What are the IT Consulting payment structures? And what structure works best for your business?
At the onset, I would say that hiring an IT consultant is already a big advantage for your business. Among many, you benefit from skipping the payments on healthcare, employee benefits, taxes, employee equipment, and training, or any in-house-related expenses.
On top of that, choosing the fitting fee structure brings further advantage. Let’s these major types and their pros and cons.
Most Americans today are paid by the hour. Many consultants may prefer to be paid hourly as well, and in some cases, daily. Pros: The good side is this is flexible and the total invoice is easy to determine. It appears affordable since it may only happen once or a few times.
Cons: But the negative side is that there are consultants who intentionally prolong hours to increase the pay. Some who are good and honest will also invest hard on self-improvement and eventually find themselves working faster, hence, they lose preference to working hourly.
Since your business needs regular consulting, you will have the tendencies to hold back calling consultants because scheduling and tracking are time-consuming, or you just want to avoid spending, or most of the time, you simply forget. Another problem is, what if you need it during outside work hours? As a layman, how will you know that tech issues are looming? In the absence of regular independent assessment, your organization will suffer from inefficiency.
Hourly lets you enjoy flexibility, but it somehow gives you certain levels of anxiety when the consultant “needs to put in more hours.” Pros: This can be solved by per-project consulting. Regardless of the hours spent, a per-project structure charges you per output.
The consultant will do an initial research and say, “I will make a proposal to improve your IT network and phone systems, and these will be the items to turn-in… and my charge is $5,000.” With a per-project contract, you will get itemized outputs and benefits. You can also pay “by milestone” or by a certain percentage of the job done.
Cons: The downside is inflexibility. Your business will surely grow, will need to change or will have evolving needs. What if there is a sudden need to transfer offices? Or implement a work-from-home policy? What if you need to suddenly down-scale a department or branch? Project-based, unfortunately, limits your speed and flexibility. The last one is what we recommend…
Some may call this retainers fee, but we call this “flat rate with ROI.” We have proven that a flat-rate consulting structure is beneficial for both consultants and clients. It starts with an initial down payment, then a flat-rate monthly retainer.
Pros: Why does this method work well? The IT consultant pitches you with fees in two parts: (1) Initial payment that covers the cost of launching the engagement, and (2) the flat-rate retainers fee that will cover the ongoing consulting work.
Best thing? You’ll enjoy the benefit of accessing their services anytime you need them. Whether the workload is heavier or lighter than usual, your business expense remains the same.
Also, the consultant will master your operations through time and will gain a better understanding of how to keep things working well. Problems are prevented before they occur, and you certainly don’t have to undergo “panic attacks.”
As a motivation, you can propose to the consultant an additional commission for increasing ROI. The better the revenues, the higher will be the extra pay.
Cons: The downside of flat-rate retainers appears to be on the possibility of “what if there are no issues to assess or no goals to consult with?” We would say that this is highly improbable because technology needs constant assessment, and constant evaluation. Among industries, technology is the fastest to evolve, and thereby the need for updates. You won’t have the time to assess these new updates whether these are applicable or relevant to the business.
Also, goals come as short-term, medium, and long-term goals. An IT consultant may have “nothing to do today” but he surely has an assignment to improve your future state. His goal is to use his tech expertise for you to reach that future state in the soonest possible time.
At Troinet, we offer IT consulting services for you to reach your desired future state such as increasing ROI, better connectivity, or enhanced operations through technology. Feel free to call us or book a complimentary consultation.