Expert Consultant Entrepreneurs

Expert Entrepreneurs are entrepreneurs who are expert at what they do. They are a rare breed, gifted in unique ways as they have spent years as employees, adding many skill sets and professional certifications to their belts.

For expert entrepreneurs, consulting is the best route transitioning from employee to entrepreneurs, particularly if you’re in an industry that prefer consultants to hiring full time employees.

To successfully start and grow  a consulting enterprise, expert consultant entrepreneur need to be mindful of the following:

How to Calculate and Negotiate Your Hourly and Project-Based Pricing.

If you’re a consultant, freelancer or any business that charges by the hour, you are going to have to determine and continuously review your pricing structure. For example, do you charge by the hour? What’s a reasonable rate to ask? Are you better off charging clients on a project basis?

For me, it depends on the client and the type of gig. While it’s advisable to research on the industry market rates, I take a step further to research what a particular company is paying their full time employees as different companies have different rates.  Here are some tips for calculating your hourly and project rates and how to negotiate pricing with your client.

1.  Determining Your Worth Deciding what to charge clients is a balancing act between market factors, business costs, and the value you bring to your clients. Before you quote any work, ask yourself these questions: What is the market rate for work like yours in your industry and location? How experienced are you? Not just in your line of work, but as a business owner? Being good at a skill is one thing, but being able to manage deadlines, meet expectations and above all, being dependable, are essential qualities for freelancers and consultants. What rate are you willing to accept and will it cover your costs?

2.  Calculating an Hourly Rate If you’ve been a salaried employee all your life, making the switch to self-employment requires a change of thinking. Some companies may be tempted to coerce you into a rate that reflects what they’d be willing to pay a salaried employee. But self-employment brings its costs and credit to you. Your rate should reflect this, as well as your expertise. If you are used to being a salaried employee, here’s a good rule of thumb to follow when determining an hourly rate: Divide your former salary by 52 (work weeks); then divide that number by 40 (the number of work hours in a week). Then mark it up 25-30%. Here again, I’ve gone up to 40-50% markup depending on the company and the global coverage of the project.

Your mark-up covers both your value and experience, but also takes care of our business costs such as networking, selling, and other administration, not forgetting your self-employment tax obligations and healthcare insurance costs.

Most importantly, if you have to travel internationally, never negotiate your travel expenses in your fees. Ask that you present travel, and accommodation expense for reimbursements. Speaking from experience, you will be glad you did, because global companies can have projects in different continents that your consulting gig will cover. If you are lucky enough, technologies can have you doing the work from anywhere in the global and then less travel.

3.  Calculating Project Rates Many clients will prefer to manage their costs and ask for you to price your work as a fixed project fee. This can also work to your benefit, if you price it right. However, it can also work against you, especially if your client is new and the project scope creeps beyond your original expectations. I try not to follow this strategy for a project without a defined scope. The best way to calculate project rates is to spend some time scoping out what you’ll deliver. For example, if you are a freelance copywriter and a client wants you to price out a two-page white paper, use your knowledge of your own work methods and familiarity with the subject matter to structure your time commitment, for example: Research: 2 Hours Interview subject matter expert: 1 Hour Produce First Draft: 4 Hours Two rounds of edits: 2 Hours Total: 9 Hours @ $x hourly rate = $x Remember, you don’t have to put this calculation in front of your client, but it gives you a useful framework for covering your costs and delivering within scope. Don’t forget to add a caveat to address that any work done over and above this scope of work will be charged at an hourly rate.

4.  Negotiating Your Rate Negotiation is hard to avoid and can often shed light on whether this is a client that you really want to work with. If you are confident that your pricing reflects your value and the market rate, being haggled hard on price can get a relationship off on the wrong foot. Likewise, being locked in at a low rate can quickly devalue the relationship from your perspective. So, when it comes to negotiating, be prepared to stand your ground but be willing to compromise. If you foresee further business here, try to be flexible. For example, could you deliver a one-page white paper, instead of two or cut back on the review cycles?

5.  What About Retainers? If a client starts to send a lot of volume your way, retainer-based pricing can be advantageous, even if it’s at a lower hourly rate than your advertised price.  A retainer is a fee paid for a pre-determined amount of time or work (usually within a month) and is often paid up-front. A retainer agreement can deliver the benefit of predictable work and income while giving your client the reassurance of having you on “stand-by” and a clear view of monthly costs. Many consultants charge the full retainer fee, even if they don’t work the entire hours allocated. If you value the relationship, steer clear of this; instead, roll unused hours over to next month.

How Do You Get Clients?

Industry and Professional networking is a must, and yes, your previous employers could be your initial clients.

Go through professional agencies: These agencies will make money from the work you do but they usually get you clients easily as they have developed a network companies they supply to.

Be Legit

If you can’t do your own taxes, make sure you have an accountant that is working with you.

And, finally, don’t sell yourself short.

Good luck!

Cletus Olebunne