How to set and explain your hourly consulting rates
Learn how to charge clients what your expertise is actually worth and to set up your consulting business to realistically scale.
Launch a scalable online presence for your consultancy
Starting a consulting business as you’ve gained valuable experience in your career can be a great way to earn a living. However, there’s more to being a consultant than just offering consulting services; you need to take in all that experience you’ve built up and add a price tag to that too. Your consulting rates aren’t just a transaction of services you offer but also all the knowledge you have that customers can’t get from anybody but you.
Deciding on your consulting fees and hourly rate is an important step you don’t want to overlook as you begin your consulting business. In this article, we’re going to share the best pricing models for your consulting business so that you can have a lucrative business without selling yourself short.
Costs to consider before pricing your consulting work
Before coming up with a fee structure for your consulting services, you need to factor in all the costs associated with living and the work that goes into building your business. Most new consultants leave their life as full-time employees behind to make it big as a consultant. However, before you start earning more than your annual salary, you need to find more clients.
The time and money you invest in finding small businesses that provide consistent income will need to factor into your rate. Alternatively, you want to ensure you can easily afford your living expenses. If you have three clients paying your hourly rate once a month, that’s only three hours of work on paper. However, you’ll likely be doing more than three hours of work to attract those clients, build up your website and social media, and gain the experience to provide value for your consulting services.
Pricing models: How much should I charge as a consultant?
Hourly consulting rate
The easiest way to calculate your hourly rate as a consulting company is to consider the annual salary you’d like to earn as a consultant. For example, if you currently earn $85,000 as a full-time employee but hope to earn $100,000 annually as a consultant, your consulting rate would equate to $48.08 per hour. But hold your horses; it’s doubtful that you’ll have 40 hours of consulting services booked every week for an entire year. So you’ll probably fall short when pricing your consulting rates like that.
The hourly rate of a brand-new consultant is probably closer to $60-$75 an hour. However, the average consulting hourly rate is closer to $100 to $200 an hour. These consulting rates vary widely based on whether you’re a business consultant, it consultant, management consultant, strategy consultants, or other consultants in a different industry altogether. An experienced consultant can also charge higher consulting rates, especially if they have a track record of improving the performance of a business owner and her team, reducing business expenses, or offering services that help skyrocket a company’s growth.
Monthly fee structure
If hourly rates seem like too little income for your hours worked, a monthly retainer might be just what you consider for your pricing structure. One of the key benefits of a monthly retainer is that you can create contracts monthly to help you plan better for your income. When comparing the average hourly rates to a monthly fee structure, you’ll likely earn more consulting fees overall for a monthly retainer. You could include your hourly consulting fees for a weekly meeting, a set amount of work you’ll complete, and support on consulting projects.
For example, a digital marketing consulting business might charge $7,000 monthly for the work they’ll do on a client’s business. If you only find two to three clients, you could earn around $14,000 to $21,000 monthly. Finding only a couple of high-paying clients is easier than finding multiple clients for an hourly rate. This makes the monthly retainer more attractive for an experienced consultant, as you earn more from your consulting fees.
Per project-based rate
Alternatively, you might also charge a project rate. Not all businesses need year-round support. For example, an accountant might offer consulting services around tax season. A business might not need year-round help, so the consultancy fees are around the project they need help with. Some companies may operate seasonally and require consulting services only during peak season. Or if there’s an annual campaign for an event, a per-project rate might make more sense.
Project-based fees are a bit trickier to set pricing strategies for. It can be hard for new consultants to set estimated hours for a project they haven’t started yet. It’s easy to fall into the trap of working harder than you would at your corporate job with less pay upfront. You’ll want to create a list of all the tasks associated with the project, and the time it takes to complete those tasks, and then add a 20% increase to the overall cost in case more work creeps up.
Some potential clients may choose to hire a consultant based on their impact. For example, an SEO consultant might do a more value-based pricing model to offer similar services to their clients based on their performance. A new consultant might not have as much experience in terms of the value they can offer another business unless they have a track record of helping businesses attract new clients.
The challenging part of this model is that you need to provide tangible value that helps businesses win clients. A value-based method will seem more attractive to your clients, who may be more willing to offer weekly pay for your services as it directly helps their bottom line.
So, what should your consulting fees be?
As a consulting company, whether you choose an hourly rate or another consulting fee structure, the goal is to price your value, provide results, and consider additional expenses that are associated with starting a consulting business. Choosing a fixed rate or monthly fee as your pricing method will depend on how many new customers you can attract. You can also offer an initial fee to help you decide if the amount of work and the hourly rate are worth it.
Consider all your consulting rates carefully. But also remember that you can also create products to help scale your consulting business on top of any consulting fees you charge. What you charge as a consultant matters, so when in doubt, ask for a second opinion or look at the average rates people charge as a consultant for a better idea.
Get a consulting website that helps you sell services
Once you’ve set your rates or hourly fee and you’re ready to attract and serve new clients, you need an online presence that makes it seamless. B12 is the all-in-one solution for consultants and other service providers to launch a professional online presence and sell services with less effort.
It’s simple. Answer a few questions about your consulting business, then see your AI website draft in 60 seconds. Management consultants, IT consultants, marketing consultants, and more — B12 has all of the functionality needed to make life easier for both you and your clients.