This is it! You have been planning your move for weeks and months, and you feel the time is right to finally launch your new consulting practice. But one nagging question keeps coming to mind – “What should I charge my clients?”
Regardless of the industry you are in, you are most vulnerable to 3 pricing errors when you are just starting out. These three pricing errors, if left unchecked, can set your business success back by months and even years. Pricing errors erode more than just your bottom line, they can chip away at your confidence right when you need it the most. In fact, being the cheapest guy or gal on the block can hurt your company’s brand image as well.
To learn how to confidently charge what you are worth, sign up for Rainwerks’ free video series where we go into greater depth on ways to help you price your products and services the right way.
3 Common Pitfalls To Avoid When First Setting Your Consulting Fees
Mistake #1: Matching your fees to your competitors’ rates. By comparing your rates to others, you can unwittingly make yourself a commodity in the mind of your potential prospects. What sets you apart from your competition is “you” and your unique knowledge and experience. When, I first started in business, I checked out competitors’ websites for pricing information and talked with others about what I should charge. This approach failed to look at the years of experience I brought to my customers’ business problems, years in a specific industry and my unique approach to solving their problems.
Mistake #2: You assume your consulting fees are too high. As a new independent consultant, it’s easy to set your rates too low in the belief that if you charge too much, clients won’t choose you or you won’t retain them. So you drop your prices thinking that some income is better than no income at all. The underlying problem here is that by assuming what others will pay you, you can unwittingly leave money on the table. No one is likely to tell you that your prices are too low, and the loss in income can be substantial.
Mistake #3: You set your consulting fees based on your income target. If you have had a full-time career before deciding to go out on your own, it’s natural to set your consulting fees similar to the hourly rate you were making in your last full time position. It’s easy to forget that we earned more than what is reflected in the hourly rate including: vacation, 401K contributions and insurance benefits. In addition, you now have to consider your overhead expenses including: marketing, computer hardware and software and office space. Don’t get me wrong—that’s a legitimate consideration in your pricing decisions. You do need to decide a floor for your pricing, and which assignments wouldn’t pay enough to justify taking them. But value to the client should carry much more weight.
Kate Wendleton, head of national career-counseling network the Five O’Clock Club, sums it up well: “Remember that someone will be deciding whether or not you’re worth it, and there is a lot of flexibility. If lots of other people can do what you do for less, hiring managers will just pick someone else. On the other hand, if your skills are unique and in demand, especially if you’re a known expert in something, clients will often pay more than the going rate.” http://fortune.com/tag/consulting-fees/
3 Steps to Pricing Your Consulting Fees
So rather than continuously putting your services on sale follow these 3 simple rules.
- Package Your Services Differently. Instead of dropping your prices automatically at every customer’s whim, why not add more value to your customers by packaging those services to better suit their budget. Customers will appreciate the ease of working with you, and it may serve as a way to differentiate you from the competition.
- Offer options with different price levels. Pricing your services with different options will help clients feel they had more choice in their selection.
- Determine Your Unique Selling Proposition. Consultants in most industries face fierce competition. To help you stand out, make a list of what sets you apart in your industry, and be sure to highlight this list in your marketing materials and sales conversations.
To learn how to confidently charge what you are worth, please sign up for Rainwerks’ free video series that can help you price your products and services correctly.