How and When to Raise Your Consulting Rate

How and When to Raise Your Consulting Rate

The easiest time to raise your rate is on the cusp of something new — a new year, a new project, a new client. With the new year just a few weeks away, now might be the time. This article offers ideas of how to do this, as well as some sample language to use when notifying your clients.

How to determine your new rate

Unfortunately, there’s no one-size-fits-all formula. Instead, I suggest triangulating on a rate that seems fair. Look at several different numbers and then decide. Here are four suggestions.

First, make a ballpark guess of what you think your new rate should be. For example, if your rate is now $150 an hour, what do you think is a logical next step? $175? $165? Jot it down.

Second, calculate a percentage increase. The amount might be 3% or 5% annually. Or maybe you need to make up for two or three years without a rate increase, and a 10% or 15% increase seems appropriate. Do the math a few different ways and see how these numbers play out. In my example of $150 hourly, a 5% annual increase works out to $157.50 for year one, $165 for year two, and $172.50 for year three. 

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What To Do If Your Client Doesn't Pay

What To Do If Your Client Doesn't Pay

It was bound to happen. After 15 years and hundreds of contracts, I finally had a client that didn’t pay, and didn’t pay, and didn’t pay. For six months there was one lame update after another. “We’re working on it,” or “We’ve switched to a new process.”

Yesterday, my bank finally received the wire transfer. Here’s my story, what I learned along the way, and steps you can take if you find yourself in the same situation.

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Website or No Website? Answers and Help for Independent Consultants

Website or No Website? Answers and Help for Independent Consultants

As a self-employed consultant do you really need a website?

I’m asked this a lot, particularly if a consultant gets most business from referrals or they contract through agencies or boutique firms. Besides, it’s highly unlikely that a prospective client is going to stumble upon your website and decide to hire you. Surely creating a website is a waste of time and money, right?

I used to say that if you had a really strong LinkedIn profile and you keep your network warm, you probably didn’t need a website. Indeed, I know dozens of independent consultants making six-figure incomes without one.

Now, however, my answer is, yes, absolutely, you need to have a business website. Here’s why:

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How Tax Reform Affects Independent Consultants

How Tax Reform Affects Independent Consultants

Everyone has questions about the sweeping tax reform that became law at the end of last year. As a coach and champion for independent consultants, I went on a fact-finding mission to answer two important questions: 

  1. Are self-employed consultants still better off being paid on a 1099 tax basis as a business or on a W-2 tax basis through a third party?
  2. Is there a tax advantage to how independent consultants structure their businesses — as a sole proprietor, LLC, S corp or C corp?

Here’s what I learned after too many hours of research and talking with two CPAs and a lawyer. (Disclaimer: I am neither an accountant nor a tax lawyer, so I’m not qualified to give tax or legal advice. I’m simply trying to help self-employed consultants understand how the changes in tax law may affect them, so they — you — can have a more productive conversation with your tax professional.)

Key Findings

A. The answer to my first question is yes. It’s still better to be paid on a 1099 tax basis because you can still take business-owner tax deductions, possibly in addition to the new 20% deduction (more on that below), and you can still take advantage of better retirement options like a SEP-IRA to lower your taxable income. (See “Friends Don’t Let Friends W-2”TM for more information.)

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How Diligent Biz Dev Led to a Six-Figure Consulting Project

How Diligent Biz Dev Led to a Six-Figure Consulting Project

Recently I helped a consultant land a $420,000 consulting contract. That’s not a typo. It’s an 11-month project for one consultant: $320k in consulting fees and another $100k for travel expenses. I’ve excluded my company’s agency fee in these numbers; the actual budget was a bit larger.

Clearly this was a big win for the consultant. The client was pleased too since a global consulting firm working with his company quoted $660,000 for the same project. (See my related article, “Quote Your Rate with Confidence.”)

A project this big doesn’t just fall out of the sky. Why did the client contact me for help? The short answer: business development. The long answer: diligent business development that built a relationship over time. Rather than any one particular thing I did, it was simple actions over the course of five years. Those actions cultivated a trusting relationship with the client and, as a result, he was comfortable reaching out to me for help.

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