4 Root Causes for Undercharging as a Consultant

Mar 04, 2022

Are you stuck earning roughly the same amount year over year as an independent consultant?

It's no secret that independent consulting can be a simple business model that affords consultants like you the ability to maximize your earning potential beyond what you ever thought was possible, while at the same time living your life on your own terms.

With this said, I find many consultants aren't running their businesses in a way that maximizes these three important factors - income, impact, and independence.

I find this dynamic with so many independent consulting clients as we begin coaching together.

They feel stuck and unable to break through their income ceiling without sacrificing their personal lives.

One of the reasons for getting stuck, hitting roughly the same income year after year is that independent consultants are commonly undercharging for their services. This can keep independent consultants earning around the same amount year over year, regardless of how much experience or expertise they may have.


Stuck at an income ceiling and worried the only way past it is to work more?

Here's a great example.

I had a coaching client who came to me, telling me she was stuck in her consulting business. She was making between $300k and $350k each year. She was torn because felt like she should be grateful and content with this revenue, while at the same time she knew she was capable of more.

But, deep down she wasn't happy.

She didn't want to stay in the same place in her business, making the same amount each year, when she knew she was capable of more.

She just wasn't sure how to get past that $350k ceiling.

And, she was worried she would have to work more hours in order to move past this $350k upper limit.

She didn't want to work more. Truth be told, she was already working nights and weekends. She didn't feel the energy (or the desire) to put in more hours.

As we dug into it, we realized she was undercharging in 3 main areas:

  1. She wasn't taking on work at the level she was capable of. For example, she wasn't selling work to help companies set strategy or build out longer-term roadmaps. Instead, she was taking on work where she knew for sure she would succeed like project management and program management.
  2. She wasn't charging for all of her work. We uncovered so many scenarios where she wasn't billing for her work. Why? There were many reasons, such as: she was uncomfortable with managing scope changes, she was worried that it wasn't a good time to bring up SOW adjustments, and also simply hated the billing process and procrastinated.
  3. She hadn't increased her pricing structure in over a year. She had charged the same rates (a mix of value-based pricing and daily rates) for over a year. When we dug into it, she said she had known for a long time that she could raise her rates, that the value the clients were getting was far more than what she was charging them. But, she hadn't done it. She always talked herself out of raising her rates, thinking that it just wasn't the right time. And then, months and quarters went by without her increasing consulting rates.

So, what did we do to address her undercharging in her consulting business?

You might be thinking the answer for her was to:

  • Simply raise her rates
  • Fully switch to value-based pricing or performance-based pricing from daily rates
  • Create some form of passive income so she had more time leverage

You might be surprised when I explain that we didn't dive into these strategies initially.

Instead, we focused on the four real root causes of her undercharging for consulting services. When we addressed these root causes, it helped my coaching client increase her rates by an average of 28%. That's roughly another $98,000 in her business on an annual basis.

Here are those four root causes we worked on, at a deeper level for her, so that implementing the strategies became so much more straightforward.


4 Root Causes of Undercharging

There are four root causes for undercharging as a consultant.

1. You undercharge because of the way you think about yourself

The first root cause of your undercharging as a consultant is that the way you think about yourself as a consultant is undercutting and undermining you.

How are you thinking about yourself as a consultant?

Are you thinking things like:

  • I'm incredible at what I do
  • My clients get so much value out of the work we do together
  • I'm a sought-after expert for _______________

Most consultants aren't thinking about themselves in this way.

Instead, when we dive in together, I almost always find they're thinking about themselves:

  • I should know more
  • I haven’t been a consultant long enough
  • I haven’t done this before
  • When it comes down to it, I’m just a ______

I’m telling you. I hear these types of thoughts from consultants every day.

  • From PhDs.
  • From consultants with the most specialized experience you can imagine.
  • From consultants who have had tremendous success in their corporate careers.
  • From consultants who have gone to Ivy League schools.

When you look at people on paper, you might think to yourself: "there’s no way they aren’t 110% confident, that I’m the only one who suffers from this." 

You are wrong. Almost every consultant I meet second-guesses themselves. Almost every consultant I meet suffers from imposter syndrome.

Caveat: if you are one of the few who feels confident most of the time, this is still the work for you. The self-doubts are there (because you're a human and that's how we're designed). You have to uncover those sneaky thoughts where you’re diminishing yourself.


2. You undercharge because of the way you think about your clients

The second root cause that may be causing you to undercharge as a consultant is the way you're thinking about your clients.

When you have low-quality thinking about your clients, you end up undercharging by default.

So, you want to look at all your thoughts about your consulting clients, and figure out where you're thinking that they won't pay what your work is worth, that they won't pay you what you want to charge, etc.

What do you think about your clients?

Here are some examples. When I dig into these thoughts with my private clients, we uncover they're thinking things (sometimes shocking) about their consulting clients such as:

  • My clients can’t pay that much
  • My clients are on a tight budget
  • My clients have a budget that’s already set for the year, I’d rather get my foot in the door
  • My clients will only pay that much money for one of the big consultancies
  • And for existing clients who want to extend an engagement or work on another phase, they think things like: my clients won’t want to pay more, they’re already used to this structure

I hear this from independent consultants who work with Fortune 10, non-profits, and everything in between.

All of these thoughts sound so logical and rational, right?

You've probably managed corporate budgets in the past, and know there are real limitations.

But, oftentimes you assume these thoughts are hard-and-fast facts and limitations that you have to work around or work within. And, from there you don't consider the possibility that you've either

  1. made up these assumptions and they're not facts or
  2. that these conditions can be changed given the inputs.
  • We assume consulting clients won't pay us as much as we want to charge.
  • We assume

But really, these thoughts are very logical-sounding excuses that most consultants lean on because they’re uncomfortable presenting pricing and with the possibility that they'll need to negotiate.

So when your thoughts about your client aren’t what I call “clean”, then you end up:

  • Avoiding discussing pricing
  • Hoping they offer you a rate you can live with
  • Undercutting your pricing before you’ve had a conversation with them about their range
  • Not finding a way to co-define the pricing as you build out the engagement approach
  • Delaying, delaying, delaying until you feel like you’ve painted yourself in a corner
  • Not getting creative about defining and articulating the ROI

Do you see how the way you're perceiving your clients is holding you back and causing you to undercharge?

It usually isn’t the client’s situation - their budget, their willingness to pay - that's causing you to undercharge and leave money on the table in your consulting business.

Instead, you could be undercharging because you’re using what you believe to be their situation as an excuse to avoid this topic.

Now again, I’m not saying that clients don’t have budgets or real constraints. But what I am saying is that

  1. most of the time when you don't have high-quality thoughts about your clients, you don’t really dig in to find out what the constraints are and you make assumptions and/or
  2. you use this as an excuse to not build up the value of what you’re doing to make the consulting client's ROI a no-brainer.


3. You undercharge because of the way you think about your consulting service offerings

The third root cause of your undercharging as a consultant is the way you think about the consulting service you offer.

What do you truly think about the value of what you do for your clients? I hear these types of responses from independent consultants:

  • I’m a project manager
  • I’m a program manager
  • I run workshops for clients
  • It can be hard to articulate or quantify the value I bring
  • I’m not sure what my unique offer or niche is. I’m just a ________

If your thoughts about what you offer are more tactical and less strategic, then that will be one of the root causes of your undercharging.

Because if you don’t see the full value of your services in your mind, your client won’t see them either.

Shifting your thinking about your service offerings is important so that you can start elevating what you charge and the results you deliver.


4. You undercharge because of the way you think about money

The fourth root cause of your undercharging as a consultant is the way you think about the consulting service you offer.

What are your thoughts about money?

Here are some example money beliefs I commonly hear from independent consultants:

  • Money is amazing
  • Money enables great experiences in life.


  • I shouldn’t have too much.
  • I shouldn’t take more than I need.
  • I’m making plenty.
  • I shouldn’t be driven by money.
  • It takes too much time to make more money.

I find this is usually a sneaky bucket. You may have many productive thoughts about money that serve you (you wouldn't be where you are otherwise).

But lurking under the layers in your brain you most likely have other thoughts that keep you in this cycle of making the same amount over and over again.

So, for you, this is an important area to dig into, to uncover where your thoughts about money could be leading you to undercharge.


What To Do Now That You Understand These Four Root Causes of Undercharging as an Independent Consultant

Now what?

You could be undercharging as a consultant because of one, two, three, or all four of these root causes.

It's usually some combination of all four!


You want to uncover the thoughts where you’re questioning your abilities – whether they’re blatant or sneaky. (Usually both.)


Because when you have thoughts about yourself that diminish your expertise and your capability, you undercut yourself, your pricing, and the way you present your pricing.

You try to make up for what you perceive as lacking by charging less.

And, in turn, you end up giving the consulting client a discount without even realizing it because you can’t sell something to someone that you don’t believe in.

So, for you, to put this into practice, ask these simple questions:

  1. What do I think about myself as a consultant?
  2. What do I think about myself as a business owner?
  3. What do I think about my clients?
  4. What do I think my clients are thinking about me?
  5. What do I think about my service offering(s)?
  6. What do I think about money?

Then be honest with yourself.

Find the limiting thoughts that are keeping you stuck in the same earnings bracket year over year.

I can help you if you're stuck

And many times, it can be very hard to see this for yourself.

Isn't it true that it can so easy to help other people but then you get stuck when it’s about you?

If you want help figuring out these four root causes that are causing you to undercharge, reach out for help. I’m here for you.

This is the work we do in my 90 Day Independent Consultant's Bootcamp. We implement the strategy, tactics, and mindset to transform you from a consultant into a consulting business owner so you can make more money, have more impact, and have more freedom in your life.

  1. Click here for more information.
  2. Click here to schedule a time for a coaching consultation.

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