Learning how to charge clients and how to set rates is one of the most difficult challenges for new consultants. Even seasoned veterans of the consulting industry struggle with raising their bill rates out of fear of losing clients. The most effective way around this is to learn the technique of value-based selling. This technique, when mastered, enables consultants in any industry to gain more business and charge higher fees without losing potential customers.
If youve been in the consulting field for awhile, when is the last time you re-negotiated your bill rates? Your fees, just like the cost of fuel and groceries, should be adjusted for inflation and other market forces. In some industries, you may need to negotiate your fees down instead of up, depending on the market trends and how valuable your services are in todays marketplace. If youre charging too much, you could be losing business. On the other hand, if youre charging too little, youre leaving money on the table and also de-valuing the services you offer. Part of a customers perceived value of a product or service is based on price; if your prices are cheap, they may assume that your services are sub-par as well. When re-evaluating your fee schedule, keep in mind what a difference only $5 more per hour over the course of a year could make to your income, and how little it could impact the overall project cost for your clients.
You should still know what your minimum hourly rate is, and use this figure as a starting point from which to determine total project costs, and to help you gauge which assignments are worth taking and which are not. By knowing your minimum hourly rate, you can break down any project to an hourly fee to be sure that youre making the minimum amount you require. Your minimum hourly rate should be a figure that you keep to yourself, and use in your own calculations to determine a projects worth to you. Using a value-based pricing model with your clients potentially allows you to charge more for your services and gain more business by increasing your perceived value in your customers minds.
Use value-based propositions to demand higher fees than you would by charging an hourly rate. Value-based pricing is a method of quoting costs based on the value of your services. In order to use this effectively, you must learn how to communicate the value of your services to your clients.
Your value as a consultant is based on your brand identity. When completing your business plan and marketing strategy, you should conduct a S.W.O.T. Analysis (Strengths, Weaknesses, Opportunities, and Threats) to compare yourself to your competitors. This analysis will help you determine your unique position in the market and your unique selling proposition. A unique selling proposition is your niche in the marketplace, or your advantage over your competition. What can you offer to your clients that none of your competitors can? Do you have more experience, are you more specialized, or do you have connections that your competitors do not?
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