How to Set your Consulting Fees

CareerStint Staff Nov 5, 2018
Charging consulting fees is sometimes very confusing for people from various professional backgrounds. Here are some tips that one can follow while fixing such fees.
Many professionals or business consulting professionals, no matter how well placed they are in society, still face the problem of fixing fees for consulting.
Some people, knowingly or unknowingly, charge consulting fees on the basis of the time that they give to clients. But little do they know that this is not the proper way of fixing the fees. The correct method of setting consulting fees is on the basis of the results delivered.

Setting the Rates

Charging an appropriate amount as consultation fees is important, so that your clients do not feel cheated, and you too get what you deserve. Here are some tips which you need to keep in mind to reach the right figure.

Hourly and Daily Rate

Some consultants charge their clients on the basis of the number of hours that they serve them. That might be hourly or daily. In some jobs, the hours will be huge, so, of course, it's not possible to charge per hour, thus, in these cases, a daily rate is fixed. The fees for consulting should be such that it should also cover the overhead charges.

Fees by Project

There are some consultants who set their fees on the basis of the project that is being done. How do they calculate this? Well, first they roughly find out the time that will be needed to spend on the project. Then, they just multiply it with the hourly rate. If any advice is given, even then a fee is charged.

Fees Based on Performance

Fees for some consultants, like engineers or accountants, are also fixed on the basis of their performance. In such cases, you need to have good negotiation skills, as this work might pose many risks, as it might take several days to get the results of the work on the basis of which the fees are fixed.
The client might have manipulated the results, and the consultants might have a difficult time trying to find it out. Also, the focus shifts from the best possible quality to short term gains.

Find Out Your Billable Hours

After you have found out what is the hourly rate as a consultant, you have to estimate the billable hours. This will include all the time that you need to spend in either marketing, or in administration, or in some work which you cannot include in the fees. Even that has to be kept in mind.

Estimation of Collection Rate

Sometimes, it might happen that some of your clients do not pay the bills. So even this will have to be kept in mind while you are setting the fees for consulting. If you do not do that, then it's you who will suffer a loss.

Calculating Business and Personal Expenses Incurred

When you are running a business, there are several extra expenses which you have to take care of. There are the phone bills that you have to pay, electricity bills, stationery expenses, traveling costs, legal services, etc.
Besides the business expenses, there are also some personal expenses, like food and entertainment, housing costs, or vacation costs. From the business money, some is kept aside for personal use too. Hence, while fixing fees for consultants, keeping this in mind is important.

Check Your Savings

It's important that the saving of the entire year also be considered. Loner vacations, children education, house expenses, etc, all need to be considered while estimating the savings and then, calculate the fees.

Total

Now make a sum total of all the expenses and then, calculate the consulting fess using the following formula that will give you the fees that the consultant should charge their clients:

(Total Expenses Incurred + Desirable Profit)/Hours That Are Billable
So now you know how one is supposed to calculate consulting fees. Just keep the mentioned steps in mind while fixing the amount that will be charged from the clients. Make sure that no mistakes are made in the calculations and also that the clients are not cheated.