According to the Bureau of Labor Statistics, the median annual pay for a management consultant was $87,660, or $42.14 per hour, in 2020. But consulting charges are typically higher to cover business expenses. 

Consultants don’t always charge by the hour. According to a consultant fee study by Consulting Success, these are some popular fee arrangements and the percentages of consultants who favor them:

According to the study, 40.5% of consultants earn up to $5,000 per project, though some make more than $100,000 per project. The project’s size, scope and length will determine the cost.

Business consultants are a considerable expense, but their feedback and planning can help you increase business and boost profits while eliminating problems and identifying opportunities to ensure future success.

You measure ROI by examining specific key metrics to determine the consultant’s work. Most companies look at their net profits in the quarter before hiring the business consultant and then evaluate their net profits in the next quarter or two after implementing the consultant’s recommendations. You should deduct the cost of the consultancy before calculating the ROI.

Considering ROI is a crucial part of hiring a business consultant. If you’re paying a business consultant more than $5,000, you want to see an established ROI after the project. Established business consultants should be able to show their former ROI data to prospective clients. 

According to The Predictive Index, 27% of surveyed businesses chose not to hire a consultant because the consultant could not demonstrate ROI. This is the most frequent reason for companies not using consultancy services, and it falls on the consultant to use big data to demonstrate past ROI. [Learn more about big data solutions for small businesses.]

Hiring a consultant can be a significant expense. Considering that fees vary, it’s essential to establish a realistic and reasonable budget. Consider setting the consultant’s cost as a fixed percentage of your total sales. For example, if your monthly sales are $10,000, paying a monthly consultant fee of $5,000, which amounts to 50% of your earnings, might not be advisable. A 5% fee on $100,000 of revenue seems more reasonable. 

If you establish clear phases for your consulting project, you can reduce costs and risks by assessing the progress at each stage. For example, if you employ the consultant’s marketing expertise to bring a range of products to market, evaluate their efforts after the first launch and potentially apply the same strategy to the rest of your product line without needing continued services.

Many consultants will be able to assist you with determining your project’s scope and budget as part of a free consultation. This interaction can also help you test the waters and determine whether the consultant is a good match for your business needs. 

When defining your consulting project needs and KPIs, determine whether the work must be done on-site or it can be carried out remotely. Opting for a virtual consultant can broaden the potential talent pool, as you wouldn’t be tied to your local market. Additionally, it can reduce the consultant’s cost and ensure flexibility. 

When it comes to niche specialists, especially in the digital space, remote arrangements, if clearly defined, can be mutually beneficial. At the same time, some consultancy work involves working hands-on with your team and is better suited for in-person collaboration.

A small business consultancy is an online business idea you can implement quickly and easily. 

Several common mistakes can prevent you from achieving success in your work with a business consultant.

Hiring a business consultant isn’t a one-size-fits-all solution. You’ll need to evaluate your company in these key areas:

If your business is struggling in any of these areas, it’s a good idea to seek out a business consultant who’s a verified expert. If you note any declines in profits that you can’t explain, this could be another sign that it’s time to hire a business consultant who can pinpoint potential reasons for the decrease and suggest ways to remedy them.

Sean Peek contributed to the writing and research in this article.