CharityVillage® Research: Consultants: High-Priced Scourge, or First-Class Investment?

Resources & Library

Path: Main Street : Resources & Library : Research Articles : Feature Article

Consultants: High-Priced Scourge, or First-Class Investment?
by Warren Dow, PhD

I told ya, last December consultants are the Rodney Dangerfields of the nonprofit world: "they don't get no respect," even though they often bring invaluable skills and fresh new perspectives to help organizations develop. But I promised to return to address the more vexing questions: What about those high-priced fees consultants charge? Just how high are they? And, are exorbitant, considering that they often surpass the wages of most salaried employees of nonprofit organizations?

A) How Much?
Let's start with some of the general ballpark figures for the types of fees a small to medium sized nonprofit organization could expect to pay for some of the most common services it might retain a consultant for. Of course, a ballpark is pretty wide, and so is the spread on these fees, but there are several reasons for this. To begin, the prevailing rates will differ in different parts of the country, in accordance with the costs of living — just as mechanics' fees do, for example. Moreover, even consultants in the same geographic region may bill at quite different rates, depending upon their qualifications, training, levels of experience, efficiency, amount of overhead, or comfort level with capitalism. Finally, consultants also vary in their fee structures. Depending upon the size and nature of the project; the experience of the consultant; and the likelihood of the client changing the terms of reference midway into the project, some consultants charge flat, full-project fees; others, a per diem rate; some are on a monthly retainer; and still others keep detailed records and bill by the hour. Hence, there is no single "blue book" of standardized prices to give you.

That said, here are some of the ranges you might expect on some of those last four dimensions.

Hourly fees: are similar to psychologists' and lawyers' fees. They range anywhere from $50 to $600 or more per hour, for consultants to develop grant proposals or fundraising campaigns; analyze management problems and give strategic advice; conduct feasibility studies, and so on. Some novices may charge less, but the downside may be that they require more give and take from the executive director or senior program staff to deliver the finished product, so that time must be factored into the final expense, as well.

Per diem rates: similar to the (updated) "Rockford Files" rates for Private Investigators: from $250 to $1,500 a day, when they are on the case — plus expenses.

Monthly retainers: often in the $1,000 to $1,500 per month range, for a consultant to be "on call" for ongoing advice as needed (on public relations matters, or fundraising campaigns, e.g.).

Project fees:

To plan and facilitate a one or two day board retreat, strategic planning session, or training seminar, a consultant may charge between $1,000 and $3,000 depending on the preparation time and topics involved.

To prepare a funding or grant proposal, including the case statement: from $500 for a small one, where much of the needed information is already provided (instead of forcing the grantwriter to ferret it out, on issues like, "How well did this program work in the past?"), $1,500 for a more standard package (which can then be adapted or reworked for future funders), or as much as $5,000 or more, for a more extensive one for government or academic sources, which can take months to prepare properly (many require a scholarly literature review of similar efforts to date).

To prepare a fundraising campaign brochure: this may cost up to $5,000, including research, copywriting and production (about 50 hours of work), according to Writer's Digest rates on other forms of copywriting.

To prepare a feasibility study as a prelude to beginning a new capital campaign, or developing a new program or agency: from $15,000 to $25,000.

For Computer work:

$1,000 to $1,500 to develop a very basic website; $150/hour to update it.

And see http://www.realrates.com/rates.htm for the hourly and project rates for other types of services (ranging from technical writing to setting up new networks), which reports similar rates as non-computer consultants: a median rate $60 per hour for contractors working through middlemen; and $75 per hour for contractors working directly for clients

B) Too Much?

Is $100 per hour far too much to be paying a consultant, especially considering that even the Executive Directors of most small to medium sized nonprofits make only a third of that amount?

There are a number of factors which should be taken into account before automatically replying "Yes." They can be divided into two sets: the first concerns some of the relevant differences between self-employed and salaried workers; and the second relate to the very reasons outside help is needed in the first place.

1) Freelance or self-employed individuals need to charge more than they would if they were regular, salaried employees, for several reasons:

Unlike salaried employees, who often get other sorts of benefits (dental, extended health, etc.) and whose employers contribute matching "payroll taxes" to the Canadian (or Quebec) Pension Plans, Employment Insurance, and Workman's Compensation Board on their behalf, self-employed individuals are not eligible for such programs, and are solely responsible for providing for their own security, both in the short term (no EI between contracts, no ‘compo' for carpal tunnel syndrome) and the long term (no pension). Thus, it should be remembered that your salaried employees' total compensation packages are typically 10 to 15 percent higher than their actual salaries.

Although it may not be explicit, there is an additional 10 to 15% worth of overhead built into consultants' fees. They have to purchase and maintain much of the office and computer equipment (including to Internet connections, sometimes additional phone lines, etc.) which is freely supplied to regular employees, and they may either rent an office, or at least have to pay for more power and heat, if they work out of home. Usually, the incidental expenses of many projects (photocopying, printing or faxing materials, mileage, and postage) are incorporated into the fee, as well. In addition, there also the administrative duties they have to carry out themselves (such as preparing invoices, and submitting quarterly income tax payments), whereas within an organization these ancillary expenses of the activities of the program staff or senior managers may be hidden because they are taken up as part of the administrative assistant's duties.

Productivity must be considered, as well. Regular, salaried employees are afforded a greater comfort level and sense of security, which may make them less productive. Moreover, they have many other distractions at work. Consultants don't have these luxuries. They don't get paid for coffee breaks or lunch hours, they don't get paid to mark time during slow periods — they only bill for the time they are actually working on your project.

2) The other piece to consider in evaluating whether consultants are "worth" their fees, relates to what they have to offer — and why you need them:

For their unique skills and/or extensive experience: consultants often have very specialized knowledge (in computer networks, e.g.) or extensive training or experience which were ten years or more in the making. Some have doctorates, some are lawyers, some were Executive Directors, themselves, most keep their skills up to date with professional development courses or journals. It would cost your organization thousands of dollars and years of lost productivity to try to train one of your own employees to a comparable level; and then you would likely lose them to a competing organization. Consultants, on the other hand, can often provide training to many levels of your organization as a part of their contract, to help you develop the capacity in-house, for the next time.

For their short-term availability to help relieve your organization with an overload. The fact that well-qualified consultants are available for peak-period or unique projects (a new fund-raising campaign, e.g.) without needing a lot of screening and training time from you can prevent the workload of your permanent staff from becoming too crushing — and ward off resignations. And when their contract is up, and there isn't enough extra work left for them to do, they can be let go amicably, without fear of a wrongful dismissal suit, or undermining the morale of the remaining employees.

For their ability to innovate. Consultants can contribute fresh thinking and be very effective as catalysts for alteration and change — particularly when an organization is at a bit of an impasse, due to set ways of thinking among certain parts of its leadership. The changes they introduce may make the organization much more efficient, effective, or productive, and greatly increase its chances of getting more funding, contracts, or support in the future.

Warren Dow is a nonprofit writer / researcher / consultant now based out of Winnipeg. He can be reached at wdow@mts.net