There are quite a few rock solid reasons behind this pricing decision. These are all really important things to consider. These are just a few of the reasons the gig market has exploded over the last decade. When you work as an employee, the company is profiting off of you a lot more than they are paying you. By removing the middleman, your clients can pay you a lot more than you were earning while still saving quite a bit of money in the process.
Of course, we still have to factor in market rate. While charging by hour is probably the most flexible pricing method available, it does have one glaring downside: the faster and more efficient you become at your work, the less you get paid. Fast forward ten clients and all of a sudden, you are only needing 15 hours and billing half of what you originally charged to setup a website.
This is where charging by project makes perfect sense. The client simply wants their website built and they have a defined budget available for that. With this method, your client knows exactly what they are getting, and you can actually increase your effective hourly rate by getting better and faster at delivering your service!
When charging by project, try to calculate your time in stages. It may take you an hour to analyze and research your topic. Maybe the first draft of work takes you five hours, and a predict a few hours worth of edits.
From here, you are going to want to allow some time for anything extra that may arise and then calculate your rough estimate against your hourly rate. Remember, charging by project is best used when most of your projects tend to look similar to each other and you are improving or getting faster over time.
In an ideal world, every consultant would be paid based on the Return on Investment ROI their work generates. In reality, however, ROI-based pay is usually just a tool for scamming new and lower-end consultants and service providers. In short, the businesses that tend to generate a significant ROI from consulting services are usually not going to be interested in offering ROI-based pay.
In reality, most successful businesses have a good idea of where they need to improve and how profitable it will be for the business once that area is improved. They also understand how large their own role will be in any solutions proposed by a consultant.
Because of this, it makes more sense for them to shop around and pay a fixed fee rather than attempting to pay based on performance.
What makes more sense for this business? What could we change about this scenario to make ROI-based pay make more sense? There are a few options:. Successful businesses know exactly who the proven players in their industry are or can find out quickly , and those players are virtually never going to undercharge for their services.
This leaves us with the latter two options. Neither of these options make for good consulting clients Now, all this being said, there are scenarios where ROI-based pay can work out, and this model remains common in certain corners of the consulting world. It might even work for you, particularly if the following factors line up:. Even with these highly favorable pieces in place, you are still at risk of not being paid your dues in the end. Ultimately, performance based payment is the method with the highest possible risk and return, so if adding additional volatility to your business is something you are willing to do, it does have the potential to pay off very well in the end.
You pitch the client on a two-part payment plan. The first part is a one-time initial charge that covers all the unique costs that come with starting a consulting engagement. The second part is an ongoing monthly fee that covers ongoing consulting work. A similar concept can be leveraged even by experienced consultants. One of the challenges of sales is that you want to close as big a contact as possible without overshooting and losing the sale altogether. Second, this payment method requires you to create a consulting package that includes an ongoing monthly service.
If you are only selling one-off projects, no matter how successful you are this month, you will be back to square one next month. With ongoing services, your income stacks with each additional client and allows for a lot more security and peace of mind as a business owner.
Restaurant consulting is one of the more common categories of independent consulting. In fact, hiring a consultant to help with the launch of a restaurant has become standard practice in an industry known for its unusually high failure rates.
However this is just the starting point for your rate as a consultant. To make sure you are getting your fair value, there are several steps you must take. This is a BETA experience. You may opt-out by clicking here. More From Forbes. Nov 8, , am EST. May 19, , pm EDT. Apr 28, , pm EDT. Apr 21, , pm EDT. Confidence is essential. It may take some time to build up that confidence, but be wary of undervaluing your services as you build that belief in yourself. If there is a cause you support, you could even consider donating your time to a nonprofit or charging a nominal fee in order to build up your portfolio.
You're good at what you do and know that you bring value to your clients. The question becomes, "How do I figure out what my service is worth? People have been led to believe that goods and services have an inherent value — but they don't. Pricing comes down to two parties agreeing to a specific number.
That number can be as high or as low as those parties accept. In reality, the more important questions in regards to pricing are, "How much are people willing to pay me for my time?
This can be a delicate balance between making sure your needs are met and not pricing yourself out of the sale. There is one more factor to consider that makes this a bit easier. Don't shortchange yourself. You likely received:. Your employer footed the bill for all of that. Paying you more to not be an employee actually saves them money in the long run.
Consider what you were making at your last job. If you know the hourly rate, you are ahead of the game. Annual Salary divided by 50 weeks the number of weeks in a year minus 2 for vacation divided by 40 hours the average number of hours worked in a week. Charging project-based fees is another consulting fee structure you can utilize. Charging per hour definitely has its benefits, but there is one definite downside to this fee structure — the better you get at your job, the less you make.
This is especially true when your projects are very similar to one another. Perhaps you set up businesses for people, helping them create the foundation of their enterprise. You could raise your hourly fee to compensate, but clients may have a hard time swallowing the higher hourly rate. Instead of frightening your client or taking a pay cut, you can charge by the project.
You know approximately how much time it will take you and how much you should make. This can become your project rate and make quoting much easier. For a new consultant, the idea of getting paid a percentage of what you bring in can sound wonderful. It also sounds like something that a business owner should jump at. Sounds perfect, right? If you have a history with the client and full trust in them, know how to track the ROI, know that they will implement your solutions, and believe they will pay you in a timely fashion, charging based on ROI may have a lucrative payoff.
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