It’s a common problem in consulting. How should you price your services? Pricing is a very important part of any business. Here are some thoughts on how to price your consulting service.
By Project
Some consultants like to charge per project. This can be good, as it provides an incentive for the consultants to be efficient. If you’re charging by the hour, clients might worry you’re just running up the clock.
Unfortunately, there’s a big downside to this method as well. Many clients will tack on additional work or change the scope as the project goes on. For example, someone outsourcing the development of a program might want it to be faster or have more features. Negotiating the new price might be troublesome.
If you’re doing it by project, it’s important to hash out what will happen if the scope increases or the project expands.
Hourly Billing
Hourly billing might be the most common form of billing for consultants. If it’s by the hour, you should have a program to keep track of your hours. Be sure to charge enough to reflect for downtime when you do not have a client.
The ability of Client to Pay
If you’re consulting for a small local charity, you might charge a lot less than if it was a Fortune 500 company. Some clients can’t pay a lot. A purely profit-driven consulting firm might want to avoid these. However, others are concerned with doing good and take them on.
Sometimes, a consulting firm will exchange services for non-cash goods. This can be equity or convertible debt. This can be risky. Most established consultants would prefer cash. For those just starting, though, it can be a good opportunity.
Established Competition
Quite simply, what are your competitors doing? You need to compare yourself to your equals. If you’re just starting with a few years of experience in your field, don’t compare yourself to top management firms.
Financial Goals
Your price should reflect what you’re trying to do. Maybe you have enough clients, and you’re not looking to grow this year. Charge a high price.
On the other hand, if you’re just starting, you might have to do some lowballing to build up clients’ solid base.
Better too high than too low
With the way the consulting industry works, it’s better to charge too much. You can always lower your prices. However, if your prices are too low, it might be challenging to raise them.
Consulting can be a great business. Sometimes it’s difficult to know how to price your services.
