As an Independent Consultant, setting your rates can be a challenging, but highly important task. The consultant should ensure they are charging the correct price for their work, whilst also making a profit. Over the years I have spent in the industry, I have noticed that setting rates seems to be a tricky discussion for most consultants and something that they do not fully think through before naming their prices. Often, consultants fall into a trap of either pitching their rate too low so they can get started and are then unable to increase it for future projects, or pitching too high and missing out on work because they are pricing themselves out of the market. Here are a few tips on setting rates that will help consultants from falling into traps.
Set your earnings goal and break it down
The first step to setting your rates is to determine your earnings goal for the year and then break that down to an hourly/daily rate. This can be done by calculating your desired annual income in comparison to the number of days you plan to work for the year. Consultants should also remember when setting their rates and desired earnings that there are a few models to choose from when charging clients, these include.
Per project: With project rates, the consultant sets up an agreement with pre-determined deliverables. Anything outside of this project’s scope can be billed at an hourly rate or another pre-determined rate.
Per day: Charging per day is similar to charging per hour since days have a set number of hours in them. But it allows you to focus an entire day on a single client while getting paid for an entire day — instead of getting paid for 3-4 hours and feeling too exhausted to see another client for another 3-4 hours.
Retainer: This is a recurring pricing strategy. The consultant can set retainer rates based on a specific number of deliverables or monthly hours. The retainer model works well for consultants who offer services that need continuity, such as IT, social media, or accounting.
Hourly model: Yes, the hourly rate model is still a great choice for consultants, especially when clients need you in short bursts.
There’s no perfect model for consulting rates. The best model for you depends on how you deliver your consulting services (and your personal preference!).
Research industry standards
As well as determining your pricing model and the figure that you will be charging your clients, it is essential that a consultant also thoroughly researches the market that they are operating. A lot of Independent Consultants that I meet and speak with do not do this and are not aware of who their competition is, what they are offering clients, and how much they charge. By gathering this information, you can stay ahead of the competition by continuously innovating and offering value-added services to your clients. This data can be collated via job boards, industry associations, and online forums.
Consider your experience, expertise, and the complexity of the project.
Your experience and expertise should also be taken into account when setting your rates, as well as the complexity and duration of the project. If you have years of specialised knowledge, or the project has high impact objectives, or has an international remit, then the chance of charging a higher fee is more feasible. Again, your research in the market will help here as you will know what similar projects have been charged out at by other consultants historically. Clients are willing to pay more for consultants who have a proven track record of success.
Factor in your expenses
An area most Independent Consultants forget when setting rates is to always consider their expenses and add them to the price. This includes overhead costs such as office space, equipment, and software. You should also factor in any costs associated with insurance, retirement savings, and taxes. By considering your expenses, you can ensure that you are charging enough to cover your costs and make a profit.
Consider your client’s budget
Finally, it is also essential to consider the client’s budget when setting your rates. If the client has a limited budget, you may need to adjust your rates accordingly. However, you should also be careful not to undervalue your services, instead be transparent with your client about your rates and what they can expect for the price.
Here at Veriex, we are experts in scaling teams of freelance independent consultants in strategy, change, digital, and people transformation across the globe. We work closely with our network of ‘Approved Consultants’ to support them with building their skills and developing their business pipeline by giving them access to some of the most complex transformation projects on offer. For more information about becoming a Veriex Approved Consultant please contact info@veriex.co.uk or check out our opportunities page on our website.
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