Consultants who price their services based on value and ROI are 86% more likely to provide productive services. Most management consultants use an hourly rate, while strategy consultants are divided between the hourly rate and value-based pricing. The scope of work should be a major determinant of your rates, but it's difficult to estimate the price per hour or project. For example, you might find it faster to write a 2,000-word article for a company than to help produce a 5-minute podcast episode. When deciding on consulting fees, it's important to consider the true value of your work.
For example, if a client offers you a huge sum for a large project, you might analyze the work and find that it takes twice as much time and effort to do what a smaller project with a smaller budget rewards. Consider the example of the Declaration of Independence - if you're doing business-disrupting work, that also comes at a financial price. When clients ask: “How much do you charge for consulting?” try to guide the conversation to the details of the project. For example, you can say, “I'd like to have a good idea of the scope of the work before we talk about rates.” Sometimes, you'll have to compromise. For example, a customer's budget might not be able to afford it. Instead of completely rejecting the customer (or having the customer reject you), guide them toward negotiation.
Don't hesitate to check consulting rates by industry, but don't use them as a bible to set prices - use them as other reference data. Some of my colleagues sell one-time consulting calls and then sell other services through their agencies or partners. However, setting consulting rates doesn't have to be an anxiety-provoking experience that keeps you awake at night. Consultants often choose a pricing model or fee structure for their work in order to maintain transparency. New consultants charge less to build a portfolio, so you can expect to get great deals working with one. If you're transitioning from a previous job, business, or corporation, you can take your hourly wage (plus benefits) and then double or triple it.
Your general location will also influence your prices - consultants who live in coastal or urban cities typically charge higher consulting fees. Once you've determined how much you'll charge for your consulting services, think about how you'll accept payments. Lowering the price of a consulting fee for a one-off project (or a couple of calls) sends the wrong message and can affect the quality of the service, even if you receive a discounted rate. Keep in mind that your pricing structure must be constantly reviewed, especially as you develop your skills and try to expand your consulting. Clients are often more comfortable with an hourly or daily rate because they can assess the need for consulting services from time to time without the complications of most long-term agreements. To set fees, multiply your hourly rate by the estimated time needed for the project and then add a profit margin of 10-20% for unexpected contingencies. Companies usually hire contractors and consultants on a regular basis, so they will be aware of current rates and will perceive your value depending on your location within that range.
