Consulting Fees

[Bob George]

"Derek A. Neighbors" <derek@gnue.org> wrote:

> Just in case no one has done the math
>
> 60,000 / 2080 (hours) = 28.85

In case you haven't lived in the real world, most consultants are NOT going
to be billing clients based on a 40 hour work week. The actual number will
be less than that, often far less if things are tight, and you have to pay
the bills regardless. You're also expected to keep your skill honed in that
same time, something that is not cheap in terms of time or money. Yeah,
clients don't pay consultants to train, remember? Consider that next time
you ask to go to a $1,500 out-of-town course. And please, next time anybody
wants to figure out what somebody else should be worth, don't forget to
factor in a *little bit* of vacation time.

> Now of course there are things like a normal employers benefits (and
> their tax contribution to factor in)  So say you figure in 10,000 for
> benefits and lump 10% for tax contribution and you are at 77,000 a year
> add another 10% for office supplies space etc... and you are at 84,000.

The last profitable consulting outfit I worked for charged based on a 3.2 or
higher multiplier. (My current outfit is in startup mode.) My salary X 3.2
is what clients were charged. This was based on a utilization rate of 90%+
(something we rarely hit but strived for). These rates were for the
below-average utility market.

Benefits come to much more than $10,000 per year for benefits if you
consider medical, and 401K (oh yeah, THAT) and -- hope upon hope -- some
sort of performance bonus. I don't know about you guys, but a well more than
10% of my salary goes to taxes, even AFTER deductions and all the creativity
that TurboTax can muster.

> [...]
> So I am curious to those that give consultants a bad name buy wanting
> 100 plus an hour.  Do you really think that 60,000 is paltry salary, or
> do you expect companies to burden your time without work?

Ah, well if we're going to snipe at each other here, let's see. When I'm
called in, it's usually after some FTEs (aka "headcount") have been trying
to get something done for months or years, and have failed miserably. We
usually get the job done in less than 30 days, and most of that is spent
waiting for the full timers to cover their asses and provide information
they should've had at their fingertips. Considering the money that was
wasted paying the dead weight, I think I'm a bargain. While I don't actively
encourage management to dump the bums, there are those who do. Do you expect
companies to keep you around without delivering equivalent value for the
dollar?

Slam my lifestyle, and I'll slam yours. Fun, ain't it?

> Based on these numbers anything more than 80 an hour is HIGHWAY robbery.
> As you would only be working half a year to earn 60,000 or if working a
> full year making 120,000 with full benefits etc included in the
> calculation.  I just ask that you re-evaluate bagging on 'the microsoft
> tax' if you are charging more than 80 an hour and ask are you charging
> 'the consultant tax'?

If I go in and do a job that's going to save a client $100K+ a year, I don't
think the $30-60K (not me, my company) typically charges is "highway
robbery". If they COULD do it themselves, they WOULD. We're far less than
yet another body on the payroll in the long run, and if we "don't work out",
there are no union issues, nor any HR considerations. We're just gone. The
gain is commensurate with the risk.

I have been fortunate enough to typically engage in "fixed fee" jobs, where
I get to participate in developing the project plan for the job. We charge
what we said it would cost for the project, and if we go over we eat it. The
flipside is that we charge what the project is worth, not based on the hours
it takes. If I do something once and it's worth $20K for the first client,
it is still worth $20K the second time I do it, even if I get faster at it.
You don't see Ford selling cars cheaper as they realize efficiencies in
manufacturing.

The company I'm with now does outsourcing of IT operations, so we're pretty
good at showing just how wasteful it can be to have full timers on staff
doing things like running servers, configuring software and such. Typically,
the "dedicated employees" are a drain on the bottom line. Most companies are
far better off working with a skeleton staff, and dumping the rest. The cost
of consulting, transition and communications are far less than the cost of
employees, and you don't have to pay us to keep our skills at a high level.
OK I don't actually agree with that, but that's the the other side of
Derek's rather insulting slam. It's not pleasant when somebody gets on their
stupid little soapbox and decides that the 15+ years I've spent in this
business are only worth what they bring in themselves. It also explains why
this market is getting so nasty.

Consultants charge based on the value delivered to the client. A client does
NOT (usually) bring them in when they're not needed, unless we're talking
about Staff Augmentation services and not consulting. To compare hourly
rates between FTEs and consultants is misleading at best. Unlike staffers,
things like "seniority", "loyalty" and "dedication" don't mean a thing. I
don't go to the clients' Christmas parties, I don't go on the weekend
outings, I don't hang out by the water cooler. If I'm there, I'm delivering
value. Looking around a lot of offices, I don't think everyone there can say
the same.

The hardest part of being a consultant is coming to the realization that the
years you've spent developing your skills are worth something, even if it
comes easily to you as a result of those skills. Lot's of people sneer, but
in the majority of cases I don't see the salaried people stepping up to the
task at their workplaces. Not to say that there aren't dedicated and
effective salaried employees, but consultants are kept busy by the ones that
fall down - so I don't work with the good ones in most cases.

Derek, it's very good of you to decide what constitutes "enough" for your
fellow professionals. However, I wouldn't be billed at what I am if I
weren't delivering VALUE.

- Bob