Deciding What to Charge for Services
BY Art Steele
If you're about to contract your services for the first time, this is adifficult question to answer. For most professionals, whether a sales trainingconsultant, plumber or cleaning contractor, the usual practice is to quote bythe job. For example, "I'll prepare your income taxes for X dollars."
The landscape company that does my yard examines the property and then quotesa monthly amount to do a regular list of jobs. Once they are established,additional work is done by the hour or by the piece. For example, I'll tell mylandscaper to fertilize the bushes when he thinks they need it. There is noquote because I trust him to be reasonable. And he seems to have a standardrate schedule he works from for each additional task.
For consultants, the norm is to have an hourly rate for additional tasksabove the major project they quoted. The same would be true for attorneys andaccountants. They tell clients beforehand what their hourly rate is. Theneach month, they report their hours by task. Your rate should be based uponmarket rates for comparable services, not your costs. The exception is"expenses," such as outside goods purchased on behalf of clients,which should be passed directly to them without markups.
One more approach that is sometimes used is to calculate a percentage ofsomething. Attorneys working on contingency basis do this by agreeing to take 25%to 40% of the settlement. They also charge clients for all expenses. A trendsimilar to that is showing up in some business services. For example, atelecommunications consultant offers to find a way to reduce your long-distancecharges in return for a percentage of the savings.
Both consultants and clients tend to like the last (contingency) option theleast. One of the problems involved is establishing who caused what. Suppose youswitch a client to a different carrier, and this change results in a 15% savings. You have to consider whether or not their calling patterns havechanged. You can end up in a dispute with the client over the true savings.
From my company's experience, the best approach for most services is:
Offer packages of services at various price points, from high end to bare bones, enabling the client to make a simple decision.
Along with the base packages, quote additional fixed-price options or hourly rates, whichever is most appropriate.