How to Set Your Consulting Fees

Before you close your first consulting customer you need to know how much to charge. Now this number does not need to be set in stone, but you must have a ballpark to work from.

There are many sources out there that have tricky formulas to determine consulting fees. However, I like to keep things simple. You should be able to determine your hourly rate by looking at two things.

1. What is the hourly rate someone would make doing this full time? Multiply that by a factor of 2-3.

2. What are other consultants in the industry charging for these services?

Most consultants charge 2 to 3 times the hourly rate of a full time position. So, if someone would get paid $75,000 a year to do what you would be doing, the math would look something like this:

$75,000 salary + $15,000 benefits = $90,000 Yearly Cost

50 Weeks a Year (less 2 for vacation) * 40 Hours a Week = 2,000 Hours a Year

$90,000 / 2,000 = $45 per Hour as an Employee

$45 * 2 = $90 $45 * 3 = $135

Based on these calculations, your consulting fee for this type of work should be between $90 and $135 respectively. Now, compare these numbers to other consultants in the industry. How do they match up? Based on these two factors you should be able to determine a ballpark for your fees.

You may see other resources that recommend basing your hourly rate off of things such as expenses, working days, bad debt, and other outside factors. I do not recommend going down that path. The above formula is easy to explain and back up.

If a potential customer questions you about your hourly rate you can simply state:

"Mr./Mrs. Smith, my hourly rate is simple. If you had to hire someone to do this position it would cost you close to $90,000 a year and you would have to manage them. Yes I am charging 2-3 times what their hourly rate would be, but you don't have to pay me all year or worry about my benefits. Plus, I am 10% cheaper than other consultants in the industry."

If you based your hourly rate off of working days, expenses, bad debt, and other factors, you would not be able to answer the same question as easy. Remember 'KISS' - Keep It Simple Stupid

For more information about how to start consulting and helpful tips to improve your business, visit our website at www.HowToStartConsulting.com.