One of the biggest challenges many service-based consultants and coaches have is what to charge their clients.
Fees can be a big grey area especially when you’re starting out on your own and don’t necessarily have the reputation or credibility yet to match the rates of your competitors.
That being said, whilst you should be aware of what others are charging, this shouldn’t necessarily be the basis for how you set your own fees and, it will drive you nuts trying to match what everyone else is doing. Focus on what you need first and everything else will fall into place as your business grows and develops.
Okay, so there are different parameters to help you come to an amount that means you are an affordable option for your target market and, that you are earning what you want to earn.
Here are my 3 tips for calculating what your fees should be:
1 – Firstly focus on what do you need to earn, not what you want to earn?
Remember that needs and wants are two different things. So, when you’re thinking about what you need to earn focus on your monthly expenses, so your bills and other financial commitments that you need to meet each month. This ensures that you are covered for this as a minimum. So, let’s say for example this is £2000 x 12 = £24,000.
This may seem low based on industry standards but remember this is just about meeting your everyday expenses and bills, so doesn’t include savings or investing back into your business.
2 – Next, do some research on what the average market value for a coach or consultant is in your industry?
Understanding what your competitors are charging will help you to create a benchmark for your own services but remember that what you do and how you do it may be different from them, so you should only use this for reference purposes.
Let’s say that starting out the average salary for a coach or consultant in your industry is £50,000. So, on that figure alone you are already doubling what you need to earn vs what you can potentially earn. Which will then allow you to invest back into your business, add to your personal savings and maybe outsource some of the operational work.
3 – Based on the products and services you will be offering to your clients, what is the average client worth?
This is an essential element of your income and revenue calculations because it helps you understand how many clients you should be working with on a monthly basis to meet your earnings goal. However, it also depends on how you work – do you offer set consultancy or 121 services or programmes that your clients can purchase? Are you relying on a passive income stream from online training? Do you work on a retainer fee basis?
Based on the £50k income level – you need to earn approximately £4,166 per month.
So, how you charge for your services should take this into account? The questions you need to work out are:
Can you earn this on a retainer from 1 client? Or do you need to work with more to reach this goal?
Can deliver a programme or service where you can split the cost between each client who signs up?
Are there any peaks and troughs in your business during the year that you need to consider to ensure you maintain your income?
At this point you need to figure out who your ideal client is and what they should be able to afford. If you’re targeting working class individuals, start-ups or SMEs their tolerance may be on the lower end of the scale, so you are potentially looking at having to work with more clients to reach your earnings goal.
Conversely, if you’re targeting high net worth or large/corporate organisations the fee tolerance level is much higher and therefore you are likely to be working with less clients.
That may sound like the ideal scenario – working with less people and earning more money, who wouldn’t want that? However, it’s likely that the expectation of the level and value of the service you provide will also be much higher. You will also need to show your experience, credibility and previous successes in order to work with this target audience.
Let’s say that you work on a monthly retainer basis and each client is worth £1100. You will need to have approximately clients to reach your £50k income target.
Increasing Your Fees and Managing Growth
Once you have established yourself and have spent time investing in your knowledge so that you can be of more value to your clients, by improving the products and/or services you deliver, you can think about increasing your fees and growing your business.
When you’ve invested time building your brand within your industry and demand is increasing for your services you’ll need to start carefully planning your growth. It may be worthwhile getting advice from your bank, your accountant or a business mentor to help you create a plan for your progression.
So again, the things you should consider are:
Are you moving into a new target market, what services do they need from you and what will the value of these new clients be?
Do you need to restructure, update or innovate existing services to ensure your current clients maintain their loyalty and again, what will the value of these new services be?
Can your existing clients tolerate these new changes in price and can you demonstrate how they will improve on the current benefits they are receiving?
Do you need to take on new or additional employees to support your new services/target clients and how much do you need to invest in this?
What will the financial impact be on other areas of your business – such as, location/premises costs, additional IT requirements, increased marketing costs etc.
What sort of income do you now want to be earning in order to improve your own lifestyle and will the value of each client and the new services cover this increase as well as all the other financial requirements outlined in points 4 and 5 above?
Whilst it may be easier to just pull a figure out of the sky or copy what someone else is charging, the danger with that option is that you really don’t know if it’s achievable.
Coming up with a considered strategy for managing your business cash-flow and growth means that you have a logical basis to work from.
If you're just starting out, check out my Starting A Successful Coaching or Consulting Business online training course for more advice and support to get your business off on the right foot. Or if you need any help with your personal or business brand development, please get in touch.