Entry by Howard Abell

Consulting Compensation


It seems to me that offering an hourly rate for consulting services is limiting. I would prefer to offer a rate on a project basis or some form of a retainer fee which gives the client access to your expertise. I am not referring to a retainer fee that is common with attorneys in that the retainer is a down payment on the hourly work estimated. Does anyone have thoughts or experiences to share?


The nice thing about this is that you can set up your structure IN ANY MANNER THAT WORKS FOR YOU & YOUR CLIENTS, AND COMPLIES WITH YOUR STATE LICENSE LAWS. And it could incorporate commission, hourly rate, bundled services, fee for service...whatever make sense. For example, you can set up packaged arrangements (like silver, gold, platinum bundles that say "I'll do a,b,c,d,e and f for the Silver, those plus g,h,i, and j for the Gold, k,l, and m for the Platinum"; and if the client wants other services they can request them, you discuss the fees you'd want for those services and they can choose to agree or not agree to include those services for those fees.

This entire program is designed to give you and your clients FLEXIBILITY and TRANSPARENCY, not to restrict anyone to a particular fee arrangement.


Howard, sometimes an hourly rate just makes sense. For example one area where I had the majority of my consulting business come from was with sellers who already had a buyer (sometimes they weren't even trying - they mentioned they were thinking of selling their home and someone said - hey, I have a daughter that is interested in that neighborhood).

In this situation, where what they needed from me was negotiating the offer and troubleshooting the transaction to close, an hourly rate capped at a certain number of hours made sense to me. I could also do a package because I knew the average amount of time that it took, but it still varied from transaction to transaction. There are many more examples of where hourly might make sense.

However, as you point out, in other situations, having fee packages makes a lot more sense - task based compensation in bundles or individually would work best.

As Judi points out, the great thing about consulting, is that you can structure your services and compensation to address the needs you see. There is no right or wrong. However, it's really good to use the Coaching Exchange forum to discuss - many minds bring many ideas!

Thanks for sharing Howard.

Howard, I can understand your thoughts, initially, it may seem like an hourly rate is limiting.

Have you defined an hourly rate, one which you feel adequately and fairly reflects the value you offer your clients? That may be a good starting point since. Then, keep in mind that no two clients are the same. Their needs and abilities vary. It follows then that as needs vary, so does the nature of the work, both of which are reflected in the total compensation.

This doesn't mean that you can't bundle or package services, apply discounts, etc., it's just that the foundation is the pre determined hourly rate.
I see it as a much more equitable, consumer centric approach. Most especially so because it offers consumers objectivity, customization, choice, flexibility, clarity, etc.

Hope you find this helpful, Simone

You might want to peruse the content in Best practices and Setting rates and fees if you haven't already. An hourly rate is important in setting up a schedule of fees as an activity fee is determined based on overhead expense, direct expense and hours devoted to completing the task.

I always advertised the option but discouraged it in a buy/sell transaction as it puts the entire risk for expense on the client.

I did find an hourly rate useful for all the non buy/sell transactions. But, I used my hourly rate and estimated hours to complete a task to set a fixed price for the task.

I for one believe it is necessary to have it, disclose it but seldom explicitly do it. The reason: I did not want the bookkeeping headaches to track it. I like just translating it to a fixed price in the appropriate circumstance.

You will soon learn that there are no hard and fast rules. The only limiting rule on how we charge is our creativity as long as it does not violate established regulation and law.

This page contains a single entry by Howard Abell published on January 10, 2011 11:20 AM.

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