What Should I Charge As A Consultant Or Coach?
This must be the most common question I get asked by women in business. I’ll give you a recent question from Sue, who is setting herself up a marketing consultant.
“I was the marketing manager for three different companies over the past 10 years. Not just strategy, but practical hands on stuff. I’m really passionate about food brands. I did some work for my brother-in-law’s business (pro-bono of course), and the business responded well. He offered to introduce me to a couple of other business owners he knows. But what should I charge? Should I charge by the hour? Or a retainer? Is there another way to package it? I’m going crazy watching myself go around in circles! Why it is easy to figure out what others should charge and have no idea how to do it for myself.”
(Hint: it’s difficult because it asking you to put a value on your offering, and many women mix that up with putting a value on themselves – we’re just not trained to do that easily.)
“What should I charge” is also one of the most important questions in business.
There are only three levers to help you make more money in your business.
- The number of clients you serve in a year
- The average amount they pay you for each engagement
- The number of times they come back each year
That’s it. Even when I worked at a Fortune 50 company managing a US$100million business, these were the three levers I looked. How many consumers, how much they paid, how often they paid it.
What you decide to charge positions you in the market
What you decide to charge positions you in the market. It’s an indication of the service levels you provide – are you ‘no frills’ or a more comprehensive offer for when it’s important to get it right?
Many women fall into the trap of under-charging and over-delivering
A lot of women set their prices on the low side, so that they don’t offend anyone, and they’ll get more people saying yes. This means that they end up under-charging and over-delivering. And not making enough money along the way.
Under-charging is when you agree to do a set amount of work, and you charge less than you should. It might be that you’re just starting out, and you’re not sure how to charge higher fees. It might also be that you’re working with a legacy client, one where you started working together a while ago, and whilst you’ve taken your fees up with other clients, you haven’t figured out how to do that yet with this past client. Or it might just be that you always under-charge.
Over-delivering is when you agree to do a set amount of work. And you end up doing more. You might have agreed a certain scope, and the client asks you to also do this one little thing extra, and doesn’t offer to pay you, and you don’t ask. It might be that you’ve seen the work would be better if you added on a little extra, and you don’t ask for more. It could even be that the client wanted the work delivered tomorrow morning, and you gave up your evening to get it done, and didn’t charge extra for the ‘rush job’ nature.
Whether it’s under-charging or over-delivering, you end up doing more work for not quite enough money. This means that you run the risk of burning out. Which shows you that you weren’t worth it.
But there are many clients who believe that you get what you pay for. These clients aren’t looking for the cheapest girl in town.
It also gives valuable information about how much you think your offering is worth, and asks your clients whether or not if they agree with you.
But the real reason I love this topic is because, when you want to increase your income, it’s generally the easiest lever that you can pull.
When you figure out how to increase your fees, you’ll be sending a message to the market that i) you’re more valuable, and ii) you have boundaries around the lower limit of what you’ll accept for yourself.
You have to value yourself so that others can value you.
It’s important to separate out the value that you offer in business to your clients from the value of who you are as a person. I acknowledge that this is easier said than done, but it is important to do.
How do you know what value you provide? You need to find clues. Either you can ask your clients outright, or you can do a subtle mini-audit yourself.
You cannot just guess. I repeat, do not guess!
You have to get the answer from your clients’ point of view. Otherwise, you end up making assumptions, basing your fees or your offering on these assumptions, and missing the mark entirely.
Your clients will tell you if you ask nicely.
The simplest question to ask is “What was most valuable about the work we did together?”
Asking your client what they got out of it makes you look so professional.
Here are the three ways that you can decide what to charge
There are three ways that consultants or coaches or other women with service-based businesses generally decide to price their offerings.
Quite often, I find that women work through these three different ways of charging as they progress through their evolution in business. (Pro tip: it’s better if you can get to Method 3 faster!)
1. Charge an hourly or daily rate (at the lower end of the market rate)
The first method is to charge an hourly or daily rate, based on what they see others charging in the market. You might call this the ‘going market rate for consultants’ or whatever it is that you offer.
This is where you look around at published tables of average charge out rates for these services (eg, ProMatcher.com). The rates on these often seem a bit low to me. You might find that an HR Consultant will often charge for between $96 – $188 per hour.
Some people find it useful to think of it as a multiple of their old salary. They have a total remuneration of say, $80k as an employee, and decide to double or triple that as an hourly fee as a consultant. You can read my view on that here.
Let’s say there’s a range for your offering. Just for fun, let’s say it’s $50-$150 per hour (it could just as easily be $300-$750 per hour – but as I said, this example is just for fun!). Generally, women might start out at the lower end of whatever range they see.
(Why they do that is a whole other article! But trust me, that’s very often what women do. They shouldn’t, but they do.
2. Charge an hourly or daily rate (at the upper end of the market rate)
At some stage, you’ll sit yourself down, and say to yourself “I’m not quite making enough”. You’ll figure out that you have non-billable time that you didn’t take into account before. This might include time for business development, travelling to networking events, having coffees after networking events, attending to (the deep well of) social media, or writing blog posts or newsletters. There’s also time to put aside for administrative tasks such as doing the books, making sure that last invoice got paid, booking accommodation or flights for something. And even time out to attend a funeral, take the dog to the vet or get one of your kid’s braces taken off.
And there was that one time you accidentally pressed “upgrade” on your operating software for your computer, and it took an hour before you got back on.
All of this means that you realise that you can’t charge for every hour in your working week.
So, you go back and figure out your costs and available time, and decide that you need to take your fees up. Maybe not to price yourself out of the market, but you need to bite the bullet and take them up.
You think about the most expensive person you know who does similar work as you (not better work mind you, just more expensive). You decide that you’ll charge almost as much as him.
My Objections to charging on an hourly or daily rate
I really don’t like it when you charge for time, for two main reasons:
- It’s unethical – It feels quite unethical to me. You have a desire to keep the project going for as long as you can.
- You’re focused on the wrong thing – Having both of you focused on how long the job takes, and therefore, how much the job costs, means that both of you are focused on the dollars. You should be focused on the quality of the outcome instead.
I know some consultants or coaches who drag the process out. Seriously. Sometimes, they’ll tell me that they went into their client’s office, and deliberately worked slowly or on something adjacent to what they should be doing so that they could pad out their timesheet.
Whilst it bumps up that invoice, it doesn’t make them feel good about their self-worth. And their client would be outraged.
On the other hand, your client has a desire to keep the number of hours you work as short as they can. If they can get a result that is good enough, they don’t want to pay for another minute of your time.
Sometimes, the client will get to a point in the work where they’ll say, “That’s great, we’ll finish off the rest of this in-house now.” And you’ll know that they won’t get around to it, or the person they give it to won’t do nearly as good a job as you would do.
Is it ever OK to charge based on time?
There are a couple of exceptions to this, eg, a forensic accountant, or a lawyer going into a complex litigation, where the range of what it might take is an order of magnitude or two different. For example, it might take one week, or ten weeks, or even 100 weeks. You really don’t know before you get started. This is because whilst the desired outcome is clear, what ultimately happens is partly dependent on factors outside of your control.
Modern game theory can help you predict whether the other party will crumble early or decide to battle long and hard, but it will always be a prediction, it won’t be absolute.
In these cases, you might be able to charge a success fee or a percentage of the winnings. However, this approach can be risky if you’re a solo-business owner, and you don’t have the financial backing of a big firm to absorb a big loss if you’ve worked for months on a deal that goes poorly.
Not many women I know have the risk appetite for this approach. In this case, I’d say it’s ok to charge by the hour.
3. Charging by the Project or Set Piece of Work
My favourite and preferred way to charge for the vast majority of engagements is by the project or package.
This is where you say, “If you are looking for this outcome, I can help you get there. I recommend that we follow my framework (or signature system, or process). I’ll charge you a set fee for this body of work.”
This is a really great way to decide what to charge, because it gives certainty to you, it gives certainty to the client.
More importantly, it changes the conversation from ‘how long will this take’ to ‘what is the depth of work we need to give us an outcome we would be happy with’.
If you’re a consultant, you’ll probably have a scoping phase (which can be charged or not), a design or strategy phase, where you decide exactly what the plan is. This would be followed by an execution or implementation phase, where you’ll actually help guide the work that you’ve decided needs to be done.
If you’re a coach, you’ll have a session to get clear on the goals, then a strategy component upfront, which could be a VIP day, a strategic retreat, or a road-mapping session. And then some sort of execution or accountability to keep your client on track over the coming weeks or months.
Don’t get me wrong, the client will still want an idea of how long it is going to take. They’ll want to know if the project will be completed in June or January. If it’s a coaching assignment, they’ll want to know how many months you’ll be helping them. But they won’t care quite so much if it takes you 75 hours or 150 hours to achieve that result.
In fact, there are some clients who will value the outcome if you can deliver it quicker without compromising on the quality of the work.
You’ll still want to go back and make sure that what you propose to charge them, and the time you need to put into delivering this, makes sense from your business model point of view. I recommend having an hourly fee in the back of your mind, and ensuring that you don’t go beneath this.
Ultimately, what you decide to charge will be determined by what you ask for, the service levels that you wrap around your offering, as well as the intersection with the types of clients you want to work with.