Are you pricing your consulting projects in a way that provides the most value for both you and your client?

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TRANSCRIPT:
Let’s break down the different consulting fee structures that are available to you as a consultant, and then contrast and compare the positives and negatives of each.

Hourly Billing for Consultants
A very common one is hourly billing. A lot of consultants use hourly fees, and that’s really where a lot of people get started. That’s the status quo for people now.

What’s good about hourly fees?

They’re easy. It’s pretty easy to figure out how much you want to make and then what you should be charging on an hourly basis. Based on how many days you’re going to be working — so on and so forth. This helps you come with an hourly fee that makes sense for you.

However, there are many problems with hourly billing. Number one, there’s not a good way to work truly well with a client on an hourly fee. Because your interests aren’t aligned with the client’s situation, they’re not going to want to bring you in and share new ideas with you as much or ask you to do something that might be beneficial for the project because they know that every time they ask you, you’re going to be charging them more.

The clock is always ticking for you as a consultant. You always have to be thinking about tracking your time. You might find yourself actually wanting to slow the project down a little bit or take your time a bit more because the longer that it takes, the more that you make. There’s not a good alignment between you and the client.

The other big problem is that there’s a ceiling. You can only make so. You can’t create more time of the day and the only way to make more is to work more, create more hours, more money — and that’s creating another job for yourself. With hourly billing, I’m not creating much freedom and flexibility — which is what most consultants want.

Consulting Daily Rates
The next is a daily rate. A lot of consultants and a lot of consulting firms use a daily rate. The positives, again are that it’s easy because a daily rate is just your hourly rate times the number of hours per day. Some consultants might use a daily rate of a thousand dollars, $1,500, $2,000, $3,000, or whatever the number is. As you gain more experience and expertise, you can deliver in more volume and more results.

The problem though with a daily rate is the same as the problem with hourly. You could only earn more by working more days, so you’re working more hours, you’re working more days, but again, more means more hours. There’s a real ceiling for growth.

The only way around this is if you start working and bringing in other consultants, and then you’re charging at a certain daily rate and capturing the margin between what you’re paying them and what the client is paying you. Doing that requires obviously more resources. You have to start managing other people, and if you don’t want to do that, then the daily rate is definitely not a good one.

A lot of consultants will use a daily rate because that’s what buyers of consulting services know. Many are used to paying based on a daily rate or an hourly rate, but just because many are used to it doesn’t mean that it’s the right approach for you to take. In fact, I would certainly suggest against it.

LEARN MORE HERE:
https://www.consultingsuccess.com/con...
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