Q: How should I set my consulting fees?
A: Marketing and management consultants are excellent at helping other businesses manage their resources, yet first-time consultants often struggle to set their own rates.
In fairness, it's extremely hard to set your own consultant salary. You'll have to take into consideration…
- The competition.
- Your experience level.
- The cost of your insurance and tax requirements.
There may be a host of other factors you might not be familiar with if this is your first time running a business. Still, you can't avoid it. So let's get into the nitty-gritty details.
What's the right amount to charge for my consulting services?
You should research the competition around your business and price your services accordingly. Take into consideration what other consultants charge, and whether your work fits into the high or low-end of that range.
For more tips, check out this great Entrepreneur article on setting consultant prices. There are different options available to you when setting rates, such as…
- Hourly fees. If it's a short-term consultation, consider charging your client at an hourly rate.
- Project rates. If it's a longer project, consider asking for a fixed amount of money for a predetermined period of time.
- Retainer basis. If you work for a set number of hours per month for a client on a consistent basis, consider setting a monthly fee as you're providing ongoing services.
When it comes down to it, your consulting salary has to be enough to keep your budget afloat and pay you a livable (if not comfortable) wage. But even then, there are many pitfalls.
The dangers of underselling your management, marketing, or business consulting firm
Many first-time business owners undercharge for their services. As you strike out on your own, you might not be confident you can get business and underprice your management consulting services in the hopes of attracting new clients. But that's exactly what you shouldn't do.
Don't undersell yourself! Businesses that don't charge enough won't make enough to keep their head above water, even when they do get work. As a bare minimum, you'll have to make sure your fees will be sufficient to support you and keep the business going.
Remember that there are many costs you might overlook. First-time consultants often forget that self-employed professionals have to pay more taxes and a higher share of healthcare costs (now that your employer isn't contributing). The first time you do your own taxes as a self-employed professional, you'll be surprised that you still owe the government more taxes, even after making estimated payments throughout the year.