How to Set Your Consulting Fees
For any consultant starting off, figuring out what you should bill your clients is often the most difficult challenge. Charge too much and you'll fear that you wont get any clients, charge too little and you wont make enough money.
The quick answer is to find out what your peers are billing, and use that as a basis. Often when you are starting off, price may be the only way you can compete.
Once you have an established track record, you can start to justify a higher fee. Many consultants will walk away from a lot of money because they fear that they will not attract the same amount of work. Ironically, this is exactly what you want.
Think about when you first started off in your consulting career. You probably did work for clients who wanted as much as they could get for free, or for next to nothing. In wanting to establish a clientele or portfolio, you likely agreed. Think about the number of hours you spent working on this clients project, and the pay you received for that.
There are many potential clients out there who wants your work, your expertise and your opinion for free, or next to nothing.
There is another set of potential clients who dont mind paying for quality. Those are the clients you want to target. Here's why:
a) these clients are likely used to paying for quality, and the higher price gives the perception that you are providing that quality.
b) these clients know exactly what they want, and are willing to provide you with details you need to get the project completed. When they are paying you top dollar, time is money
c) a cheaper fee conveys inexperience. The type of clients you want to attract do not want inexperience
d) a higher fee feeds the perception that your work is in demand
When you raise your rates, you will lose clients. However, the clients you gain will make up for it. Imagine working on fewer projects and making the same amount of money as you do today. Now imagine picking up another client in that free time.
Its important to remember that you must deliver on the quality. The increase in expectations match the increase in your fees. If you are going to raise the bar for your fees, be prepared to raise the bar on the quality of your work and how you deliver on it.
Value based billing will often help you get past the challenge of billing a higher rate. If you bill by the project, or bill by the phase of the project, you will find that you can bill a higher rate than your current hourly rate. The faster you get the project done, the more you make per hour, and the happier your client is.
If you bill $2000 for a project that can deliver in 2 weeks, your client will likely budget that you are billing $25/hr. If the project is worth $2000 to complete to the client, they will sign off on the project. If you deliver that project in 1 week instead of 2, you'll have 1 week off to play golf, or start work on your next project. Meanwhile, your work will be worth $50/hr. Of course, your client is happy because you have delivered your project early, and met his expectations.
Underpromise and over deliver.
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ABOUT THE AUTHOR
Christopher Smith has been providing tips for small business consultants for over 7 years. For more great tips, please visit http://www.consultingscene.com