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How to set prices for consulting services | anglicansrcwa

How to set prices for consulting services

How to set prices for consulting servicesIn world practice taken four main forms of pricing consulting services:

time payment;

fixed undifferentiated payment;

a percentage of the value of the property advising of the result;

combined payment.

All these prices are market, i.e. are in the process of competition and negotiation. No national fee schedules for consulting services does not exist*, but the basis of determining the prices always are some reasonable considerations, arguments and justifications. The client must have information about the pricing on the consulting market in order to, on the one hand, not to overpay, and on the other, so as not to alienate qualified consultants low grade of their work. Last to Russian conditions: particularly important because business leaders do not always set out to pay money “for the words and paper.”

* International organizations that hire consultants to provide consulting and technical assistance to enterprises in different countries usually have a set limit prices on consultants. Thus, in the European Union, this value should not exceed 500 ECU ( 620 USD) for one person one day. However, this amount usually does not include travel and transportation costs, which will be charged separately.

In determining the payment for all the above forms should be kept in mind that consultants sell You the product that they produce not only while on Your premises, but also during the preliminary work. It is known that on average, the consultant spends on the project-specific work only 120 days a year. But this does not mean that the remaining 245 days, i.e. 2/3 of the year, he’s resting. At this time he collects the intellectual capital, which invests, working on a specific project at Your company. Otherwise he would not be a consultant.

In addition, as already noted, payment of consultant’s work does not mean his salary. Usually consultants are United in the firm, the content of which (rent of premises, equipment, management and technical staff, purchase information, etc.), as well as on income and taxes leaves a certain portion of money received from the client. This value can be up to 70-80%, so the cost of consulting services is not a payment to the consultant, and the fee to the firm for its use of consultants. (If we are talking about the payment made to the individual consultant all the same it should include the costs of equipment, buying information and other paid services).

1. Time payment

It is based on the calculation of the amount of working time that must be expended to carry out a consulting project (in man-hours, man-days or man-months) and the unit cost of working time consultants based on their qualifications.

Rates per unit time are set by each consultant consulting firm separately, but they were based on reporting statistical data on market Advisory services (such data are usually published by national associations of consultants or statistical offices). For example, according to the American Association of consultants (ACME) in 1992, the level of hourly pay was $ depending on skills and size of consulting firms from 60 (assistant researcher), 250 (for the senior staff of consulting firms) $. per hour, i.e. respectively from 480 to 2 thousand dollars. man-day. Similar values are characteristic of other developed countries. It should also be noted that for individual consultants, depending on the uniqueness of their skills and the value and significance of the project, the size of the fee can be much more than average quantities.

Prices of rooms Russian consultants still much below the world. They, as already noted, about 4-5 times smaller and make from 200 up to $ 400. man-day of Russian companies, however, there is a clear tendency towards growth. For the last 2 years they have grown about 2 times and while maintaining this trend in 4-5 years to reach the level of the world. The foreign consulting firm operating in Russia have long set their prices at the level adopted in their countries. Though their payment is often made not by Russian customers and foreign companies entering the Russian market or at the expense of international organizations and foreign governments, sent to the consulting and technical assistance to Russia. It had, however, a certain stratum of Russian clients self-financing consultancy services to foreign firms at world prices. First of all it is the oil and gas and other extractive industries, and banks.

When determining the price based on hourly pay consulting firm is an estimate, which is the justification of the contract price for the customer (see diagram 1).

In Russian conditions, the use of time-based form of payment comes up against problems of a psychological nature: managers of Russian enterprises are often not emotionally ready to pay for the work of consultants in the amount of several hundred dollars. on the day, thinking that this is impossible in a situation where the average monthly salary in Russia is at the level of $ 100.

Therefore, the Russian consultants, using calculations based on the hourly pay for its internal calculation purposes, often prefer not to disclose this estimate to clients using in negotiations with him 3 other forms of pricing.

Scheme 1.

Form estimates for consulting services if the payment for