How Consultants Charge Clients:

According to Stenson, all consultants use the same basic formula to determine the fees charged for their services, but clients are asked to pay these fees in a wide variety of ways. All consultants' fees are based on a daily billing rate, which reflects the value they place on one day's labor plus expected overhead expenses. In some cases, this daily billing rate—multiplied by the amount of time the consultant spends on the project—is the amount the company actually pays. But other consultants may estimate the amount of time needed and quote the client a fixed fee. Other consultants may provide a bracket quotation, or a range within which the total fee will fall. Another way in which consultants charge clients is a monthly retainer, which covers all the necessary services for that month. Finally, some consultants—especially in high-technology fields—charge on the basis of the company's performance.

  How to Select a Consultant:  
 

Selecting the right consultant for the company and the type of problem at hand is a vital part of the process. The first step is to assemble a list of candidates by getting recommendations from people in the same line of business, contacting consulting associations or consultant brokers that represent the same industry, or reviewing advertisements in trade or professional journals. Several library reference books, such as the Gale Group's Consultants and Consulting Organizations Directory, provide contact information for consultants in a variety of fields. It is important to avoid selecting a consultant based upon a current management fad; instead, the decision should be based upon the company's particular needs.

The next step is to determine, based on the nature of the problem, what type of consultant is needed. An advisory consultant analyzes the problem and turns recommendations over to the client, but is not involved in implementation of the solution. In contrast, an operational consultant remains on hand to assist the client in proper implementation, or in some cases handles the implementation without the client's assistance. Part-time consultants are generally employed full-time within their field of expertise—marketing, for example—but also offer their services to other companies on the side. They usually charge less money than full-time consultants, but they also cannot devote their undivided time and energy to the client.

Process consultants are skills-oriented generalists. With expertise in one or more technical areas, these consultants can apply their skills to any industry or organization. In contrast, functional consultants apply their skills to a particular environment; for example, a hospital facilities planner would concentrate on consulting to hospitals, rather than to other types of businesses that require facilities planning. Another distinction between consultants is based on the size of their operation. Consultants can work for large firms, small firms, or even independently. Large firms offer greater resources, but also have higher overhead and thus charge higher fees. Small firms or independent consultants may offer more attentive service, but may not have access to the precise type of talent that is required. Finally, consultants can be academically or commercially based. In general, academic consultants may be most helpful with problems requiring research or a background in theory, while commercial consultants may be able offer more practical experience.

 
 
 
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Once a small business owner has determined what type of consultant would be best suited to handle the company's problem and assembled a list of candidates, the next step is to interview the candidates. Some of the traits to consider include experience with the company or industry, availability, knowledge of the problem at hand, communication skills, flexibility, and compatibility. Since consultants are usually required to work within the corporate culture, often in times of crisis, it is important that their style is compatible with that of the firm.

After discussing the problem in detail with the leading candidates, the small business owner may opt to ask each consultant to submit a written proposal to aid in the selection process. In some cases, the contents of these proposals may convince the small business owner that the problem could be better handled using in-house resources. After deciding to hire a specific consultant, the small business owner should ask that consultant to draw up a contract, or at least a formal letter, confirming their arrangements. It is important to note that the contract should be based on negotiations between the two parties, so the small business owner may wish to add, delete, or clarify the information included. There are several peripheral issues that the small business owner may want to address in the contract, including the consultant's proposed methods of handling conflicts of interest, subcontractors, insurance/liability, expenses, confidentiality, and nonperformance.

 
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