How to Figure Value for Your Online Consultations
It seems like 2021 keeps taking its toll on many people who try to make it through the economic downfall caused by a coronavirus. On one hand, technologies are growing at a rapid speed. The need for people with extensive knowledge and skills only grows. On the other hand, more and more professionals can’t put their skills to good use because of layoffs. Is there a way to get around tough times? Actually, there are plenty of ways. If you find appropriate solutions that bring money. One of such solutions is setting up your own consulting/coaching business online to make money by providing consultations to others.
In this blog post, we’ll give you some hints and tips to help you figure out how to evaluate yourself as a consultant. Also, you’ll learn what to take into account when you need to make some calculations to determine your rates. If this topic interests you, give it a read and take notes!
What are Important Aspects to Keep in Mind if You’re a Starter in the Online Consulting Business?
If you’re just stepping into the online consulting business, be aware of some important factors that can affect your rates. Sure thing, the biggest problem is a tough competition that almost all fresh entrepreneurs bump into at the very beginning. Yes, some starters have to jump in this pool filled with a vast array of mature sole sharks. Or compete not only with large professional services but even with smaller firms. But it’s just like any other business out there – you have to pave your way through and keep afloat.
So, when it comes down to an effective strategy that can help you out, think about building a smart pricing structure and use it for your consulting service correctly. Yes, a trick is to make your price list look appealing to clients. But also you have to make it so the deal will be sealed on your own terms and provide consultation at the rates that you put on the table.
How do you come up with the right pricing? This is a million-dollar question. Anybody who just jumped on the bandwagon of consulting business wonders about it at some point. Okay, look at this quick list of tips for the right strategies. If you use them, then you’ll come up with the right rates that will work in your favor:
- Make an objective estimation of the exact value of your knowledge and any materials that you will be providing to your clients.
- Avoid letting your rates make a wrong impression because rates are the first thing that clients see and perceive consultants accordingly.
- Avoid letting your emotions be in charge of you because they can take over logic. And you need to approach your client with a cold mind while both of you negotiate about rates.
- Don’t hesitate to take into account such important stuff like your network and actual practical expertise you gained over the years working in your field. Find good ways to interweave them into consulting services you offer. This is something that can really elevate your rates and your professional value for other people.
Determine your future professional goals, then correlate them with your personal goals. This strategy helps you to look ahead and decide what else you can do to achieve financial freedom.
What Can Help to Build a Right Rate Structure for Online Consulting Business?
Charging less for consulting services is probably the very first intention that any starter has at the beginning. The common misconception is that it helps to overcome entry barriers easier and builds a solid foundation of dedicated clientele faster. But is this approach as good as it seems? No really.
If you are trying to pitch yourself at the lower end so you can get a kick-off with a deal, obviously, it’s a mistake. Lower rates won’t necessarily get you as many offers as you want. And low rates won’t necessarily contribute to establishing a great reputation. Well, we don’t mean that after you jack up rates it will earn you a reputation as a highly knowledgeable and experienced professional right away. The whole idea is to find a golden middle. Align your rates according to your real knowledge but don’t’ sell yourself short. Learn how to balance your clients’ expectations (indeed they always have their own view on rates) with a decent price tag you put on all the time that you’ve spent consulting.
The thing is that most people make a judgment and draw a conclusion regarding the level of the consultant’s expertise just by viewing a list of his/her rates. And your goal is to achieve a correct and unprejudiced clients’ perception of the right value for your consultations. Once you get this, it is time to pick the correct rate structure. In reality, there are about 4 major rate structures to deal with, as follows:
- Paid-by-hour rate.
- Project-based (set as “fixed” before the start of any project).
- Combination fee (also a fixed rate calculated from the total time).
- Performance-based (consultant gets single payot at the final project stage).
So, think and decide whether you want to consult on an hourly basis or would prefer to get a single payout at the end of projects. Specifying what particular rate structure you prefer to work with is very important especially if you’re still building a professional portfolio.
Are there any more strategies to talk about? Sure! Let’s go over the most important ones and cover ways to utilize them successfully.
What is Value-Based Pricing Strategy in Online Consulting Business?
Finding the right value-based price is extremely important since it’s something that will generate income for you in the future. Again, when you chase for the right value-based price, don’t end up being an undercharged specialist! How does this particular strategy work in real life? Let’s go over some aspects here:
- The first thing to do is to set up a mutual discussion between you and your client. You’re supposed to ask any questions necessary for clarification with a purpose to determine what profit is expected by the client at the end;
- Come up with a number that you both agree to and set it as a price for your rate. This usually gets calculated with many aspects in mind, such as account current sales, turnover rates, production numbers, etc.
- In case if you already had it calculated, don’t spill it out right away. Instead, let your client estimate, so you get a chance to evaluate and see how your own fee communicates with the client’s ROI and then go from there.
Pretty much the whole process goes in stages and each stage can be quite challenging. You might end up with lots of calculations while negotiating. So, think about boosting your negotiation skills when you have a chance.
How Does Hourly Rates Get Calculated?
A good number of professional consultants don’t recommend limiting yourself to charging by the hour only. But if you know how to calculate an hourly rate, this gives you more idea of what retainer rates should look like. Some tips on how to do your math with simple calculations:
- Estimate the figure you’d want to see in your bank account after receiving payouts;
- Got your number? If yes, take this number and divide it according to the number of weeks you worked;
- Divide your result by total hours per one week (usually it’s 40 h/w);
- Got a final result? Go ahead, mark it up by 25% or 50%, and now you’re all set.
Obviously, figuring out what markup fully covers the cost of your consultations is extremely important. Then, evaluate your status and think about any other expenses that might come up (taxes, benefits, etc.).
How Do You Calculate Pre-Project and Retainer Fees?
First, let’s cover pre-project rates because the calculation method works almost the same as the value-based strategy. Whenever you deal with any project where you charge fixed fees, the good thing is that you don’t have to mess with tracking hours and worry too much about that.
Consequently, your own workflow becomes more straightforward. The tough part is developing an ability to estimate and predetermine your upcoming scope of responsibilities. Basically, you have to come up with a correct prediction on the number of hours it will take you to get everything done and call it good.
As a good example, pretend that you have an online webinar project coming up where you need to create a well-researched presentation for a business group. So, your estimate on the number of hours will look like that:
- Total hours spent on research
- Total hours for reviewing
- Hours writing a draft of your presentation
- Total hours spent on editing
- Total hours you spent as a speaker
As for retainer fees, this implies that you’ve worked with a client for a while on a regular basis. Basically, your payouts go to the bank account once a month and are calculated for the total amount of hours you worked for this client. Retainer fees work well for many consultants because that way they build more stable earnings to rely on. The other side of the coin is that you can end up in a situation where you can get locked in set rates that might not compensate for the entire work you provided.
How to Determine Rates to Consult on e-Learning Platforms?
If you’ve decided that you want to provide your expertise to others through online consultations on tutoring sites or e-learning platforms, then keep in mind three important aspects:
- Tutoring medium
- Subject area
- Own qualities
By the term “medium” we mean the particular way you’re going to offer consultations. For example, whether it will be a collaboration with a tutoring service like Wyzant or become an in-person tutor on the Grinfer platform. As for payouts, tutoring sites (like Tutor.com) pay from $10 to $15 on average and take their cut from the amount of money you made.
Most tutoring businesses use a similar strategy. For example, the Grinfer e-learning platform offers a gross amount to its online consultants based on a fixed fee equal to 60%. This means you are going to get 60% revenue for each and every successful consultation you completed. E.g., if your hourly rate is $10, therefore a 2-hour consultation brings you $10 x 2h x 60% = $12.
Some online instructors believe that having your own website for promotion is more profitable. However, this can bring huge headaches whenever something goes wrong on the technical side or if your site suddenly gets hacked. Otherwise, sure thing, this approach can earn a good living.
After all, a pile of cash you’ll earn through online consultations highly depends upon your own credentials. The more knowledgeable, as well as experienced you are, the more money people will be willing to pay for your consultations. Generally, $15–20 p/hour is an average rate for students of a high school level. College students can charge up to $30, then the rate goes up when you earn your science degree.
In reality, rates often depend upon geographic location. And this makes sense since larger cities can pay higher rates compared to smaller towns. But if you’ve got some rare skills with fewer competitors in your specialty, you have more room for setting your own rates. So, do some research on the average rates in your specialty area. Or collaborate with Grinfer and get onboard as a consultant. Consult with no hassle and no headaches through the Grinfer e-learning marketplace!