As small business owners, nonprofit consultants spend a lot of time and energy landing clients. But we tend to spend far less time on two equally critical areas of business development: defining our services and setting our prices.
Today, I want to delve into how to figure out pricing for your services.
1) Start with your business goals
First and foremost, your pricing needs to align with your business goals. Keep in mind that every consultant will have their own business goals. Some consultants want to increase their income, grow their businesses year-over-year, and build hand-picked teams. Others want to work flexible schedules with part-time hours while still paying the bills. Knowing your individual business goals is essential.
Once you decide how much you want (or need) to earn each year and how much time you want to spend doing so, you can calculate your baseline hourly rate (factoring in time off). For example, say you want to earn $80,000, take one month off each year, and work 15 billable client hours per week. You would divide $80,000 by 11 (months worked per year), then divide that number by 60 hours (15 hours per week, with four weeks per month). That gives you a baseline hourly rate of $121. Now, I do not recommend billing hourly (see tip 4), but your baseline rate is invaluable information when you’re calculating project or retainer-based pricing.
2) Conduct market research on services pricing
Once you know your desired minimum hourly rate, you need to make sure it’s within market expectations. For example, Funding for Good did a deep dive on how to price grant writing services. Be sure to take your prior work experience into account. If you spent the last decade as an in-house nonprofit fundraiser, you could start off pricing your grant services at a professional rate.
3) Focus on the value you add through your services
In your pricing and in your communications with clients, be clear about the value you are adding. For example, one of our Nonprofit Consulting Boot Camp alums recently moved a grant-writing client from an hourly contract to a retainer model and increased her rates at the same time. The trick was emphasizing the value she delivered: being available to quickly and reliably meet donor deadlines.
4) Move toward project-based pricing for consulting services
With project-based pricing, you charge by the project or deliverable, rather than by the hour. This allows you to price on a value-based model and take advantage of your prior experience and growing efficiency. The key is understanding how much time a project will realistically take, keeping in mind that your efficiency will improve over time and as you develop templates. You may not always get your pricing right the first time. For example, you might end up working 20 hours on a project when you planned and priced for 10 hours. That’s okay! Now you have more information and can adjust your pricing on your next project.
5) Refine, refine, refine
Pricing your services is not a one-time activity. Here at Funding for Good, we still revisit our services and pricing every year. We assess where we worked too much for too little (yes, it still happens sometimes), which services delivered the best and most reliable results for clients, and which services we enjoyed providing most. Because yes, one of the perks of being a consultant is the opportunity to focus on work that is most rewarding, meaningful, and financially sustainable.