One area many independent and small consulting firms struggle with is pricing. Figuring out appropriate fees for services is a challenge especially when first starting out. Additionally, many new consultants usually undercharge for what they offer. So how can you set consulting fees that are both reasonable and appropriate?
The only way your consulting business will continue to thrive is if you properly evaluate how you want to get paid and what your financial needs are. Determine if you want to set fees at an hourly rate or by the project. Many potential clients are hesitant to work with new consultants outside of a daily or hourly rate agreement. In most cases, a set rate is easier for those starting out.
Another way to determine fees is by assessing your income objectives. Set your fees according to what you need to achieve the income objective. Entrepreneur suggests identifying a floor for your fees by “taking your aspirational fee income and dividing by 1,200 (12 months X 100 hours per month).” This will give you an idea of what your rate should start at. From here you can raise or lower it depending on the viability of the business model.
It’s also a good idea to take a look at how the competition is setting prices. The market will help set appropriate prices because clients look for consultants with a reasonable price point. If a competitor can provide what you’re doing for half the cost, you won’t be able to keep up. Set appropriate costs by talking to those who are already doing what you plan to do; ask how they set their rates. Taking the time to do the research will help you succeed in the long run.
Experience and Standards
Another major influence of how much you can charge is based on experience level. If you have plenty of experience in the industry you can command a higher price point. According to SquareUp, “Different industries have different rates for projects, so your area of expertise and the scope of the project will influence your pricing model and consultant arrangement.” Do research to make sure you’re not overvaluing or undervaluing your level of expertise.
Setting reasonable price points for your services is all about evaluating what your goals are and seeing what others in your market are doing. Take the time to set your income objectives, talk with the competition, and look at your experience levels.