firms. A consulting firm can bill a customer 6x what we are paid and relay our research to not just one customer but multiple customers.
When consulting firms or analyst firms contact us, we have learned they are typically interested in stealing our IP.
How Hedge Funds and Private Equity Works
The concept behind hedge fund and Private Equity research is that you can hire people who lack domain expertise, and without any research background, and they can determine the reality of industries and companies. There is an active group that covers IT/enterprise software that provides research to these firms, that provide very superficial analysis — but the researchers in hedge funds and Private Equity, who by in large have never worked on an IT project, don’t know any better.
People inside the hedge fund will present our research to their bosses, without indicating we produced the research. Keeping the dollar amount low allows them to hide who they paid to obtain the research or minimize its contribution to the report they create. Again, this is a type of research “skimming,” so we refuse to have any of these firms as customers.
The Lack of Referencing
In the research field, the vast majority of those entities that do research, do not show references. For instance, this is why you don’t typically see references at the end of a Gartner report. The idea promoted by Gartner and virtually all consulting firms (notice the lack of reference in consulting presentations) is that all knowledge is created internally to Gartner or to that consulting firm. It took us a while to figure this out, but the consulting, analyst and financial analyst space is in part about presenting the work of others as their own. If this were not true, references would be far more commonly used.
In light of all of this, we only take on projects where there is a serious interest in getting to the bottom of a topic, not where someone wants to pretend they did the research.
Why Not Billing Hours Instead of Milestones?
Using billing hours does not work very well for research projects because there is a budget or fixed fee that is applied. In every case, when we have worked billing hour based research contracts in the past, we were told..
“Be sure to keep the hours within our budget.”
It is not efficient or desirable to have two different targets to track, and this is particularly true for contracts that are short – as is the case with our research contracts.
In our view, billing hours work better for consulting projects than they do for research projects.
Research Contracts
Our research contracts are concise, just a few pages. They outline the scope of the project, the payment terms, and then the milestones.
How Billing Works
Once a milestone is complete, an invoice is created.