In the market-based approach, you’ll learn how to benchmark your internal cost-based rate against external conditions to remain competitive. Whether or not you share your market intelligence with your customer, understanding this rate can help you stand out from the commodity providers and align yourself with higher value firms competing in your space.
Market-based rates take into account your sector and its competitive landscape at a specific point in time. To do so, you will need to define what you do, seek similar services in the marketplace and determine what clients who purchase those types of services are paying. In essence, you will determine what the market is willing to pay for your services.
There are several steps to calculating a market-based rate.
It’s common to fall into the trap of defining what you do by title (for example, as a Director of Marketing). While titles may be good points of reference, they aren’t definitions of the services you provide. Think of yourself not as a person comparing what you do to a salaried role, but rather a business serving a specific audience.
Now, it is time to do some competitive research.
Talk to others in your industry, consulting companies and even current clients. They might be willing to share what they have paid in the past or are currently paying for similar services. In case of current clients, it will be easiest to pose this question in the sales process: “What is your budget?” or “What are your expectations of what you would normally pay?’ are two good probing questions to help establish their market price assumptions. Alternatively, connect with professional associations and network with other independent consultants in your field.
Rates don’t have to be specific; your research is to help you find a range of rates.
Have you already established a cost-based rate? If you haven’t, we recommend you do so. By comparing it to the market, you can understand if your market analysis results in a boom or a bust.
Big name brands and indie shops alike spend significant time and effort on marketing and branding – and independent contractors are the same. You’re not just selling your expertise, but you’re also selling yourself to the client. It’s important to “build your brand” and get client buy-in on not just your skill, but also your ability to develop long-term, sustainable relationships.
Learn more valuable information, including detailed charts and graphs on how exactly to calculate your rate in the free guide below.
Contracts should clearly articulate services to be performed, timelines for completion, and payment terms and conditions. Here are 6 best practices for drafting the right contract for your independent consulting services.
When it comes to consulting, your reputation can be everything—so why risk it? Here's how to keep your record clean and your clients satisfied.