New HR consultants are always on a steep learning curve, so it’s impossible to pin down the biggest lesson they learn during their first year. But pricing at their true value has to be right up there.
It can be enormously tempting to cut your fees, or to set them really low in the first place, when you’re first starting out. You’re at that stage where you really need clients as quickly as possible, plus having come from a salaried position, the rates for consultancy might feel high to you, especially when a bit of imposter syndrome is thrown into the mix (“Will anyone really pay that much for little old me?”).
But it’s really important to resist that temptation, and to make sure you charge high enough fees, from day one, for three reasons.
The first reason is that small businesses (or actually whichever kind of client you’re working with) don’t generally choose their HR consultant based on who is cheapest. There are several factors they take into account, but it’s not a race to the bottom, so as long as you are within reasonable range of everyone else, there’s no need to try to undercut the competition in order to get business.
The second reason is about value and how you are treated by clients. People most value what they pay highly for, so if a client is paying highly for your advice, they’ll take it seriously and really pay attention, and generally follow it, because they believe (and want to support their believe) that advice is worth it.
I often use the handbag analogy. If you have a cheap plastic handbag you picked up from a supermarket or discount store, you don’t take care of it particularly. You might stuff lots
of things into it so it’s bulging at the seams struggling to carry it all. You might chuck it on the floor. It doesn’t really matter if the dog chews it, or it gets sticky on the bottom. And it’s pretty disposable.
But if you’re lucky enough to obtain a beautiful Chanel handbag (other luxury brands are available), you behave very differently. You might keep it in a dustbag when not in use. You wouldn’t dream of trying to squeeze too much stuff in for fear of damaging the lovely leather or compromising the shape. And woe betide any canine who sniffs it….
See what I mean? You want clients who truly value you, recognise your worth to their business and treat you well. Clients who do that don’t choose their HR consultant based on who’s cheapest. Cutting your fees to bargain basement rates is short sighted, won’t build you a successful business, and won’t get you the quality of client you deserve.
The final reason is a simple commercial one. If you’ve started your own business you aren’t doing it as a hobby, usually. You want and need to be financially successful too. Undercharging clients means you need many more clients in order to make a reasonable profit. That means more time, effort and money spent marketing, and more stress for you. Consider your current turnover, if you are already in business. If you were to add 5% to everyone’s fees, how much difference would that make? A fair bit, probably. Charging at the right point can make all the difference to your income, can boost your confidence as you realise how much you are worth, and can take a bit of pressure off your marketing, which is not generally an HR practitioners favourite activity!
If you’d like to benefit from our advice, experience and support launching your own HR consultancy under our brand, do get in touch.