Consulting Fees Calculator

With our consulting fees calculator, we aim to help you assess the total fees you should charge clients based on your hourly rate, operating costs, and other relevant factors.

In this article, we will talk about:

• What consulting fees rate are;
• How to calculate consulting fees per hour; and
• Their importance for consulting businesses.

We have also included examples to help you grasp the concept and the process of calculating consulting fees.

Consulting fees are the charges that consultants charge their clients for the professional services they provide. These fees are typically calculated based on several factors, including the consultant's expertise, the scope and complexity of the project, the duration of the engagement, and the consultant's operating costs and income goals.

Here are a few types of consulting fees that are common in the market:

• Hourly rate

  This is a common method for charging clients. The consultant sets a consulting fee per hour and bills the client based on the number of hours worked. The hourly rate is often determined by the consultant's experience, industry standards, and the value they bring to the client.

• Daily rate

  Some consultants prefer to charge a daily rate, especially for projects that require full-day engagements. This rate is calculated based on the number of billable days in a year and the consultant's target income and operating costs.

• Project-based fee

  Consultants may charge a fixed fee for specific projects. This method is beneficial when the project's scope and deliverables are clearly defined.

• Retainer fee

  A retainer fee is a pre-agreed amount that a client pays upfront to secure the consultant's services for a specified period. This fee structure is typical in ongoing advisory roles where the consultant provides continuous support over time.

• Value-based fee

  In some cases, consultants may charge based on the value they deliver to the client. This can be in the form of incentives, or it could be a fraction of the additional value generated for the clients by the project.

In this calculator, we focus on helping you calculate the appropriate consulting daily rate and hourly rate.

To understand how to calculate consulting fees, let's look at the hypothetical scenario below:

• Working hours per day: 8 hours
• Number of weekdays in a year: 261 days
• Number of holiday days you want each year: 20 days
• Number of sick days predicted each year: 5 days
• Number of marketing, admin, non-client work days each year: 5 days
• Average project value: $2,500
• Target income: $50,000
• Annual operating costs: $50,000

1. Determine the billable days.

   The first step is to compute the number of billable days, on average, the consultants have in a year. Be sure to take into account holiday days, sick days, and non-client work days. You can calculate the number of billable days using the following formula:

   Billable days = Weekdays − (Holidays + Sick days + Non-client work days)

   For our example:

   Billable days = 261 − (20 + 5 + 5) = 231

   To speed up your calculation, you can use our day counter to help you in this calculation.

2. Compute the annual operating costs.

   The next step is to determine your consulting business's annual operating costs. These costs include advertising and marketing, equipment, training, office expenses, rent, supplies, and professional fees.

   The total operating costs for this example are $5,500. You can calculate this by adding up all its components.

   Please check out our operating margin calculator to understand more about this topic.

3. Identify the average project value and target income.

   Next, you need to provide the average project value and target income. For this scenario, the average project value is $2,500, and the target income is $50,000.

4. Calculating the daily billable rate.

   Now, you should calculate the daily billable rate using the formula below:

   Daily billable rate = (Target income + Annual operating costs) / Billable days

   For our example:

   Daily billable rate = ($50,000 + $5,500) / 231 = $240.26

   Thus, you need a daily billable rate of $240.26 to meet your target income.

5. Calculate the hourly rate.

   The final step is to calculate the hourly rate needed to meet your target income. This can be achieved using the formula below:

   Hourly rate = Daily billable rate / Working hours per day

   For this example:

   Hourly rate = $240.26 / 8 = $30.03

   Hence, your hourly rate should be approximately $30.03.

Now that we have explored how to calculate consulting fee rates, let's talk about why it is important to set an appropriate consulting fee per hour.

• Business viability

  For a business to thrive, it needs to charge its clients appropriately, as this impacts its bottom line, meaning profit. No business can survive long-term without making a profit. Investments are also required to further enhance the business's capability, including the development of its consultants.

• Fair compensation

  Consulting is hard work, and in many cases, it involves long hours. Hence, it is important that the consultants are compensated appropriately. This means the business needs to charge a price that can be afforded sustainably. The price should also reflect the value of the services provided.

• Client expectations

  An appropriate rate is also one that meet your client expectations given the expertise and service that you are providing. Clearly defined consulting fees can not only help you manage current clientele, but also allow you to easily get new ones.