You may be thinking mostly about serving your clients, but how to bill and how much are critical factors to your success. 

I just finished a phone call with a physician who proclaimed, "When I'm billing by the hour as a consultant, I bet I'll make more money than I do now." She just might, but there are several critical points to "billing" and setting your rates you should consider.

First, never bill by the hour. There are only 24 of them in a day and 168 in a week. You just rate limited yourself. You don't want to do that. If you bill by the project, project-based billing, you can work on projects for multiple clients simultaneously. Your only limitation is your ability to produce work - valuable work. If you're working by the hour, then any one minute can only be billed to one client. Sure, there are exceptions. For example, you have three clients who each want you to review a new surgical device for them. You can review the device, provide the report to each client and bill a "full rate" to each. However, most ethical consultants would only bill one-third to each, and most physicians are inherently ethical. So there goes the double (or triple) dipping. 

No, project-based billing provides you the greatest latitude and flexibility, and most likely, those are two important attributes to you in a new consulting business. 

Determining the value of a project becomes your next task. First, does it cost you anything to provide the work? Do you have to buy something - don't count travel, that's always an additional charge. Next, how long will it take you to do? I know, that sound a lot like hourly billing, but it is a basis for your calculation, not a basis for justification to the client. Next what is it worth? There is an old story about Thomas Edison (true or not, a good story), who was called to fix an "unfixable" machine at a textile mill in New England. Edison, the premier inventor, engineer, etc... of the time, asked for a hammer and a few minutes alone with the machine that was determined to be invaluable to the success of the mill. After five or ten minutes Edison summoned the mill's owners to return saying the machine was now running just fine. The owners were amazed. They had their own engineer examine it carefully. He couldn't figure out what Edison had done, but he confirmed it appeared in perfect working order. The owners then asked Edison what they owed him. "$5,000," Edison replied. The mill owners were aghast. $5,000 was was a significant sum at the turn of the century. How they asked could his time possibly be worth $5,000 for only five minutes of work? Edison's reply was, "What has it cost you for every minutes this machine didn't run?" Edison had them there... $5,000 was nothing compared to the cost of downtime for their machine. 

So what is the value of your work. It's said the cost of replacing the average worker is as high as three times there salary. If you're called to reduce staff turnover, and it is indeed high, then a fairly brief period of work could be worth the annual salaries of every position you impact. If you're reducing time in receivable, that's a more direct equation... the literal value of the dollars involved. 

Consider all these issues before deciding your fee, and then one final question. Is this enough? Do I feel fairly compensated for what I'll need to do? Sometimes, the answer is simply, "No," and you need to accept that.

Now, how much? First, it is always easier to lower a fee than to increase it. Next, what are you paying for professional services? What do you pay your attorney or your accountant. Have you ever hired an architect to look at facility development?

If you look at other professional fees you'll find a very wide range of rates. However, from experience, you'll find most between $200 and $600 per hour. So you know, I charge $400/hr - but only when I'm forced to watch a clock. Where should you be? It depends on where you work and where your clients are located. That may sound like one and the same... almost, but not quite. If your office is in Manhattan, you'll be expected to have high fees. But if you're based in Manhattan, KS, it's another story. Likewise, if your clients are in high priced areas, then the same is true. What you may experience, some clients will seek out firms in smaller cities for the specific expectation of lower fees. Just keep that in mind. 

Next is how you get paid, the payout schedule, etc.... but that's another story, literally.  Check back Later, or Call Me... Bob - 720-339-3585 - rfp@thirdevo.com 

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