Once you’ve decided to start working as a data analytics consultant, whether it's just on the side or full-time, you likely face the next challenge: how much should you charge?
Ok, actually the next challenge that every consultant needs to focus on is how to land clients.
But, I still often get asked, "How much should I charge as a data analytics consultant?"
Now truthfully, I’ve talked to many people and consultants and asked them what they charge. I have seen people go as low as $40-50/hr., which when you consider the fact that you need to pay for benefits and taxes, is very low.
Even if you’re just doing contracting work, it’s far too low to be fair.
But that leaves the question, what should a data analytics consultant charge and how should you price?
In this article, we’ll discuss how to price as a data analytics consultant and walk through some examples to help you think and improve your long-term pricing.
How To Price as a Data Analytics Consultant
In order to properly approach the question"how much should you charge as a consultant", I’d like to break this discussion up into two sections.
First, we need to cover pricing early on as you’re growing as a data consultant and then later as you become more experienced.
And I don’t mean in terms of technical skills, but instead, your ability to run and deliver projects.
So before talking about pricing per value, let’s talk about how you should price early on as a data analytics consultant.
How To Price Early On as a Data Analytics Consultant
When you first start, you might pick up a book or two that tell you, the analytics consultant, ‘hey you need to price per the project's value.”
Great!
What does that mean? You don’t know what clients value. You don’t understand why they value it. You also don’t know if you can deliver it well. That’s why early on, I suggest most people charge by the hour and take on smaller projects.
Don’t worry, you’ll get to your 6-figure projects!
Again, the focus is on delivering value. Not how much should you charge as a consultant.
So early on, if you’re trying to decide what to price as a data analytics consultant, you should likely take your current hourly rate and multiply it by 2-3x. The only exception is if you work for a FAANG or big tech company and are making $200/hr. Don’t get me wrong, in the long run, you’ll get to 3-4x that rate, but not until you specialize or have clear productized services that you offer.
For most people, I imagine you’ll start around $125-$200/hr.
Which is a lot of money. But eventually, you’ll hit a cap where companies may not want to pay you past $350-$500 (unless you’re working with really large organizations). At least, not if you price per hour.
That's where pricing the project for the value of the project comes in!
But before we discuss value based pricing, let's talk about how pricing isn't just about money.
Pricing Is A Tool - How You Can Use Pricing To Drive Projects
The pricing range you choose can significantly influence how prospective clients perceive your work and position you in the market.
Pricing also paves the way for expectations, viability and competitive positioning.
In this way I view pricing as a tool. One that can be used to do a lot more than just increase your companies bottom line.
For example, it motivates your client to be more on top of the project. I once had a project drag out because I charged hourly and the client was distracted by multiple other projects. In turn, they only responded to my questions and inquiries when they had time. This project could have taken two months instead it took four.
It can also help the client determine whether or not the project is really what they want to focus on at the moment.
Learning how to price your projects as a data analytics consultant is so much more than just trying to make more money.
In the end, it's your way of understanding the client. If they think paying $80k is too expensive, then maybe you're not the right solution. Perhaps they should look for an out of the box option(and if you're a good consultant, you'll tell them that).
You can still be useful, even if you are too expensive.
But that's a different article. For now, let's dive into how you can price per a projects value as a data analytics consultant.
How To Price for Project Value
Now truthfully, you need to eventually stop thinking about price per hour and eventually think about pricing a project for the value of the work. Now value is hard because it means different things for different people.
For example, recently I went to NYC with my wife, and she went shopping and came back with a $100 candle. I was shocked. Candles can cost $100 and my wife is the type of person who buys candles worth that amount!
Can’t we just buy a $20 candle? Doesn’t it serve the same function?
Pricing per value means you consider all the value you offer. Meaning you need to include the entire experience.
Here are at least a few pillars you can use to determine the value of a project.
Speed
Cost
Expertise/Experience
Quality
Risk reduction
Tangible outcomes
Below we’ll go through a pricing example, the different benefits you bring, and why pricing per value is really so much more than hours worked.
Examples of How To Price As A Consultant
Here is an example I often give. Let’s say you need to set up a client’s data infrastructure. If they are talking to you, that means they might want to avoid hiring someone. Because they could always hire an employee full-time and pay them $120-150k a year (plus benefits and taxes). They also can’t fire that person easily, not without looking bad or possibly getting sued. I’ve also seen instances where a company hires a “Director Of Data Engineering” that they pay $225k only to find out that that director is more of a “hands-off” kind of person. So that director hires another employee $100k to do the actual work.
Yikes!
So knowing that you as the consultant being hired bring several benefits and values, here are just a few:
Experience - If you’ve built data infrastructure from scratch multiple times, you’ve got a great perspective on how to pick and implement effectively.
Speed - Instead of spending months trying to hire someone who’d likely take 2-3x as long as you would to set up the data infrastructure because they don’t have the experience referenced in the last point, they could hire you to deliver the work in 3 months.
Terminal - At the end of the day, once the project is done, it’s done. They don’t have to pay you anymore, and there is no hassle when the contract ends. That’s a huge value add.
Trust - If you have a brand or provide some level of guarantee, that also makes your service worth more!
You’re not just giving them the value of the solution itself but also the value of your experience and the fact that once you’re done, you’re done. They don’t have to pay you more. You likely just saved $200k there alone.
Also, if you picked the right tools, perhaps better than a less experienced employee, you could have saved $50-100k as well.
Do you still think this project which likely took about 3 months at 160 hours a month was only worth about $48k? It was at least worth 100, if not $150k. But I know people who would have charged $30k.
Don’t discount yourself!
Building a Value Proposition - How Much Should You Charge As A Consultaant
Saying all these numbers isn't going to be enough to truly demand $150k for a project. You will need to craft a strong value proposition. It's is essential for standing out in a crowded market. Your unique selling proposition (USP) is what makes you different and more appealing to potential clients.
Part of this can come from creating a brand, such as the Seattle Data Guy. But here are some other tips and methods you should use so you can demand a higher price as a data analytics consultant.
Case Studies and Testimonials
Demonstrate your value through concrete examples of past successes. Case studies provide potential clients with detailed insights into your problem-solving process and the tangible results you’ve delivered. Testimonials offer social proof, showcasing the positive experiences of your previous clients.
Comprehensive Solutions
Position yourself as more than just a service provider. Offer comprehensive solutions that address your clients' specific needs. This might involve bundling services together or providing end-to-end solutions that save clients time and resources.
ROI Focus
Clients want to know what they’re getting in return for their investment. Highlight the return on investment (ROI) your services provide. Whether it’s increased revenue, cost savings, or improved efficiency, make sure you communicate the tangible benefits clearly.
Client Experience
The experience you provide your clients from the initial contact through to project completion can be a significant differentiator. Focus on delivering exceptional customer service, being responsive, and exceeding expectations. A great client experience can often justify higher rates.
Brand Trust
Build a strong brand that clients can trust. This involves consistently delivering high-quality work, maintaining professionalism, and establishing a reputation for reliability. Trust can significantly influence a client's decision to choose your services and be willing to pay a premium for them.
By developing a robust value proposition, you can effectively communicate the unique benefits of your services, justify your rates, and attract clients who value quality and expertise over cost
So Where Will You Start?
Many analytics consultants will undercharge when they first start consulting, partially because it’s hard to decide what the right price is for analytics consulting but also because of a lack of certainty and confidence in delivering work.
That’s fine when you start; your focus should be on gaining experience.
However, as you grow and learn, it’s important that you start to understand why clients are paying you and the value of your work.
Hopefully, this helped provide some insight into that!
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