Are You Charging the Right Amount for Your Consulting Work?
Letβs talk about money.
Wait, letβs be more specific. Letβs talk about the money that freelance consultants make for their freelance consulting work.
If youβre a freelance consultant, you will, at some point, have to negotiate the right consulting fees with your clients.
But itβs easier to say than do. Thatβs why in this article, weβll 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 whoβll respect your talent and pay you what youβre worth.
1. Hourly Rate
Even if you donβt end up charging hourly consulting rates, itβs important to really understand this structure as good as you can. Weβll discuss other consulting fees structures further in this article. But one thing is for sure: as a freelance consultant, youβll 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, youβre 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 itβs 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 βHourly rates of freelance SEO consultants in Londonβ to get an idea. Youβre 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
Letβs 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, youβre providing a million-dollar value to them and you should charge accordingly. So, if you charge 10% of the financial value you provide, youβll be entitled to earn $100,000 as consulting fees for this engagement.
Now, letβs 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, youβd only make $72,000.
See the difference? Even though youβre putting in the same amount of work, you could earn more and itβll still be reasonable. After all, youβre 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 youβre providing to your clients in money, then itβll help you charge the consulting fees you actually deserve.
Project-Based Fee
This may sound similar to a value-based fee but itβs 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 youβre charging per project, and not per hour, you should be aware of how many hours itβll take you to complete the project when setting your consulting rates. Your clients donβt 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. Itβs like getting a fixed monthly salary as an employeeβsomething 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 youβre 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 donβt 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. Thatβs why itβs 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 thatβs 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, donβt settle for less and donβt try to sell your services to companies who donβt need it or cannot afford it.
on a weekly basis.