As a consultant, there are many ins-and-outs that you need to navigate when entering the world of contractor work. Starting your own consulting business is a big step, and there are many different things to take into consideration when setting out on this new path.
Consultants are experts in a niche area of business, and are hired to give their knowledgeable advice on particular subject matters. This is an extremely versatile field, with there being many different kinds of consulting areas to specialize in.
The upside: you are in control! There are many perks of being a consultant, the foremost being that you have the power to create your own schedule and operate however you want.
The downside: you have to learn how to operate your own business. It can be tricky when it comes to figuring out some of the logistics of working as a consultant.
One of the biggest things – and probably the most important thing – that you will want to have figured out right away is how to set your rate as a consultant.
You may be asking yourself “how much should I charge per hour for consulting work?”
This is the golden question that may leave you with a big ol’ question mark spinning over the top of your head.
The answer is, well… it’s complicated (we know, everyone’s favorite response). But we are here to break it down for you so that you have a clear understanding of exactly how much you should charge per hour as a consultant based on your business and your worth.
When you are just starting out on your journey as a consultant, you may feel overwhelmed trying to figure out what your worth is… which is why we have put together a comprehensive guide to help answer the question of how much do consultants charge per hour?
Skip ahead or continue reading to find out more about how much consultants make per hour:
- How to determine your worth
- How much do consultants charge per hour?
- How to set your rate with your clients
- What should your terms of payment be?
- Alternative rate options
Related: How to Build a Personal Brand
How to determine your worth
Determining what your consulting services are worth and what your rate should be is one of the most common struggles when it comes to being your own boss. The two go hand-in-hand, which is what makes the process a little more challenging.
As a beginner, it can seem a little daunting trying to figure out what your rate should be when you don’t have limited experience. The key is to have confidence in yourself and your abilities.
You decided to pursue consulting because you have some sort of expertise to offer to clients, and so you should be compensated based on your skills and qualifications.
Remember, the rate you initially set for yourself doesn’t have to be the rate you stick with forever! You can always start out at a lower rate, and once you get into a solid rhythm you can change it to whatever you think is representative of your services. That’s the beauty of being a consultant – it’s totally up to you to determine what the value of your services are worth.
Your clients will see the value you bring to the table, and eventually, the demand for your services will increase. With more experience, you will be able to charge higher rates on your own terms.
Here are some important tips to keep in mind if you find yourself faltering on your rate:
Don’t be scared to set a high rate
The worst that can happen when you set a high rate is that your client says no. You don’t want to sell yourself short or work for less than what you deserve, so it’s important to be firm with your rates.
However, just like with any job it’s common to negotiate your wage. Asking for a higher rate initially may work out in your favor if your client comes back with a slightly lower rate (which may actually be your normal rate).
Make sure you decide beforehand if you are okay with a little negotiating. If not, that’s totally okay! Just be prepared for the possibility of politely declining to work with some potential clients if you feel like they are not worth your time.
Consulting work can be risky
Consulting work isn’t like your reliable standard 9-5 job – it’s riskier as you don’t always know when your next gig will come along.
Consultant and freelance rates tend to be higher than what your hourly rate might be in a steady 9-5 job as work may be less frequent. As a consultant, you spend a lot of time trying to search for new potential clients, whereas in a traditional steady job you can just show up without having to worry about your hours.
Know what your competitors are charging
It’s a good idea to keep in mind what the current market is for your line of consulting work. It wouldn’t work in your favor to be an outlier with your rates.
If you set your rate significantly lower than what other consultants in your niche area are charging, you could get taken advantage of by working for less than what you deserve.
On the other hand, if you set your rates too high you might not see any work at all. When you are just starting out as a consultant, setting your rates somewhere in the middle of the market will ensure that you will receive new jobs and can make a sustainable living.
Consultants pay their own benefits and taxes
If you’ve ever wondered why consultant rates seem like they are much higher than your average wage, it’s because no one talks about the additional costs of being a consultant.
As a regular employee at your standard 9-5 salary job, you likely receive perks you may have never even thought about.
These perks include: health and dental insurance, paid sick days, office equipment (desks, computers, software programs, etc.), paid vacation days, unemployment insurance, personal days, extended health and wellness benefits… and the list goes on!
Employers cover the costs of all those extra employee benefits, which can make having employees expensive. This is one of the reasons why it is appealing for a business to hire a consultant for freelance work, as they don’t have to shell out all those extra costs for employee benefits.
As a consultant, you’ll be paying for all of those additional expenses out of your own pocket. Businesses realize this, and it’s actually more cost-efficient for them to not cough up the extra money for those employee benefits, which is why consultant rates tend to be set higher than your average employee rate.
Another important thing to note is that as a consultant, you are in charge of your own tax deductions. You won’t receive a bi-weekly paycheck with a lump sum already deducted – you are the one who is in charge of that.
Ultimately, ask yourself what you think your time is worth and how much you think people are willing to pay for your time. At the end of the day you and your client should both be satisfied with the rate that you agree upon.
How much do consultants charge per hour?
So, how much do consultants charge per hour?
The answer is, it depends on what kind of consultant work you do.
If you’re just starting out with your own consultancy business, it’s important that you find your niche. Consultants are experts in a particular area of business, and they offer their advice to clients on specific subject matters such as strategy, technology, and operations.
Unlike coaches, who focus more on individuals, consultants tackle problems within a business or a project. Consultants typically gather information about the present situation and then propose possible solutions for it.
While there are many different areas you can specialize in as a consultant (not inclusive to this list), here are the most common types of consultants:
- Business consultants
- Management consultants
- Strategy consultants
- Operations consultants
- Engineering consultants
- Human resources consultants
- IT consultants
- Financial consultants
- Marketing consultants
As you can tell, consulting is a vast profession. Hourly rates for consultants will differ and depend on the specialty. So you can get a ballpark idea of what different consultants are earning, we have collected data on the average hourly rate for each consultant speciality listed in Canada for 2023.
Here are some examples of different industry hourly rates:
- Business consultants average hourly rate – $47.73 / hour
- Management consultants – $47.97 / hour
- Strategy consultants – $50.59 / hour
- Operations consultants – $41.50 / hour
- Engineering consultants – $64.34 / hour
- Human resources consultants – $40.55 / hour
- IT consultants – $46.50 / hour
- Financial consultants – $47.44 / hour
- Marketing consultants – $33.95 / hour
*(Multiply these hourly rates by 3 for your consultant rate)
These hourly rates are calculated as an average based on employees who earn a salary, so to cover all your basis as a consultant you will want to double or triple this number.
Remember that these rates can fluctuate greatly depending on the level of expertise, specialization, and experience you have as a consultant.
We listed the most common (and broad) types of consultant jobs, but there is a huge range of less conventional kinds of specializations you can pursue as a consultant.
Some other types of consultants include:
- Social media consultant
- SEO consultant
- Interior design consultant
- Style consultant
- Brand consultant
The bottom line is that if you’re an expert in any specific area that people seek advice on, you have the potential to build a consultancy career out of it.
Now, how do you calculate a good hourly rate for yourself?
Related: How to Turn Your Consulting Service Into a Product
How to set your rate with your clients
When thinking of what your hourly consultant rate should be, it’s important to account for a few different things. This should be an educated decision, not some random number you come up with because you think it sounds right (wouldn’t that be easy)!
Look at what other consultants in your field are charging
As we mentioned before, check out your competitors. There are downsides to either charging too little or too much, so you want to fall somewhere in the middle to make sure your consulting business hits the ground running.
Set an income goal for yourself
You may have a goal or a number in mind of how much money you would like to make per year. This can be a great pinpoint for how much you should charge hourly.
Say you want to make $100,000 annually and you want to work 30 hours a week. If you want 4 weeks of vacation a year, you would be working for 48 weeks out of the year.
30 x 48 = 1,440 hours working / year
100,000 / 1,440 = $69.40 / hour for your consulting rate
Another way to calculate your potential rate if you have (or had) a job as a full time employee, and you know what your salary goal was for that position, is to multiply your hourly rate by the number three to get your consultant rate. This compensates for all the additional expenses that you have to pay out of pocket for as a consultant.
Account for your time, expenses, and value
Once you have a goal in mind for your consultant rate, it’s time so see if it’s a realistic number.
First, you need to account for your cost of living. These are fixed costs such as your rent/mortgage, utilities, bills, food, etc. that you need to survive.
Second, base your consultant rate on any additional expenses you need to cover yourself. This includes those benefits (health, dental, office equipment…) that normal employees receive that you will have to pay for yourself. As mentioned before, you usually double or triple your hourly rate to account for these extra costs.
Lastly, think of the value of your time. What rate would be worth it for your services? What do you think clients would be willing to pay for your expertise?
Your consultant rate should be an educated decision based on all of the factors above. You should come out with a number that you would be happy receiving and your clients would be happy paying.
Keep in mind that this is not set in stone! You can change your hourly rate whenever you want as you gain more experience and satisfied clients.
Related: 4 Ways to Diversify Your Income as a Freelancer
What should your terms of payment be?
Now that you have an idea of what to charge per hour as a consultant, it’ll be beneficial for you to think of your terms of payment.
You will want to draft up a consulting agreement, and make it very clear in this document what your set rate is.
Consider if you want to charge for the first few hours up front, bill your clients bi-weekly, or have them pay you at the end of the month. If you are working for a big corporation, they also may already have a scheduled payment plan for consultants.
Alternative rate options
If you eventually decide that charging hourly is not for you, there are other ways you can accept payment from your clients.
Other forms of charging for payment include:
- Per project rate
- Per day rate
- Retainer rate
Charging a client per project can work out in both you and your clients’ favor. You both know exactly how much this project is going to cost and how much you will make from it.
If you know approximately how much time it will take you to get something done, charging per project may be the easier route. You can also request a percentage of the project upfront so you have some security.
Charging per day is similar to charging per hour, it just takes a little bit of stress off your shoulders.
When you charge per day, the client knows exactly what fee they will be paying you. You also don’t need to keep detailed accounts of your hours with this rate.
Charging per day has pros and cons. Pro: charging per day rewards above-average productivity for consultants who complete their work in a timely manner. Con: if you are new to consulting, it’s difficult to estimate your project rate.
For charging a day rate, you will most likely need a solid portfolio and references that show you are worth the rate.
A retainer rate is when you have an agreement with your client to deliver your services in a timely manner and in turn your client provides a regular payment plan, typically monthly.
This payment plan works well for clients who need a recurring service. It allows for contractors to develop a steady income, establish strong client relations, and produce a stable client base.
Conclusion
As a consultant, you have the ability to set a pricing model that works for you and your business.
Now that you have an understanding of what to charge per hour as a consultant, you can adjust your rate to the value of your services. Remember that it is okay to test out the waters on setting a rate, and fish around until you find a rate that works for you and your lifestyle.
Being a consultant gives you the ability to build and structure your life to your own accord. It’s time to get started on your consulting journey now that you have the logistics of pricing your services out of the way.
Need help getting started? Check out our consulting business checklist.
