Mina left a plant operations job and priced her consulting at $1,000 a day because it sounded like a consultant's number. In her first year she billed 58 days. That was $58,000 before insurance, software and self-employment tax, and about half of what she'd earned as an employee. Nothing was wrong with her work. The number came from a feeling, not a calculation.
The way to price consulting is to start from the income you need, subtract the days you won't be able to bill, and divide. The result is the lowest day rate that works. Market rates tell you how far above it you can go. Here's the worksheet, with a full example.
Start from income, not from a rate card
Rate surveys tell you what some consultants charge. They don't tell you what you need. So write down two numbers first: what you want to pay yourself, before income tax, and what the business itself costs to run in a year.
Our example consultant wants to pay herself $120,000. Business costs: health insurance $9,600, software and tools $2,400, professional liability insurance $1,800, accounting and legal $1,500, and marketing and travel $2,700. That's $18,000.
Billable days are fewer than you think
A year has about 260 weekdays. Take out 10 holidays, 15 days of vacation and 5 sick or lost days, and you have 230 working days. Now take out the days you don't bill: writing proposals, chasing invoices, sales calls, learning something new, and the gaps between projects. In the first year with no retainers, that's close to half, about 110 days. You can bill 120.
If you assume 220 billable days, your day rate will be low by almost half, and you'll find out in the autumn.
The day-rate worksheet
In the United States, a self-employed person pays self-employment tax, the Social Security and Medicare that an employer would have split with you. The IRS rate is 15.3 percent, applied to 92.35 percent of net earnings. It's separate from income tax, and people forget it. I'm not your accountant, so check the figures for your situation, but here's how it changes the math.
You want $120,000 left after self-employment tax. Net earnings N has to satisfy N minus 14.13 percent of N equals $120,000 (0.9235 times 15.3 percent is 14.13 percent). That makes N about $139,700, and the tax about $19,700.
| Line | Amount |
|---|---|
| Pay you want before income tax | $120,000 |
| Self-employment tax (about) | $19,700 |
| Business costs | $18,000 |
| Revenue you need | $157,700 |
| Billable days | 120 |
| Minimum day rate | $1,314, round to $1,325 |
The naive version, $120,000 divided by 120 days, gives $1,000. The complete one gives about $1,325, which is about a third higher. That's the gap between Mina's first year and the year she wanted. If you want an hourly figure for a quote, divide by 6, not 8, because even a billable day includes email and setup. $1,325 divided by 6 is about $220.
How much the billable-day guess moves the rate
The 120 is the softest number on the sheet, so test it. Keep the $157,700 and change the days. At 100 billable days the rate is $1,577. At 140 it is $1,126. At 160, which only happens once you have repeat clients and retainers, it is about $986. A swing of 20 days moves the rate by roughly $190 to $260. That's why a new consultant should price on the low-days assumption and let the extra days become a raise to yourself later. Pricing on the hopeful number is how a year ends with money missing.
Retainers
A retainer sells a block of your time each month. Four days a month at $1,325 is $5,300. Most clients expect a modest discount for a commitment, so say $4,950 (about 7 percent off) with two conditions written down: the days are for a defined kind of work, and unused days expire at month-end. Without the expiry you're banking the client's days for free. A retainer's main value to you isn't the discount. It's that it fills four of your 120 days in advance, every month, without a proposal. The solo consultant acquisition loop shows how to keep the pipeline moving around them.
Project pricing
For a defined project, estimate the days, multiply by your day rate, and add a buffer for what you can't see. Eight days at $1,325 is $10,600. With a 20 percent buffer, $12,720, which you might present as $12,500. The client sees a single number and you've covered the usual overrun. If you're unsure whether to quote a project or time, hourly rate vs flat fee compares them with the same buffer arithmetic, and how to price your services shows how to check a number against what buyers near you pay.
Raising rates with current clients
Raise rates for new clients first. They have no old number to compare it with. For existing clients, give 60 to 90 days of notice and tie the change to a date: "Starting January 1, my day rate is $1,450. Work already scheduled stays at the current rate." Most clients with an active need will accept a raise of ten percent or so. If you're afraid to send the message, the flinch has a cause; say the number and stop talking covers it.
What to say when asked for a discount
Don't move the rate. Move the scope or the terms. Suppose a client says the $12,500 eight-day project is over their budget:
"I can't change the day rate, but I can change the work. If we drop the second workshop and the written handbook, it's six days, which is $7,950. Or we keep the full scope and you pay half up front, which I'm happy to do for 5 percent off."
Six days at $1,325 is $7,950. A discount for payment up front keeps the rate intact because it buys you something real, which is cash. If the client wants less work for the same money, say no and mean it.
A day rate that works is useless if nobody hears it. What happens when your best referral source stops referring explains why the pipeline needs a second source, and how many customers you need to replace your salary turns this rate into a client count. Rocketship finds the buyers, emails them from your own Gmail, follows up, and books the meeting on its own. Plans that get you customers start at $24.99 a month (Launch), and every monthly plan starts with a 7-day free trial, card required.