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Consulting Pricing Models Overview
Sep 18, 2024
Consulting Crash Course: Pricing Models
Introduction
Presenter: Drew from Hourslogger
Focus: Consulting pricing models
Various pricing models
How much to charge
Payment terms
Discussing price with clients
Pricing Models
Overview
Selection of model depends on industry and experience
Main pricing models:
Hourly
Per Project
Retainer
Productized Services
Value-Based
Details
Hourly
Simple and common
Charge based on hours worked
Per Project
Estimate total project cost upfront
Risk of under/overbilling
Retainer
Advance payment for future services
Useful for sporadic work
Productized Services
Systematized and packaged services
Example: Fixed price for a service (e.g., $1,000 for a website)
Value-Based
Price based on value/ROI to client
Can be highly profitable but difficult to negotiate
Setting Rates
Calculating Rates
Formula: Desired salary / working months / weeks per month / hours per week
Example: $100,000 goal -> $70/hour
Assumes 75% billable hours
Consider industry, experience, location
Check competitor rates
Experimentation advised
Additional Considerations
Consultants charge more due to lack of benefits and extra taxes
Opt for fewer large contracts over many small ones
Advice: Charge more than you think you’re worth
Payment Terms
Include terms in contracts and invoices
Payment frequency: Twice a month is recommended
Payment period options: Due immediately, Net 10, 15, 30, 60
Payment methods: ACH, check, credit card
Consider fees (e.g., 2.9% for credit cards)
Late fees or discounts for early/late payments (2-5%)
Discussing Price with Clients
Strategies
Practice to speak confidently about price
Disclose price after understanding client needs
Develop a list of client questions
Use a high-low range if not ready to give a definitive price
Understand the client's needs, project scope, and timeframe first
Handling Objections
Steps: Listen, Understand, Respond, Confirm
Common objections: Too expensive, Busy, Not interested
Sample responses:
"What if x changes?"
"Would you consider a test run?"
"What would have to happen for us to do business?"
"Mind if I follow up?"
Conclusion
Next topic: Accounting for consultants
Aim: Building effective consulting practices
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Full transcript