The life of a consultant may seem alluring—jetting off to meet clients, gaining respect as an expert, and making more than you ever did at your desk job. But just how much do consultants really make?
It depends. The word “consultant” can apply to all sorts of roles in various fields—from management to marketing to fashion—with wide-ranging rates.
Thankfully, we’ve got Sabri Suby, CEO of multimillion-dollar digital marketing agency King Kong, to answer that question and break down the different ways consultants can price their services and increase their earnings.
Check out his quick explainer video below, and then we’ll dive into the details of each point, plus take a look at some example salaries from real-life consultants.
The Average Salary of a Consultant
If you’re wondering how much consultants make, it’s important to realize that there are two types to consider: employees of consulting firms and self-employed independent consultants.
According to Glassdoor, the average salary for a consultant is $79,526/year, with the low end being $53,000 and the high end reaching $119,000. But remember, that’s the average across every field of consulting in the United States. So consultants in some fields earn much higher, and others earn much lower.
The great thing about being a self-employed independent consultant, however, is that it blows the cap off that average salary limit. Instead of having your income dictated by a boss and an industry standard, you can control your income by strategically setting your rates based on the value of the problems you solve.
How to Set Your Rates as a Consultant
In the video, Sabri highlights three major pricing structures you can use as a consultant.
The hourly rate you set depends on supply and demand in the market. As always, Sabri recommends charging based on the value you’re providing. The higher your level of specialty, the higher your rates can be. For example, copywriter extraordinaire Laura Belgray commands a rate of $1,450 for one of her Power Hours.
Sabri explains that if you charge an hourly rate, you’ll typically estimate how many hours a project will take you to complete, multiply that by your hourly rate, and deliver a quote to your client. It’s common courtesy for a consultant to notify their client before billing extra hours if the project ends up taking longer than originally planned.
The problem with hourly rates, however, is that they can move the focus away from value and toward speed. Your client, of course, will be interested in your doing the work as quickly as possible to save them money. But the more quickly you work through things (which will happen naturally as you become more accustomed to the work), the less you’ll be compensated. Eventually, you may want to move away from a pricing model that has you constantly watching the clock.
With project-based rates, you’ll quote clients a flat fee based on the scope of their project. Sabri points out that it all comes down to the value you’re providing, where the market is at, and how specialized you are in your craft.
Sometimes it’s difficult to place a dollar amount on a project. So Sabri recommends asking, “How much is it worth for this person to solve this problem?”
He gives an example in sales and marketing. Let’s say you find out your client is spending $5,000 a month on marketing, but it’s not converting well. They’re not getting enough leads, calls, or sales. Right now, for all their marketing efforts, they’re only making $10,000 in sales.
But what if you could step in, refine their strategy, and turn their $5,000 marketing spend into $20,000 in sales? That means there’s a $10,000 gap between what they’re making now and what they could be making if they hire you. When setting your rates, Sabri’s general guideline is to charge 10% of the value of what you create. In this example, solving that problem would mean $10,000 of extra revenue for your client. So charge $1,000 to fix it.
With a retainer, Sabri says you’ll want to assess how much work will go into the project and if it will be recurring work. For many consultants, retainer agreements are the ideal arrangements because they introduce predictability and stability into what can otherwise be a volatile field of work.
Retainer agreements typically work like this: You get paid a flat fee at the beginning of every month in exchange for doing a set number of tasks or completing a set number of hours that month for the client. You can also choose to roll over any unused time or tasks to the next month, but that can get complicated. Retainer agreements can be month-to-month (cancel anytime), or they can require a specific minimum commitment.
An example of how this can be set up is Member Up’s business coaching services. Their packages start at $500/month, and they require a three-month commitment plus $1,500 upfront. However, they add that the money can be refunded in full after the initial 45-minute kickoff call, if it turns out not to be a good fit.
As an entrepreneur, you get to control how you structure your business and its retainer agreements, so get creative! And be sure to work out arrangements that are beneficial for both you and your clients.
The advantage of retainer agreements for the client include:
- Predictability. Just as you’ll always know how much you’re going to earn each month from the client, they’ll always know how much they’ll spend to retain you. There are no surprises for either party.
- Priority access. Retainer clients should receive priority access to you over one-off clients. The reasoning here is that they’ve prepaid to reserve your time.
- More impact. Working with someone long-term enables the consultant to gain a deeper understanding of the client and have more impact. It’s difficult to make a significant change in just one month (though it can be done!). Over the course of a year, though, the improvements you make could be exponential.
Bonus: Royalty-Based Arrangements
A royalty-based arrangement is an advanced-level pricing structure. As Sabri explains, this is a hybrid model that can include a retainer fee plus a performance percentage.
For example, maybe you’re a Facebook advertising consultant getting paid $3,000 a month to run ad campaigns for your client, and you’re getting 2% of gross sales on top of the retainer fee.
Getting paid extra based on performance is a great incentive for you to do your best work, so this could be an attractive pricing model for a client.
If you’re wondering which pricing structure most consultants use, a 2018 study by Consulting Success found that the most common price structure was the project-based rate (31.4% of consultants reported using this), second only to hourly rate (25.5%).
Real-World Examples of How Much Consultants Can Make
Private Practice Business Consultant for Counselors: $5,494 in One Month
Joe Sanok is a counselor with a private practice who also serves as a consultant to other counselors who are trying to grow their businesses. In October 2016, he made $5,494.08 in consulting income.
Content Marketing Consultant: $8,220 in One Month
Ryan Robinson brought in $8,220 in January 2018 from three content marketing clients—all while working a day job.
Digital Marketing Agency: $12,000+/month
Khaleelah Jones runs a digital marketing agency called Careful Feet Digital, which earns a steady $12,000+ in monthly revenue. She’s the only full-time employee, and she contracts with freelancers to work on different projects.
Sabri Suby’s King Kong Digital Marketing Agency: Zero to $10 million in 4 Years
Sabri grew his first digital agency to 16 people and $1 million in revenue. Now, as the founder of digital marketing agency King Kong, he’s grown this business from zero to $10 million in four years.
How to Make More Money as a Consultant
The main lesson Sabri wants to impart to you is that clients will pay you based on how big of a problem you solve for them. If you’re struggling to make ends meet as a consultant, solve bigger problems for your clients.
How can you do that?
- Dig deeper. Clients seek out consultants because of the deep expertise these professionals can provide. Someone may come to you because they think they need to be publishing more blog content, but as a consultant, you may realize the problem isn’t the content at all but the distribution (or lack thereof). Get to the core of your client’s problem, find a way to solve it, and you can charge more for that greater value.
- Use value-based pricing. Sabri went over the three major pricing models in the video, but he dissuades consultants from charging by the hour. Instead, focus on the value of the project, and then set a project fee if you can.
- Build in-demand skills. “The more of a specialty and the more specialized the service that you’re consulting on is, generally the higher fees that you’ll be able to command,” Sabri says.Keep a finger on the pulse of your industry to make sure you stay current on the latest skills. For example, as a digital marketer, you may notice that chatbots are on the rise and are providing a high ROI for lots of companies. Learning more about this burgeoning field will give you a specialty you can charge more for.
We have another article about how to make more money as a consultant. Be sure to check that one out!
So How Much Can YOU Make as a Consultant?
“It’s really as much as you desire,” Sabri says, “and as many hours as you want to work or as much value that you want to provide when you move to a retainer fee or a performance fee.”
Being an independent consultant and running your own business means you can control how much you earn by strategically setting your rates and solving bigger problems—no more begging your boss for a raise!
To recap, there are three major ways consultants structure their prices:
- Hourly rate
- Project fee
If you’re a more advanced consultant, you may even consider doing a hybrid model, such as a retainer fee plus a certain percentage of sales based on your performance.
Overall, it’s essential to remember Sabri Suby’s words of advice: “You’re really compensated based on the value that you’re going to be providing to your marketplace.”