Best Strategy for Setting Consultant Fees

First of all, there’s no way I can say that any specific structure of consultant fees are better than others. There’s only what’s best for your situation.

So in today’s post I’m going to tell you about what’s been best for me. After nearly a decade I’ve found one fee structure to work better than all others.

Make Your Life Simple
One thing that makes working a 9-5 job easier than being an independent consultant is the predictable pay. Every two week or each month you get the loot and all is good.

What scares the new entrant in the consulting arena is not getting that steady pay check.

It Doesn’t Have to Be That Way
Guess what? You can get payment from your clients pretty much like clockwork too.

Set your consulting fees as a monthly retainer. This means billing them each month on an agreed to price. And I recommend billing them at the beginning of each month for that month’s work. Yes, it’s pre-payment and it’s good!

How To Make This Happen
There are a few keys to making this happen:

  1. You need to find the right client and create a long-term project that you can help them with. Since you’re going after long-term work you need to make sure there are lots of things you can help your client with – and be sure that you can really add value to the mix.
  2. You must deliver. The fastest way to fail when it comes to retainer fees is not to deliver. If you don’t keep your clients happy, don’t get the results you’ve agreed on, or lack the communication skills necessary to keep this going, you’ll fail.
  3. Tell them the price. Consultants often seem to whine, “my clients only pay hourly”, “I can only do project work”. If that’s what works for you, great. But if you want to move to a monthly retainer for your consulting fees, you need to tell your clients that’s how you bill.

Getting the Go Ahead
If you’ve followed steps one and two above, then it all comes down to asking for the sale. If you put together a nice project plan, and clearly demonstrate to your prospective client how you will help them on a regular long-term basis, everything should come together.

Whether you’re asking for $500/mo, $3,000 or $10,000/mo as your retainer fee, it doesn’t really matter. The principles and approach are all the same. The monthly fee you ask for will depend on the amount of value and hours you’ll be spending with this client each week and month.

I hope you’ve found this guide helpful. This approach has worked for me for many years and is the backbone of my client projects. Setting my consultant fees this way has led to most of my client projects lasting not weeks or months, but years.

If you have questions, ask in the comments below and I’ll be glad to share more.

*UPDATE: If you enjoyed this article and want to learn many more proven strategies for consulting fees that will allow you to increase your income and be more confident setting your fees be sure to check out our Consulting Fees Guide.

Check out our fully updated Consulting Success System! Learn More and Buy Now.
  • triahl

    I’ve been working on retainers since day one of my consulting business for the last four years. The problems you run into is finding the magic number they can afford, no one ever wants to tell you what they can spend or they don’t know. Second, even contracts don’t secure that you will get paid your retainer fee. A lot of work goes into the front-end of retainer clients before the residual income starts. My suggestion after several years of experience is to be very careful. If you think retainer projects are the answer, have a VERY sound contract, a client that has either put a bond in place for the project or a larger down payment just in case they fall short and stop paying the retainer you have come to count on, and have them sign a statement of work that nothing is owned by them until the contract is fulfilled for the full term as long as you are holding up your end of the bargain.

  • http://www.consulting-business.com Michael Zipursky

    Trisha,

    Thanks for your comment and great to hear your thoughts and experience with retainers.

    Here’s the thing, retainers can be very simple in their structure and still work perfectly well.

    You have an initial consultation with the client – maybe 2 if needed. Once they are ready to move forward you get your first payment – for that first month.

    You continue to get paid on the first of each month. You don’t get paid, the work doesn’t get done.

    That’s a basic approach. There are many variables and more advanced techniques.

    If you’re looking for a percentage of sales or increase in X then yes, it does become more complicated and you should have a solid contract in place.

    But a month to month retainer with a simple agreement works like a charm.

    Regarding getting the appropriate fee – several ways to go about this, like our “3 Color” technique. We go into this and much more in our Consulting Success System.

  • http://www.dragonpeace.com.hk Belsa Wong

    I’ve just started my consultant last year in November, with one retain agreement for half year only, and it is finished for now, this because of my client expecting me to seach him new clients for his business, which we did not included in our agreement. Hence my client just disappear when the agreement is done. The other client I have is based on hourly payment, he denied on the retain as this is not mataching his budget. I am confuse on how to count the working hour for an hourly payment, shall I count the meeting hours as well, and this return a high budget at month end.

    As I am just a fresh consultant, now is in the situation of looking for new clients while having no retain agreement in hand now. All of my previous clients were come from referrals from my friends. What do you suggest me to do now as a fresh consultant.

    Thanks for your support!

    • http://www.consulting-business.com Michael Zipursky

      Belsa, good question. You should charge for ALL of your time associated with the project.

      You can decide to list meeting hours as part of your invoice, or build that in to your hourly fee. If the meetings are clearly an integral part of the project – ie. real decisions and ideas are being made at them – they can easily be listed as a separate item on your invoice. If they are just short follow up meetings you’d likely want to build them into your overall hourly fee.

      For more information on getting clients see our section on Marketing A Consulting Business

  • http://www.westcoastway.wordpress.com Karen

    I switched to a prepaid monthly retainer model a few years ago and have never looked back.

    I offer my clients the freedom to choose an amount comfortable for them, but with the proviso that when retainer runs down, work must cease until they top it up to finish out the month. It’s that simple.

    New clients maintain a positive balance in order for work to continue uninterrupted until a solid working relationship is in place. Established clients pay a set amount at the beginning of the month and the following month’s retainer is either adjusted up or down to bring the account into line for the next month.

    It’s about mutual trust; they trust that they’re getting good value for money and I can trust that we’re going to be paid for the work we perform. Our clients also realize that when they engage our services, they are tapping into a team of professionals to provide the various tasks they require. My associates bill me every month, so it’s reasonable to expect that I have the funds prepaid to cover their valuable contributions to the project(s).

    It’s been a successful model for a number of years. I can keep my rates reasonable as I don’t have to factor in bookkeeping time to chase down unpaid invoices which would have to result in charging higher rates. In addition to benefiting from reasonable rates, clients appreciate maintaining complete control over their monthly budget which can fluctuate based on their business circumstances.

    • http://intensedebate.com/profiles/mzipursky Michael Zipursky

      Karen – don't know how I missed your post, apologies…you've hit that one out of the bark, nice work!

      That's a great example of how effective consulting retainers can be. Thanks for sharing!

  • http://www.matthewlordconsulting.com Matthew Lord

    I have found that setting rates using the monthly retainer model is the way to go. I try to make sure that I position myself to work with clients that have no problems paying, because generally the "cheap" clients are the ones that give you the most difficulty with billing.

    I agree with Karen that trust is a key issue, and to add onto that you need to manage client expectations. For instance, I tell my clients up from that any search engine marketing work is going to take time. Your website is not going to hit the top of the SERPS in a matter of days and weeks, because it takes time!

    If anyone could do it, then everyone would be doing it!

    • http://intensedebate.com/profiles/mzipursky Michael Zipursky

      Matthew – thanks for the comment. You're right, managing expectations is vitally important to successful client relationships.

  • Hope

    These are great comments! I recently started a marketing consulting firm and am using a monthly retainer plus 15% on all paid advertising. There is a 3-month commitment required. My question is the agreement… Does anyone have or know where I can attain a complete yet not complicated agreement/contract? Thanks.

    • http://www.consulting-business.com Michael Zipursky

      Hi Hope,

      If you search online you can probably find a rough template. We've included the contract/agreement we've used successfully for years as part of our Consulting Success System which is available here. It's simple, usually 1 to 2 pages, but it works. Just the time that will save you is worth the cost of the course in my opinion. The Consulting Success System

  • Mike

    I have many years in both business operations and New business development, I am in the process of starting a consultant business and would like to know what worked best for all of you in marketing yourself to start out? Which type of networking works for you? I intend to start blogging and networking on the webb through Facebook and Linkedin but any ideas would be great

  • Ankush Soni04

    I have just started with my marketing consultant business in india and here tradition in not like for hourly payment,clients here often expect payment based on projects….so kindly suggest me any bottom line for my pricing policies.

  • Megan

    New to the biz as well. How much work is involved in a monthly retainer contract? Can you still have other jobs on the side? is $5000/mo reasonable for PR/GR?

  • http://profile.yahoo.com/BV2EYNUDRWTSK7QAILYUER5BPM Adria

    I am new to this consulting business and have a meeting with my first client this wednesday the 25th of April. My question is how do i secure my position as the service provider? I’m afraid i will sit down with him and bounce ideas then he will run with it and not hire me.I’ve been looking for a consulting agreement and cant really find one.

    Thanks for all the previous comments as well, I was thinking of doing a retainer to secure him for atleast 90 days and all the feed back has helped me very much.

    • http://www.consulting-business.com Michael Zipursky

      Adria – sorry I didn’t see your comment until now. Congratulations with that and hope it worked out. As long as you demonstrate that you can add value to your client’s situation they are very unlikely to walk away and implement your ideas. After all, they are coming to you because they likely don’t have the knowledge or time to do so. They’re looking for an expert ;)

  • Francisvaillancourt

    With the monthly retainer fee, do you guarantee a minimum amount of hours?
    Tks,
    Francis Vaillancourt

    • http://www.consulting-business.com Michael Zipursky

      Francis – the retainer is not always connected to a set amount of hours, but rather the value or deliverable you will provide.

  • Don

    As a consultant with a retainer? How do you invoice the client? Since I have not registered a business and do not have an ABN will my payment be deducted for GST? How do you overcome this situation?

    • http://www.consulting-business.com Michael Zipursky

      Don – this is more of an accounting question and depends on your location. Generally, whether or not you’ve registered your business you can still invoice a client on a retainer agreement. But talk with an account about your specific situation.

  • Jay

    This is great advice! Let me first say, “thank you.” This is exactly what I was looking for when I googled the subject. I’ve identified the areas where I am strong, where sand how I can add value, and even the client type I want to initially pursue. Being that there are numerous ways to get clients (networking, word of mouth, online, etc.), What is the most effective way to market or to get new clients? Should I walk in? Request a meeting? Email?

    • http://www.consulting-business.com Michael Zipursky

      Jay – glad you found this helpful. There is no ‘best’ way to market your services. Many ways can work. It depends on your market, the environment and your strengths. Find an area that you feel confident in and work that one to start.

  • Fernando

    Great article and advise. I have the following situation I’d like advise on: I have my first project, which is to introduce a product into an international market. I’m developing the strategy to enter the market for the client. I also chose the city that we would target. I am also researching distributors as well as locations to focus on. He tells me that he can pay me a commission on the first sale as well as future ones. In addition to consulting fee for the project per say on the previously mentioned activities. He will be working with me hands on but, I will not be his employee. I’m not sure how to bill him, he’s asked me to make the proposal. If I bill him as a project, the issue is that I’m not sure how long it will take to carry out the initial research, strategy and will likely need support with operational aspects of the project. If I bill him by the hour is the same issue, I don’t know how long it would take until commission kicks in. Future research and operational issues will most likely be involved to some degree to enter other areas of the country. Any thoughts on what would be the best way to bill on this type of mixed project? Appreciate any advise.

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