How much to charge for a business consulting?

Have you stopped buying something because it is very cheap and distrust of quality? On the other hand, already stopped buying a product because even knowing that it was good, did not justify the price that was being charged? I'm sure yes! Defining how much to charge for a consultancy requires care, just as many companies do when they want to launch a product!

Balance is the key word, isn’t it? Nothing leaves a customer more satisfied than realizing that it was worth buying a product, investing in a certain service, knowing that money was well spent!

For new consultants, how much to charge for their work is a frequent doubt and causes a certain affliction! But rest assured, in this article you will learn how to charge for a business consultancy in the following:

• Price Factors
• Ways to charge for a consultancy
• Method of success

Let’s start?

Price Factors

1. Project Costs

To begin with, you need to understand that several factors influence when determining how much you will charge for your consulting. Travel, lodging, materials, hours of work, all this counts when it comes to pricing a project.

To make it clear, let's illustrate with an example.

This example is very simple, but it makes it easier to see what we are dealing with. All expenses generated during the project must be included in the total charged. After all, nobody works for free, nor pays to work, right?

So it's important that you do an analysis of what you'll need, from fixed costs such as food, to variable costs such as hotel accommodation or parking expenses.

2. Administrative expenses

In this step, all expenses not directly related to the realization of the consultancy must be included in the calculation. The key question here is to ask the following question: how much does each project use from the administrative structure of the company?

Assigning a portion of the administrative expenses to balance the company in each project is a key strategy to obtain a fair price by including the apportionment made in the final value of the project that will be executed.

Illustrating to make visual what were told, we would have the following succession of facts:

It is up to you once again to know what your administrative expenses are and how much will be used from your headquarters to include this in the time to decide how much will charge for a consultancy, so as not to stay in the negative.

3. Profit Margin

Here the idea is as simple as possible, to profit! As I said earlier, you will not do a project for free, nor spend money to do it. On the other hand, you also can’t extrapolate on your margin, or even if your consulting services are good, no one will want to hire you.

So how do you achieve the desired balance? Simple! With the entire project structure finalized, costs and expenses included, include two profit margins in your project, the desired and the possible.

But why do that? Because not always what you want can be achieved. After all, every proposal involves a negotiation, so you should be prepared for it! In addition to that, there is another extremely important factor when determining the price of a project, which is the ...

4. Market Suit

How much is the market willing to pay for a project? How much people are willing to invest to get a good return? These questions are extremely important when deciding the price of your consulting.

You need to understand how much the market is willing to absorb and then profit. With this understanding, your profit margin should be adequate to this absorption.

Taking an example, in large centers consultancies are generally 25% more expensive than in smaller cities. As you might imagine, this is due to the fact that large centers move more capital, have companies with greater financial power, and people who are willing to invest more for return.

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Ways to charge for a consultancy

Just as it is important to understand the cost factors of the project, it is also important to determine the method that you will choose to charge. We will talk in this article of 4 methods used by consultants in general. Shall we go to them?

Working Time

This method is widely used by new consultants, since generally they do not have a package of services stipulated yet. As the title says, in this form of charging the cost is calculated per hour of services rendered. But how to do this calculation? Let’s go.

First you must get all the salary information from your old jobs. After doing this, divide your payment by the number of hours worked over the same period and you will get your cost per hour.

Your consulting time will be that amount multiplied by 3 generally. Of course in that amount that will be tripled you should also include your costs, as said above. Another key point is to analyze the consulting field in which you are included.

If your consulting business does not have many expenses, it is interesting to multiply the value by 2, to remain more competitive in your market. Another point that you cannot forget is to do a market research in determining this value.

Charge for product

Charge for product delivered, this is the idea of ​​a very direct way here. Each product has a semi fixed amount that will be paid after its delivery.

Payment by Delivery

In this form of charging by the consultancy, the services that will be in charge. That is, with each step of the service being finalized, there will be a relative payment. Simple, right?

Results

In this model, the consultant stipulates his gains over the results obtained. There are two ways to do this, which are: to win the goals achieved and the results achieved. Let's illustrate for a better understanding:

Method of success

We have already seen the factors that must be taken into account when deciding how much to charge for a consultancy, and also what forms we can take in this process. But what method to follow? What is the step by step?

For those who are starting, it is always good to know the steps to follow in order to optimize this process. So I made one for you!

It is worth mentioning that always before pricing the resources, a market research must be done, as we discussed above!

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