Pricing Your Consultancy Services | How To Price Your Consultancy Services
When it comes to running a consultancy business, one of the biggest challenges that I see most consultancy business owners facing is how to price their services. If they get it wrong, not only will the pricing structure cost them thousands or even hundreds of thousands in lost revenue, but it can also lead to strangling the growth of their consultancy.
Let me give you an example to show what I mean, by looking at the biggest problem with pricing; charging by the hour or by the day.
Whether you are a PR consultant, marketing consultant or any other business consultant, if you charge by the day you are consigned to failure.
Charging your consultancy services by the day instantly puts a cap on the amount of money that you can make.
Even if you choose a high daily rate for your consultancy services, you are limited to the 20 days in any given month to provide your services. Take away a few days for selling and marketing your services, then some administration days, and soon you are down to around 15 days per month.
Even if you charge £1,000 per day, you now have a cap of £15,000 per month. When you discount for holidays, sickness etc. you are probably reduced to a maximum of 10 months, therefore, £150,000.
Now don’t get me wrong, I am not suggesting that isn’t a reasonable price for your consultancy services, but it is your absolute top limit.
However, not only is it a limit for you financially, but it also limits your ability to help as many businesses as you can.
If you are good at the consultancy service that you provide, and I only work with good consultants providing real value to their clients, then you should look to help as many business owners as you can. Charging a daily rate limits your ability to help people.
But this isn’t the only problem.
The other problem with charging a daily rate for your consultancy services.
The other problem with a daily rate for your consultancy services is that it totally misses the point of your service; that is to provide value
It clouds what you actually do for your clients. Suddenly they don’t see you as someone that can unlock some doors for them and take them from A to B more quickly, but instead they see you as another member of their team who they have to get value from.
As the only way that they can extract value from you is by ensuring that you cram as much into the ‘day’ or ‘two days’ that you do for them a month, then that is what they are going to do.
It now doesn’t matter what you are doing for them, just that they get their pound of flesh and keep you incredibly busy for the day or days of consultancy service that you provide for them.
I was talking with a consultant recently who is incredibly experienced and provides huge value, yet I nearly fell off my chair when she told me that she charges by the day.
“It is what people do in our sector” she said….
One of my key learnings from running a consultancy business for the last umpteen years is that we can make up our own rules.
If you do your job of educating your target market that you really are an expert in your sector, then get them coming to you at the time that they are ready to use your consultancy services, you can charge in any way you like and deliver your services as you wish.
You make the rules for how you price and how you deliver your consultancy services. It is completely up to you – as I say as long as you add value, so let me promise you that like my friend, you should never charge for your consultancy services by the day.
Needless to say, she is now no longer charging by the day. She provides far too much value to be doing that.
Charge your consultancy services in relation to the value you add through the expertise you have acquired over the years, not by the day!
If you can now do Job A in 15 minutes because you have spent the last 20 years acquiring your expert knowledge, it would be completely insane to only charge for your time. Someone else is acquiring your expertise and that is what you are selling as a consultant.
Let me say it again; charge your consultancy services in relation to the value you add through the expertise you have acquired over the years!
When you do this, both your business and your clients’ businesses will both be much better off.