How much should I charge as a consultant?

Numbers

As a new consultant, how much should me hourly rate be? How many days do I need to work to achieve me target income? What else do I need to consider?

How many consultancy days are there in a year?

Start from 365 or 366.

Now consider how many days you will not work due to:

  • Weekends (104)
  • Public holidays
  • Holiday
  • Illness
  • Training and education
  • Marketing and sales
  • Administration
  • Meetings, team events, and corporate events

If you are working independently, you might be able to control some of these, for example, you will not need many team events, and you might choose to take less holidays and do your administration paperwork at weekends. But you will still need to spend time on sales calls and networking events, especially when you are starting out, and these will mostly be during working hours.

If you work in an agency, there might be other staff or managers with responsibility for sales and marketing, but you are more likely to spend time in meetings.

Not all of these can be calculated precisely: on average, most consultants find that a reasonable expectation for full time work is around 200 consulting days a year.

What should my hourly rate be?

Start from the salary you would like to earn, for example 50,000. For this example you can work in any currency, the maths is the same.

A reasonable estimate for your hourly rate is to divide the salary by 1,000. For the salary example of 50,000, this would give you an hourly rate of 50.

Multiply 50 / hour * 200 (working) days * 8 hours / day, the result is 80,000. Is this too much?

What else do you need to consider?

As well as your salary, your consultancy rate needs to pay for a whole bunch of other things, including:

  • Office, laptop, and phone
  • Employer pension contributions
  • Business and employer taxes
  • Training and education
  • Marketing and sales
  • Administration
  • Meetings, team events, and corporate events
  • Accountancy, audit, and book-keeping
  • Legal and indemnity costs and insurances

Once you factor these in, a rate that started out looking generous feels rather less so!

There are a surprising range of costs that are not just 'salary'.

Over time, you should be able to work out your optimal hourly rate through analysing your costs and understanding what your customers are willing to pay. If you do not have this information yet, take your intended (or last) salary and divide by 1000. This should give you an idea of where to start.