Consultants can earn anything from nothing to holy-moly-thatsalotta-dough. Generally, we pay a consultant roughly what we might pay an accountant or a lawyer. Whether we are considering hiring a consultant or becoming consultants ourselves, we can gauge fees based on these factors (in no particular order):
- The industry or client: Rates are higher in some industries.
- Competition from other consultants: Usually, the more sharply a consultant narrows and focuses on her niche, the more she can charge because she will have less competition.
- The length of the project: Consultants often charge lower fees for projects that demand their full-time or near full-time attention and for longer-term projects.
- Pro bono work: Consultants occasionally reduce or forgo fees for charities.
- The remuneration structure of the team: If a consultant works with other consultants, he will likely share some of his earnings with the team. One model for small consulting groups is “15% of every sales (not expense) dollar goes to the company, 15% goes the the person or people who sell the deal, and the remaining 70% is split among the people delivering the consulting work as per their skills and the time they spend.”
- Sales and marketing: A consultant or consulting group can earn significantly more if they know how to market and sell their services with care and authenticity. Old-school selling depresses fees and drive up sales costs. New-school, “what-do-you-most-desire-to-achieve-and-how-can-we-help?” selling earns significantly more and clients are delighted.
- The economy: It’s not the economy per se but how the consultant’s offerings relate to the economy. In an up economy, clients will consider and buy more of most everything. In a down economy, clients will continue to buy as long as the offer helps them save money or make money in that climate.
- Age/experience: We pay different amounts for different consultants depending on the work to be done and how much we trust the consultant to achieve the promised goals (e.g. we will pay $350/hour to have a first-year law associate do legal research and writing; we will pay $2500/hour to have the senior law partner who is a specialist in this area do the negotiations for us.) But consultants really need to conservatively quantify the dollar-impact of their work for the client and charge some percentage of that. Startups and new consultants can struggle unless they focus tightly on their niche, sell well, and land significant work even before they “hang out their shingle.”
- Discounts and packages: To address clients’ fears about “open-ended” projects billed at the consultant’s hourly or daily rates, consultants often sell their work at a discount (not recommended) or at fixed price for a project (recommended if priced well). Packages can be a good or bad deal for consultant and client.
- Delivery: Even the best sales, offers, and rates won’t matter much if the project goes off the rails. Scope creep, poor relationships, chaos, and other unexpected surprises can kill a project, harm the clients’ business, lose money for consultants, and sour relationships. Clients and consultants do well to include clear contracting, project management, facilitation, and the associated fees in their project agreements.
In your corner,
Mike
PS: Beware low fees. If we charge too little as a consultants, clients will discount our abilities. If we squeeze too much as clients, we will get and deserve what we pay for.
PS: If you choose to go into consulting, I highly recommend the books Million Dollar Consulting by Alan Weiss and Getting Naked by Patrick Lencioni.
Today’s photo credit: Matthew Burpee cc