Business consultant prices are something that come up a lot in my line of work, and they are important. But what’s more important than the price you pay is what you will be getting in return.
Investing in the assistance of outside advisors is a key decision for you. Your time is very valuable and you want to make sure that you get a high ROI.
The most important decision you’ll make is WHO to engage. And to make that best decision work for you, you want to approach it with a good understanding of business consultant prices and how to assess how much you should be willing to pay.
What determines the price?
As in most industries, business prices are determined by a number of factors, none more important than the reputation and track record of the consultant.
Generally speaking, if the track record is there and can be verified by satisfied customers who have been the recipient of tangible results, your ROI will be secure. If they’ve performed before in similar situations, there is a much higher probability that they can perform for you.
Other factors besides reputation and track record weigh heavily as well. Rates vary by
- Size of customer,
- Markets served,
- The degree of specialization,
- The potential value of the work and
- The marketability of the consultant.
Let’s take these factors determining business consultant prices one at a time.
Larger companies tend to pay higher consulting fees than smaller companies. The consulting firms that serve them have high marketing costs and overhead and therefore have a higher rate structure.
Certain markets allow higher rates and this is closely tied to the level of specialization. For example, heavily regulated industries such as financial institutions and technology generally prefer to work with consultants who have specialized in understanding their issues.
Specialization can also be a differentiator that rationalizes the price you should pay for business consulting services. For example, there is a strong demand for intergenerational consultants to help companies understand their multigenerational workers better in order to motivate and retain them.
The potential value of the work is a key determinant of price. If your potential gain from every additional sale is $100,000 profit, you will pay more for consulting advice that wins that business than another company who gains $100 from an additional customer.
Unfortunately, the ability of the consultant to market themselves is another key variable in determining price. I say unfortunately because ultimately what you care about is getting results, not in being wowed. Unless they are a pure genius who stands out dramatically from the crowd, consulting fees will be higher for those who market themselves well.
So, how much should you pay?
The key to making a good decision is to calculate the ROI on each consultant you interview and choose the one that delivers the highest ROI. You’ll have to make some assumptions to do this but that is the rigorous thought process that gets you the best result. Its not the business consultant prices in isolation that matters, it’s the RETURN on them that’s the key!
With a now thorough understanding of how prices are determined, ask the consultant to provide you with an ROI projection. A simple ROI calculation would be to take the total incremental earnings you will receive because of the assistance of the consultant and divide it by the total cost of the consultant.
A better calculation is to time-adjust and risk-adjust the rewards and the cost using a net present value calculation.
So, calculate your ROI on your consulting options, choose wisely and prosper!