How Much to Bill Clients

Feb. 03, 2018 by
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How much to bill clients

If you say business isn’t about money, you won’t be in business very long. Deciding how, when, and what to charge clients is very important for consultants.

Money is an indicator of how much value you bring in the form of currency. It’s not some evil thing that you should feel bad about. When clients are happy to pay, it’s a good sign that you’re doing your job well.

Here are some of our guidelines to think about when negotiating payment.


1.  CHARGE MORE!

Seriously, always try to be charging more! You run a business to have control AND MAKE MONEY. Don’t charge too little and scrape by. It’s always better to start high and negotiate down.

As a consultant, you don’t get the same benefits as employees do, so you’ll have to charge more to compensate for this. If a client question your rate, this is a great topic to bring up during negotiation.

You pay all your own taxes (~30% of your income), healthcare, dental, vision, cell phone, laptop, internet, and more. In total, benefit packages typically add up to about $10-15k per year. Incorporate this into your price when you are estimating how much you want to make for the year.

Also, make sure you raise your rates regularly. You’re skills and experience grow over time; your rates should reflect this. We think raising your rates every year or two is a good pace.



2.  There are multiple ways to bill: Hourly, Lump sum, Value based

Most consultants I know use a combination of lump sum and hourly. Typically, they estimate how much work there is and bill hourly against the estimate. Once they are close to reaching the end of the project or budget, it's time to renegotiate.

Lump sum by itself can be dangerous. If your estimate is off or unexpected circumstances occur, you can easily lose money on a project. On the flip side, if you overestimated and get the project done quickly, you can make a lot more money. This is a high risk, high reward strategy.

Value based is the holy grail for consultants, but it’s harder to negotiate. This means you bill the client based on the value you provide. Most clients don’t like this option unless you are REALLY performing and generating excess profits.



3.  How much should I charge?

This depends on your skills, experience and how much value you bring. At a minimum, you want to charge enough to make a livable wage ($6-10k+ per month). 

Here is our general guideline for hourly rates, regardless of industry:

  • Minimum of $50 per hour if you’re just starting out.

  • ~$80 per hour if you’re mid-range or confident in your skills.

  • $100 - $150 per hour if your experienced.

  • $150+ per hour. You’ll know if you’re in this category.


One important note: 
A higher hourly rate DOES NOT always equate to more money. We've had clients that were paying $100 an hour, but were VERY cautious about how many hours they wanted to pay for. Whereas, we charged other clients $80 an hour and they were happy to pay for more hours. We made much more money on the second client based on the number of hours they wanted to pay for.



4.  How often should I bill?

Twice a month was our usual schedule. We’d bill on the 1st and the 15th. This worked really well for us and kept money coming in consistently. Once a month also works for larger contracts. However, this is less desirable in my opinion.

When possible, make your invoices “due upon receipt”. This means invoices should be paid as soon as clients get them. Net 15 is next best option if you have to give them time to make the payment. We dislike Net 30 or more because it feels like forever until you get paid for work that was done a month or two ago.

Again, this is something that is different per client. Try to be flexible with them and settle on something that works for the both of you. The business relationship is more important than deciding when you get paid.



5.  How should I bill them?

You should be using software to generate your invoices. Keep track of your times and what you worked on, then use software to generate the invoice. 

This will save you tons of time and makes it easy to look at what you did if you’re being audited.

We highly recommend integrating your billing system into an accounting system like QuickBooks. For example, you should track your time, generate the invoice, sync the invoice to your accounting system, and send the invoice from your accounting system. That way, when it’s paid, it should be logged and easy to book in your accounting system.

P.S.
We built software that does this for you!

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Spend time consulting, not tracking time.
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TRUELY.
SIMPLE.
TIME.
TRACKING.

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