Consulting Fee Calculator
Recommended Pricing Structure
How to Calculate Your Professional Consulting Fees
Transitioning from a salaried role to independent consulting requires a fundamental shift in how you view your time and value. Unlike a traditional job, where your salary is your gross take-home pay, a consultant's fee must cover taxes, health insurance, marketing, software, and "unbillable" time spent on business development.
The Core Components of a Consulting Rate
To ensure your business is sustainable, you must account for three primary factors:
- Labor Cost (Desired Income): This is the amount you want to pay yourself before personal taxes. If you earned $100,000 as an employee, you should aim for a higher figure as a consultant to account for the loss of benefits.
- Overhead: These are the costs of doing business. This includes professional indemnity insurance, home office costs, SaaS subscriptions (like Zoom, Slack, or accounting software), and hardware.
- Profit Margin: Business profit is different from your salary. Profit provides a buffer for slow months, allows for reinvestment in the business (like training or hiring), and ensures the business is actually "profitable" rather than just a high-paying job.
Accounting for Billable vs. Non-Billable Time
A common mistake new consultants make is assuming they will work 40 billable hours every week. In reality, a significant portion of your week will be spent on:
- Invoicing and administrative tasks
- Sales calls and lead generation
- Creating marketing content or networking
- Internal research and education
Most successful consultants find that 20 to 25 billable hours per week is a realistic target for a full-time practice. Our calculator uses this "Billable Efficiency" to ensure your hourly rate covers the hours you can't charge for.
Example Calculation
Suppose you want to take home $120,000 annually. You have $20,000 in business expenses. You plan to take 4 weeks off per year and expect to bill 25 hours per week. You also want a 15% profit margin for business growth.
In this scenario, your total required revenue would be approximately $164,705. To reach this goal over 48 working weeks (1,200 billable hours total), your required hourly rate would be $137.25.
Beyond Hourly: Project and Value-Based Pricing
While an hourly rate is a critical internal metric, many consultants move toward Project-Based Pricing or Value-Based Pricing. Once you know your minimum hourly requirement, you can estimate how many hours a project will take and add a contingency buffer. Value-based pricing goes further by charging based on the ROI you provide to the client, which often results in significantly higher margins than simple hourly billing.