Sunday, February 5, 2012

IT Consulting: Determining Your Rates as a Start-up

IT consulting for the long haul requires you to set rates at the high end of the scale. It's easier to start your rates high than raising rates and having to grandfather in your old clients in IT consulting.

In IT consulting, people charge various rates.  Some charge at the zero level, others at the $25, $35, $45 an hour level. 

Starting an IT Consulting Business: What to Charge?

Probably a lot of you want to start charging, and should be, in the $75, $85, $95 an hour level to build up a reputation for your IT consulting business.  Don’t start out with much less than that.

IT consultants working with larger small companies generally charge $100 - $125 an hour and up, depending on how deep their specialty is, whether they’re in a certain vertical industry, or depending on the metro area they’re in. 

Adjusting Your IT Consulting Business Rates

Many new IT consulting businesses underestimate their true expenses and as a result, end up charging way too little for their IT consulting services.  The big question they often ask is, "Can’t I adjust it later?" The answer in most cases is no. 

It’s very difficult to adjust rates later with your existing customers and clients. The only thing you’re usually left resorting to is fixing rates going forward, and then you end up with a whole bunch of people that are grandfathered in at these rates you can’t afford.

The Problem with Raising Rates

When you grandfather rates, half or a quarter of your IT consulting business essentially becomes worthless because it’s not profitable. It can be really hard, if not impossible to get your existing clients to agree to substantial rate increases. 

The Bottom Line about IT Consulting

As a start-up IT consulting business, if you charge too little, you may end up having to dump your client list and start over, which could put you out of business really fast. It doesn’t have to be that way. 

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