Why Are Consultants So Expensive?

How to calcuate consulting fees

I was recently reflecting on establishing a daily rate for a consultant.  It is task everyone goes through when starting out and hopefully reviews on an annual basis. Typically a person can bill off 188 days per year, so that would be a full time amount of hours.  Then a consultant has calculate out your monthly:

Cost of Living

·         Mortgage/Rent

·         Utilities

·         Food


 Operational Expenses

·         Rent

·         Internet/Telephone

·         Marketing

         Professional Associations


Health Care, Retirement and Investment



 Income Tax

 Business Licenses


 Reserves or loans

 To cover cash flow issues


Quickly you can develop your monthly budget. Then you maintain the budget in an accounting software package to examine your rates and make sure your current work is covering your operational cost for the future. Consultants have to be realistic about the amount of billiable time they are puting in monthly. Are the you doing enough paid hours to meet your budget? If not, how can you impact that number? The real numbers of a budgit are the best measure of that performance.


Those who hire consultants can use this type of budget to assess the worth of consultants they are considering. What would it cost you to have an employee do the same task? Remember you are paying a freelancer for a completed project which requires skill/knowledge and time that is outside the scope of your current staffing. If this is a one-time or infrequent use, then freelancers generally offer good value for project completion. If it is a repeated situation, then weighing training and personel costs becomes more important. It is very difficult for small companies to hire and maintain skilled procucers. Often entrepreneurs with ambition and dive prefer haveing more control over their work environment. These freelancers can be an important part of a strategic growth plan.


Gail Reid's blog earlier this year addresses some of the pros and cons of the freelance economy.


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