One of the most important questions both new and seasoned consultants MUST answer is: "How much should I charge for my consulting services?"
What your charge and your pricing philosophy determines both your earning potential AND your labor intensity. It's where the rubber hits the road on your eventual income you earn as a consultant and how scalable that income ultimately becomes.
Here's some steps to follow to get you started:
1. Get clear on your pricing philosophy: Contrary to what you have heard, your price isn't determined by the market rate for your methodology or your expertise. You set your price against the value that when your expertise is applied - the value it creates for your clients. Your fee reflects an equitable energy exchange against the results you help create and the incremental value of working with you.
2. When you meet with a potential client - LONG BEFORE you put a proposal in front of them, get them to articulate the business performance gaps that working with you is supposed to bridge. Specifically, when a client asks for you help with a solution, how does that solution change leadership, employee or customer behaviors? When those behaviors shifts, what difference do those shifts make in terms or tangible business outcomes?
3. When putting a proposal together - Create at least three options for how your clients can access your expertise at differing levels of involvement that will translate naturally to differing price points. With your options, you are demonstrating in a tangible way the value that you can create for them that they would not receive on their own.
4. When setting fees - first calculate the business case for the project (whether the client works with you or not.) What benefit benefits will they gain? What costs will they incur? What's the return on investment for the project itself?
5. Then finally isolate the contribution of your consulting. When you work with a client, what INCREMENTAL VALUE do they get? Do you reduce the project cycle time (and all the cost savings and revenue upside that comes along with it?)? Do you create stronger buy-in and reduce resistance (and all the cost savings that goes along with avoiding that dreaded “flavor of the month” syndrome)?
I put together a short video walk you through the art and science of pricing. You'll get more insight into the math AND what hidden fears might be getting in your way of setting equitable fees for your consulting.
Henry Ford once balked at $10,000 bill provided by “consultant” Charles Steinmetz of General Electric whose help was needed to resolve a generator problem. In response to Fords’ objections, Steinmetz sent this: “Marking chalk mark on generator, $1. Knowing where to make the mark, $9,999.” Ford paid the bill.
When you are able to calculate your value, you are able to stand in your worth. When you are clear on why your client really needs you, it will give you the courage to confidently say: “I am not an expense to be managed. I am an investment that will generate a dramatic return.”