Written by: Jillian Climie.
I didn’t truly appreciate the importance of charging what you deserve until becoming an entrepreneur. All consultants, coaches, and advisors have to work to prove their worth, and especially as a young woman, this became clear to me right away. Women are expected to be agreeable and communal, so charging for our value (and sticking to those numbers) can feel daunting. We need to be confident in how we approach fees to ensure we earn what we deserve.
Utilizing what I’ve learned from compensation teams within companies, I’ve created a list of considerations below for women coaches, consultants or advisors to help guide you as you’re trying to set an initial rate, or re-elevating your current rate.
1) What structure will you use? There are a variety of structures you can choose, with the most typical being 1) hourly rate, 2) project estimate/one-time quote, or 3) retainer. Each of these has their pros and cons depending on your client base and experience. Hourly rates ensure you’re billing for all of your time; however, project estimates and retainers can be easier for clients to justify and budget for. Structure is important, so leverage advisors and industry connections to get a sense of what works in your field.
Beyond the main structure, think through how you will treat overtime hours or non-budgeted work if you’re using a project or retainer structure. This is important to state openly with the client in advance of starting the project. Additionally, decide billing cadence up front (e.g., will you charge for every 5 minutes or every 15 minutes?), and be clear on how late payments will be treated. Know that each client doesn’t need to have the same structure – an hourly rate may be appropriate for a project with broad or uncertain scope, whereas a one-time estimate may be appropriate for a smaller scope, new client project.
Within this, decide in advance if you’re open to other forms of payment. For example, equity compensation can be offered when you’re advising boards, start-ups or other high growth companies. Other forms include promoting your business, exchanging a service for a service, discounts and perks. Be careful in evaluating these and ensure it still means you’re being paid for the value you deliver (see #5 on non-negotiables below).
2) How much will you bill? This is the toughest question to answer for yourself. There are simple formulas to start off with depending on what services you provide – for example, taking your most recent salary, dividing it by 2,080 hours typically worked per year, and then multiplying that by 1.5-2.5x. The specific inputs of this will differ by industry, but it can be helpful as a data point, and takes into account operational costs and elements you aren’t getting from full-time employment (e.g., benefits and job security).
However, it’s also important to look at it from a different perspective: how much do you want to make in this venture and how often do you plan on working? This can help you determine what your ideal hourly rate is. Combining these two data points, and adding in the context of market comparables, location, and experience can get you to a solid number. And don’t be nervous to charge different rates for different industries and client types, or to test and learn, especially if your offering is unique. Lastly, don't forget to consider the impact of tax on your rates, and how you will pass that along to your client.
3) How will you articulate your value? This topic could be a whole article in itself, but at a high level, ensure you’re able to confidently articulate why you’re charging what you are. While you might not always get asked this question, confidently knowing the rationale behind your rate (and believing in it) will come across when you’re explaining your fees. Just like negotiating within a company, the more confident and prepared you are in asking for what you want, the better you will do. Take the time to practice so it comes naturally to you, and make sure you understand what your “hook” is – what is unique about you and your offering that makes clients want to work with you?
4) How will you ensure you’re charging all of your hours? As a consultant or coach, you’ll have to get into the practice of closely tracking your hours. If this is new to you, it will take some getting used to, especially as it means non-distracted work. Using a system that makes this easy, and setting check in times with yourself (I do this twice a day) can be helpful. Don’t leave it until the end of the week!
Once you're in the practice of tracking, you’ll have to ensure you bill all the hours you work. Once you’ve set your rate, sticking to your hours is crucial for getting paid your worth. While it’s tempting to think “this took me much longer than it should have”, that strategy is unhelpful as you are consistently lowering your actual rate in practice (and that statement is very likely untrue). Set weekly check-ins with yourself to review your hours against what you’ve billed to ensure they match up.
5) How will you know when to say no? Inevitably as a consultant, advisor or coach, you will be asked to do something for a fee or payment structure that you know is not right. Listen to your gut – if you’re uncomfortable by what someone is offering you, then it's time to say no. Hold true to yourself. If you don’t value your own time, no one else will. It also means you’ll be spending time with clients who do not value your worth, which means you are losing out on spending time with those clients that do. Know your non-negotiables and stick to them.
6) How will you handle the biases women face? Be realistic with yourself about the biases women face in business. This way, you can understand why you might struggle with holding to your rates, or why your gut reaction is to undervalue yourself – it’s because women expect and ask for lower compensation than men do (the “ask gap”), and because we face the likability bias. Being aware of these biases can help you to actively push against them, and check yourself when you’re making decisions that are heavily influenced by them. Also, give yourself a little grace – pushing against bias is hard work!
7) How will you gut-check your rates, and how often? When setting rates, it’s important to leverage resources to gut check them – including connections, mentors, and internet databases. Especially in the current employment and inflationary environment, rates are rapidly changing. Set a check-in for yourself once a quarter to evaluate your rates and if any changes are needed. The more expertise you have, the more you should be charging. And don't be afraid to utilize advisors; an up-front investment that helps you feel confident about what you’re charging can be invaluable. If you need help with this, we would love to support. Please reach out to us at The Thoughtful Co at contact@thethoughtfulco.net.