Why Consultants Charge “A Lot”

217th Sep 2010Various, , , , , , ,

A couple of friends and family members have asked me why consultants charge what they do for their services, and here’s what I tell them.

Length of the Job
Consulting jobs are generally short-term gigs. Once it’s done, it’s done. You may get future projects from that client, but there are no guarantees. When dealing with uncertain income or unstable working conditions, it’s in a consultant’s best interest to charge a little more and prepare for the times when there isn’t steady work.

No Benefits
If you’re a consultant, you have to provide your own health, dental, prescription, and optical insurance. There is no corporation to foot that bill for you. That being the case, you will have to charge a bit more than someone might accept in hourly pay for a full or part-time gig. They get the bonus of not keeping someone on payroll, so you have to fend for yourself.

Cost of Business
Running any kind of business isn’t cheap. With hosting and domain fees, plus accounting, and a plethora of other expenses, you can’t afford to low-ball every contract. If you did, your business wouldn’t be around for very long. Make sure you know your expenses well, and what you need to make per hour on average to cover those expense, plus whatever salary you set aside for yourself.

Knowing When to Charge What
It’s also important to be responsible in your bids. If you’re dealing with a multi-national corporation with millions of dollars in revenue, you will be able to charge more for your services than if you were bidding on a project for a small family-run business. Clients know their wallet well, and they’re not afraid to pass on your services if the price is too steep, especially if there are other consultants willing to work on the cheap.

The Specialty
Most of the time, consultants are either highly-trained, highly-experienced, or both. When a client comes to you, they are doing so for a reason. They expect high-quality work based on what they know of you. That’s part of what they’re paying for. They are parting with their hard-earned money to get, hopefully, the best the can.

The Bottom Line
When bidding on a new project you need to take all of these factors in to account. How long will the contract be for? Is there any reason to think you might get steady repeat business from this client? Can the client afford your standard rate, or can you help them out without hurting yourself? What’s the current market rate for similar services from other consultants? And, of course, what sort of work will you be doing? Using all of these considerations, you should be able to come up with a rate that will be equatable for both you and your client.

2 Comments Comments Feed

  1. Will B (September 17, 2010, 12:08 pm). Reply

    Great article!

    …you can’t afford to low-ball every contract. If you did, your business wouldn’t be around for very long.

    Yes sir, that is the honest truth!

  2. Anthony G. Cyphers (September 22, 2010, 1:17 pm). Reply

    Someone brought up a good point that I thought I would mention. Hiring an independent to do the work you need done is much more cost-effective than most regional companies.

    As an example, I would generally swap a hard drive, do the OS reinstall, and copy whatever data I could get for about $75.00 locally. One company in the area charges over $100.00 per hour, so I can assure that it would be MUCH more expensive.

    Just an FYI.

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