I recently had a conversation with a client who’s in transition of leaving their job and starting a consulting agency. They’ve worked in their industry for over a decade now and have a ton of in-the-trenches experience that they can offer their clients. The thing is, they are so used to collecting a paycheck that they have the tendency to want to charge way too little for their consulting. So, I thought I’d pass on a bit about what we discussed.
How much you earned on your day job doesn’t apply here. When you’re a business owner, you have additional things you need to take into consideration when pricing your consulting services. Things like:
- Business Expenses: Costs incurred to run your consulting business, including software, marketing, office supplies, and any other overhead necessary for operations.
- Taxes: The portion of your earnings set aside for federal, state, and possibly local taxes. As a business owner, you’re responsible for calculating and paying these, unlike an employee whose taxes are often withheld by their employer.
- Benefits: Unlike traditional employment, where benefits like health insurance and retirement plans may be provided, as a business owner, you’ll need to secure and fund these benefits on your own.
You also need to take into consideration:
- Market Rates: Understanding what others in your industry charge can help you competitively price your services without undervaluing your offer.
- Your Time: The hours you invest in delivering your services, including direct client work and the time spent on related tasks (planning, research, follow-up).
- Your Ability to Scale: Consider how your pricing strategy supports your ability to grow and expand your services, potentially serving more clients or offering more in-depth services without compromising quality.
- The Value of Your Expertise: Pricing should reflect the depth of your knowledge and experience. Your unique skills and insights are what clients pay for beyond just the time you spend with them.
Adding these factors into your pricing strategy isn’t just about making sure you’re compensated fairly; it’s also about setting a sustainable foundation for your consulting business. It’s a transition from being paid for your time to being paid for the value you deliver.
Don’t short-change yourself by underpricing your services out of fear or uncertainty. Be confident in the value you bring, and price your services accordingly.