George is a subcontractor who works for me from time to time. He’s competent, honest, trustworthy, personable, fun to work with—and in seven years he still charges his time to me (and everyone else) at the same hourly rate. I’d pay him more—and even foolishly mentioned this to him once—but he still keeps the same rates.
Should George increase his rates? I think so. Even if you estimate inflation at only 2 percent per year, over seven years that compounds to 15 percent. So George is working for 15 percent less than he was seven years ago. Also he is seven years older, wiser, and more experienced. Certainly he should be charging more.
So that’s George. How about you? Well, ideally, you should be charging based on the value you’re delivering to the client, not the number of hours you work. So quoting a fee rate is probably not appropriate. However, on an ongoing basis, you should be working out what your hourly earnings are, and that value should be increasing over time. If it’s flat lining or going down, there’s something you have to fix. Like George, you’re now accepting less for your time and skills than you were before.
If you’re in the unenviable position of having to quote a fee rate, my advice is to increase it annually at a rate you feel is fair. This allows you to take into account inflation and your increasing expertise. It’s much easier for a client to accept an annual fee rate increase than a sudden, large increase after five years.
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 firstname.lastname@example.org to learn more.
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