30.2 Costing chargeable services

Fee per unit of time

The time unit used by most consultants in calculating fees is one working day, but some consultants use weekly or hourly rates. The basic consideration is simple: every fee-earning day has to earn a corresponding proportion of the total budgeted income. This, of course, is an average figure. The actual fee will be influenced by other factors, as will be shown in section 30.3.

Let us use the hypothetical example of a consulting unit described in section 35.2 and assume that the time budget of the 20 operating consultants in that unit is 190 days each and that the six senior consultants should achieve 130 chargeable days each. To keep things simple, the unit’s director and the two trainees attached to the unit do not do any directly chargeable work. Let us assume, too, that the unit’s target income is $3,898,000, which corresponds to the operating budget (total income) shown in table 33.1 (Chapter 33). The average daily fee rate will then be:

Fees for various categories of consultant

Charging the same daily rate for all consultants irrespective of their experience and seniority would be a wrong policy. Many clients would insist on having only senior consultants assigned to their projects if they could get them for the same price. In contrast, some tasks that can be done by less experienced consultants would become too costly. Most consulting firms therefore apply differential fee