What you need to know when charging your consulting rates
By theconsultant. Published on Monday May 9, 2022
Whether you are a novice consultant or beginner, how to charge for your consulting fees is not as easy as we may think. There are many assumptions, such as, ‘the client has a budget and should pay what they normally do with other consultants’ or ‘there is no need to ask for more than the company can afford’. Think of any assumption you may have heard or created that is not necessarily the case.
What to charge as your consulting fee is almost similar but very different to negotiating a salary as an employee. A project may be a one day contract or a one year contract. It could be based on doing the work four hours a day as opposed to working an 8 – 5 job. How best can you be able to know what you should be paid for the work you will be putting in?
Know the value of your work
You begin to understand the value of your work by analysing the type of consultancy work you specialise in, how much experience you have and knowing the competitive landscape. What you charged five years ago is not what you will ask for today. Every time you complete a successful project, always strive to increase your rate. Do your research on how much others are charging to remain competitive. You never know if you are undercharging unless you know what other consultants in the same field as you are charging.
Understand the different types of pricing models
There are various types of structures you can use to charge consultancy fees. These include; an hourly rate, a project-based rate, a combination fee or a performance-based rate. While an hourly rate is time based and based on the number of hours worked, a project-based rate will be decided with your client on a fixed rate based on the project. A combination fee will be based on both the fixed rate of the project and the time spent on the project. The performance – based rate is based on your performance or the outcome of the work done. As a beginner, it is important to determine which structure best suits you. In some cases, the client may be the decision maker.
Analyse your cash flow
Since consultancy may not be a full time job, set rates that will make sense for both your business and personal expenses. Always think about your business goals which will ensure the sustainability of your business.
Are you a novice or beginner? How do you charge for your consultancy rate?