How Much to Charge for Consulting: Profitable and Painless Consulting

By Cindy Tonkin

There are three ways to find out what to charge: What the market is charging; What you want to charge or What you can afford to charge.
This book takes you through each of those 3 options and then guides you through a series of reasoned questions and checklists to help you determine what you can really afford to charge.
Then you can project where your expenses will be to work out your cashflow, when to plan price increases and when to take your holidays.
Everything you need to know about how much to charge in one place!
This is an update and rewrite of Cindy Tonkin's popular Australian Consultant's Guide, newly re-organised and with more stories and examples than before.

• Language: English
• Publisher: Cindy Tonkin
• Release date: Oct 9, 2015
• ISBN: 9781311782311

Cindy Tonkin

Cindy Tonkin is the consultants’ consultant – specialising in working with people whose consultative skills differentiate their product and service. Managers, sales people and consultants. A qualified NLP-trained trainer she combines an extroverted, energetic presentation style with a strong understanding of what makes people tick. The results are fun, dynamic ways to make your sales force, your management team or your cultural change program work.Her solid background in consulting and training means she can design a change program with whatever change elements you need – coaching, training, workshops, action learning projects, whatever suits your organisation’s culture and outcomes!With more than 20 years experience in reengineering and productivity improvement, she has the project management skills to deliver your requirements on time, on budget and in the way you need them to work long term with your organisational culture and market. As a comedic improviser, Cindy can link anything to anything, and surprises often result.Her first book, The Australian Consultant’s Guide, was an Australian Institute of Management bestseller. She has written more than a dozen other books for consultants and managers since then

Book preview

How much to charge: it’s simple and it’s complex!

The topic of how much to charge is an important one.

How much you charge for your services is tied up with your self-esteem and your self-worth.

How much you charge can make it easier or harder for clients to engage you.

How much you charge can mean the difference between lentils or caviar for dinner. And between a good or bad school for your kid.

So it’s complex.

It’s also simple.

Why are you doing it?

How much you charge for your consulting can depend quite heavily on why you are working as a consultant.

There are many reasons to become a consultant. Some of them include:

• it’s interesting work

• it gives a flexible lifestyle

• you can use your expertise

• you can be hyper-specialised

• it offers maximum variety

• it can be well paid for the time invested

and of course, sometimes it’s the easiest option for now.

If you are just starting out you should at least read I Want to be a Consultant – Book 1 in my Consultant’s Guide series. It will help you set up a personal business plan. Money may only be one of the factors you want from your consultancy.

Whether you are consulting because you must or because you’d love to, when you do the exercises and calculation set out here, you will know how much to charge your clients.

Why do you care?

You want to know how much to charge so that you feel your work is valued. The range of charge-out rates can be confusing. The same work done in different industries can sometimes be charged out at wildly different sums.

Brenda worked in Occupational Health & Safety for the not-for-profit sector. She was constantly bargaining with clients about plus or minus 3 dollars per hour on her $60 per hour rate. And they took more than 120 days to pay their bills, so cash flow was a nightmare.

A good friend advised her to change industries and she found a niche in occupational health and safety in the insurance and banking industries.

The first year was an emotional journey for her, learning to ask for $120 per hour without blushing.

Seven years later she negotiates entire projects for her five subcontractors. The equivalent daily rate is more than $270 per hour, but she no longer charges by the hour. She says the biggest hurdle was her emotional resistance to asking for the money.

If you consider each assignment as a test case for your new rate that can help. You can always increase the rate with each new assignment if you wish to.

Many people are attracted to consulting by what they perceive to be high daily rates. Beware. Before you jump make the calculations on how much you earn now.

You may be surprised how daily rates are whittled away when you factor out the benefits of having constant employment. By benefits, I mean someone paying you a salary, (even if you’re sick, on holiday or in training) and having your employer pay for your training courses. Simple things like having your salary in the bank on the right day so you don’t pay penalty interest on your credit card, or the cost of the computer or pens you write with must also be factored into the equation.

So it is important to figure in all the extra costs you will have to bear yourself into your consulting fee.

Three ways to set your fees

There are fundamentally three ways to charge. You can use:

• Method 1: Pluck A Figure Out of the Air

• Method 2: The market rate or industry standard

• Method 3: What you can afford to charge

I will go through each of these methods and highlight the traps and pitfalls one by one. But first, let’s talk about the semiotics: the meaning of daily and hourly rates.

Price creates expectations

How much you charge says a lot about your services. Your prices will create an expectation in the minds of your clients and peers. There is an implied kudos when charging a higher rate.

Geoffrey was looking for subcontractors to work in his business. We had an appointment to meet in North Sydney. I was impressed with the brand new building, baroque music tinkling in the foyer and a tasteful fountain. The doorman wore livery, and nodded pleasantly as I walked in. As soon as I stepped out of the lift though I detected serviced offices. Gilt and maroon décor, very classy reception area, and not a single company logo or identifying annual report in sight.

Geoffrey met with me in an enormous boardroom. Twelve tall, gold chairs stood around a glass-topped table. The receptionist brought us iced water and offered coffee and cake. Geoffrey sat across the table and told me all about his impressive board, how much money his investors