While experienced freelance management consultants can determine the market value of their work, freelancers who are just starting out may have a more difficult time determining what they should charge for their services. There are a few ways you can determine how much you ought to charge when starting out as a freelance management consultant.
- Ask Other Freelancers - One way to make sure you are priced competitively amongst your peers is to ask other freelancers in your market about what they receive on average in terms of their day rates. Aim to ask around half a dozen consultants about their day rates in order to get an accurate estimate of what you can expect to make when you become a freelance consultant. Take into account the level of experience of the person you ask - aim to ask some consultants of the same level and the level just above yours about their day rates.
- Survey Current Employers and Potential Clients - By surveying current employers and potential clients, you can get an idea of what companies and consultancies are willing to pay freelancers. This can give you a realistic view of what you can achieve as a freelancer.
- Calculate Based upon Premiums - Within any given year, there are about 250 working days. Take your current salary as a permanent employee, add in all benefits, and divide by 250. This will give you your day rate. For example, if you are making $75,000 (£52,000) a year including benefits, your day rate works out to be around $300 (£208). Now, depending on the project you are working on and the client, you can expect to make up to twice this premium as part of your day rate.
- Calculate Based upon Utilisation Rates and What You Need to Make - Alternatively, you can calculate your day rate based upon your utilisation rates. The utilisation rate is the percentage of those 250 working days that you expect to work. If your utilisation rate is 80%, you will be expecting to work 200 days out of the year. Take your current (or desired) annual salary and divide it by the number of days you expect to work in a year based upon your utilisation rate, and this will give you your day rate.
A note on day rates vs. project rates: An alternative way of pricing your services is through using a project rate. You can calculate the project rate based upon the number of days you expect it will take to complete the project (i.e. you think it will take 21 days to complete a project). Multiply the day rate by the number of days you estimate for completion. This will give you the project price. However, not all projects you do for clients can be priced this way. Some projects you complete will have a large scope or an open-ended scope. When this occurs, you should charge by the day rate.