Embarking on any freelance-based business can be a tricky proposition, especially when deciding on what your rates will be, and setting your consulting fees is no different!
Finding the balance between what you believe your consulting services are worth, and what you think your clients are willing to pay for them is by far the most difficult. Too high, and you will lose potential clients on cost, too low, and warning bells ring in your clients heads – what’s wrong with this service, and why is it under priced!
Therefore, you need to carefully assess a few key points, as well as conducting market research, to determine your rate. The main factors to consider are:
Type of Consulting Service and Competition
If your services are in a highly specialized field, with extensive barriers to entry, such as small business consulting, or marketing consulting, your services will automatically fall into a higher price category, than services that anybody could potentially deliver.
IT, business consulting, or technical fields like engineering, all command higher prices than less technical fields.
However, while considering the type of service, you do need to look into the quality, and quantity, of competitors! If there are 100 consultants offering a particular service in your area, price will be a deciding factor, while if there are only 2 or 3, money will likely be secondary to service and quality.
Consulting Office Location
As with any business, where you are situated plays a role in the prices you can charge.
Smaller towns and cities generally have smaller businesses, who are likely to become your consulting clients, than major cities.
Offering consulting services in a small town therefore, is a double edged sword, since while there may be less competition, which makes work easier to come by, may mean that the client base cannot support higher costs, and you will need to price your services accordingly.
Consulting Education and Experience
Of course, credentials come into play when starting a consulting business. Clients will want to know what kind of projects you have worked on, and what your knowledge of the topic is.
If you have a college degree in a particular field, or have worked in that field for a long time, and are considered an expert, your fees may be higher than a counterpart who is new to the field.
While it is not impossible to begin consulting without a solid background, straight out of college, it rarely happens, and you do need to first “pay your dues.”
Of course, a key factor when deciding on consulting services, even when taking all of these factors into account, has to be your required income.
If you calculate your required income and overhead costs, and all of the factors listed above indicate that you will be unable to attain those earnings, either due to location, industry, competition or your own experience, you will need to tweak your plan in order to guarantee, or at least “hedge your bets” in terms of your potential earnings!