What is consulting worth?

An intriguing question? What are consultants worth? For different industries the rates can vary widely, Henri Vanroelen, a VP for Estee Lauder Companies believes the following are general guidelines for pricing IT consultants:

• Help desk / PC support / IS Operators: around 40$/hr
• VB / RPG / Cobol programmers: around 65$/hr
• Oracle SQL / ABAP prgrammers: around 95$/hr
• business analysts / ERP consultants: 120 $/hr
• Program mgrs / projects leads: upward of 120/hr, depends on experience level

Sounds fair doesnt it? In many sectors consultants do indeed charge by the hour, in others they charge by the day or week.

The maths is simple; find out what you are really worth a year. (Salary plus costs) divide it either by the number of expected billable days, or by the number of expected billable hours, then add a percentage. Remember taxes and overheads and make sure to capture all expenses that you normally agree to recharge to the client.

Some common approaches to this type of rate setting include:

- Double or triple your cost per hour/day
- Setting consulting fees based on each particular project
- Setting fees based on actual data
- Or just charging market prices

The last option is the most common. Within a short time in your industry you will become very aware of what your competitors are charging.

Often, when they are confident in their space, they charge by value; meaning that they charge a portion of the value it would represent to their client company regardless of the time they spend executing it.

Alan Weiss has always been one of the more vocal advocates for value based fees, a method he has used and publicized as the best means of earning what your services are worth. As always, he makes a very good case for the practice.

These include:

• capping investment at a specific level
• never having a meter running so clients can feel free to call or email on any issue without additional authorizations
• and no debates over what constitutes billable time and what does not

Ultimately many consultants end up choosing a range of methods for pricing their services, including some that may not be here. Your ability to generate consistent high yield fees will end up being determined by:

• Your relationship with your client
• Your track record
• The uniqueness, or perceived uniqueness, of the services you offer
• Your ability to keep your overheads under control, and
  
• Your familiarity with your clients industry or business
  

Rick Schultz, Founder and Software Architect of 100Watt Solutions, ties the concept of fees to overall consultancy effectiveness and paints the picture this way " The other part of the question, though, is "which clients do you want"? You don't have to be in any consulting role long before you meet "the client from hell" and need to fire them. If you charge top dollar, you have a smaller pool of clients to choose from, and they're often pickier (because, hey, they're paying you so darn much, right?). The lower your price, the greater your pool of potential clients. "