Setting your fee rates.

July 25, 2016 1 Comment

After years of pricing consulting projects, I believe that fee setting is like brewing beer: both an art and a science. You evolve into it with experience. Your fees are per project, per client, and in a competitive situation, based on your knowledge of your competitors. Here are a few points to consider as you price client assignments:

Fee rates are mainly for you, not the client, try to avoid telling clients what your fee rate is. They don’t need to know unless it’s for payment by the hour. For fixed-price projects, where you submit a quote of, say, $25,000, if you do the work in accordance with what’s required, why would they care what you charge per hour?
Where possible, charge based on value if you can calculate it—and generally you can make a good estimate. Put yourself in your client’s shoes. If your client stands to make half a million dollars from your input, paying you $50,000 is a good deal.
We all have the same number of hours in a day. Just as a starting point, work out the minimum you need per hour if you work twenty hours per week. Then add fifty percent, and make the increased figure the absolute minimum you won’t go below.
Finally, when you start, try to find out what others in your field are charging, just as a guide.

Knowing what to charge as a new consultant is very difficult, even if you have some background in consulting, say, with a big consulting company. Be prepared for a trial-and-error period, during which you overprice some jobs (and lose them) and underprice others. You’ll find your level fairly quickly.

Early on in my career, I had two critical lessons on what fees to charge that have influenced my thinking in this area ever since.

I was a relatively junior consultant working for a medium-size consulting company of around one hundred people. The CEO had just sold a consulting project to a well-known organization and was talking to me and a couple of other consultants who were written into the proposal to do the work. He had nearly doubled our usual fee rates, and I made a comment about this. “Adrian,” he said, in an arm-around-the-shoulder tone, “they are an international organization and leaders in their sector. It would be an insult to charge them anything less.”

In the second instance, I’d just launched my own consulting company and was chatting with Jack, whom I’d always been impressed by. He was twenty-five years my senior and had been my boss many years before. In his late sixties, he still had bright, sparkly blue eyes and a funny story for every occasion.

Jack continued to work a couple of days a week for extremely high fee rates. “I decided long ago,” he told me, “that I’d prefer to work one or two days a week at my rates than five days a week at someone else’s rates. So that’s what I do. I sell value; so if people don’t perceive enough value, they don’t hire me. Once someone worked out my hourly rate and asked me how I justified charging so much. I told him I didn’t need to justify it; you hired me, so you do.” Jack has enough people wanting to hire him that he could work five days a week at those rates if he wanted to. He simply chooses to do his work on Mondays and Tuesdays and to enjoy himself the rest of the week. And why not?

One last point: there is a tendency among consultants, particularly newly minted ones, to underrate themselves. You’re a valuable resource for a company, so don’t be shy about charging accordingly.

As a highly experienced consultant and author of “Consulting Made Easy”, Adrian assists consultants, or would be consultants, to achieve success on their terms in their own consulting businesses. Adrian helps consultants increase their fee rates, find more clients, have more free time and have more fun.
Contact Adrian at adrian@adrianpartridge.com to learn more.