Should You Charge For Sales Work Consulting Services

How Much Should I Charge as a Consultant?

By Indeed Editorial Team

Nov 17, 2021

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A consultant makes many of their own decisions, including planning their work schedule, who they piece of work with and how much they charge. Post-obit industry standards can make it easier to make up one's mind your consultant hourly rate or other fee methods by turning judgments about your value into a comparable formula. In this article, we explicate what consultants do and how to calculate your consultant hourly rate or other pricing methods, plus offer tips for setting your consultant fees.

What is a consultant?

A consultant is an skilful in a particular field who works for companies or individuals on a freelance or contract ground rather than as a full-fourth dimension employee. This tin be an attractive option for businesses because they can do good from the professional'due south knowledge and work without taking on the toll of having a total-time employee, such as providing benefits. For the consultant, it can provide more freedom, a greater variety of work and higher pay than working for 1 company.

A consultant uses their expertise to assistance a client perform or complete a specialized project or gear up of tasks, like launching a restaurant, improving marketing campaigns, boosting acquirement or bringing in sales. A consultant bills a company according to their hourly rates or other consultant fees they've ready.

Read more: Learn About Being a Consultant

How to summate your consultant hourly rate

As a consultant, you lot can base of operations your fees on your value as an expert in your field as well as your income requirements. You may have additional expenses a company doesn't directly compensate you for, like healthcare, bookkeeping and tax filing, and then your hourly rate may be significantly higher than if you were a salaried full-fourth dimension employee.

Hither are two means you can calculate your consultant hourly charge per unit:

Multiply an hourly charge per unit past three

One method for determining your hourly charge per unit is to determine if your consulting work is like to the work being performed past a full-time employee at the same company. If you've worked recently as a salaried full-fourth dimension employee, you can utilize your previous annual pay to determine your hourly pay. Detect the judge salary for someone with your skills using an online job board or resource like Indeed Salaries if y'all're in a new geographic expanse or take gained additional skills since working full time.

To calculate your hourly rate if you were a full-time employee, divide your annual salary by 50 for the number of working weeks in a yr to determine weekly pay. Then, divide that number by forty working hours per week. Once y'all know your hourly rate, multiply that number by three to recoup for your extra costs as a consultant.

Case: To calculate a potential consultant hourly rate based on an almanac total-fourth dimension employee salary of $75,000:

(75,000 / 50) / forty = $37.50 per hr

37.5 x iii = $112.50 per hour for your hourly consulting fee

Related: Top 15 Highest Paying Consulting Jobs

Fix a salary goal

Some other method to determine your consultant hourly rate is to set a salary goal if you lot have a specific corporeality you want to make in a yr. For example, if you'd like to earn $75,000 a twelvemonth, you need to decide how many hours a week you want to work and and so calculate how many hours y'all need to work in a year. And so, separate your desired annual bacon by your planned number of working hours in a year.

Proceed in mind that equally a consultant, you'll estimate your paid hours for the week, which are only part of your working hours if you account for other tasks.

Example: To calculate your hourly charge per unit from a desired almanac bacon of $75,000, working xx paid hours a week and 50 weeks per year:

20 ten 50 = 1,000 working hours per year

75,000 / one,000 = $75 per hr for your hourly consulting fee

Related: The Pros and Cons of Consulting

Other consultant pricing models

Charging an appropriate hourly fee might not work well for you if you're merely starting out as a consultant or looking for more than stable income. Here are a few other pricing methods to consider as y'all calculate what to charge as a consultant:

1. Reduced fee

Charging a lower fee as a starting consultant can help you concenter customers and build your portfolio. You may cull to negotiate non-cash items as part of your payment, like a positive review on your website. To decide how much to charge, consider the payment range for consultants in your industry and set your toll near the bottom.

Example: You're a consultant looking to secure your first project afterward a corporate job and don't have a portfolio notwithstanding. You've calculated an hourly charge per unit of $100, but as a new consultant, you haven't been able to discover work. You lot decide to charge $50 per hr for your first task. After that, you ask for a review from the client for your website and add the piece of work to your portfolio. You can at present secure piece of work at $lxx per 60 minutes and can build to $100 inside a year.

ii. By project

Charging by the projection can exist the best pricing model if you practise a lot of similar work, similar designing certain products or creating similar plans for unlike businesses. If y'all have become faster at your work and keep charging hourly, you lot'll become less revenue each time. This is a adept formula for calculating a project fee:

(Estimated hours of work + 20% for contingencies) x Hourly rate = Project charge

Instance: Developing a marketing plan for a new app launch takes you ten hours. You add twenty% to the time, or two additional hours, in example you encounter difficulties, which brings y'all to 12 hours. Your hourly rate is $40, then you multiply 12 x $twoscore. You lot charge $480 to build a marketing plan for ane app.

Related: How To Become a Marketing Consultant

three. Initial fee plus retainer

An initial fee with a monthly servant can be a good pricing model for consistent income. The low initial fee tin also be beneficial to those starting out as a consultant because a business concern can invest in your services at a lower upfront cost. The formula would look similar this:

Initial fee + (Monthly servant x Number of months of work) = Total consultant income

Example: You calculate it takes two hours to set up a new client, and your hourly rate is $xl, so you set your initial fee at $80. You set your monthly retainer at $450. A startup app company hires you to develop marketing plans for their releases, and you work for them for half-dozen months. Over that time, you lot make $2,780. The company launched five apps during that time, and then you lot earn more by being on retainer than by charging by the project and they besides pay y'all less than they'd have to pay a full-time marketer.

iv. Value-based pricing

Value-based pricing, also called return on investment (ROI), is when a consultant sets their price based on the outcome of their work. To succeed with this method, take a word starting time with your client and ask what they hope to become from your piece of work. Estimate monetary and other values they wait, such as an increase in revenue and decrease in workload among full-time employees. Then calculate whatever extended value your work may continue to produce for the company, which is the annually recurring value. The formula is equally follows:

Increase in revenue + Value of other benefits + Annually recurring value = ROI value

After you lot've calculated ROI value, determine certain percentages as potential payment rates. As you lot negotiate with your client, you may offer to practise more work for a higher percentage of the ROI value.

Example: Your marketing program will bring in $15,000 initially for the app company, simply it will also free up hours of time that others take been using to do similar work, which saves the visitor $5,000. Your marketing plan will also bring in $15,000 the following year before the company discontinues its app. Adding these together gives yous an ROI value of $35,000. If yous charge five%, you make $1,750; if yous charge fifteen%, y'all brand $5,250.

Related: Freelancer vs. Independent Contractor: What's the Difference?

Tips for setting your consulting rate

Although yous can utilise a formula to make it at a cost for your consulting services, other factors should be involved when determining your rate. Here are a few tips to consider:

Exist enlightened of the market

Equally a consultant, you compete with other consultants, so information technology's important to know what they're charging and what value they provide. As yous determine how much you'd like to charge, you can encounter how your skills and value compare, and you lot'll accept a improve thought of what clients expect to pay for your services. Keeping up with other consultants can also provide you lot with professional connections who may refer you for a project or share some of their clients if they're busy.

Related: 24 Consulting Buzzwords To Know

Be confident in your value

The businesses yous work with will probably try to maximize the value of their investment in y'all, so they might ask to negotiate a lower rate. Consider what'south important to you before this chat starts and remember how you calculated your price. If they're looking for cheaper consulting, they may require lower-value services. If you're confident your services are worth your price, reinforce that message.

Related: 10 Common Types of Consultants

Factor in your goals

Aside from value and market toll, consider your goals. You might make up one's mind how much money you ultimately want to make from consulting and brand a programme to go there. Think about if you lot wish to be a consultant long-term or if you hope to offering value to a specific company with the potential to piece of work at that place total-time. Recognize that these goals and your own feelings impact how you value your work and your income, and be honest with yourself and then you can consider your price objectively.

Consultant average pay past task blazon

Maybe you're looking into condign a consultant in your industry for the first time. The following are some mutual types of consultant roles and their average national pay. For the most upwards-to-date bacon data from Indeed, click on the provided links: