This won’t come as a surprise to you – that most consultants want to increase their rates but aren’t sure when and how to do so.
In fact, according to Consulting Success’ 2019 Consulting Fees Study, 80% are looking to do that…however, a startling 33% would actually reduce their rates in order to win business.
It’s time to change what you’re doing. Starting now!
While your background and experience can speak volumes about the value you bring (as long as it’s positioned correctly), putting a price on your services requires careful consideration.
What it comes down to is that clients are looking for:
- Value – the skills and expertise you bring
- Return on investment (ROI) – the results you provide
- And, of course, a comfortable Trusted Advisor working relationship free of drama that provides both parties with positive interactions that move them forward toward shared goals.
There are basically 4 ways you can bill your clients:
- Monthly retainer
So how do you choose? There are pros and cons to each.
When you bill hourly rates, you CAN quickly diminish your value and set yourself up for time-trapped burnout – particularly since the more you do provide repeated services, the faster and more experienced you get, resulting in you ending up working harder yet making less. Plus, when you think about it, if the client knows every little moment of that hour is being billed, even if they want to run something by you, it can be off-putting. Now, of course there are times when an hourly rate is necessary (especially when responding to RFPs) or monthly retainers. I’m glad to see that just over 23% of consultants surveyed by Consulting Success use hourly billing (still a little high for my taste as per the arguments above).
If you’re going to do a one-off day engagement, you simply times your hourly rate times the number of hours you offer to get your day rate. This can be increased as your experience and deliverables increase. However, it still traps you into a time-for-dollar trading scenario that ends up costing you more time than the ROI you bring in. I also see consultants discounting their daily rate as they don’t want to appear “too rich”.
About 40% of consultants surveyed use this kind of pricing model and just as many would like to gain more of these gigs. While recurring revenue can be great for your financial peace of mind, don’t forget that the ball is in your client’s court, should they decide to end the engagement at any point. However, scope creep can often rear its ugly head as the relationship with your client continues. Over time, they may veer outside the lines and ask you to do work that wasn’t in the original agreement. Plus there is the potential that your value will be diminished if the client begins to treat you like an employee rather than an expert.
This kind of fee should be calculated carefully as you don’t simply want to look at what your hourly rate is, figure out the number of hours the project will take, and then propose that fee. The project fee should take many other items into consideration such as your overhead and admin time, as well as the number of meetings you anticipate in addition to the actual work. It can also make sense to build in a 10 – 20% contingency which can help with unanticipated work and to manage scope creep.
Providing a tangible ROI to your client can command big fees. If, for instance, you are able to help them make 10X what they paid you in new business, you can up your rate considerably! This takes away the time-for-money trade and your client can become much more “outcome” focused. A word of warning. You have to be very confident about what you can achieve in order to position the high level of value you promise. That’s probably why just over 41% of consultants don’t try this model as they’re not sure how to go about it.
The other thing that stands out for me that is totally aligned to what I teach – and what you probably already know – is that specialist consultants who market their value can enjoy larger engagement paydays – the study shows at least 25% go on to make between $20K and $100K per contract.
There is a great article by Steven Gangbar, Founder of SAM Communications you should read. He has a very interesting point of view of how best to position what you do with clients. It’s like a consultants manifesto, with excellent examples and the way to change your mindset to do the “little things around the edges” that bring even more value to what you do. You can check it out here: https://www.samcommunications.ca/post/my-consulting-commandments
With these tips in mind, how will price your value in 2020? I would love to hear your thoughts around this. Feel free to comment below!
© Kim Chernecki
Kim Chernecki is CEO and Founder of Freedom Street, a global training and coaching company that helps high-performing consultants, coaches, freelance executives and other experts land lucrative corporate contracts. She is the creator of the Land Corporate Contracts Fast-Track System, and is a top-rated sales performance executive, facilitator, coach, advisor, speaker and strategist. A 25-year entrepreneur, Kim has consulted with executives from 100+ leading North American and Fortune 1000 companies and has, herself, started up and helped grow 8 businesses and business divisions.