The Sketch May Have Taken Me 5 Minutes, But The Learning Took Me 30 Years
Updated: Aug 29, 2020
I was recently asked to give a talk on how consultants should justify their fees. Needless to say, my initial rebuff was "if you have to justify them, then you are either in the wrong business or you are not charging enough". However, having spoken to the group that asked me to speak, and hearing all kinds of "war stories" from the field, I decided to try and provide insight into how I have always charged and why.
For some context, the genre of my area of expertise has indeed become more desirable of late, however, my pricing strategy has not changed in the 12-years that I have consulted to governments, corporations, institutions, or families.
Given that you are being paid for your expertise, knowledge, and experience, and unless you are truly doing a client a
disservice by prolonging the "gig" , you are at your most valuable to them within the first 320 hours of your assignment. It is for this reason that I charge $750 per hour for the first 320 as this is when the client benefits the most from the download of my 30 years of knowledge and experience. If you are unprepared to provide that kind of download within 320, or your client is incapable of extracting it from you, then you are both culpable.
Once the initial 320 is behind you both, you should be entering an "execution" stage, at which time the value of your USP is reduced. Although you will still remain an expert, there are probably more people that can do what you are about to do, so, to be fair to the client, and given the efficient market theory actually does work, it is prudent to reduce your fee. I reduce mine to $500 per hour for the next 320 hours.
Once you are 4-months in, the value of your USP is again reduced, as this is normally about the time a lot of "blocking and tackling" will occur. More efficient market theory pressure can be brought to bare, and hence another hourly reduction is passed through to the client. For me, I reduce the $500 to $400 per hour.
At this stage, you and the client will be fully aware of the value you have provided, are currently providing, and can continue to provide. For example, you may have a network that would allow for future scale, you may have paid for and hence own, complex legal documents that can be reused (that you had developed for yourself, not other clients), saving your client money. Hence it is at this stage that you either hold the line, or, provide another reduction to your "floor". My floor for managing and measuring (notice not designing and implementing) a change, is $350 per hour.
Needless to say this will not work for everyone, and is at its most effective when you take an assignment that is longer than 4 months. For shorter assignments (generally with clients that only need to pick your brain and your network for a short period of time), I have gone as high as $1,000 per hour. For longer assignments I also offer a flat project fee.
As an aside, I also donate over 1,000 hours of my time each year to helping Impact Innovators and Entrepreneurs achieve their dreams.
Much of the above comes down to KYC and how unique and or sort after your knowledge, experience, and contacts actually are. For me, if people do not wish to pay, I do not debate or argue, I just respectfully decline the offer to engage because I know full well how much extra time and money it would take that client to get where they wish to be without me. Arrogant? Possibly, but based upon fact derived through experience.
The bottom line is, that the answers you can provide and the doors that you can open did not take you 5 minutes, they took you 30-years, and never forget, that if the client were totally capable of doing it, you would not have been contacted in the first place.
Good luck, and don't ever be afraid to charge what you are worth.