One of the most frequent questions I receive
from those who are trying to start or grow
their own consulting enterprise is: "How and
what do you payment clients for your consulting
services?"
The ways of billing clients are numerous.
There are hourly rates, by-the-job fixed rates,
contingency or execution arrangements,
flat fee plus expenses, daily fee plus expenses,
and many other methods of charging for your
consulting services. Which one is best?
Tax Return Estimator 2012
Let us reconsider some ways of billing for your
time.
1. Hourly or Daily Rate
Many consultants payment by the hour or day.
To create an hourly or daily rate, they try
to hypothesize the number of billable hours in a
year. Many hours will be spent marketing and in
administrative and other functions, so this
time is not taxable to the client. As well,
vacation time, holidays, sick days, and so on,
can not be directly billed to the client.
Consultants, like other businesses, must charge
enough to cover their overhead expenses and also
earn a profit. If a counselor wants to earn
twenty-five dollars per hour of working time,
he (or she) might have to payment one hundred
dollars per hour to the client. This assumes
one half billable hours and fifty percent
overhead and profit.
Your hourly or daily rate may be little by
what your competition charges, especially if
you have not positioned yourself as different
from them.
2. Fixed or Flat Rate
Some consultants payment by the job or a flat rate.
For example, a tax counselor might payment three
hundred dollars to put in order a tax return for
you and your spouse, along with an unaudited
income statement for your enterprise from information
supplied by you. If the counselor takes only one
hour to do this, he grosses three hundred dollars
per hour. If, though, the tax consultant
miscalculates the time required, he could take
twenty hours to unblemished the job and make only
fifteen dollars per hour.
Of course, consultants can also make a profit on
the labour of their employees or subcontractors.
Many consultants claim to make more on a flat rate
than on a hourly basis. Advantages comprise being
able to give a quote to the client up front and
less disputes on price (as the total bill was
agreed upon in advance).
To safe yourself on flat rate assignments,
always limit the scope of your engagement to
something that you can hypothesize easily.
For example, if you are asked to give a quote
for setting up a website for a business, you
might break this scheme into smaller assignments.
First, you could give a quote for preliminary
research and recommendations. Assessment the time
required to meet with the client, learn about
his enterprise and goals, create strategies and a
budget, and put in order recommendations on how to
proceed. Then, give the client a quote (perhaps
in the form of a one page letter trade or
proposal). Upon acceptance of the offer by the
client in writing, you may trek, with this
phase of the project.
Some consultants get one-half of their fee
up front and half upon assignment completion for
each phase of the consulting project.
If the client doesn`t like your recommendations,
at least you get paid for the work you did.
Perhaps you can payment him to prepare
alternative suggestions.
If your website scheme was not broken into
smaller steps or assignments, you could find
that you spent way more time on the project
than anticipated.
Also, you might not find out until you present
your bill for the whole scheme that your client
won`t pay, whether because he is not satisfied
with the results or because he is unable or
unwilling to pay.
Breaking down a scheme into smaller assignments
helps you Assessment more accurately and limits
your financial exposure.
3. Contingency or execution Arrangements
Sometimes clients will ask you to come to be their
partner. If you do, you are no longer an
objective consultant.
What if your client asks you to do management
consulting for twenty-five percent of the net
profits? Will there even be any profit by the
time he writes off his car, home office,
entertainment, travel, wages to self and
family members, and other expenses?
On the other hand, if you are a marketing
consultant that is verily certain
that you can increase a client`s sales, you
may feel safe bet charging a fee based on the
increased sales volume of the client. Are you
sure your client will co-operate with you in
the attaining of this goal?
Some consultants payment a flat rate plus a
percentage of ownership or profits for their
services.
Fees based on contingency or performance
arrangements are risky. Most consultants are
better off charging a fair price for their
services and leaving the risk of the client`s
business to the client.
4. Value Based Fees
Sometimes consultants can clarify fees based on
their value to the client. For example, if you
save a client one million dollars in taxes, your
fee may be higher than general to reflect the
value of the services rendered.
You might pay an accountant or lawyer a fee of
fifteen hundred dollars based on time for certain
tax related services. What would you be willing
to pay to legally save an extra million dollars
in taxes? Ten thousand dollars, one hundred
thousand dollars, or more?
Can you apply this data to your own
consulting practice? Is there some particularly
valuable assistance that you can render that would
justify premium rates?
However and whatever you charge, be sure that
your fee is a good value for your client
and also compensates you fairly.
For added data and resources about
consulting, visit:
http://www.yenommarketinginc.com/consulting.html
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