Basic pricing methods
In the practice of counseling, there are various methods for setting prices. Based on the specifics of the relationship between the consulting firm and the customers of the project services, the following methods of setting the rates are recommended.
The fee for a unit of time. The most commonly used method is the price assignment for the time spent on the project work for clients. In most cases, an hour is applied per unit of time, but it can also be a working day (8 hours), a week or a month (when carrying out project tasks that require a long time).
Prices are recommended to differentiate by levels or categories of staff of designers. If you establish the same time-based payment for the service provided by the projectors, regardless of experience, academic degree and rank, you can face significant difficulties. Many customers will insist that their tasks are entrusted to perform only to more experienced and qualified projectors, since they will still have to pay equally. At the same time, some tasks that require less experienced specialists for their implementation will be too expensive. Therefore, most of these firms differentiate rates for designers of different categories. The ratio between the fee for services rendered by highly qualified and ordinary specialists can reach 4: 1. The work of research assistants and junior professionals can be paid at even lower rates
The main advantage of this method is the ease and clarity of calculating service fees and processing invoices.
However, the time fee for services has its drawbacks. The customer is charged for hours worked, and not for the work done. Therefore, he has to trust the professional honesty and competence of his performer. Or he should monitor the progress of the task, and in sufficient detail to ensure that he pays not only for the time spent, but also for the products stipulated by the contract.
Payment depends on the result. Prices that depend on the result, or so-called unexpected payment, have one or both of the following two characteristics:
1) the service is paid only after receiving certain results - the production of project documentation or the implementation of the project in practice;
2) the size of the fee depends on the size of the results obtained (savings, profits) when the project is implemented.
Theoretically, this method could be considered an ideal option for paying designers and their material incentives: they pay not for the time spent, but for the results. Payment is made only when the results obtained are real and measurable, and there is an acceptable dependence between the money paid and the results obtained. However, in practice, a number of problems arise:
- the designer can concentrate on easily achievable short-term improvements that give immediate savings, while refraining from effective measures, the effect of which does not appear immediately (for example, preventive maintenance, personnel training, etc.);
- It is often very difficult to determine and measure real results. In this case, the parties can evaluate them in different ways, which can lead to friction and conflict;
- sometimes the planned results are unattainable through the fault of the client, and the designer can not do anything;
- it may be difficult to pay the designer, if the results of his work will be manifested only after a long period of time after the assignment.
Considering the foregoing, when providing design services to commodity producers, the wide application of this method is difficult. However, this approach is recommended to apply to certain special types of tasks. For example, a financial management project designer can accept a payment for a result if he helps the client negotiate in a merger or acquisition project. The designer is interested in ensuring that the results are most favorable to his client and at the same time acceptable to the other party. Since the financial results of negotiations can be measured, in this case the payment for this type of services is guaranteed.
Fee for the project - most often the amount of payment for the project (for example, the cost of developing an advertising campaign or optimizing the organizational structure of the enterprise). It does not take into account how many consultants and what qualifications will work on the project. Even if the cost calculation is carried out by a consulting firm on the basis of the daily rates of the consultants involved in the project, only the final amount is negotiated with the client-customer. At the same time, the terms of the project are stipulated, and if the consultant exceeds the agreed time limits, the work is not paid additionally.
As a rule, the contract specifies additional costs: for business trips, long-distance calls, etc. If they are not agreed, they are paid by the consultant. If additional involvement of a specialized organization is required for the implementation of the project, for example, for focus groups (this is expedient, since it saves time, because the work can be carried out in parallel), their payment is agreed in advance, or made by a consultant.
A premium fee may be provided: it is paid by the client in the event that the agreed results are achieved or if the project is evaluated positively. The size of the premium is usually 30-50% of the principal amount.
Partial prepayment of services at a rate of 20-50% of the basic sum is practiced. The final calculation is made after the completion of the project. In the event of termination of work on the initiative of the client, the payment is recalculated on the basis of the really expended time in comparison with the stipulated. Early execution provides for full payment.
This system stimulates the fastest execution of the assignment by the consultant. It is used by most consulting firms and part of independent consultants.
Payment for the duration of the project. The deadline for the project is specified. Weekly payment of the consultant's services is provided in a certain amount (reaching a certain final amount). Additional services and costs are similar to the previous payment system.
Provision is made for a premium fee if the client-client evaluates the results of the consultant's work. For evaluation, a certain period or certain conditions are assigned (for example, two months after project implementation). The size of the premium is, as a rule, 30-50% of the principal amount.
There is no prepayment in this case. Termination of work on the initiative of the client is similar to the previous system of payment. In the early implementation of the project, the actual time spent by the consultant is usually paid. The extension of the terms can be paid additionally by agreement with the client-customer, if it occurs through his fault.
The system more stimulates the client-customer to save the time of the consultant. It is used by a part of consulting firms and by most independent consultants.
Perhaps any of the previous systems, but with an additional dependence on the size of payment on the qualifications of the consultants involved. The services of experienced consultants are more expensive, the choice is offered to the client-customer.
Some consulting firms are beginning to use this payment system recently.
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