Creating a fee schedule for your consulting business can have challenges. It is important to decide whether your fees will be per hour or per project. Calculating a fee per project can be based on an hourly rate and adjusted from there. With that in mind, let’s take a look at how to calculate an hourly fee and you can then go from there for a “per project” fee. Keep in mind two very critical elements, be careful not to “give away” your services – and be sure to give your clients what they paid for.

Tips on how to calculate an Hourly Rate for Consulting Fees

Hourly rates: Take your hourly rate you would receive as an employee and double or triple that rate. (Don’t forget to consider the benefits you would receive as an employee. There is a dollar value to same that needs to be considered.)

Many consultants choose a triple rate because of the rule of thirds — one third goes to your real or actual wage, one third to expenses, and one third to administration. Be sure to consider low utilization, bad debt and some combination of unforeseen overhead vs. additional profit. The rule of thirds is pretty easy math, which is also a reason for its popularity.

Let’s calculate! Lets say your region calls for a mere $50,000 annual salary and your employer provides you four weeks of paid leave. Recognize the following calculations does not reflect additional costs the employer has such as 401K plans, taxes, insurance, liability, auto, telephone, laptop or other that may be included in a salary position.

  • 40 hours week x 52 weeks = 2080 hours a year
  • 4 weeks off for paid leave -> 2080 – 160 hours = 1920 hours a year
  • $50,000 divided by 1920 = $26.04 an hour x 3 (triple your hourly rate) = $78 hour

There are many tools across the internet to give you an idea of an average salary, but if you’re going into consulting in a specialty niche we presume you are well aware of the average salaries.

Let’s be honest about it, a pharma or device rep makes more than $50K a year, while managers make even more!

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