Are You Charging the Right Amount for Your Consulting Work?
Letâs talk about money.
Wait, letâs be more specific. Letâs talk about the money that freelance consultants make for their freelance consulting work.
If youâre a freelance consultant, you will, at some point, have to negotiate the right consulting fees with your clients.
But itâs easier to say than do. Thatâs why in this article, weâll discuss the top four consulting fee structures, along with some tips on when to choose which structure. We will also discuss how to find clients whoâll respect your talent and pay you what youâre worth.
1. Hourly Rate
Even if you donât end up charging hourly consulting rates, itâs important to really understand this structure as good as you can. Weâll discuss other consulting fees structures further in this article. But one thing is for sure: as a freelance consultant, youâll 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, youâre 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 itâs 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 âHourly rates of freelance SEO consultants in Londonâ to get an idea. Youâre 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
Letâs consider an example: Suppose you create a manufacturing cost reduction strategy for a toy company. It helps them save $1 million every year. In this case, youâre providing a million-dollar value to them and you should charge accordingly. So, if you charge 10% of the financial value you provide, youâll be entitled to earn $100,000 as consulting fees for this engagement.
Now, letâs 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, youâd only make $72,000.
See the difference? Even though youâre putting in the same amount of work, you could earn more and itâll still be reasonable. After all, youâre 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 youâre providing to your clients in money, then itâll help you charge the consulting fees you actually deserve.
Project-Based Fee
This may sound similar to a value-based fee but itâs 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 youâre charging per project, and not per hour, you should be aware of how many hours itâll take you to complete the project when setting your consulting rates. Your clients donât 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. Itâs like getting a fixed monthly salary as an employeeâsomething that is predictable and stable. Retainer models are awesome when the project is expected to last for a few months (or years).
For example, if youâre a Facebook Ads consultant hired by a company to run their weekly social media advertisements, you could propose a retainer model in which you can charge a fixed amount for every month. This could be beneficial for both the consultant and the client if the investment in consulting fees produces positive returns.
To determine your retainer fee, you could multiply your expected hourly rate by the number of billable hours per month. Feel free to add a little discount to the final retainer fee because your clients deserve some concession for offering you a stable source of long-term income.
Remember, retainer agreements can be hard to get. Your clients might be a bit hesitant initially. However, an excellent portfolio and a proven track record of success can increase your chances of getting retainer contracts.
4. Negotiate Like a Pro
In an ideal world, you could just build a freelance consulting website. You can 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 donât have the right connections. This problem can be easily fixed by connecting with a freelance consulting platforms 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. Thatâs why itâs 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 thatâs 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, donât settle for less and donât try to sell your services to companies who donât need it or cannot afford it.