Organization

How to Find the Best Consultant for Your Business at the Right Price

  • Dr.Tayfun Aykaç
  • May 20, 2021
Search Engine Optimization

Wouldn’t it be nice if you could send out a bat signal for a project and only the right candidates responded – and all in the same price range? Unfortunately, in the real world, finding the right-priced consultant with expertise in your industry can be challenging. 

And in today’s fast-paced economy, independent consultants play a significant role in helping businesses stay nimble. Many consultants provide industry insights or bring a fresh perspective to an existing challenge. Experienced consultants can recommend strategies, educate about new markets, and help with execution.

But consultants in the marketplace come with a wide range of skills, qualifications, and consulting fees can vary — even within an industry and area of expertise. 

In this article, we’ll break down consultant prices: what drives them, the different models, and why clients sometimes end up with sticker shock (when they could have kept costs down). As a small disclaimer, ​​this article discusses strategy and management consulting only—however, there are plenty of other consulting services out there. 

What Drives Consultant Prices? 

The truth is that no consulting company is the same. There are bound to be differences in location, expertise, industry, and other factors that affect what they are able to charge — and what you’ll get for those fees. Take the following into consideration when you begin reviewing rates. 

Level of experience 

One of the biggest drivers of consultant prices is how much experience they have. How long has the consultants been working in the industry? Who are their most senior team members, and what will their role be on your project? As you might expect, more senior consultants command a higher price. Larger firms offer a blended rate for entire project teams, where they take into account a mix of seasoned and junior professionals. 

Country of residence (and/or primary language)  

In our increasingly digital world, it’s becoming easier to work with people from across the globe. Therefore, companies now have the freedom to hire trans-continentally, and can select whatever part of the world offers the most attractive consultant prices. 

Expertise in an industry or function 

Supply and demand is a big factor when it comes to specialists. Strategic relevancy and the expected ROI need to be considered here. For instance, a transaction advisory consultant is paid well because there is a lot of risks involved with the process. How crucial is the project and how much ROI can be achieved? If the answer is “a lot”, then you can also expect to pay a lot. 

Competition

 It’s often said in business that “you get what you pay for”. Established companies with strong reputations, such as the Big 4 and Top-Tier consultancies will command a price premium. You can pay attention to consultant rankings, as those play an important role in rates. Supply and demand again set the stage as increased competition will lead to fair price determination between the consultant and client.

Brand

The personal branding of independent consultants has increased in recent years (particularly due to social media), so it’s important to do proper research when comparing consultants. Marketplaces create transparency in a competitive space, which tends to lead to positive price outcomes. At the end of the day, remember that you’ll be working with a particular person — not the whole firm — so make sure that a natural personal fit is apparent before moving forward. 

Taking all of these factors into account, there are a few rules of thumb to help you navigate the consultant pricing landscape. At the top of the range (for an advisor from a firm like McKinsey, for example) you can expect to pay anywhere between $300 and $1,000 per hour. 

If you work with an independent consultant, these rates will drop drastically and be more closely based on the factors above. The rule of thumb is you will normally pay around the annual salary of a full-time employee *3/250 working days. 

Different Consultants Have Different Price Models

Most consultants charge a daily or hourly rate. Travel costs, print collateral, or other expenses are separate costs based on a rate card. This is known as a time and materials-based fee. However, these are not the only arrangements. It’s important to first understand what type of consultant you’re working with. 

  1. Independent consultants – A non-employee who offers valuable services to individuals or businesses, typically on a contractual basis
  2. Industry experts – Best known as veteran specialists in a specific industry with upwards of 10 years of experience.  They add meaningful value to their client’s business or projects and use their vast experience to guide clients in the right direction. 
  3. Independent team – A team of freelance consultants that can complement an existing team or form their own. 
  4. Consulting firms – An entire business comprised of industry-specific or vertical experts who offer professional advice, guidance, and actionable solutions on a project or retainer basis.

Once you are more clear on which type of consultant you are working with, you can understand more about the pricing models that they are likely to use: 

  1. Time and Materials-Based Fee – In this model firms will bill clients for a standard labor rate per hour used, plus the actual cost of materials used. This pricing agreement tends to be employed in independent consulting arrangements, as it is pretty straightforward and typically fair for both the client and consultant. It works best when the consultant gives an estimate for the project’s duration upfront. The total budget won’t be 100% clear to the client, but they will have an idea of what to expect. Consulting firms may also use this model if the project scope or timeline isn’t clear from the beginning. 
  2. Flat-Rate or Fixed-Price Fee – These terms are used interchangeably, but they both refer to a pricing structure that charges a single fixed amount for a project or deliverable, regardless of hours worked. When larger projects are cut down into smaller ones for this purpose, they are called “milestone-based fees”. Clients like this model because it’s highly predictable and they know what they are paying, but ongoing negotiation is required. There will likely be further discussions about what is in scope or out of scope. This structure is mostly used by consulting firms (not independent consultants) who have done similar projects several times and can accurately assess the effort required. They also may offer a security buffer in the price to ensure the project is delivered on time. 
  3. Success-Based Consulting Fee – Sometimes combined with one of the models above, in this model the consultant is paid based on achieving a certain milestone or goal. This can ensure better alignment between the client and consultant, but can only be used if the outcome can be measured and clearly attributed to the work being done. These fees are typically used by specialized consulting firms (for example, pricing or cost optimization professionals). 
  4. Retainer-Based Fee A retainer is a set sum of money paid upfront to hire a consultant for a particular amount of time. Some firms charge a retainer fee each month regardless of hours worked, for access to their expertise. Though they often have high daily fees, there is typically a volume discount in place. These fees are also highly predictable for clients and many firms allow you to carry over unused hours into the next month. It’s not often used in the consulting world and is much more popular in law firms. Once in a while, senior advisors to executives may charge a retainer to consult on a monthly basis. 

There are other costs that may come into play and should be discussed with your consultant. When travel is involved, the client should expect to pay either exact travel expenses or a percentage of project fees (between 10-18%). There also may be third-party fees that will be passed on, such as payment for research or technology tools. Those expenses should be clarified upfront and not a surprise.

Why do Clients Exceed Their Consulting Budget? 

About 85% of all business projects go over budget. That usually happens for one of the following reasons: 

  • Unclear scope or problem definitions – “Scope creep” is a common problem. What began as one deliverable often ends up turning into more. It’s essential to document the specific scope and problems being solved when you hire a consultant. Expect that if additional tasks or hours are required to meet your original goals, you will be billed for them. If the problem is more complex than originally thought, more hours will likely be required. 
  • An opaque pricing model (hidden fees) – Price-conscious clients are more likely to end up in trouble here. A firm may state that they have the lowest fees, but then add on costs for research, third-party tools, etc. Focus on the value you’re getting from a consultant and not price alone, and you’re less likely to end up with a consultant who nickel-and-dimes you. 
  • Lack of collaboration – Consultants need support. Inability to collaborate effectively will hurt any project, but especially one where a key resource isn’t as familiar with your organization’s knowledge base and culture. Ensure that your internal teams are providing access to their resources and their time, and are ready to cooperate as a unit to reach the established goals. 
  • Working with the wrong consultants – It is essential to select the right kind of project partner for an engagement. Some situations call for an industry expert while others require a team of independent consultants. To find out what kind of support you need, check out our consultant pathfinder

Your best outcomes are likely to come from developing a hybrid team: a blend of your own resources as well as independent consultants. Most consultants are used to this kind of arrangement which lends itself to better knowledge transfer, internal buy-in, and onboarding speed. 

The Right Consultant at the Right Price

Your business needs are complex, and so are the options for addressing them. Qualifications, consultant prices, ability to execute, certifications, references, and prior wins should all play a role in finding the right person for the job. But consultants price their services in a variety of fee structures. An apples-to-apples comparison can be hard. It’s up to you to weigh the options and see which consultant, and which fee structure is the best match for your business. 

If you need help selecting the best kind of support for your needs, get in touch. 

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