Establishing Consulting Fees
When you are first starting out, establishing consulting fees, can seem difficult to figure out. One way to start is by setting an income goal for the year, and guess at how many consulting jobs you will be likely to get. If you are like I was, you will likely be more than happy to take the first consulting job that comes along and charge too little.When you first start as an independent consultant, you are fighting to establish yourself and your name and reputation. Under these circumstances, I think undercharging can be a good thing. But to establish your fees over the long term and make a good living you need to set your consulting fees systematically.
First off, how do you want to charge for your services, do you want to charge by the hour, or value based. Some consultants only charge value based, citing ethical concerns about charging by the hour, but normally I tend to go with whatever the client feels comfortable with.
While charging by the project to be done (value based) versus charging by the hour may seem to be more ethical, most clients are a lot more comfortable being charged by the hour. They are used to it, and often expect it. Also it is often times a much easier sell, because your hourly rate appears much lower than citing a completed project based fee.
Also charging by the hour seems to work better for ongoing consulting jobs where you are just needed for a few hours a week. A retainer could also work in a situation like this, but again, I often go with what the client is used to and comfortable with, since after all they have the money to spend.
Irregardless of how you charge, you have to make sure you are being compensated for the time you are putting in. When charging by the hour it is easier to make sure you are being compensated, because you set the hourly rate, and can always increase it.
But when you do project based fees when you are first starting out, you can very easily undercharge, and end up putting in way too much time.
I’ll be going into this more in later posts about establishing consulting fees.
