How to set your rate (free download)

Thanks!

In a lot of cases, working remotely is possible, but it may depend on your niche and the type of consulting services you provide. For the consulting that I do (database & software consulting for law firms), I’ve only had to go on a client site 1 time in the past 5 years. Sometimes clients ask me if I do on-site work, and although I always say “yes,” I find that either the work can be done remotely or that I can subcontract the on-site work to a colleague. In the case of subcontracting my colleague, she’s a CPA (which I’m not), and so it’s much easier to justify having a CPA on site to either do group training and/or work through the firm’s accounting set-up or clean-up.

In any case, there are a couple main tools I use for working remotely:

GoToMeeting: let’s me dial in to a users desktop to see what they see. Invaluable for troubleshooting, as well as remote support. Cost is about $350/year.

RDP/Terminal Server: This is the main way that I dial in to client sites to do on-site work. The client’s IT person or contractor configures it, then gives me the dial-in info. Free.

Skype: I use Skype for all my phone calls (which costs about $60/year, including my own phone number). Skype also gives you voicemail, and can forward calls to your mobile phone; you can also do screen sharing, but the resolution is subpar compared to GoToMeeting. Skype also offers video calls.

Dropbox: This is good for getting files to a client site from my machine since GoToMeeting doesn’t have a file upload feature, and RDP sometimes doesn’t map my machine to allow file sharing. Free.

YouSendIt: Lets you e-mail large files to clients. Free.

Google Docs: Let’s you store files (any file type, not just docs) in the cloud, and manage and share files between people. Free.

If you absolutely must be on-site, you could cluster your on-site visits on a specific day or 2 of the week so that you’re not constantly on the road. That’s similar to how I do my client phone calls, so that I get all the info I need, and can then go off and do the technical work at home, in a cafe, or in my office whenever I want–which means I can schedule other stuff during my days (lunch with my wife, volunteering in my kids’ school, etc.).

You can check out more tools on my Tools/Resources page:
http://startmyconsultingbusiness.com/tools-resources/

Thanks for your comment!

Don’t worry about how the economy is doing. There are always opportunities, and people will always pay for value.

Since you have a degree in a specialized technical field, and have technical certifications, that tells me that you have specialized knowledge that businesses will pay for. The next step is determining exactly who your target customers are, and what problems they most need to solve. Once you know that, it’s just a matter of finding and snagging clients. That’s not to say it’ll be easy, but those will be the basic steps you’ll need to follow.

Creating a successful business requires resourcefulness, creativity, and the confidence that your actions will produce results. So, ignore the economy and any other factors outside your control, and focus on the things you can do to begin creating your business.

Thanks for your comment–glad you found the article useful.

As for choosing a business entity, I’d be inclined to go with either an LLC or s-corp, since they offer some liability protection and can also give you some tax benefits. You can check out an article I did on choosing a legal entity here:
http://startmyconsultingbusiness.com/get-over-it-choose-a-legal-entity/

Of course–obligatory caveat–I’m not an accountant or attorney, so you’ll want to seek the advice of qualified professionals.

Hey, Matt, thanks for your comment! LLC’s and s-corp’s can be fairly equivalent, but it depends on the specifics of your situation.

One other thing to keep in mind is that when consulting for a former employer, they’ll often have a tendency to still treat you as an employee. So, you’ll want to be clear about the ground rules and expectations going in. Same idea with your consulting rate for your former employer: they’ll typically want to pay you roughly your former salary hourly rate, instead of the market consulting rate for your services. However, even better would be to use value-based pricing for the project, since that has the potential to greatly boost your effective hourly rate.

Hey, Nina, thanks for your comment! That’s a great question. What I’d first do is target the exact type of markets and potential clients with whom you want to work. Next, you’ll need to find out who your competitors are in that target market, and get an idea of what the prevailing rates are. Those will be a guide for your rates. However, and more important, you’ll need to peg your rates based on the specific, quantifiable value you can provide your clients.

Thanks for your comment, Tal! That’s actually OK if clients don’t prefer to use a contract; for solo consultants, you’ll rarely if ever end up enforcing a contract by using an attorney anyway. More important is to screen potential clients beforehand so you reduce the chances that they’ll be a non-paying, or discount-chasing, or high-maintenance client. People who are easy to work with before the sale are typically easy to work with during the project. If your gut tells you something’s wrong, then it usually is.

Hey, Tonya, thanks for your comment–I’m glad you found the article useful!

Thanks! One thing I’ve found is that most consultants starting out have a VERY hard time charging market rates–simply because they’re so used to their salary hourly rate. Getting past that hurdle is a huge step, but one that will propel you forward, and literally allow you to earn more and work less.

Great question. Generally, your degree and professional certifications matter very little. Personally, I work with attorneys and accounting people doing database/software programming, but am not a programmer/attorney/accountant, and have a B.S. in psychology and an M.A. in recreation (yes, it’s for real); however, my hourly rates are roughly $175.

The more important factor in setting–and getting paid–your rate is the value you provide to your clients. If there’s little value they get, then your rate will be fairly low; if the value is immense, you can charge what equates to hundreds–or even thousands–of dollars per hour.

If I were you, I might consider targeting people who are looking for high-paying jobs, since the value of landing that type of job–or negotiating for a higher compensation package–is huge. You can look at what similar consultants charge, but a better approach is to peg your price to the value your clients receive, and maybe pricing yourself at about 10% of the projected value they’d get.

For example, if you can coach people so they can land 6-figure jobs or negotiate their salary/compensation upwards of 10%, then pricing your services at $1k, $2k, or even $5k+ might be a reasonable investment for your clients to make. Again, you’ll need to consider the value your clients receive from working with you.

Sure thing, Sonia! Pricing can be a tricky thing–more so because we all get wrapped up in the emotional issues of what we thing we’re worth.

Hey, Kate, thanks, and that’s a great question.

You can do a ballpark 3x rate, since that’s an easy calculation.

However, I’ve found that it’s better to tie your price to the value you’ll provide to your clients, since you’ll typically end up boosting your effective hourly rate (i.e., the amount you earn compared to the hours you work), and it forces you to highlight the value the client will receive–that way, you re-frame your price as an investment in getting their desired result, rather than a cost for a deliverable.

The bottom line is that it’s possible to earn far more (anywhere between 50%, 100%, 200%+ more) by pricing on your value rather than a quick 3x rate.

Here’s an article I wrote on the topic: http://startmyconsultingbusiness.com/the-experiment-that-boosted-my-rate-70/

Thanks for your comment, Lena!

Yes, absolutely renegotiate your rate. It’s–sadly–too common for consultants to get hired by their former employer (that’s not the sad part) at essentially their old pro-rated hourly rate, even though the value you provide is far in excess of your hourly rate.

What I’d suggest is to frame the discussion in terms of what value the client gets from the events/conferences you’re coordinating. Do they get projects/business, new partnerships, market exposure or an “in” to new markets, or some other benefits from these events? Figure out what the client gets, then quantify it as best you can (this might require getting some info from the client).

Once you have some semi-solid–or at least believable–numbers, you can peg your price to that. Generally, clients find it an easy decision to invest 1/10th to get the value you’ve outlined. For example, if they’ll get $100,000 in new sales per conference, your price could be $10,000.

And, yes, get payment in dollars (or whatever the client’s home currency is).

If you focus on the value they get, it’s far easier to justify your pricing. The client doesn’t care about your living expenses, taxes, etc.

Great question. The short answer is, yes, travel expenses are to be paid by the client; however, they are NOT part of your consulting rate. Your consulting rate is completely independent of travel expenses.

As far as setting your rate, I’ve found it best to always tie my pricing to the value the client will derive. Hourly rates are OK starting out, but you’ll reach a ceiling effect, and won’t be able to charge more than $X/hour eventually, which puts a limit on your revenue.

Instead, it’s far better to separate your time from your pricing–that way, you can earn far more revenue, and your revenue can be less dependent on your time.

Thanks for the question. If I understand correctly, it sounds like you’re struggling with whether you should go out on your own or as a subcontractor for other firms. Unless you already have clients and consulting work and/or have a big cash reserve to pay your bills while you build your business, you’re nearly always better off starting your business on the side, part-time, while you have a day job that pays your living expenses.

For your situation, it’s probably going to be quicker to get subcontract work from other consulting firms. However, as a subcontractor, you’ll generally earn less and have less control than working independently.

Glad to hear it was helpful!

Hey, Carla, thanks for your comment!

To answer your question, how you structure your fees and pricing depends on a number of things: whether you want to charge hourly/fixed-price/performance-based/revenue-share/etc., the type of project, type of client, etc.

Generally, hourly rates limit how much you can earn per hour. It’s possible to earn an effective rate of $1,000/hour (e.g., you charge the client $2k and only work 2 hours on the project), but very few clients will agree to paying you $1,000/hour for projects where you track & report your hours worked.

If you can, it’s better to scope the project/work, then do a fixed-price or recurring retainer.

Great question. First, my guess is that it IS possible to structure your fee arrangement so that you receive a share of the profits–it just depends on whether the physician is willing to do that. Next, I’d strongly urge you to peg your pricing to the value the physician receives from your services, instead of an hourly rate. For example, does your work lead to increased revenue, or lower costs, or preventing huge liabilities? Those are all things you can use for the basis of your value, and thus, your pricing.

Hey, Beth, sure thing! Briefly, retainers work best when the client wants recurring services–for example, marketing, tech support, content writing, etc.

From there, you’ll want to identify and quantify all the areas of value the client will receive from your services, and clearly define exactly what the deliverables will be. That’s a REALLY brief overview of the process, and there’s a lot more to actually implementing each of those pieces (identifying value areas, quantifying value, defining deliverables), but that should at least give you the basic framework.

Hey, Amy, great questions. For question #1, you’ll want to focus on a specific niche market–that way, you’ll be able to target very specific problems and create benefits tailored to that market.

For your question #2, another approach to pricing (instead of value-pricing), especially where the outcome is more vague, is to use day or weekly rates. That way, the client commits to a larger use of your time, and neither one of you is worrying about watching the clock.