The Quandary of Pricing for the Project Management Consultant

If you’re an independent consultant who is pricing yourself directly to a potential client or to a consulting firm in need of placing your type of skills somewhere, then you’ll understand this process. The client may suggest that he’s interested in your service but not happy with the rate you’ve priced yourself at. This is the million-dollar problem that happens whether you’re a consultant selling your expertise or a job-hunter being asked during an interview what your salary range is. It’s awkward any way you approach it. Unfortunately, this is always a normal part of the negotiating process.

To Negotiate or Not to Negotiate

In the Western culture it is not as clear as other cultures when negotiation is appropriate and when it is not. Therefore, many consultants find it very difficult to distinguish between a negative response from a potential client that truly is a flat-out rejection and one that is merely the beginnings of the negotiation process. You sometimes just have to trust your instincts.

Always remember, you are not required to negotiate your rate. If you’ve set your price well in line with market rates for your type of service and expertise level, then it is ok to stand your ground and state confidently that your rate is what you charge and there is no negotiation.

That said, you may want to consider the economy and your situation into that plan. If you need the work badly and you’d rather do it for less than not at all, you may want to go for it. I’ve had clients offer me more than I was even going to ask for, thus eliminating any need for negotiation or even price-setting. And I’ve also had clients negotiate hard and get an extremely favorable rate from me, but I was willing to do the work for less because I knew I would be working almost exclusively in a telecommuting role with no travel or driving expenses and could schedule when I wanted to do most of the work leaving me free for other consulting.

Dealing with Rate Objections

One way to deal with client objections to your rate is to remind them what that rate will buy them. Explain that rate is for actual productive work performed per hour, not the diluted effort they are getting from employees at 60-70% of productivity. Also explain you expertise in their particular area of need meaning you can perform the work much more efficiently and quickly, thus saving them time and mostly likely money and re-work over an employee or a less experienced and lower-priced consultant. To add to that, explain that you may be re-using code or existing templates that you’ve already developed thus utilizing proven tools and saving even more time and money.

Another approach is to explain that the your consulting services come with no overhead price built-in that would be realized when utilizing their own employees. Those overhead costs on their employees is in addition to the salaries they are already paying, but are none existent when using your services.

The Jealousy Factor

One thing to be careful of, however, is that the client you’re dealing with may be wrongfully looking at a $80 rate and thinking that translates easily into a $160,000 salary which may be much higher than the hiring manager you’re talking to. This can challenge their ego and put them on the defensive. If necessary, explain that the rate must cover professional overhead including insurance, professional fees, hardware and software – expenses that employees often do not experience. This can go a long way to alleviating the objection if it does stem from envy or feelings of inferiority.

If you still can’t get past the rate issue, and you don’t feel that it is in your best interest for this particular opportunity to price yourself lower, then it may be best to just walk away. You can try to evangelize the client all you want on why your rate is appropriate, but they just may never get it or they may not be able to afford it. It’s far better to know that up front than to get left without a payment later on – which is always a danger for consultants in nearly every industry.