Consultants, Are You Charging the Right Amount for Your Consulting Work?
Let’s talk about money.
Wait, let’s be more specific. Let’s talk about the money that freelance consultants make for their freelance consulting work.
If you’re a freelance consultant, you will, at some point, have to negotiate the right consulting rates with your clients.
But it’s easier said than done. That’s why in this article, we’ll discuss the top four consulting fee structures, along with some tips on when to choose which structure, and how to find clients who’ll respect your talent and pay you what you’re worth.
1. Hourly Rate
Even if you don’t end up charging hourly consulting rates, it’s important to really understand this structure as good as you can. We’ll discuss other consulting fees structures further in this article, but one thing is for sure: as a freelance consultant, you’ll be putting in most of the hours yourself and there will be little to no possibility of delegating your tasks to someone else. After all, you’re the expert your clients will hire, and they will expect only you to lead the project and do most of the work.
That being said, hourly rates are great for short-term projects in which it’s easy to estimate the number of billable hours. Also, if the number of hours increases due to unforeseen circumstances by any chance, then you, as a freelance consultant, will be entitled to be remunerated for those hours as well.
To determine your hourly rate, you should investigate and find out what a consultant with the same expertise and experience as you earns in an hour in any given area. For example, you could search “Hourly rates of freelance SEO consultants in London” to get an idea. You’re encouraged to skip this part and set your hourly rates as per your wish, but knowing what others are charging will help you charge fair consulting rates.
2. Value-Based Fee
Let’s consider an example: Suppose you create a manufacturing cost reduction strategy for a toy company that helps them save $1 million every year. In this case, you’re providing a million-dollar value to them and you should charge accordingly. So, if you charge 10% of the financial value you provide, you’ll be entitled to earn $100,000 as consulting fees for this engagement.
Now, let’s do the math for hourly consulting rates in this case to calculate the difference. If you go for an hourly rate with this engagement and charge $150 per hour for twelve 40-hour weeks, you’d only make $72,000.
See the difference? Even though you’re putting in the same amount of work, you could earn more and it’ll still be reasonable because, after all, you’re providing so much value to your client by saving them a million dollars every year for the next few years.
If you can measure the value you’re providing to your clients in money, then it’ll help you charge the consulting fees you actually deserve.
This may sound similar to a value-based fee but it’s not. The outcomes for all types of consulting engagements cannot be measured in currency. For example, if an HR consultant is hired to help a company with the learning and development of its employees, then measuring an exact monetary benefit to the company might not be possible in this case. However, this consulting engagement is still very important as talented employees are essential to keep a business running.
The key here is this: Even though you’re charging per project, and not per hour, you should be aware of how many hours it’ll take you to complete the project when setting your consulting rates. Your clients don’t necessarily need to know the number of billable hours in this case. You can simply tell them what your consulting rates are for a given project.
3. Retainer Model
Oh! The retainer model. This one is a blessing for freelancers. It’s like getting a fixed monthly salary as an employee—something that is predictable and stable. Retainer models are awesome when the project is expected to last for a few months (or years) and the scope of work is unlikely to change drastically.
4. Negotiate Like a Pro
In an ideal world, you could just build a freelance consulting website, list your consulting fees, and expect clients to come work with you. However, the reality might be a bit different. Finding new clients can be harder than you think if you don’t have the right connections. This problem can be easily fixed by connecting with a freelance consulting platform that connects clients and freelance consultants.
When you are navigating the market to find new clients, some clients are busy navigating online consulting platforms to find top consultants. That’s why it’s always a good idea, as a freelance consultant, to keep in touch with these consulting platforms that can connect you with clients.
Once you find potential clients, you will have to negotiate a fee structure that’s reasonable for both of you. The key here is to be confident and make your offer look like a win-win for both of you. And before you even talk about fees, be completely sure about what the project is going to include and set your fees accordingly. Your rates should be set based on your skills, experience, and most importantly, the project scope. Ultimately, don’t settle for less and don’t try to sell your services to companies who don’t need it or cannot afford it.