How Much Should You Charge For Consulting?

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Hi team!

Question for you: what is the largest single driver of profitability as a consultant?

There are plenty of things it could be:

1. The number of new project leads you get

2. The conversion rate of your sales meetings

3. The costs you pay to deliver a project

While reasonable answers, those are wrong:

You only need to sell 3-5 projects a year to make $$$$. That means you don’t need a lot of project leads or an incredible conversion rate at sales meetings

Cost is negligible since margin as a solopreneur should be 90%+

The correct answer is price.

I've learned this the hard way. On my first project for a private equity firm, I charged $2,500 per week. Now, I charge $2,500 per day.

I left a ton of money on the table with poor pricing.

The goal of this email is to make sure you don't do the same.

#1: Find Data Points…and price at the highest end of the range.

If you're new to consulting, try to find data points for others in a similar niche.

One of the easiest ways to do this is to create an UpWork client account and search for a niche. For example: Hubspot implementation.

Based off what I'm seeing on UpWork, it looks like you can charge $50-150/hour for that work.

You should price around $150/hour then. (exception: you use platforms for clients and don't have reviews yet.)

If you have experience as a consultant, it's worth checking the market periodically. Make sure you aren't under-charging.

2. Competing on Price is a Recipe For Disaster

Why should you price at the high end of the range?

Because competing on price never leads to good clients.

Clients who push for the lowest possible price will be a nightmare to work with.

If their only selection criteria for a consultant is cost, then they don't recognize or value quality work.

Consulting is a $330B industry. There are clients who are willing to recognize quality.

To note: this doesn't mean you can't negotiate with a client. The difference to keep an eye out for:

• Is price the only consideration the client cares about? (BAD!)

• Is price one consideration the client cares about? (Good!)

3. Price as a Proxy for Quality

I know for a fact that the highest price bid wins the project an outsized percent of the time on Catalant.

What does that mean?

A good client is more likely to think you are a good consultant if you bid higher prices.

Think about the person who has budget to spend five-six figures on a consultant. They are likely pretty senior at their job, VP level or higher

They buy a German car instead of an American one. They shop at Whole Foods instead of their local grocery

They pay for quality in all aspects of life.

Lean into that!

4. You can adjust down, not up

I've had this conversation at least 5 times:

"Hey Sean-we really liked your proposal and you are the right person for the job. However, your proposal came in double the next highest price

Do you have any flexibility there?"

In that case, I'm typically happy to help meet in the middle for the client.

The conversation I've never had with clients:

"Hey Sean-we really liked your proposal. However, you bid half price compared to everyone else. We want to pay you more than you asked for."

Lesson: you can go down, but you can't go up

Interesting Property of the Week

This week’s interesting property is right out of my wife and I’s strategy. We buy single family homes in elite high school districts (more detail on that here).

This 3 bed/3 bath home is asking $475,000 and is located in Homer, Alaska. Homer is 4 hours south of Anchorage and home to 6,000 people.

More importantly, Homer is also home to one of the best high school’s in the state.

This house looks to be in pretty good shape, so check-box there.

Alaska also has some of the lowest property taxes in the entire country. Including vacancy, maintenance, and Hemlane, I’d say ~$2,850/month in cost.

So let’s talk the big question: does it cashflow?

Answer: it’s really hard to tell

Rentometer says $2,050, but notice that’s only based off of three different properties.

Those properties were also all apartments! If you check Zillow now, there are four rentals today on the market in Homer. All of them are apartments.

That makes our job difficult, since houses tend to rent for much more than apartments.

If “much more” is $2,500, then the house will lose money. If “more” is $3,500, this house is a slam dunk buy.

I love markets with no comps….

It’s supply and demand. No comps means there is no supply of rental homes in this town.

Remember, about 6,000 people live there. That’s likely ~3,000 households.

If even 1% of those households want a rental house, that’s 30 households looking for a rental.

Or, 30 households on the “demand” side and 0 on the supply. If you can have the only rental house around, you’ll have pricing power.

Our best investments have been in towns where there were no comps

How do find data when there are no comps?

Call a dozen realtors in town and/or go to open houses.

Chat them up. Do they have clients looking for rental homes?

If they say yes, then ask how much clients are willing to pay?

Do this 5-10 times and you’ll have a pretty solid data set.

And if the numbers you’re hearing makes sense, then this Alaskan home could be yours 🙂 

How can I help?

If you reply to this email, it will come directly to me & I’ll respond.

I don’t have any formalized training to help people get started consulting.

I’ve helped people one on one (like in this video), but I’m still learning on how to teach multiple people at once.

Every~6 weeks or so, I’m teaching a free class of ~5 people how to get started consulting. That could help more people get started, and allow me to learn how to teach in a larger setting.

Can you help me?

This is officially the fifth email I’ve sent to you guys!

There’s no point in me sending this email if it isn’t helpful for you guys! So, I’d love any feedback you might have on how to make this newsletter more helpful for you!

• What is the most helpful part?

• What is the least helpful part?

• What would make this better for you?

Just reply to this note and I’ll get it!

Or if you prefer anonymous feedback, you could vote in this poll!

One note: the Hemlane link is an affiliate link. That basically means if you sign up for Hemlane from that link, Hemlane will pay me. This is at no cost to you. My wife and I have used Hemlane for years now and love it!