How Much Should I Charge for My Service?
I want to start an information consultancy firm in a relatively new market -- meaning I have not seen any other business like this for the advertising industry. Given this, how can I determine how much money I should charge clients to look for information for them? Obviously I don't want to over-charge them but I also don't want to under-pay myself. Any advice?
Get the working capital your business needs from Entrepreneur Lending, powered by CAN Capital. Learn More »You need to work out what your numbers are on the expense side first, then determine what you bring in terms of value to the table to price your services accordingly. Since you are in the consultancy category, you should aim for fairly high margins, and you should be able to achieve them as there are typically very manageable overheads for this type of business.
Now, what do I mean by "high"? Can you get a 75 percent or 85 percent margin on your services? Work out the numbers and see if you can, and that should give you a good base point to start from.
A couple things to consider: How much of your time will be actual paid work versus proposal writing, planning and more? In general, if you're looking at 2,000 working hours per year, a good 40 percent to 50 percent of that time can be eroded by non-billable administrative duties. This is why you should consider the costs of a good administrative or personal assistant to do the paper work that won't be earning you any fees.
Also, find ways to get out of the "paid by the hour" mentality common to this category. Can you offer workshops or seminars where you can leverage your time to consult or teach eight or 10 customers instead of a one-on-one model? Can you offer a "back-end" of books, CDs or DVDs or other materials to create additional income streams?
Once you see there are ways to generate consultancy revenues outside of hourly fees, you can get very creative and innovative in how you deliver your services. Talk to people in industries and categories other than your own to see how others work their fees and generate revenues.
Just remember to find ways to maintain your margins, and don't discount just to get clients on your roster. In general, if you have a good value proposition, you can charge any amount you wish, and you'll be working with a better level of customer than if you rely on a discount or lower fee model.
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