6 Questions to Determine If You’re Undercharging as an Independent Consultant

By Melisa Liberman | April 6, 2022

Share
consultants working in office

Do you have a hunch that you’re undercharging? Most independent consultants know they could be undercharging, but aren’t sure how to pinpoint the exact ways and amounts they’re undercharging. In today’s post, I share the six questions you can ask to figure out if you’re undercharging for your work.

With this knowledge, you’ll be able identify opportunities to increase your consulting rates and pricing structures. And, ultimately, you’ll be able to make more money and more impact doing what you love to do.

Question #1: What is the Market Telling You?

First, ask yourself: What is the market telling me? Here are two indicators that the market is telling you your consulting rates are low:

  1. You have more demand than supply. Do you have more consulting work than you can handle? Are you in a situation where you defer business development because you can’t take on more work? If this is the case, you have more demand than supply. Instead of ignoring or deferring the demand, take this as a strong indicator that your pricing may be low. This is an opportunity to increase it.
  2. New clients don’t push back on your consulting rates. Do new clients agree to your pricing without any negotiation or discussion? This could be a sign that you’re undercharging and your potential client was willing to pay more.

Question #2. Are You Considering ROI?

Many consultants base their rates and pricing structures by calculating an hourly or daily rate that would be the equivalent of what they’d be making (or did make) in their corporate job. Then, they add in the overhead costs of running a business to create their rate. Is this how you’ve calculated your rates? If so, you could be leaving money on the table.

Ask yourself:

  • What is the client’s ultimate return on investment for the project I’ll be doing?
  • How can I calculate the quantitative and qualitative results they’ll experience?
  • What is the lifetime value of the work I’ll be doing for them?

If you don’t know the answers to these questions, include them in your sales process. This will help you describe the specific value you bring to the table. Then, include these factors as you price out your client proposal.

Question #3: When Did You Last Change Your Rates?

When most consultants look at their business data, they see that they haven’t raised their rates in the last year. For some consultants, the answer is several years. And others have never raised their rates. As yourself these questions:

  • When is the last time I raised my consulting fee structure or consulting rates?
  • Do I raise my rates after each project?

If you don’t have a business process to adjust your pricing after every engagement, this can be an indicator that you’re undercharging.

Question #4: Have You Researched Your Own Business?

It can be challenging to find publicly available consulting rates to compare your own rates to. Also, publicly available consulting rates are often on the low end. In addition to any market research you perform, consider researching your own business. This way, you find areas where you’ve been undercharging and identify opportunities to increase your consulting fees.

Here are the steps:

  1. Review past engagements.
  2. Quantify the financial and other benefits clients received as a result of your consulting expertise.
  3. Now that you’re armed with this data, you can use it as inputs to raise your consulting fees. Align these new rates to the results (qualitative and quantitative) you deliver.

Question #5: How Do You See Yourself When Considering Your Rates?

This question is incredibly important to ask and answer for yourself. I find that almost every consultant overlooks it. When you ask yourself what you’re thinking, it can be incredibly insightful. You might find you have an internal dialogue that is leading you to undercharge.

For example, if your answer is something like: “when we boil it down, I’m just a ________________”, there is a strong possibility you’re undercharging. This is because you’re not giving yourself credit for your own expertise and experience. You diminish the value you bring for your clients.

As a result, you price yourself and your work accordingly. The way you see and think about yourself impacts everything from the level of questions you ask during the due diligence phase to the rates you calculate for your project proposals.

Question #6: Where Are You Not Charging for Work?

Not charging for work is a common way independent consultants undercharge. There are many scenarios. Do you relate to any of these?

  • You think managing scope change is too much of a hassle, so you absorb the work without adjusting your fees.
  • You feel like you made a mistake so you decide to eat the costs.
  • You worry that the timing isn’t right so you don’t bring up rate changes.
  • You procrastinate on invoicing, then think too much time has gone by, and decide not to invoice the client.

Which of these sounds familiar for you? There can be a time and place for giving clients a concession of some sort. However, I find that independent consultants end up making compromises without getting any goodwill in return. They just eat the hours worked because they feel they did something wrong. As a result, they end up undercharging.

Summary

To discover if you’re undercharging, ask yourself these six questions:

  1. What is the market telling me?
  2. Do I take Return on Investment (ROI) into account when I decide on my rates?
  3. Do I regularly raise my consulting fees?
  4. Have I researched my own business for data on the results I deliver?
  5. How do I see myself as I’m building consulting project pricing?
  6. Where am I not invoicing clients for work that I’m doing? (And, if when I do decide to give the client a concession, am I getting goodwill from it?)

About Melisa

Melisa Liberman is the host of the Grow Your Independent Consulting Business podcast and creator of the IC Bootcamp where she helps her clients transform you from a contractor-consultant into a consulting business owner so you make more money, make more impact, and have more flexibility and freedom for yourself. You can find her in the MBO app store at https://www.melisaliberman.com/mbo-preferred.

Related Posts

How to Create a Professional Profile for a Job Marketplace
| 3 MIN READ

How to Network with Your Peers

May 6, 2022

Networking with your peers may sound too easy to be good advice, but there are many advantages: hearing a new perspective, gaining industry advice, or obtaining an outside opinion about an idea you have, just to name a few. It can be easy to get caught up in the daily grind of running your own…

| 9 MIN READ

Independent Business Owner Advice Based On Your Enneagram

April 25, 2022

For more than 25 years, MBO has led the charge to keep the independent economy moving forward. And now we are thrilled to give you advice based specifically on your enneagram type. Unsure what your number is? Take the quiz from the Enneagram Institute and discover your strengths and weaknesses. As an Independent Business owner,…

| 3 MIN READ

9 Ways to Increase Productivity When You’re Self Employed

April 20, 2022

Staying productive can be tough as an independent contractor. Besides the usual distractions of a chirping inbox or the siren’s call of social media, there’s the added layer of working remotely— where there’s always something else vying for your attention. Minimizing distractions, lowering your stress levels, and staying organized will go far in boosting your…

Learn more about the MBO Platform

For Independent Professionals

Start, run, and grow your independent business with MBO

For Enterprises

Find, manage and retain top-tier independent talent