How to Set Right Contract / Consultancy Rates

When setting and running a contract or consultancy business, setting & negotiating the right rates can be difficult.

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Setting rates for contract work / consultancy

There are also difficulties in setting charges and rates for consultancy and contract work. It is also not as easy to see the rates of competitors, so some consultants and contract workers can easily under-sell themselves.

As with selling a product, if the rates are too high, then fewer contracts and consultancy opportunities will be given as budgets may be limited and companies may not view the services offered as value for money. If the rates are too low, then the revenue will be reduced and the contractors or consultant will not receive the amount they could.

A further issue is that once the rates have been set low, then it is difficult to raise them until the next contract is taken on.

There can also be a perception that if the rates are low, then the expertise or work quality will match it. If the rates are high, then there is a perception of high value by the company taking on the contractor or consultant.

In view of this, it is wise to set the expectation for rates as closely as possible to the expectations of the employing company, or possibly push them a little higher. Any higher than this and the consultant may not be taken on, lower and the earnings will be less. That said, negotiation is always needed to ensure that the best rate is obtained. This may not come easily to some people, but it is good to try some negotiation.

There are several ways of discovering what rates may be expected.

Discover similar rates advertised: Many employment agencies and contract agencies will have a number of opportunities for contractors and consultants. It is possible to gain some idea of the going rate from these.

It is sometimes difficult to compare the rates against permanent positions because permanent positions tend to include aspects including holiday and sick pay, pensions and other benefits. It is possible to carry over some idea of rates from permanent positions but be careful to ensure that rates include amounts to cover the hidden costs borne by contract staff, and a certain amount to cover the lower levels of job security and the time between contracts.

It is always best to do research to find out similar rates so that it is possible to negotiate knowing what is fair and reasonable.

Sometimes a Google search can reveal some useful data. Possibly search on something like: "standard electronics consultant rates uk" or "consulting rates by industry uk." Another search that was found was: "consultant daily rate calculator." This all goes to show that some research can be undertaken reasonably easily, although it is often best not to only rely on the Internet if at all possible, but it gives a good start.
Discover industry standard rates: For some work, including the writing of articles there are industry standard rates. These are not normally too difficult to discover and these can easily be applied. Often there is some variation that can be applied, especially if there are more complications to the task beyond what would normally be expected. Care might need to be taken not to demand too much though.
Set a standard day rate: Many consultants set a standard day rate for their work. This is normally in line with industry expectations, so before doing this a little research on what similar consultants might charge can be undertaken. Often trying to find out what these standard rates might be can be discovered by discussion with those who employ consultants, agencies possibly and others int he industry. Unfortunately there is not set place to gain access to what the standard rates might be.

Once this is done, when clients come to them, they know the day rate that will be charged. Work can be undertaken knowing that as many days as it takes, there will be the day rate charge. Alternatively an estimate for the overall work can be made, but this will be more complicated because it requires the whole project to be planned, time to be estimated, etc. A contingency should also be added.