You could offer the best services in your niche, but no one will hire you if you haven't created solid pricing and marketing strategies.
Business books can't get stress enough the importance of the 4 Ps, i.e., Product, Place, Price and Promotion. So there's no denying the fact that price is a critical element of a successful marketing strategy.
Pick the right price and make all your consultation business goals a reality. But undervalue or overvalue your services, and you risk immediate failure.
So, how to set and raise the consulting fees and make clients accept them? Which pricing structure works better for big projects?
Whether you're a seasoned consultant or a beginner, pricing your services can be increasingly challenging. This article will walk you through everything you need to know about how much to charge freelancing.
Selecting The Right Pricing Model For Your Consultancy
Your pricing structure should primarily depend on what your clients expect from you. Some prefer per-hour rates, while others like to pay a retainer or per project.
Flexibility plays a critical role in choosing the right pricing model. Instead of going with one 'similar' pricing method, open yourself to other structures and give your clients exactly what they need. All is well as long as you get fair remuneration for services rendered.
Here are the four best pricing models you can use to scale your business and brand.
The hourly pricing structure allows you to charge per hour for your consulting services. You set hourly rates, track your hours, and bill clients accordingly.
This easy and simple method is perfect for beginners who have just started working as independent consultants and taking on smaller projects. Moreover, if you don't know the estimated time for project completion, going with per-hour rates is your best bet.
However, it's best to avoid the hourly strategy if you have deep knowledge and expertise and take on large-scale projects that can go on for weeks or even months.
Follow the steps below to the T to set your hourly rates:
- Find out the average income (salary) for your job on Google. When you find it, please write it down. For instance, "senior marketing director average salary" = 99K
- Put your average annual income into an hourly calculator. Enter '20' in a working week. As beginner consultants, you won't work 40 hours a week - you'll divide your time between winning and delivering projects. For working weeks in a year, place '48' - or whatever you deem fit
- Going by this equation, your starting per-hour rate will be around $103 (An income of 99,000 equates to $8250 monthly pay, $2062 weekly pay, and $103 hourly wage)
- Most clients are comfortable with this pricing method
- Perfect for vaguely defined projects in which the project scope might change
- The longer you take to finish the project, the more you get paid
- Easy-to-compete with experienced consultants early on
- Your earning potential is limited
- You might get penalized for quick, efficient work
- Scheduling issues may arise for clients and consultants if the project takes longer to finish
Project Based Pricing
A major issue with the per-hour model is that clients feel uncertain about how much they will end up spending. Often, uncertainties around projects lead to project cancelation.
The project-based pricing method is best for beginners, intermediate, and experienced consultants. Although it's more demanding than the per-hour model, it eliminates all sorts of uncertainties around per-hour billing - your clients know what they're paying upfront.
Your earnings stay the same (or increase with experience) as you polish your skills and become more effective. For example, a beginner writer charges around $200 per 1500 words and takes 20 hours to complete the project. However, after some experience, the same writer takes only 5 hours to write the same-length blog, possibly with increased pay, unlike in the hourly pricing model.
Follow the steps below to set your project-based rates:
- Create a list of project deliverables
- Estimate the time required for each deliverable to complete
- Add all hours and multiply them by your per-hour rate. For example, 35 hours (total hours needed to complete all deliverables) x $103 = $3605
- Multiply it by 1.5 for unexpected follow-up meetings, revisions, etc. For instance, $3605 x 1.5 = $5407 for the entire project
Additionally, you can include a specific clause in the contract stating the project rate is based on things outlined here. Anything beyond the defined scope will be charged at hourly rates or renegotiated.
Track your performance with each task to better set your rates.
- Focuses on the project outcome and removes time-based billing
- Helps you easily achieve your revenue goals
- Predictable income
- You are rewarded for efficiency
- Typically includes advance payments
- You won't have to track time
- You'll provide better and more effective client service
- You may lose money if you undercut the work scope
- You can lose earnings (revenue) if the timeline or scope changes or you've to renegotiate whenever it does
- Uncertainty with future projects
- The constant need to adapt
Of all the pricing methods consultants can use, one model offers unique professional contentment you won't find anywhere else. That model is a monthly retainer - a perfect way to create a resilient, independent consulting business, which explains why over 40% of independent consultants love to work on monthly retainers.
With monthly retainers, you work with and bill your clients each month - a recurring revenue. You'll know for certain that your wages will be secure, immediate, and paid in full. Recurring revenue often works best for seasoned consultants because you can predict your future income more accurately.
Before deciding your retainer price, agree on a project scope with clients and charge accordingly. Also, you'll have to be more communicative with clients and inform them about project progress on a day-to-day basis.
Now let's discuss how to set your monthly retainer rates.
Often, consultants who adopt a monthly retainer model base their charges on hourly rates multiplied by total associated hours.
For example, an independent consultant with a $103 hourly rate decides to give the client 42 hours every month would set their retainer charges at $4326.
- A simple yet effective pricing method for independent consultants and clients. They're easy to revive, leading to long-term partnerships
- Provides accurate, predictable income
- Clients will focus more on completed tasks than the total number of hours
- Enables you to charge higher due to high perceived value
- Doesn't require estimation. Clients may commit to "x number of months" in advance
- Discounted rates. Clients expect you to offer lower prices for recurring work
- Difficult to raise your rates once the contract is made
- Limited earning power - only 12 months to bill your client per year
- Scope creep
You could offer phone consultation services to help your clients meet their objectives. But time is a valuable commodity, so you should charge appropriately for any on-call consultations you provide.
It's a good idea to set up a phone line to take paid phone calls. Consultants from various niches can share their advice, knowledge, and experience and get paid for it.
Expert calls are also a great way to analyze the client's requirements, identify and fill knowledge gaps and help them make informed decisions.
So how much should you charge for on-call consultations?
Well, you'll have to choose whether to charge a flat rate, by the minute, or a combination of these.
- You only need video calling software and your smartphone to get started
- The deliverables are quick and easy to arrange
- Immediate cash flow
- Preliminary setup may cost a lot if you want an exclusive phone line
- Clients may ghost you last minute, causing a loss of income
Determining Your Value As An Independent Consultant
How much to charge freelancing depends on what you can offer.
As consultants, we've all been there. The client is excited to get on board; they expect us to jump in straight away and start solving their problems.
And then… crickets!
After a few weeks of hard work, we find out that the client doesn't feel we are delivering value.
It's clear that your client hasn't been experiencing results as expected. And you have no idea what metrics and measures they use to arrive at that conclusion.
So, before you sign up a client, make sure you are on the same page as them about what constitutes value for them.
Typically, your value is based on the following:
- Your industry's market rates
- Your expertise and service offerings
- What are your competitors charging
Let's discuss each in detail.
Prevalent Market Rates In Your Industry
The rates clients pay for various skills can also vary significantly, from $50 to $250 per hour.
Listed below are a few skill sets with their rates:
- Marketing consultants often charge between $25-$300 per hour. On average, they charge around $100 per hour. While SEO experts may be at the upper end of this range, brand strategists and social media freelance consultants are at the middle and lower end, respectively
- HR consultants are charging anywhere from $95 to $195 per hour. Their average rate per hour is $140
- Management and tax consultants often charge around $100-$350 and $200 per-hour respectively
- While the average rate for web designers is $75, they can charge clients around $30-$80 per hour. Alternatively, they can also charge flat project rates of $500-$5000 per site
- The hourly rate for UX consultants ranges between $25-$195 per hour – with $70 being average
If you work with locals, know that the location can be critical in how much to charge freelancing. Clients in coastal areas and cosmopolitan cities often have massive budgets and can pay you more.
For remote services, set your charges based on what's usual at your client's location – and not yours.
Evaluate Your Services And Experience
Once you know the going rates (market rates), determine where you stand within these ranges.
Do you have the required experience and skills of a specialist? It's best to go with a lower number (lower rates) until you gain enough skills and work with a diverse range of clients.
However, you can seamlessly increase your consulting rates if you have worked for over 4-5 years, catering to various industries and niches, and delivered the results your clients wanted.
Then, consider things that make you stand out (your unique personal value). Work on tangible skills like service offerings and get certifications that verify your expertise.
Additionally, it includes intangible skills like quick responsiveness, flexibility, knowing and meeting your deadlines, and adaptability to clients' needs. All these things can enhance or affect your value.
Discover What The Competitors Charge
Once you know the average industry rates for independent consultants and your value based on your experience and knowledge, you can check your competitors for further rate adjustments (or ideal rates).
Wondering why you should compare and compete with others?
Because chances are you may not be the first independent consultant your clients have hired.
Since companies and organizations regularly engage consultants and contractors, they know the current market rates and will perceive your worth based on the range you'll fall in.
When looking at and analyzing your competitors, be realistic. Avoid comparing yourself to leading thought leaders featured in the Top 100 or Top 500 Forbes list unless you're part of them. Similarly, don't undermine yourself because you have just started.
Look for independent consultant websites that offer the same services as yours. Ensure the consultants you search for have much or less the same industry tenure, experience, and targeting clients.
Are your consulting charges on par with theirs? If required, you can join networking groups or niche-specific Facebook pages to obtain this intel.
Advice/Stories From AMA With Our Top Consultants
Unsure about which pricing model to choose for your consulting business? If so, here are a few real-life examples from AMA that can help you decide which pricing method works better for your independent consultancy.
Let's find out:
Independent serial entrepreneur, Jake Jorgovan, found a client who needed an SEO-friendly website. Instead of giving hourly rates like most previous projects, Jake applied the project-based (fixed price) method where the work scope is already defined.
According to Jake, he ended up quoting the project for around $4250. He only took 5 hours at most to create the website - and the client left happily and satisfactorily.
Matt Griffin - an expert designer and the founder of Bearded Studio - believes hourly pricing is one of the best and go-to options for independent consultants - it protects their interests and helps them earn more.
He used a per-hour pricing model to scale his business and manage his office workload. It's a perfect option for those who are efficient and keep good records.
Deb Zahn, an experienced healthcare management consultant, loves monthly retainers and always seeks opportunities to utilize them. Flexibility and guaranteed income are two things you won't find easily as an independent consultant.
She negotiates retainers whenever working as an advisor to CEOs. This position requires flexibility and ongoing support and helps make sure ultimate deciders feel her value.
She always uses this pricing method when she can manage clients' expectations easily.
Set your rates like a pro
Now that you know the different and most popular pricing models to set your consulting rates along with average charges for various industries and niches, it's time to figure out how much you'll charge for your services.
When determining your consulting rates, consider your needs, the value you provide, and your expertise.
Regardless of the pricing method you choose – hourly, project-based, or retainer – make sure to be confident about your consulting rates and understand that all clients care about is the result – and not the time you take to finish the project.
I hope this guide has given you all the guidance you need to set your independent consulting rates like a pro.
Every Mylance team member has done consulting. We're experts, and we've seen what consulting enables: more time with our families, traveling the world, more time on passion projects, or to start that business we've been dreaming about.