Ever wondered, “How much should I charge as a consultant?” Deciding on your consulting rates can be confusing, for both new consultants and veterans as well.
If you’ve ever wanted to find out how much to charge for consulting in Australia, here’s our advice.
It should be noted that your background and experience may influence how you handle setting your consulting rate.
So, How Much Should I Charge As A Consultant In Australia?
Strategy #1: Double Or Triple Your Hourly Salary-Based Wage
You can double or triple your hourly salary-based wage as justification for your consulting rates. Simply take your hourly wage, including benefits, that you would earn if you were working for someone else on a salary basis. Then, just double or triple that amount.
Many consultants in Australia choose a triple rate due to what they call the rule of thirds. When you apply the rule of thirds, one-third of your hourly rate goes to your salary, one-third goes to expenses, and the other goes to administration and debt.
It’s also very easy to calculate. As an example, let’s just say you make $90k a year plus benefits, and you get four weeks of paid leave:
($90,000 salary + $22,000 benefits) / (48 weeks * 40 hours) = $112,000 / 1920 = $58.33
Should you choose to double your rate, your consulting rates will be about $120 per hour.
That’s $58.33 x 2 = $116.67, rounded to $120. We recommend rounding up to the nearest $5 or $10 multiple because a $116.67/hour fee looks odd.
If you choose to triple your hourly salary-based wage, your consulting rates will be at about $175 per hour ($58.33 x 3 = $174.99, rounded to $175 per hour).
How Much Should I Charge As A Consultant Strategy #2: Calculate A Daily Rate
If you would like to set a daily rate for your consulting services, simply multiply the hours that you would like to work in a day by your hourly rate from the examples above.
So, if your hourly rate is $175 and assuming that you’ll be working 8 hours a day, your daily rate would be $1,400 ($175 * 8 hours = $960).
Strategy #3: Calculate Consulting Rates Per Project
To find out how much to charge for consulting by the project, some consultants estimate the number of hours they expect to work on them. Then, they simply multiply by their hourly rate.
But some consultants also calculate their project rates by applying the value the client takes from the consultant’s advice. Here’s a funny story about Danish physicist, Niels Bohr, that brilliantly shows this idea.
One day, a company’s machine suddenly broke down and the owner who was an old friend of Niels Bohr called him to get it fixed.
Mr Bohr takes a look at the machine, draws an “X” on the side of the machine and says to the company’s mechanic, “Hit it right here with a hammer.”
So the mechanic strikes the X on the side of the machine, and the machine sprung to life! The owner was very grateful for Mr Bohr. He generously thanked him then sent him on his way.
Within a week or so, the owner gets a bill from Niels for $10,000! He called him up and demanded, “Niels! What's this $10,000 invoice? You were only here for 10 minutes! Send me a detailed invoice!"
Mr Bohr agreed, and some days later, the owner got the new invoice.
Drawing “X” on the side of your machine $1
Knowing where to put the “X” $ 9,999
Know your value and charge what you’re worth!
How Much Should I Charge As A Consultant Strategy #4: Charge Market Rates
The last strategy to know how much to charge for consulting is charging what everyone else in your industry is charging for. While it might be a bit silly, it actually does make a lot of sense. It boils down to what the industry will tolerate and what your competitors’ rates are.
Look at it this way, if you follow what most consultants in Australia are charging for their services, you’re signalling to your potential clients that you are a qualified consultant that plays by the rules. Also, you’re seeing to it that you get the standard consulting rate in your market, which as you’ll see below, is not that bad.
How much do consultants charge in Australia?
Here are the current rates for consultants in Australia from PayScale.
As of 17 August 2019, the average hourly rate for a management consultant in Australia is $85 an hour, a business consultant makes about $150 an hour, while a business process/management consultant makes $199 per hour.
Here are the average annual salaries for consultants nationally, also from PayScale.
How Much Should I Charge As A Consultant In Australia? – In Conclusion
Regardless of how you calculate your consulting rates, make sure to use a consulting contract and agreement when it comes to your consulting services. This is important because you want to identify what services are included, the terms of payment, protect intellectual property (if applicable), and define your relationship with the business that you’re working with.
While it might seem overwhelming at first to come up with your consulting rates, it’s really not once you’ve found a strategy that you believe in.
We hope you’ve enjoyed this post, “How Much Should I Charge As A Consultant In Australia?”. If you’d like to learn more tips on how to create a successful consulting business, register for our free webinar, “5 Steps To Starting A Consulting Business Or Coaching Business”, here.
Read more about: Coaching