Business Service Pricing
I’ve been to sites several times in the past where consultants, contractors, designers, or developers fail to provide any information on pricing or fees for their services. It always frustrated me, but as I moved along further in my business work, I discovered the reason: pricing is highly subjective when doing business development, and fixed rates always scare people off.
Sure, there’s a standard hourly rate that can easily apply. However most hourly rates are set according to generic criteria that cover a wide range of services. And most often, that hourly rate is significantly higher than the specific services that may be required. Without directly engaging with a person about their specific needs, it’s often impossible to provide a blanket price, especially for entrepreneurs and start-ups.
In my case, for instance, I do have a “base rate” that I start with for business consulting. This rate applies to the development of corporate-grade business material (business plans, product pricing, department organization guides, employee manuals, etc), and usually applies to medium-sized businesses (between 25 and 250 employees). That rate is $120/hr.
Most small businesses–especially startups–simply cannot afford that rate, nor would I expect them to. But depending on the specific service, I have other rates ranging from $15 to $80/hr.
Several years ago, I posed a question to a client: How much does rope cost? Their response, “I don’t know… it depends on the rope.” I took that moment to explain that consulting for a business is much like measuring and charging for rope. Whether you buy a lightweight string, or an industrial steel cable has a huge impact on the price. Whether you simply need three feet of it from a readily available supply, or 150,000 feet to suspend a bridge has a tremendous impact on the availability and cost. Whether you just need a piece now, or whether you need a steady supply every week for three years has an impact on the supply, and subsequently the price.
And so the answer that I always cringed at, “it depends,” becomes the most common answer I can give. And that’s entirely because everyone’s needs are different. Some simply want a few hours of advice and help. Some want development work done on their business plan, project plan, or other systems. Some want entire software platforms or web sites developed. Some just want a mentor to chat with.
I’ve found, however, that most entrepreneurs or start-up businesses effectively have a budget of $0. And I recognize that, because I’ve been there. So there are three options that I make available for fees.
- I almost always quote for a project, and specific deliverables. This way, you are not simply agreeing to an hourly rate without any accountability as to how many hours are being accumulated. You know the cost before a project starts, and you owe nothing until it does. You also know that the quote will stand as the final price, as long as you don’t make any changes to the scope of the project.
- I offer a prearranged, mutually agreeable hourly rate that will cover any and all work requested up to a maximum number of hours per month. This allows a business owner to budget, say, $250/month for about 5 hours of monthly availability. So why is this rate lower than my usual rate? Because a fixed monthly amount can be budgeted and accounted for differently than other “on-demand” services, which typically cost more because there is a level of urgency attached, or there is a demand for on-site availability on request. My regular rate takes those kinds of constraints into consideration, while a pre-arranged monthly rate allows me to keep rates lower.
- I offer a payment option that is subjective to your business’s revenue. This doesn’t mean “taking a portion of your income until your bill is paid,” but rather, “a mutually agreeable rate relative to projected revenue.” This means that if you required a $3,500 project, but couldn’t afford that up front, you could assess your business’s projected revenue stream over, say, the next twelve months, and agree to a payment that would be sustainable without affecting your profit negatively. The payment doesn’t need to be the same every month, and can be adjusted higher during busy periods, and lower during slower ones. In contrast to a loan, where you pay a fixed percentage, or a fixed dollar amount monthly, the arrangement would be to pay an estimated amount that is affordable based on the income you expect over a certain period. Specific options can be arranged on request.