Evan Carmichael explains that early-stage consultants should charge fixed fees to make it easier for clients to say yes, but must define scope clearly and watch for scope creep. Once you hit survival income, you can explore hiring staff, taking equity, or selling digital products.
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How do I charge my clients? I get this question a lot from my readers, and it's really important when you're starting a service-based business. You have to figure out how much you're going to charge and how you're going to actually get paid by your clients. I got a question again, came in from Amal, one of my Facebook readers. He wrote in, "Hi Evan, as a consultant, how do I charge my clients? Is it an hourly rate, per project, percentage of the total project cost?" Thank you. For this question, I'd really look at what phase you're at in your business. Okay, let me, let me explain. For the customers, they want cost certainty. Okay, the biggest fear for a customer is that you're going to do an hourly project, you're going to run way over your time, and they're going to be way over budget. On the flip side, the challenge for you is if you do a fixed fee, then you may not be able to factor in all of the costs that are gonna come, right? And you may end up working for minimum wage because you've done so much extra work above and beyond what you thought the project was gonna entail. My preferred model, if you're just starting up, if you are just in the startup phase, if you are not at the point of survival yet, you're not at the point where you're making enough money to pay your bills, put food on the table, have to worry about going and getting another job, right? If you're not there yet, then my preferred option would be to do a fixed fee rate. So whatever the project's gonna be, you estimate how long it's gonna take you and you give your clients certainty. The reason why it's important is because you wanna build a relationship with your clients and it's easier to get them to say yes to a deal when they have certainty. The more risk you take away from them, the easier it is to say yes. So do a fixed fee. Say it's gonna cost you $2,000, $100, $10,000, whatever it is, you make an estimate. You're gonna be wrong, but you're gonna try to be close. It'll teach you to make your estimates better, and as you develop in your business, you'll get better and better at making estimates. And the one thing I would put in there is really defining what the project is gonna be about, because almost always the project changes. The longer the project is for, there are things that will change in what they want you to do. Some things will now become important that weren't in there in the beginning. Some things that they wanted before now aren't important anymore. They, they're gonna throw away some of the project. It always happens, and that's a big risk on your part as being a consultant. So you wanna, you wanna watch out for project scope creep, and that's where your clients are changing the deals on you. Anytime something comes up where they want to change something, then you have to make a decision and talk to the client and let them know, okay, if we're gonna do this, this wasn't part of our initial deal, but if you want to do this, then it's either gonna cost more or we have to take something out. And keeping those lines of communication open, always, because it builds a relationship with you and the client, and it also prevents bad feelings. You know, if the client keeps saying add this, add this, add this, and suddenly you're working so many extra hours and not able to deliver it on a, on a budget that you're happy with, then it's not gonna be a good relationship with you and the client, and it's gonna probably end up ending in some kind of fight and the project not finishing. So be conscious of that, be conscious of the project scope creep. But at the start, to make it easy for your clients, I would say start on a fixed fee base so they have cost certainty. Okay, this is only to get to the phase of survival, to get to the point where you're making enough money that you don't have to worry about going back into the job. I'm not talking about living a life of luxury here. This is basics. The challenge with the service-based business is it's hard to scale. It's hard to really scale up a service because you're always trading your time for money and your time is limited. You could bring on other people to work under you. That's the best way to do it if you need to scale, but it's still so much harder to scale a service-based business than a product. If you look at the businesses that venture capitalists invest in, if you look at the businesses that are throwing off huge returns, they're not service-based companies because it's too hard to scale. So if you want to have a major impact, if you want to make a lot more money, if you want to really reach your community, then you want to start thinking about how you can either as a consultant take a piece of the company that you're working with, or start to productize your knowledge and information, because that's going to help you have that bigger impact. Okay, but I don't want you to do that from the beginning because that takes more time, is riskier, and you're going to run out of money before those things come through, most likely. So at the start, get to know your clients, work closely with them, Do fixed fee projects, get to the point of survival, to the point where you are not worried about having to go back and get another job, and then from there you can afford small risks and thinking about taking a piece of the companies you're working with, starting to productize your information, and starting to have a bigger impact that will help you scale up your knowledge and expertise. Believe. For those of you watching, like the video, please give it a thumbs up below. It makes me want to do more for you, and I'd love to hear what you have to think. Leave a comment under this video and I will make a video response. Response if you have a question. Thank you so much, guys, and I'll see you soon.
