Negotiating rates can feel scary. It raises questions such as: how do I know how much I am worth? And how do I make sure I do not undersell my work?

The answer combines science and art. First, this article shows a magic formula that can help you set your professional rate. Then, we share negotiation techniques that can help you gain the upper hand.

THE SCIENCE: The magic formula

Our Formula

After analyzing recent survey results among Sweav members, we found the best indicator for hourly rates. It is the total number of years of professional experience. This formula applies to people with at least three years of experience.

The magic formula for the hourly rate is:

€90 + €10 x total number of years of experience +/- €25

This applies when total years of experience is more than three.

According to this formula, an experienced strategy consultant or M&A professional with five years of experience earns €140 per hour on average. That equals €1,120 per day for an 8-hour workday.

However, some charge €155 per hour, or €1,240 per day. Others charge only €105 per hour, or €840 per day. So, what explains this difference?

Do you have to aim higher or lower?

There are three essential factors to consider when applying the +/- €25 per hour. These are the client’s purchasing power, the duration of the project, and the type of project.

For example, you may work on a short-term strategy or due diligence project of three to four weeks. If the client has high purchasing power, such as a corporate or private equity fund, you should aim for a higher fee.

On the other hand, you may work on a long-term project or interim role. This role could combine strategy and operations for a start-up or NGO. In that case, you could aim slightly below average.

THE ART: Conquer discomfort, don’t sell yourself short

We surveyed our members and found that 30% felt their rates were set too low by the end of the project. In hindsight, they believed they should have charged a higher price.

In addition, respondents said they felt uncomfortable with negotiation. They also felt insecure about charging a fair price for their work, even though the usual service price is high.

The solution? Change how you see your own value. People with your skills are scarce. In addition, the labor market is very tight. Therefore, companies should feel fortunate to have you on their team. Charging a fair rate for your work is nothing to be ashamed of.

Like other skills, you can learn to master rate negotiation. As you gain experience and confidence, you will get better at it.

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