www.nonprofit.ist - Nonprofit.ist
Posted 02/07/2023 in consultants

What Should Consultants Charge?

What Should Consultants Charge?

As a nonprofit consultant, one of the biggest challenges: pricing your services. Do you choose to charge by the project or hour? What’s a fair price? 

The truth is that there’s no one-size-fits-all answer to the question of how to set your rates. It depends on a number of factors, including your area of expertise, your standard of living, type of client you want and the type of project your client is undertaking. 

When setting rates for consultancy services, here are a few key considerations to keep in mind as you determine what works for you.

Conduct Benchmark Research

Before deciding how much to charge as a consultant, take a look at what other consultants in your field are charging for similar services. This can give you an idea of what fees would be considered “fair” or “standard” given market conditions and the area you specialize in. One source to check: UpWork or another similar site that can show you on average what’s being charged. 

Top-line findings from The 2021 Nonprofit Consultant Salary Survey report (56 respondents)

  • Billing averages: $132/hour, $105,728/year
  • Strategic planning was the most popular service and had the highest rate/hour. DEI services came in second. 
  • The service with the lowest average rate: grant writing 
  • There was no correlation between years of nonprofit experience and average hourly rate. 
  • Consultants with master’s degrees charge the highest rate compared to those with doctorates and bachelor degrees. 
  • The findings on gender align with Pew Research findings: women average $126/hour and men average $154/hour. 
  • White consultants billed higher rates than non-white consultants. 
  • The top business expense for independent consultants: technology. 
  • When it comes to recruiting clients, it comes down to your relationships. The top methods of getting clients (in order): existing relationships, networking, referrals. 
  • Workload felt pretty busy to 34.5% with only 16.4% felt overwhelmed. 
  • Interested in downloading the report? You can find both the 2020 and 2021 reports here: https://dobetter.consulting/nonprofit-consultant-salary-survey/ 
    • Download the executive summaries from 2020 and 2021 as well for free. 

Sector & Size Makes a Difference

One finding of the Nonprofit Consultant Salary Survey was that the sector with the highest rates charged was strategic planning services. Put your research to work and apply it to your niche. 

The same can be said for the size of your client as well. If your client has a higher budget, charging them a little more may help you offer lower pricing to a client that needs a bit of a price break. If the client is a nonprofit, using a tool like Causeiq.com will help you explore how much they spent on consultants in the past fiscal year. 

If it feels unfair to change rates based on the size of the organization, consider that larger organizations require more audit work, meeting with different layers of staff and in general have a higher expectation of deliverables. It is reasonable to charge fairly for these expectations.

Example of how you can explore the expenses of a group like The Nature Conservancy:

Consulting Location Matters

Benchmark rates are often higher for consultants in metropolitan areas versus more rural areas. A quick glance at median income by state or cost of living by state reveals large differences across the country. If a client is interested in someone locally doing the work, it is reasonable that this cost adjustment is additionally warranted. Another way to benchmark these costs by the type of work/service is to compare that skill by region on UpWork. 

Example of Fundraising experts in California:

Fundraising consultants in Florida:

Decide Hourly or Project or Value-based 

While often you’ll probably see an hourly rate offered by consultants, project-based fees are also an option to consider. Both have their pros and cons. While hourly rates may work well for a long-term project that requires fewer touches, it may mean a lower fee if you work more efficiently and quicker than planned. A key way to determine the best option: how you’re going to work with the client. If you have a set project with a clear scope of work, the project-based fee may be your best option for fair compensation. If the work you’re doing with a client is a little less clear or for a long period of time, an hourly rate may better serve everyone.

Working on a project or retainer basis can also help reframe the work on value-based project work. Value-based pricing is a form of pricing that considers the value of the product or services to the customer, rather than basing it on costs and time invested. It puts a premium on work that contributes to the success of the customer’s goals. It is often used by consultants because it allows them to package their services in a way that takes into account their own skill level and expertise while also recognizing what makes each client unique.

Under value-based pricing, consultants charge based on outcomes clients can expect after they receive their services, rather than at an hourly rate or per-unit basis. This method makes sense in situations where there is no standard rate or unit measurement to use in order to determine costs – such as when dealing with complex work like strategy consulting — so it encourages creativity while taking into account all potential angles and scenarios. It also serves as an incentive to ensure quality results since consultants have a strong motivation to exceed expectations under this type of arrangement. 

Ultimately, value-based pricing helps establish a more legitimate understanding between buyers and sellers by creating trust between them over time; because successful outcomes are mutually beneficial, it establishes transparency between both parties which encourages fair exchanges down the line.  Here is a great video explainer of what value-based pricing means in the design world

Offer Service Price Tiers & Loss-leaders 

Nonprofits vary and that means your clients will vary in their budgets. One way to meet the needs of nonprofits of any size is to offer multiple service packages that can offer your clients the services that they need at the price they can afford. For example, you can create a package that offers intensive services and time with you and charge a higher rate while also offering a smaller package that requires less time and effort from you for a lower price. Both still offer your services, but each can be customized and increased or decreased spending on client needs and budget. That flexibility may just get you the client. 

There is also an option to use the loss-leader service strategy which is a marketing technique used by organizations to generate revenue by under-pricing their services or products in order to attract more customers. This approach can work well for businesses when their goal is to build loyalty, grow market share, or gain exposure. Consultants typically use this strategy when they need to reach new clients or introduce new services and products. By offering discounts on popular services, consultants can benefit from the additional customers and reputation gained from the promotion. 

By charging a lower price than usual, consultants are able to draw attention to their work and can also increase their competitive advantage as potential clients decide between multiple vendors. With a loss-leader service strategy, consultants are able to create an attractive offer that encourages potential customers to choose them at a lower rate. 

This strategy also has several important considerations. Depending on the sector, some consumers might view low pricing as an indication of poor quality or lack of credibility—so it's important for consultants to maintain strong customer service standards despite offering discounts in order to avoid damaging their brand reputation. Additionally, it's important for businesses using this marketing technique to understand its full costs before investing in order to ensure that any profits gained exceed any losses incurred from discounting prices too heavily.

Ultimately, knowing exactly how much to charge will come down to your own judgment and your business goals. Want to find a network of nonprofit consultants that you can compare rates with or just ask your questions about pricing? Join Nonprofit.ist today.