Consulting Fees: How Should You Package Yours?

A consultant is someone who, when asked a question, provides an answer and recommends action.

In simple terms, they recommend or even tell people what to do. The role of a consultant is to provide advice geared at solving problems or geared to the consulting client taking advantage of an opportunity.

The Consultants Role

The role is not to be confused with business coaching or that of a contractor.

In basic terms, a business coach is one who explains a principal or process; asks the client what they think they should do, and then gets the client to take action. A contractor is someone who is told what to do and does it. Coaches are generally retained on a monthly basis and contractors are invariably retained at hourly rates.

In my opinion, the key is that a consultant is paid to provide advice, and their fee is directly related to the importance of the topic.

In my opinion, the key is that a consultant is paid to provide advice, and their fee is directly related to the importance of the topic.

Avoiding Confusion

Confusion into charge rates occurs when the consultant also sells a product. Here the clients sees the advice given as part of the sales process and will object to being billed for time unless there has been an upfront agreement to accept the charge.

Those new to consultancy will frequently fall into the trap of giving their advice and intellectual property away during the initial meeting and discovery sessions. This obviously must be avoided in the consultant intends to stay in business!

Another Mistake

The second mistake consultancy newbies make is to quote hourly rates. Yes, in an earlier article we discussed how to calculate your minimum hourly rate however it’s a mistake to tell a client you charge $160 per hour and that you estimate the project will take 20 hours. His immediate response is to calculate that your engagement will cost him $3,200 and he then wonders if he can find a cheaper consultancy rate elsewhere. You lose.

Instead, you have to propose a value solution. Here are two examples, one real, the other fictitious; both serve to illustrate the point…

Case Study #1

An engineering firm suffers a major machinery malfunction and discover that only person is able to fix it. A call is made and the consultant arrives. He questions the operators and asks for a large claw hammer. Lustily he strikes the machine four times and it busts into life. An account is rendered for $10,400 which is promptly questioned. The consultant responds; “Four hammer blows at $400, knowing where to strike the machine, $10,000.”

The account is paid promptly as the ongoing downtime costs were significantly more.

Case Study#2

A small business owner responds to a mailbox drop from a bookkeeper, asking for help to resolve why her checks were bouncing and how she could placate a very angry creditor and a very angry bank manager. The bookkeeper examines her accounting software to see that all revenue amounts have been double entered, and expenses entered once. All fixed in under two hours. Account rendered for $132.

This bookkeeper was a client of mine and he introduced me to her client. I asked her client how much she would have paid him to fix the problem. Her response? “Anything! To get it sorted was worth far more to me than $132.”

If you’re able to solve the problem; provide the advice they need, base your fees on the value of the project to the client, not your hourly rate.

James Yuille is a 35 year plus sales and marketing veteran based in Brisbane Australia He runs Mediaglue (www.mediaglue.com.au), a marketing services company. His book, “Are You Getting Enough?” is available at JamesYuille.com

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  • Viswaprema2000

    An excellent article. I am a new consultant in the field of exports, banking and export credit insurance. I now realise after reading the article that we need to evaluate the project at the begiing itself before quoting the fees.i have done quite a few projects now and in almost all of them i had indicated my fee by just getting to know the issues without evaluation of the case in detail. Ultimately though i could complete the projects successfully, i got a feeling that i have undercharged the customers as they had indicated to me that a thorough professional job was done and were immensely satisfied both with the job as well as the fees, and a few indicating that they could have been charged more! thanks and regards. Viswanathan V

  • Jp2golf18

    Case Study #1

    An engineering firm suffers a major machinery malfunction and discover that only person is able to fix it. A call is made and the consultant arrives. He questions the operators and asks for a large claw hammer. Lustily he strikes the machine four times and it busts into life. An account is rendered for $10,400 which is promptly questioned. The consultant responds; “Four hammer blows at $400 each, knowing where to strike the machine, $10,000.”

    The account is paid promptly as the ongoing downtime costs were significantly more.

    4X$400 = $1,600 + $10,000 + $11,600 ~ must have been a discount???

    • Jp2golf18 – Nice catch! I’m sure James simply missed that. We’ll update it.

    • Sanjay

      The mention is ““Four hammer blows at $400” and NOT $400 each.
      The important issue is the crux / spirit / learning of the lesson.

    • MarkW

      thats 4 x $100 = $400+ $10,000, not $400 per blow

      “Four hammer blows at $400, knowing where to strike the machine, $10,000.”

  • Bola Odulate

    So … how do I figure out that value?!

  • Marketing & Design Consulting

    Great food for thought – especially helpful with the prospective client we are developing a proposal for this week.

  • Ron

    But his English is so terrible I cannot understand what he is saying sometimes.

  • Andy

    Quick question. What about charging for travel time esp long haul. One days fee for each day of travel?

  • James do you ever charge your consultants a fee up front before a project or relationships begins? Kind of a fee for the discovery of the full scope of the project?