So you’ve been a service provider for a while, and now you want to try your hand at consulting. But how do you calculate your consulting rate, and how should it differ from your done-for-you rate? Here’s a breakdown on how to set your consulting prices and adjust them as you go.
Consulting vs. Done-For-You Services
If you've been a service provider for some time, chances are you’ve got some good insight into ways your clients can improve their businesses. If so, consider consulting! You get to use the same expertise you’ve acquired over hours and hours of client work, but you get paid for your knowledge instead of your time.
With done-for-you services, you complete tasks for your client and deliver them finished work. For example, if you’re a social media manager, you bill for the time you spent drafting, designing, and scheduling your client’s social media posts.
With consulting, you have a little more freedom to create different pricing packages and charge more. That’s because consultants are viewed as experts in their fields, and their time is extremely valuable. Plus, with consulting, you can (and should!) charge higher prices to make up for work you do outside of the typical “billable” hours, like working on your business education and researching projects for your clients.
In short, consulting is a great option if you want to put your hard-earned knowledge to good use. And in the long run, it’s a great way to level up your business and take back some of your time.
Types of Consulting Packages
The format of your consulting work will vary based on your field, but most consultants charge for their services in one of three ways:
Hourly. While it's possible to charge hourly for your consulting work, I don't usually recommend it. (More on that below.) It's tough to accurately track your time and then communicate those numbers with your clients, especially if you do a lot of research before your sessions.
By package. This is a much more common and effective way to price your consulting work. If you're charging by package, you'll probably offer your client an "intensive" type one-on-one meeting in addition to notes, strategies, and other deliverables they can keep after the meeting.
On retainer. Some consultants only work on retainer, meaning a company pays them a set amount each month to basically keep them on standby. This is a great option if you want long-term clients, but be sure to include a cap on your monthly hours in your contract.
Of course, you can mix and match these pricing systems to fit your work style. Try a few different packages, and see what works best!
How to Calculate Your Consulting Rate
STEP 1: Calculate your regular hourly rate.
First, calculate your regular, done-for-you hourly rate. Here’s how:
Determine how much your business needs to make in a year. Take into account your expenses, taxes, take-home pay, and savings.
Divide that by the hours you want to work. If you want to work 30 hours per week and make $100,000 in revenue per year, it would look like…
$100,000 per year / 52 weeks / 30 hours per week = $64.10 per hour
STEP 2: Predict your scope of work.
Next, predict exactly how much work each consulting project will entail. Keep in mind that, in addition to client-facing meetings, you’ll also spend time researching, preparing notes, and perfecting your skills. As a consultant, your rate should encompass all of this work.
For example, a one-on-one intensive might include an hour-long meeting, five hours of research, and two hours preparing documents for your client, and an hour reading business education. So if your hourly rate is $50, instead of charging $50 for a one-hour meeting, you should charge $450 for the total nine hours of work.
Keep in mind that while we’re using your hourly rate to create your packages, you don’t have to charge hourly for consulting services. (In fact, I recommend you don’t!) Use your hourly rate to create a flat-rate package. That way, you’ll make the same amount per package as you get quicker at doing the behind-the-scenes work.
STEP 3: Adjust for value.
As you create your packages, don’t be afraid to shoot a bit higher than you would with done-for-you services. While your hourly rate is a good place to start, it doesn’t take into account the added value you’re creating for your clients.
Imagine you’re a systems strategist. During a consulting session, you help your clients strategize and implement time-saving systems in their businesses. So while you’re only charging $400 for your consulting package, you could be adding thousands to your client’s earning potential.
As your clients start seeing results, raise your prices to reflect the added value.
STEP 4: Start consulting!
The more sales calls and projects you take on as a consultant, the better you’ll understand how your rate is received. If you can’t seem to book any clients, try lowering the price and seeing if that helps. If you’re constantly booked out, give yourself a raise! Your pricing model should never be set in stone, so don’t be afraid to make adjustments as you learn and grow.
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