Decided in getting help from a sales or marketing consultant, but confused about how much you should pay? Don’t worry, we all have been there at some point. Thus, we will discuss on how much they should actually cost.
There are many ways of how consultants can charge for their services, here are some of the most common ones used by sales and marketing consultants :
Payment Structures For Consultants
1. Flat fee/Lump Sum
As the name suggests, hiring a consultant based on a lump sum will only require you to pay once upfront. The plus side of this payment structure is you won’t need to pay for any hidden costs later on.
However, this also means that the project will be less flexible, and you won’t be able to make additional changes. When additional items and changes are absolutely necessary, it can be the subject of a heated negotiation.
2. Hourly or Daily Rates
This is one of the most popular methods since it adds convenience to both the clients and the consultants. Tracking the bills will be easier because you can simply add up the hours or days.Extra services are usually mentioned in the contract, making the whole process more clear and transparent.
However, the downside of this payment structure is that the bill can inflate if the consultant is working slower than expected, so you’ll need to closely monitor the progress.
3. Results Based
Recently, this payment structure is gaining popularity since it offers more fairness to the client side.
The consultant’s fee can be totally or partially result-based. An example of a total result-based fee is when the consultant will only get paid with 20% of your total sales growth. In a partial deal, some portion of the fee is a fixed cost, and the consultant will only receive the other portion if a certain target is achieved.
However, more senior consultants are highly unlikely to accept this payment structure.
Some companies (especially startups with insufficient cash-flow), may also offer their share to pay the consultancy fee, but the payment structure will still be similar with the above three.
After we’ve understood the common payment structures, let us delve further in how to benchmark the consultancy fees.
Calculating the Consultant Fees
To make calculations easier, no matter what payment structures are offered, convert them into hourly rates.For example:
- If a consultant is charging $10,000 flat rate for a project estimated for 3 months, divide it by (3 months*4 weeks*5 days*8 hours.)Thus, you’ll get a $20.83 hourly rate.
- If a consultant is getting 20% of your revenue after 3 months, with the projected revenue of $50,000, you will also get a $20.83 hourly rate.
In addition, if you are using a consultant provided by an agency, there’s usually an overhead fee attached. The overhead fee can be anywhere from 30% and above, with the typical range is around 40 to 60%. So, if a consultant from an agency is charging $80,000 for a year worth of consultancy, and the overhead is 40%, the hourly rate will be $91, compared to just $57 without any overhead.
After we’ve learned how to make simpler calculations out of all the confusing payment structures, let’s finally discuss the benchmark, and whether your consultant is charging too much or too less.
Benchmarking the Consultancy Fees
In general, the benchmark fee of a consultant is based on his/her level of experience. The current standard for top consultant agencies are:
- $250-$400 hourly rates for Pre-MBA consultants
- $400-$600 hourly rates for Post-MBA consultants
- $600-$900 hourly rates for manager-level consultants
- $800-$1,200 hourly rates for partner-level consultants
As we can see, we can roughly estimate the standard being around $300 hourly rate, although a lot of other factors can determine the fee, such as:
Size and duration of the project
- Reputation of the consulting firm (if you are using an agency)
- Competition of your industry, and the specific consulting topic
- Strategic value of your company or your project to the consulting firm (i.e., if you are a reputable company, the consulting firm or the consultant might be willing to give you discounts
- Business Cycle
- Budget Availability
And many other factors. Remember that the benchmark fees listed are those of reputable agencies. Personal consultants could be a lot cheaper, and can be more effective and time-flexible than the agency ones.
After we’ve understood the benchmark standard of consulting fees, here are some other things you might want to consider.
Maximizing Your Consultant
The first thing to remember is that your aim is not to get the best bargain as possible, but how to get more values from the consultant.Here are some of the tips on how to maximize your consultancy period:
- Try Before Buy
Some consultants and even agencies offer free trials. You can get a better picture of what you’ll get, and whether the consultant can help you achieve your goals effectively.
- When Possible, Look For Results-Based Deal
As mentioned above, a results-based deal will give you more fairness. After all, you’ll pay less, or even won’t need to pay anything at all when the project is a failure.
- Have a Clear Goal
What would you need the consultant to work at? Have a specific goal in mind, so that the consultant can work more effective in the process. Even more, in a hourly-based consultancy deal, not having a clear goal can drag the timeline of the project, inflating your bills significantly.
- Find Out Their Expertise
Different consultants have different expertise, skills, and experience in different areas. Related to our previous discussion of having a clear goal, choose a consultant with the right expertise that can help you achieve your goal faster, or better. You should also take notes that wider skill sets won’t necessarily mean better. Sometimes, focused skillsets are better for certain types of projects.
We hope this article can help you answer the question of how much to pay for a sales or marketing consultant. Remember to always have a clear goal before hiring a consultant, so that the project will be much more effective. Having a clear vision of purpose won’t only help you when searching and hiring a consultant, but help your overall business growth in the process.
For visionary business leaders and entrepreneurs, we always want to be your partner in achieving your business growth. So don’t forget to download our Ultimate Marketing Guide for Small Business Owners with Big Visions here
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