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Saturday, March 24, 2007

Hourly Rates: The Difference Between Discount and Retail Rates

Network consultants often worry about hourly rates and service agreements during business start up. How will their retail hourly rate be relative to the hourly rate in the service contract?

Many consultants will use a discounted hourly rate when starting a service contract with a client. This discounted hourly rate encourages a client to start a long-term relationship. But network consultants need to make sure the hourly rate is set so they can afford to offer a discount.

Setting Hourly Rates

When setting a retail hourly rate, network consultants should consider offering lower or waived minimums and premiums to valued, long-term service agreement clients. The hourly rate structure should allow for this from the beginning.

The following factors are important when setting hourly rates:

1. The first year’s expenses;

2. How hourly rates relate to salaries;

3. Sales commissions;

4. The hiring of subcontractors and additional staff;

5. Affordability of revenue-sharing arrangements and referral fees.
An hourly rate structure should provide something additional for the network consultant after rates are discounted for service agreement customers.

Hourly Rates: Sales Agreements and Discounts

If 85% to 90% of a network consultant’s business is coming from sales agreements, 85% to 90% of clients are being discounted. Therefore, the new discounted hourly rate needs to be high enough to offer a discount. Setting an hourly rate right from the beginning will foster trusting long-term client relationships and make for a profitable business.

Created By: Computer Consulting Kit