Establishing the correct fee for your services is critical when starting a freelancing or consulting business. Setting a price usually begins by asking yourself the following. How much are your services worth? How much are clients willing to pay for them? Your hourly rate will probably fall somewhere in-between the answers to those two questions.
To some degree, the answers are subjective. But there are several established factors that most often influence your hourly rate.
ExperienceAs with any job, your previous experience counts. And just as an employer might look at your work history to determine a starting salary, the number of years of experience you have in a particular area influences your hourly consulting rate. Management consulting studies have shown that your hourly rate can double when moving from one year to five years of experience. At the same time, the highest median hourly rate is usually linked to someone having between five and nine years of experience.
Geographic RegionHow much the market will bear, is often determined by where the market is located. For example, clients in smaller cities may not tolerate as high of an hourly rate as those in larger, metropolitan areas. If your services are confined to a specific geographic location, your rates should be comparable to those of local competitors. If you are working with clients in multiple locations, setting your rate may be more heavily influenced by other factors.
IndustryIf you specialize in servicing a particular industry, hourly rates can vary substantially. For example, companies within the IT and financial services sector tend to support higher rates, whereas government, education and retail industries are traditionally lower.
Type of ServicesJust as the industry in which you serve is important in establishing an hourly rate, so is the type of consulting or freelance work you perform. It's not uncommon for technical services, such as networking or IT security consulting, to sustain higher rates than marketing services. But you want to compare apples to apples. So, instead of comparing rates across industries, it's more appropriate to compare within your own industry. For example, in the marketing industry, the hourly rate for developing a strategic marketing plan might be different than the rate for writing a press release. Often, professional associations and other member-based organizations within an industry track and report information about current service rates.
Education and CertificationsWhen considering how much to charge for services, your formal education and training can influence your value to a client. And college educations from ivy-league schools aren't the only credentials that warrant a high hourly rate. A degree from an accredited, recognized university means a great deal, but so does the level of education. Consultants with masters degrees typically draw more than bachelors or associates degrees. Continued education factors into your hourly rate, too. Taking continuing education classes or seminars, or gaining certifications specific to a particular field or industry lends credibility. It also demonstrates to clients that you are practicing current trends and strategies - which is worth paying more.