Even once you have investigated and set your business consultant fees, your work when it comes to pricing is not over. You still need to decide how you are going to charge your client. Some of the more popular pricing strategies are discussed hereunder.
Hourly and Daily Rates
Each of these strategies bases the fees charged on chunks of time, either hours, or days.
Hourly rates allow for more accuracy, but do require more work in terms of time logging, while daily rates are easier to calculate, being made up, generally, of either full days worked, or half days.
Some clients however, may only need an hour or two of your time, so even if you prefer to charge per day or half day, have an hourly rate prepared for them.
Bear in mind though that some costs, for example traveling to and from the clients’ premises, if required, would be the same whether you work for a day or an hour, so often, hourly rates will be higher than the daily rate divided by working hours!
Fixed Price Contract
Many firms prefer to hire based on fixed prices. In this case, you will need to be very careful when calculated your price, and when writing your proposal, that all known variables are accounted for.
Likewise, you will need to specify or qualify the included items, and make special mention that if any additional items are required, they will be subject to quote! If not, you might end up doing a lot of free work!
If you provide a service to a particular client on a regular basis, or if they require said service fairly often, it may be in everyone’s interests to agree to a retainer-based fee.
This fee could be calculated based on a standard average number of hours or days per month, and the nice part about retainers is they get paid, even if the client does not require your services, or only uses a portion of the allotted time.
On the flip side of course, any additional hours or days would usually not be paid for, unless agreed and negotiated with the client, or for a particularly large or complex project, that falls outside of your normal scope.
Variable or Results Based Pay
With this approach, the consultant would place a portion of the pay for a project at risk, by agreeing to charge only a certain fixed portion of the agreed amount, with the remainder as a bonus for successful completion, or based on results achieved.
This may be a good marketing strategy if you are starting out, and lack sufficient reputation, but be sure to only take on projects you are confident of completing successfully, or you could suffer financial losses!
Cascading rates, or sliding scales, refer to the practice of charging different rates for different consultants.
For example, if your new consulting business is made up of three partners, one a veteran of the industry and published author, one a professional with several years experience, and one recently graduated with limited experience, there would be vastly differing rates for each of the three.
Of course, when deciding on who works on a project, you would also have to analyze the difficulty and skills required, and price according to the level of competency required, and the assigned consultant.
All of these are viable and accepted pricing strategies, and any one or combination of two or more can be used.
Bear in mind the last aspect of pricing strategy – fee increases. These should only occur when the direct cost of business has increased, the firm has gained experience, or the business has reached a more prestigious level. Try to avoid price increases however, as clients are often resistant, and if you do have to increase fees, keep the change to a minimum!