How are consulting fees set?

One of the most frequent questions I get

of those who are trying to start or grow

your own consulting business is: “How and

how much you charge clients for your consulting

services?”

The ways of billing customers are numerous.

There are hourly rates, fixed rates for work,

contingency or performance arrangements,

flat rate plus expenses, daily rate plus expenses,

and many other methods to collect your

consulting services. Which is the best?

Let’s consider some ways of billing your

hour.

1. Rate per hour or per day

Many consultants charge by the hour or by the day.

To set an hourly or daily rate, they try

to calculate the number of billable hours in a

year. Many hours will be spent on marketing and

administrative and other functions, so

time is not at the customer’s expense. Also,

vacation time, holidays, sick days, etc.

The customer cannot be billed directly.

Consultants, like other companies, must charge

enough to cover your overhead and also

make a profit. If a consultant wants to win

twenty-five dollars an hour of work time,

he (or she) might have to charge a hundred

dollars an hour to the customer. This assumes

half billable hours and fifty percent

overhead and profit.

Your daily or hourly 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 per job or a flat fee.

For example, a tax advisor may charge three

one hundred dollars to prepare a tax return for

you and your spouse, including a

income statement of your business from information

supplied by you. If the consultant takes only one

time to do this, the big three hundred dollars

per hour. However, if the tax advisor

miscalculates the time required, it could take

twenty hours to complete the job and do it alone

fifteen dollars an hour.

Of course, consultants can make a profit too

the work of your employees or subcontractors.

Many consultants claim to earn more with a flat fee

than for hours. Advantages include being

able to give a quote to the client in advance and

less disputes about the price (since the total bill was

agreed in advance).

To protect yourself on flat rate assignments,

always limit the scope of your commitment to

something you can easily calculate.

For example, if you are asked to give a quote

to set up a website for a business,

you could break this project down into smaller assignments.

First, you can give a preliminary quote

research and recommendations. Estimate time

necessary to meet with the client, know

your business and goals, develop strategies and a

budget and prepare recommendations on how

Continue. Then give the customer a quote (maybe

in the form of a one page letter agreement or

proposal). Upon acceptance of the offer by the

customer in writing, you can continue with this

project phase.

Some consultants charge half their fee

in advance and half at the end of the task for

each phase of the consulting project.

If the customer doesn’t like your recommendations,

at least you get paid for the work you did.

Maybe you can entrust him to prepare

alternative suggestions.

If your website project was not split into

smaller steps or assignments, you may find

that you spent much more time on the project

than expected.

Also, you may not find out until you file

your invoice for the entire project that your client

you do not pay, either because you are not satisfied

with the results or because you can’t or

not willing to pay.

Divide a project into smaller assignments

helps you estimate with greater precision and limits

your financial exposure.

3. Contingency or performance provisions

Sometimes clients will ask you to become their

partner. If it does, it is no longer a

target consultant.

What if your client asks you to take care of the management?

consulting for twenty-five percent of the network

Profits? Will there be any benefit from

time you write in your car, home office,

entertainment, travel, salary for oneself and

family members and other expenses?

On the other hand, if you are a marketer

consultant who is absolutely sure

that can increase a customer’s sales,

you can feel safe charging a fee based on the

increased customer sales volume. Are you

make sure your customer will cooperate with you in

achieving this goal?

Some consultants charge a flat fee plus a

percentage of ownership or earnings from your

services.

Rates based on contingencies or performance

arrangements are risky. Most consultants are

better charge a fair price for your

services and leaving the customer’s risk

customer business.

4 value-based fees

Consultants can sometimes justify fees based on

its value to the customer. For example, if you

save a customer a million dollars in taxes, your

The fee may be higher than normal to reflect the

value of the services provided.

You can pay an accountant or lawyer a fee of

fifteen hundred dollars based on time for certain

tax-related services. What would you be willing?

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? Are there some particularly

valuable service you can provide that

justify premium rates?

However and whatever you charge, make sure you

your rate is a good value for your customer

and it also compensates you fairly.

For more information and resources on

consulting, visit:

http://www.yenommarketinginc.com/consulting.html

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