Business Homework Help- If you offer any type of small business consulting services, one of the hardest things that you will encounter is setting fees for those services. Trying to determine what fees to charge for your services can be rather intimidating because of how many different choices you have in billing your clients.
But also because of how many factors are involved in determining what you need to charge.
There are many different billing methods that you can use it with your clients, but the hardest part is trying to decide which method is going to work best for your consulting business.
The various billing methods that you can choose from are hourly rates, fixed rates, contingency rates, a flat fee plus any expenses you incur, or a daily fee where you add on your expenses.
The only way to determine what method is going to work best for your business is to compare the different methods and select the one that fits your needs.
Charging an hourly rate or a daily rate is the most popular billing method that consulting businesses opt for because of how much clients prefer this method. To determine your hourly or daily rate you will need to first figure out how many billable hours there are in a year for your business.
When determining the billable hours you need to remember that time spent on marketing, administrative tasks, and any other functions involved in running the business cannot be included as billable because you cannot charge the clients for them.
After finding out how many billable hours there are in the year, you need to figure out your overhead expenses. You need to determine your overhead expenses because you need to assign those to your hourly rate to ensure that you charge enough to cover the expenses, but also so you can still reach a worthwhile profit.
You will also need to look around to see what your competitors are charging because if you set your rate too high you won't land any jobs. And when you set them too low, you will go out of business quickly.
Fixed or flat rates are another popular option because your clients know what to expect upfront because of the amount that you are charging is going to be based directly on the job that you are doing and the results you will deliver.
Charging a fixed or flat rate can be tricky because if you miscalculate the time you need to do the job you can end up losing money because of how much time spent doing the job.
One of the benefits of flat or fixed rates is that there are hardly ever any disputes over the final bill because of the price was agreed upon beforehand.
To figure out what to charge for a flat or fixed rate, you will need to look at the total job, sometimes breaking it down into smaller assignments is easier. When looking at the job, you need to establish how long it is going to take you to do the job. That is why it is often easier to look at smaller assignments.
Once you have verified how long it will take you to do the overall job, you need to include the overhead expenses your business has. That way you can ensure that you are charging enough and still earn a profit. Depending on the choice you make, you can quote the job as a whole or you can break it down into smaller assignments.
The above fee options for your small business consulting services are the most common. But as with anything you can combine the different methods or choose a method that is totally unique to you. It all comes down to what your client wants and is happy with.