Betty Grable’s legs were insured for $1 million dollars back in the 1940s. Bill Gates’ net worth just fell by a couple of billion dollars due to changes in the stock market. The minimum wage stands at $5.15 per hour.
So what are you worth? It’s a proverbial question among consultants, and an especially important question if you’re planning to go solo. If you have high hopes of solo success, you need to make sure you’re earning as much as you can for your market and your skill set.
As we all know, hourly rates fluctuate by industry, field of expertise, and experience level. According to a 1998 study by The Consultants Bureau of New Brunswick, NJ, the average going rate for an IT consultant is $90 an hour, with rates ranging anywhere from $65 to $195 an hour. On the high end are “scientific specialties,” for which hourly rates range from $150 to $265. Many high-level consultants who work for Big Five firms earn up to $600 an hour and receive substantial fringe benefits, but of course, the down side is constant travel—as much as 60 to 100 percent travel is common—which, consequently, is the most frequent reason people leave their lucrative positions to go solo.
As for who’s going solo in the greatest numbers, Rob Stevenson, a recruiter with Silver Associates, a Los Angeles search firm, says it’s hard to find information-systems, networking, and programming professionals to fill full-time positions. “More often than not, these candidates prefer contract work because they can make more money that way,” said Stevenson.
So before you step out of the corporate work force, make sure you determine your worth so that you get paid top dollar for your expertise. Take into account the following tips for figuring out what you’re worth.
Getting what you deserve and want
The first step to earning top dollar involves determining what the market will bear—especially if you’re planning to work locally. Look at what other consultants in your area are charging, but make sure to compensate yourself for your level of expertise. Then set a fair price that will allow you to make a good profit.
“I know people who charge different rates based on the client’s budget. I think the key is to know what the market will bear… and [then] find a range and price based upon your experience,” said Kevin Eickenberry, president of the Discian Group—a training consultancy based in Indianapolis.
One of the major mistakes many of us make when first going solo is charging too little. Although we lower our price to increase business, we actually end up spending more time working for less money, and then we don’t have time for additional projects. Instead, try this strategy: Charge what you are worth and spend the downtime finding clients who can afford to pay that rate. Once you have enough paying clients, it’s much easier to say no when someone tries to negotiate a lower fee with you.
Once you figure out what the market will bear, establish how much you will need to cover business expenses and still make a profit. As I mentioned in a previous article, “Career benchmarking: Know what you want and you just might get it,” the formula for profit-making goes like this: Multiply your former hourly rate by at least 2.5. The figure you come up with will take care of overhead, taxes, health insurance, and so forth. Some other tips:
- Ask for what you are worth. Don’t let a client talk you into a lower rate.
- Include your living expenses in the expense column.
- Don’t undercut the market rate—it will only come back to haunt you later.
- Don’t be overly anxious with clients and offer them the moon. You’ll only drive your salary down.
- Give nonprofits a reduced rate. This is just good business sense.
Tapping into the lucrative marketplace
Once you set your price, there are several ways you can generate enough business to meet your goals:
- Instead of the old one-on-one initial consultation, develop information products such as brochures, newsletters, books, and audiocassette tapes. This will save time for both you and your clients and allow you wider coverage in the marketplace.
- Communicate with potential clients through a newsletter sent by e-mail or fax. You can include an update about industry news and changes, current projects, tips for making your clients’ work more efficient, and a personal message.
- Cash in on the training market. According to Robert Bly, author of The Six-Figure Consultant: How to Start (or Jump-Start) Your Consulting Career and Earn $100,000+ a Year, companies expect to spend around $250 per employee per day for a training seminar. Many consultants get $1,500 a day, but some earn $4,000 a day or more.
Once the groundwork is laid for success—for both you and your clients—a few months down the road you will find yourself with some interesting projects, the money to pay the bills, and the enthusiasm you need to move forward to new and exciting projects.
Are you happy with the current fee your clients pay, or would you like to charge more? What’s holding you back? Start a discussion below or send us a note.