Business People Club

Search All Topics !

How Do You Set Consulting Fees?

0 like 0 dislike
208 views
by TrainedGuy
How Do You Set Consulting Fees?

Please log in or register to reply to this post.

1 Comment

0 like 0 dislike
commented by GardenParrot
One of the most frequent questions I receive from those who are trying to start or grow their own consulting business is: "How and what do you charge clients for your consulting services?"

The ways of billing clients are numerous. There are hourly rates, by-the-job fixed rates, contingency or performance arrangements, flat fee plus expenses, daily fee plus expenses, and many other methods of charging for your consulting services. Which one is best?

Let us consider some ways of billing for your time.

1. Hourly or Daily Rate

Many consultants charge by the hour or day. To establish an hourly or daily rate, they try to calculate the number of billable hours in a year. Many hours will be spent marketing and in administrative and other functions, so this time is not chargeable to the client. As well, vacation time, holidays, sick days, and so on, can not be directly billed to the client.

Consultants, like other businesses, must charge enough to cover their overhead expenses and also earn a profit. If a consultant wants to earn twenty-five dollars per hour of working time, he (or she) might have to charge one hundred dollars per hour to the client. This assumes one half billable hours and fifty percent overhead and profit.

Your hourly or daily rate may be limited by what your competition charges, especially if you have not positioned yourself as different from them.

2. Fixed or Flat Rate

Some consultants charge by the job or a flat rate. For example, a tax consultant might charge three hundred dollars to prepare a tax return for you and your spouse, including an unaudited income statement for your business from information supplied by you. If the consultant takes only one hour to do this, he grosses three hundred dollars per hour. If, though, the tax consultant miscalculates the time required, he could take twenty hours to complete the job and make only fifteen dollars per hour.

Of course, consultants can also make a profit on the labour of their employees or subcontractors.

Many consultants claim to make more on a flat rate than on a hourly basis. Advantages include being able to give a quote to the client up front and less disputes on price (as the total bill was agreed upon in advance).

To protect yourself on flat rate assignments, always limit the scope of your engagement to something that you can calculate easily.

For example, if you are asked to give a quote for setting up a website for a business, you might break this project into smaller assignments.

First, you could give a quote for preliminary research and recommendations. Estimate the time required to meet with the client, learn about his business and goals, develop strategies and a budget, and prepare recommendations on how to proceed. Then, give the client a quote (perhaps in the form of a one page letter agreement or proposal). Upon acceptance of the offer by the client in writing, you may proceed with this phase of the project.

Some consultants collect one-half of their fee up front and half upon assignment completion for each phase of the consulting project.

If the client doesn`t like your recommendations, at least you get paid for the work you did. Perhaps you can charge him to prepare alternative suggestions.

If your website project was not broken into smaller steps or assignments, you could find that you spent way more time on the project than anticipated.

Also, you might not find out until you present your bill for the whole project that your client won`t pay, either because he is not satisfied with the results or because he is unable or unwilling to pay.

Breaking down a project into smaller assignments helps you estimate more accurately and limits your financial exposure.

3. Contingency or Performance Arrangements

Sometimes clients will ask you to become their partner. If you do, you are no longer an objective consultant.

What if your client asks you to do management consulting for twenty-five percent of the net profits? Will there even be any profit by the time he writes off his car, home office, entertainment, travel, wages to self and family members, and other expenses?

On the other hand, if you are a marketing consultant that is absolutely certain that you can increase a client`s sales, you may feel confident charging a fee based on the increased sales volume of the client. Are you sure your client will co-operate with you in the attaining of this goal?

Some consultants charge a flat rate plus a percentage of ownership or profits for their services.

Fees based on contingency or performance arrangements are risky. Most consultants are better off charging a fair price for their services and leaving the risk of the client`s business to the client.

4. Value Based Fees

Sometimes consultants can justify fees based on their value to the client. For example, if you save a client one million dollars in taxes, your fee may be higher than normal to reflect the value of the services rendered.

You might pay an accountant or lawyer a fee of fifteen hundred dollars based on time for certain tax related services. What would you be willing to pay to legally save an extra million dollars in taxes? Ten thousand dollars, one hundred thousand dollars, or more?

Can you apply this information to your own consulting practice? Is there some particularly valuable service that you can render that would justify premium rates?

However and whatever you charge, be sure that your fee is a good value for your client and also compensates you fairly.

Related posts

0 like 0 dislike
1 Comment 297 views
How in the World Do People Save Money?

How in the World Do People Save Money?

by PlushSeal
0 like 0 dislike
1 Comment 233 views
How Do Interest Rates Work?

How Do Interest Rates Work?

by CheeryGrin
0 like 0 dislike
1 Comment 254 views
How Do I Choose A Lender?

How Do I Choose A Lender?

by MammothMoth
0 like 0 dislike
1 Comment 317 views
What is "RSS" and Do I Need It?

What is "RSS" and Do I Need It?

by TrainedGuy
0 like 0 dislike
1 Comment 259 views
Why people don't buy from you?

Why people don't buy from you?

by HarshThunder
0 like 0 dislike
1 Comment 298 views
How To Make Money Selling Ebooks?

How To Make Money Selling Ebooks?

by HairyFoal
0 like 0 dislike
1 Comment 294 views
How to save money as small business owner?

How to save money as small business owner?

by AmazingKitty
0 like 0 dislike
1 Comment 322 views
How To Make Money Using RSS Feeds?

can you really make money using rss feed?

by HarshThunder
0 like 0 dislike
1 Comment 353 views
0 like 0 dislike
1 Comment 263 views
How Can I Get Out Of Debt?

How Can I Get Out Of Debt?

by Oystrich
0 like 0 dislike
1 Comment 259 views
How To Safeguard Your Financial Life?

How To Safeguard Your Financial Life?

by KeyboardPie
0 like 0 dislike
1 Comment 378 views
How to Find Hidden Money for Your Business Through Revenue Recovery?

How to Find Hidden Money for Your Business Through Revenue Recovery?

by UncleRhino
0 like 0 dislike
1 Comment 321 views
How to raise funds?

How to raise funds?

by Cybora
0 like 0 dislike
1 Comment 248 views
0 like 0 dislike
1 Comment 233 views
How To Make Sure Your Financial Budget Will Succeed?

How To Make Sure Your Financial Budget Will Succeed?

by SleepyFledgling
0 like 0 dislike
1 Comment 940 views
How To Save Money On Your Home Heating Bills?

How To Save Money On Your Home Heating Bills?

by SwiftHeroine
0 like 0 dislike
1 Comment 240 views
How to make money on craigslist?

How to make money on craigslist?

by MammothMoth
0 like 0 dislike
1 Comment 214 views
How To Save Money On Gas?

How to save money on car’s gasoline?

by KeyboardPie
0 like 0 dislike
1 Comment 284 views
What Are Blogs And How Do You Profit From Them?

What Are Blogs And How Do You Profit From Them?

by FlamboyantChomper
0 like 0 dislike
1 Comment 365 views
How do you make mistakes in dropshipping?

How do you make mistakes in dropshipping?

by TrainedGuy
0 like 0 dislike
1 Comment 227 views
0 like 0 dislike
1 Comment 227 views
0 like 0 dislike
1 Comment 262 views
0 like 0 dislike
0 comments 197 views
Five Steps to Create a Budget for your Small Business

How I hate budgets! Every time an accountant told me to put together a budget for my company, my response was - When ... Have systems in place to increase revenue and decrease expenses as necessary.

by UncleRhino
0 like 0 dislike
0 comments 856 views
Cost-Reducing Tips for the Small-Business Owner

One of the keys to running a successful small business or home office is learning to control costs. Even the smallest expenses can ... a postage meter or get a mail scale to eliminate overpaying.

by HuggingDuck
0 like 0 dislike
0 comments 205 views
Business Funding Sources

When you decide to open a business on your own, often times the excitement will have you ready to launch your idea right away, however ... can start at $20,000 all the way up to around two million.

by TrainedGuy
0 like 0 dislike
0 comments 262 views
6 Tips For Saving Money On Your Next Computer Purchase

Buying a Computer does not need to be a budget breaker. A Computer purchase often includes additional components and software ... buying, will keep the salesman commissions from emptying your wallet!

by SnailMail
0 like 0 dislike
1 Comment 244 views
Tips For Better Online Banking?

Tips For Better Online Banking?

by Mosquiche
0 like 0 dislike
1 Comment 457 views
What to Ask When Choosing a Home Equity Loan?

What to Ask When Choosing a Home Equity Loan?

by Sassassin
0 like 0 dislike
1 Comment 274 views
Should I Outsource My Bookkeeping?

Should I Outsource My Bookkeeping?

by Knighthawk
0 like 0 dislike
1 Comment 541 views
How to Set Up a Wholesale Handbags Business?

How to Set Up a Wholesale Handbags Business?

by Amigod
0 like 0 dislike
1 Comment 347 views
How to Explode Your Consulting Income?

How to Explode Your Consulting Income?

by PlushSeal
0 like 0 dislike
1 Comment 236 views
How to close that consulting deal?

How to close that consulting deal?

by ForceSoldier
0 like 0 dislike
0 comments 196 views
3 Things You Can Do to Help Yourself Be Successful In Life

Do you define success as having a lot of money? Or do you define success as being able to live your life the way you want too ... work hard, educate yourself and maybe have a little luck on your side.

image
by SnailMail
0 like 0 dislike
1 Comment 213 views
What do you know about starting a home based business?

What do you know about starting a home based business?

by GreedySmile
0 like 0 dislike
1 Comment 237 views
What do you guys think of rite aid pharmacy?

I really had nagative experince at rite aid pharmacy. Very rude staff.

by Knighttime
0 like 0 dislike
1 Comment 245 views
What can you do to earn money from blog?

What can you do to earn money from blog?

by Madept
0 like 0 dislike
1 Comment 277 views
Do You Have to Be Aggressive to Make Sales?

Do You Have to Be Aggressive to Make Sales?

by BunBunny
0 like 0 dislike
1 Comment 354 views
0 like 0 dislike
1 Comment 201 views
Business Classes: What Can They Do For You?

Business Classes: What Can They Do For You?

by PositiveVoid
0 like 0 dislike
0 comments 860 views
Top 7 Finder's Fees Tips

Consider the lucrative opportunity open to you in earning finder's fees. A finder is someone who finds something for a person or business ... need, as well as other sources to find what is needed.

image
by PerfumedNecromancer
0 like 0 dislike
0 comments 195 views
Top 10 Things People Do Wrong at Interviews, And How To Avoid Them

A face-to-face interview is the most stressful part of the job search for many individuals, but it is also a critical component ... your interest and inquire about the next step in the hiring process.

by Madept
0 like 0 dislike
1 Comment 372 views
Domain Name Transfer – What Is It And How To Do It?

Domain Name Transfer – What Is It And How To Do It?

by HuggingDuck
0 like 0 dislike
1 Comment 412 views
How do Employers view your resume?

How do Employers view your resume?

by GreedyPig
0 like 0 dislike
1 Comment 322 views
How do direct sales work?

How do direct sales work?

by Frank PREMIUM MEMBER
Connect with us:
...