- The driving forces of consulting fees for doctors
- 4 fee structures for coaches and consultants
- Your fee should be a reflection of what you’re offering and what the client can gain
One of the toughest parts of getting started in consulting work is determining fees. There are calculators, tools, and rules of thumb that intend to help with this, but none of them are perfect and none of them can take into consideration all of the factors affecting your personal situation. Determining consulting fees for doctors is difficult for a few reasons:
- Physicians vary widely in their training and skill sets, so there is no single set of consulting fees that is appropriate across the board.
- Good data and comparisons of consulting fees for doctors are hard to come by, more so than physician salary info.
- Different types of consulting lend themselves to different fees and fee structures.
This post intends to familiarize doctors with types of consulting fees and considerations for determining a fee in order to get started with their own consulting or coaching work. It focuses on consulting offered as a side gig or small business in which the consultant provides a service that is similar in nature across all clients, for example:
- Life or career coaching
- Telemedicine startup consulting for doctors
- Financial and management consulting for struggling medical practices
- Med school application and interview consulting for applications
By understanding the factors that drive the value of consulting and the recognized payment structures used for consulting work, you’ll have a great backdrop for developing your own rates or fee structures.
The driving forces of consulting fees for doctors
There are 3 major drivers of a consulting fee for doctors (or any other professional engaging in consulting work).
1. Your time
Determining how much to charge a client is not as simple as charging them the same hourly rate you make in your regular job (more on this below). However, the concept of “what is your time worth?” should weigh heavily into your decision of how much to charge for your services.
As a doctor, an estimate of the value of your time might roughly correlate with your experience and level of specialization.
Experience and expertise aside, we all value our time differently. You might be willing to work for less if it’s work that you genuinely love to do. But be cognizant of not undervaluing yourself!
2. The demand
Demand as a driving force of consulting rates refers to how much your customer believes that your services are worth. Driver number 1 (above) answered the question, “What amount am I willing to accept for my time?” while this driver answers the question, “How much are clients willing to pay me?” The answer to this depends on why they are hiring you and what value they derive from your services.
A doctor in an expert consulting network with a very specific area of expertise, for example, can charge a high rate because there simply aren’t many others who would be able to provide the same insight. On the other hand, if the type of consulting that you’re offering could also be offered by someone without your vast clinical experience, this may drive down your fees.
3. The market
Finally, the range of rates that the market has set is a third driver of a consultant’s fee. The market rate for a physician consultant can be difficult to gauge, but it’s an important consideration in order to charge a rate that will keep you competitive in your niche.
When possible, take a look at what similar consultants are charging. These comparators don’t necessarily need to be your “competition.” Rather, they are providing comparable services in a similar way.
The market rate can also depend on physical location for those providing consulting services in a particular geographic area. Typical fees in a urban area may be different than those in a rural area.
Keep in mind that your rates don’t need to exactly match that of other consultants. Hopefully, you’ve identified something about your services that sets you apart. You can (and should) charge fees that reflect this.
4 fee structures for coaches and consultants
With the main drivers of consulting fees in mind, here are the 4 most common fee structures used in consulting work. The most appropriate one for your gig will depend on what you’re offering, industry standards, and your own preferences.
A time-based fee
With a time-based fee, you charge a specific amount per unit of time. Most commonly, this is an hourly rate, but can also be a daily rate, weekly rate, or other periods of time. This type of structure is common for physicians working as expert witnesses for legal cases.
Your client may want to agree on (or estimate) a certain number of hours for the project before you begin, or they may simply want you to bill as you go.
In determining an hourly rate, a very rough starting point may be how much you’d typically make in an hour practicing clinically within your specialty area.
A project-based or lump-sum fee
A project-based or lump-sum fee means that you charge a set amount for the work you and your client have agreed on – regardless of how long it takes you to complete. This amount can be derived from the estimated length of time that the project will take you, how much value your work will provide to the client, or some combination of these.
This can have several advantages. Both the consultant and the client are able to make accurate accounting projections. When your client has a certain budget in mind, you can tailor your consulting package to best meet their needs while staying within their budget.
For this type of structure to be lucrative, you should have at least a rough estimate of how long an engagement will take to make sure you’re charging at least enough to cover your time. You also need to have a clear agreement with your client about what the expectations and deliverables are.
A performance-based fee
A performance-based fee is determined at the end of the project based on the result you delivered. One example of the countless forms that this payment structure could take could be that the consultant is paid 5% of the calculated return on investment for the client. This structure is far less common than an hourly fee or project-based fee – at least for solo consultants. The reason for this is that it is both complex and risky.
An example of this structure in its simplest form is a salesperson making a commission for a sale. They get paid when their effort has resulted in revenue for the company.
Most consultants using this model have extensive experience in successfully delivering their services to multiple clients. They know what outcomes a client can expect and they are confident that their services will pay off. If you go this route with your own small business, be sure to clearly lay out the payment structure in writing.
A combination fee
Finally, coaching and consulting fees for doctors can be a combination of the above structures. For instance, you might charge a project-based fee, but require an hourly fee if the project takes more than a pre-determined number of hours. For a project involving document development, you might offer the initial written document plus one revision for a set fee, but state in your contract that additional revisions will be billed at your hourly rate.
This format can be helpful if you’re unsure how long a project will take or if a client is new to you.
How does a retainer fit into this?
Generally speaking, a retainer is any fee paid in advance to secure your services as a consultant. Retainers are most commonly used along with another payment structure. There is a benefit to this for both parties:
- The consultant is guaranteed a minimum payment.
- The client is assured that the consultant will be available and willing to address their needs.
A common retainer arrangement is that a consultant charges an up-front or monthly retainer, and his fees are billed against the retainer. When the retainer runs out, he bills additional charges (often by the hour). Less commonly, a consultant might charge a monthly retainer fee for unlimited access to his services during that month.
Retainer fee arrangements vary with regard to what happens if the retainer fee isn’t “used up” during an allotted period. Consultants and clients need to agree on whether those funds belong to the consultant or are returned to the client.
Your fee should be a reflection of what you’re offering and what the client can gain
Regardless of how you structure your fees, it helps to consider why you’re being hired by a client or customer. What are they getting from you or accomplishing as a result of your expertise?
You may be charging a simple hourly fee, but it is unlikely that your client is truly seeking a simple hour of your time. It is far more likely that they are seeking:
- A solution to a problem
- A recommendation for a challenge they are facing
- The answer to a question
- The insight from an expert
In expert consulting networks, for example, physicians can set a high hourly rate because they are basically offering an outpouring of everything they know (that they can legally say) about a very specialized topic. For a client who is an investment firm, this information could mean the difference between making a very lucrative investment or passing on an investment opportunity entirely. Paying for one hour of a consultant’s time pales in comparison to this – even if that consultant’s hour is expensive.
Don’t forget to consider your expenses
Business expenses deserve a short note here. Some types of consulting work are accompanied by far more expenses than others, but all of them incur some sort of expense. In most cases, these expenses will be your own responsibility as the consultant. Be sure that your fees account for these.
In certain industries and consulting types, expense reimbursement by the client is customary. It should never be expected, though. If you’d like to be reimbursed for your expenses, be sure you that you tell the client, that they agree, and that it is put in writing.
Finally, a great problem to have as a consultant is to have more opportunities for engagements than you can handle. In this case, one option is to simply turn down clients. Another option is to hire other consultants to work for you. With the latter option, contractor payments will be a substantial expense. You’ll also spend some of your own time managing and leading. Be sure to factor these expenses and time into your fee calculations.