The compensation dilemma for consultants

Determining what to charge as a consultant is a perplexing and often delicate undertaking. The rule is “charge what you are worth and what the market will bear”, meaning, don’t undervalue your knowledge and services, but at the same time, don’t price yourself out of the market. Drafting that fee structure is one of the most important tasks facing any consultancy-based business. If you don’t charge enough to cover your expenses and make a living, then you won’t be in business for very long!

So how do you do it?

Research your competitor’s rates, compare your services with that on the market and then decide on a pay structure. If you want to charge higher rates, you better plan on going beyond the basics for customers to choose you over a cheaper consultant. Then there is the question of the format your billing should take; hourly-based fees versus project-based, retainers, contingency fees and the like.

Karen E. Klein lists the five most common billing scenarios for consultants.