Management consulting is a $250 billion industry and it’s growing. It’s big, it’s profitable and it always has the capacity to accommodate more consultants. So, if you are an expert in any field and plan to start your own consulting business or you already have started one, you are already on the right track.
Staring a consulting business can be exciting and overwhelming at the same time, i.e. you are eager to find clients, but you are not sure how you are going to bill them. Setting up pricing is one of the most difficult and critical tasks in any business, and especially if it’s a service based business like consultancy.
The pricing of your business are largely depending on the expertise, industry, required tools and equipment and the competition. So, you need to spend some time in analyzing all the factors and then set pricing that is right for you.
Many people make the mistake of offering lower rates in the initial stages to lure clients or customers, however in the long run it becomes harmful as you are bound to increase rates which will not be appreciated by your existing clients.
Following three ways can surely help you in establishing pricing for your consultancy business:
1- Follow the Trend
You must be well acquainted about the latest prices and trends of the similar consultancy businesses. Don’t try to blindly follow them, but it will definitely give you an idea about the feasible pricing against investments made in manpower and equipment.
To have a quick data, become a customer for a while and send inquiry to some of your competitors. Reach out five to 10 consultants/companies and you will have the average industry rate in your hand.
2- Get Help of a Professional
You can also avail the option of hiring professional business mentors who have hands on experience of working with entrepreneur. Ideally, look for a local mentor, but you can also reach out people anywhere in the world. There are many online and offline mentoring services that can help you setting the right pricing. They may cost you a little money, but they are worth the cost.
3- Fixed Profit Rule
This is really an easy option, especially when you are starting up without a mentor. You decide a rate you must charge in order for you to justify your time. It is typically billed per hour. Decide a rate that includes a % for health insurance, office rent (if you have one), overheads and your profit. You decide the profit you need to make per assignment and go by the rule till you get a clear idea about the pricing model. Generally, the profit should be anywhere from 8% to 16%.
The Bottom Line
Pricing a consulting business is relatively tricky, but with little research and quick analysis, you can figure it out without much hassle.