You have formulated the perfect business plan with costs that fits your budget. But now it is time to start the process of bringing your business to life.
You’re looking to hire a project manager to represent you and your business throughout the process, but how much is that going to cost you? Project management fees depend on several factors such as the level of experience and scale of the project. There are also several ways to charge fees including invoicing an hourly rate, day rate, or charging based on the percentage of revenue.
The key here is to do your research and compare rates. As a client, you wouldn’t want to entrust the work to someone without getting the fees and payment arrangements documented in a signed agreement.
Continue reading to have a better estimate of project management fees.
What are Project Management Fees?
Project management fees are elected fees that you pay towards an individual or a firm that plays the lead role in planning, executing, managing teams, and overseeing projects. They are accountable for the entirety of the project including its outcome. While elected fees, it’s necessary to think about including it in your financial forecast.
The job of a project manager can vary according to the type of project being undertaken. Some involve large scale construction, in which one has to coordinate with various construction. Others are more digital in nature, requiring some expertise in providing consultation in business technology.
Either way, a project manager should have knowledge in financial modelling, which provides data that helps businesses make informed decisions, manage cash flows, identify risks, analyse strategies, and discover opportunities.
There are several ways a project manager can charge consulting and management fees, and costs can vary based on different factors such as:
- Expertise required for the project
- Budget, timeline, and scope of the project
- Experience level and certifications of a project manager
- Location of the project
How to Charge Project Management Fees
Hourly Fee: An hourly rate is often used for small scale projects and when there’s no guarantee how long the project will take.
Day Rate: Instead of charging an hourly rate, a project manager can also charge a daily rate for their services. This is also used for smaller projects or as an add-on to flat fee rates as a contingency for any changes in the project (i.e. projects that are taking more time than agreed upon).
Flat Fee: A flat fee is a more sensible option for large-scale projects as it allows businesses to determine exactly how much they will be paying and budget accordingly. In this structure, a project manager will have to accurately estimate the time and money it will take to complete the project to charge a reasonable fee. They also often charge additional compensation in case of a change in project timeline or scope.
Percentage: By far considered the most effective way to ensure a fair rate is by charging a percentage of the overall project cost. This is a standard structure used in construction and other projects that require more oversight and a longer or indefinite time commitment. The percentage of the costs can usually range anywhere from 1-3%.
The project management fee is a payment for the services of a project manager or consultation. It may also include incidents such as travel, accommodation, or other expenses. What a consultant can include in their project management fee scale is largely dependent on their skills and the needs of your business.
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