Our company is a small design and manufacturing firm whose clients are split about evenly between commerical and government work. We have heard from the gov clients that our service charges are low-to-moderate, while several of our com clients have remarked that it's outrageously high. Based on my prior work for a government contractor, I think it's reasonable, but I have had limited experience with the charging/billing end of things...So a question for the group. What is your education, experience, and a rough idea of what you, or your company, charge(s) for your time?
Replies to the group are fine, but if you want to email me, use
snipped-for-privacy@m-s-i.com removing the footware.
As an individual consultant I used to charge $50 an hour - it would now be 50 euro an hour.
Some time ago (Sep 22 1998, 3:00 am ) I claimed that Winfield Hill discouraged clients by charging $75 per hour. Spehro Pefhany and John Woodgate both claimed that this was on the low side, which t would be if you had an office and some tens of thousands of dollars of test equipment and CAE programs to support.
There is a very simple rule of thumb: Charge at least twice what you would earn per hour in a salaried job doing the same functions. Example: You're earning $80K with two weeks vacation, making your hourly salary $40. Your consulting rate should be at least $80 per hour. This covers SE tax, IRA, health insurance, liability insurance, supplies, electricity, and all the other things that a traditional W-2 employer would pay for you.
You can further fine-tune your fee schedule by analyzing opportunity costs. Could you be earning more by doing something else in those same hours? My hourly rate is adjusted up from the result I get by applying the above heuristic because the most lucrative thing I do on a dollars-per-hour basis is writing. So I adjusted my consulting rate to reflect the fact that hours I spend on consulting projects can't be spent writing.
Consultants' fees are all over the place. For a given job (fairly simple stuff, nothing specialized) I've been quoted a spectrum from $35 per hour (this guy estimated it would require 16 hours work) to $125 per hour (this guy estimated it would require 56 hours work). The cheap guy doesn't always get the job.
Usually I charge zero, which means I can enjoy the engineering. Or it means I can say no, I'm too busy. :>) But if I agree and put all my effort behind a task, I have charged as much as $275. That may seem a lot, but I know others who charge much more, and who've suggested my rate (which doesn't include office or lab overheads) is too low.
One thing to realize about a consultant, he's not simply charging for his time, but for his knowledge, the time aspect merely being an accounting of how long it takes to disgorge the relevant facts, knowledge and wisdom, or to quickly find them. Alternately, as an engineer working on an emergency problem, where quick and reliable results are required, and one's full attention is required, a high price is appropriate to insure attention and avoid any feelings of resentment for the inevitable disruption. A week of hard work can bring me $15k, but after I feel good about a job well done, and so does the client who hopefully has a good result, worth far more than his direct cost.
If the task is not an emergency, and perhaps not worth a great deal to the client, basic engineering say, it's likely not worth $275/hr but closer to the usual engineering pay scale, say about $75/hr., including personal overhead costs. I know many engineers work for less, which is fine, but they may not be happy about it, and may feel exploited. Of course, local living costs are a strong factor.
When I was just starting out I got a contract. As the work proceeded and I became friendly with the client, I inquired as to why they picked me... "You were the highest bidder, so we figured you knew what you were doing" ;-)
...Jim Thompson
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| James E.Thompson, P.E. | mens |
| Analog Innovations, Inc. | et |
| Analog/Mixed-Signal ASIC\'s and Discrete Systems | manus |
| Phoenix, Arizona Voice:(480)460-2350 | |
| E-mail Address at Website Fax:(480)460-2142 | Brass Rat |
| http://www.analog-innovations.com | 1962 |
I love to cook with wine. Sometimes I even put it in the food.
Everyone was back in the lab struggling over getting the circuitry in an exercise machine to work, particularly a portion that included a strain gauge amplifier.
The device had to be in Vegas the next day for a trade show.
So they said, "Thompson, here's our problem, how do we fix this?"
I allowed as to how I had addressed this problem many times over the years and I knew exactly how to fix it.
But the fee would be $4000, since it had taken me quite a struggle to develop the technique.
They balked. I walked. They chased after me.
"We'll write you a check right now for $2K, if it works, we'll write another $2K check."
"OK"
I scribbled the schematic on the back of the check envelope.
The tech had it built and running in 15 minutes.
They wrote the second check ;-)
...Jim Thompson
--
| James E.Thompson, P.E. | mens |
| Analog Innovations, Inc. | et |
| Analog/Mixed-Signal ASIC\'s and Discrete Systems | manus |
| Phoenix, Arizona Voice:(480)460-2350 | |
| E-mail Address at Website Fax:(480)460-2142 | Brass Rat |
| http://www.analog-innovations.com | 1962 |
I love to cook with wine. Sometimes I even put it in the food.
Actually, this makes perfect sense - he had priced himself into the wrong group. What few contractors realize is that the billing rate is a
*key* filter when culling the first round of candidates - before we even bother reading the resumes.
As a hiring manager, I have the choice of: a) picking from a generous selection of candidates in the "right" price range (i.e., who are experienced enough to know the market rate for their skills) b) culling through a huge pile of crap trying to find someone with the right skills that has inadvertently underpriced themselves (i.e., someone who's ignorant of their market value [warning: inexperienced!] and may jump ship when they find a better deal)
Option B takes much more effort, carries more risk, and may not be sustainable. Option A is more expensive but lower risk and likely more stable - as long as it meets our budget for the role, that's good enough.
The staffing firms will work the same way - if I tell them I need someone $70-85/hr, that's what they'll filter for. They have no interest in presenting someone cheaper than I'm willing to pay.
Our expectation of contractor rate is based on years of culling resumes, interviewing candidates, and then living with those decisions. Outside our realm of direct experience the rate range broadens, but it still has the same basis.
When justifying the expense to middle management, the discussion revolves entirely around the cost (they aren't concerned with the skillset, and wouldn't have a clue anyway).
When going to the staffing firm, a collection of keywords are provided, along with a description of the role and a desired range - e.g., -. So, we'll never even see resumes that are priced too low.
So, the best thing a contractor could do is market research on billing rates to get them into the right range. For individuals, the contracting firms can usually provide guidance on this as well.
As already commented, the rate needs to be 2x a corporate salary to allow for time between projects and overhead expenses. Long-term projects are either gravy, or allow for lower rates. Very short gigs or specialty skills (e.g., intense troubleshooting) can demand much higher rates.
A few years ago we hired a consultant to help push along a design. His rate was $90/hr., though because we had to hire through a outsourcing firm, it cost us $117/hr (27/hr. into the bit-bucket).
That is a very good number. The above consultant figured it much the same way. We got to comparing his costs vs. what I was making and what the company shelled out for me. Though $90/hr. seemed like a lot of cash, our numbers weren't all that far different from each other. My L&B rate ("funny-money" charged to the project) is a bit over 2x (maybe
2.5x) my salary.
...and how hungry you are. ;-)
The consultant told me that he had recently raised his rates from $75 to $90 and his demand grew, as it did a couple of years earlier when he went from $50 to $75. Go figure. ;-)
Been there, done that. You gotta be able to gauge the urgency and have the guts to charge what you think it's worth to them.
My best deal worked out to $5000/hr. Customer had an urgent, chronic, customer-impacting problem. I guaranteed a fix for $5k, figuring it couldn't take more than 2 days at worst. Walked in with the test gear and the right experience, and left an hour later.
Here engineering exists to help manufacturing customers, its pretty much a break-even operation at best. $55/hr we charge helps cover the cost of the engineer. So basically, any less than that and you'd be losing money.
I should add, that I often have customers balk at the low price (good for us as we aren't looking for tons of engineering work). I can understand that viewpoint, after all, my neighbor's dog will poop in my yard for free, that doesn't make it a good deal.
However, our low engineering price is great for existing manufacturing customers, it kind of a added benefit to them and that is all we want to do.
I don't like to tip my hand with regards to my actual cost to do a job. I can bid jobs cheaper than other engineers, but I like to keep my per-hour rates high. It keeps clients from wasting my time and it keeps the competition guessing about what tools and processes I use to achieve my level of productivity.
I've had a few people offer to hire me (and a few friends of mine as well) as contract employees just so they could watch us work and figure out what the tricks are. I just tell them that I send everything to my subsidiary in India. ;-)
--
Paul Hovnanian mailto:Paul@Hovnanian.com
------------------------------------------------------------------
Due to recent budget cuts, the light at the end of the tunnel has
temporarily been turned off.
I do the work on my premises and appear at the customer's site only for design reviews.
...Jim Thompson
--
| James E.Thompson, P.E. | mens |
| Analog Innovations, Inc. | et |
| Analog/Mixed-Signal ASIC\'s and Discrete Systems | manus |
| Phoenix, Arizona Voice:(480)460-2350 | |
| E-mail Address at Website Fax:(480)460-2142 | Brass Rat |
| http://www.analog-innovations.com | 1962 |
I love to cook with wine. Sometimes I even put it in the food.
As do I. But I'm amazed at how many outfits want to hire me to come in and work for them on a per hour basis. My hourly rate for such work is much higher than the rate I quote as a part of a bid job for associated meetings just to discourage such nonsense.
--
Paul Hovnanian mailto:Paul@Hovnanian.com
------------------------------------------------------------------
ASCII stupid question, get a stupid ANSI!
--
| James E.Thompson, P.E. | mens |
| Analog Innovations, Inc. | et |
| Analog/Mixed-Signal ASIC\'s and Discrete Systems | manus |
| Phoenix, Arizona Voice:(480)460-2350 | |
| E-mail Address at Website Fax:(480)460-2142 | Brass Rat |
| http://www.analog-innovations.com | 1962 |
I love to cook with wine. Sometimes I even put it in the food.
Never for the travel time. Always for billable work done en route (e.g., in the airport). Except when driving, it's usually possible to do something billable in transit.
From the buyer's perspective, you knew the travel overhead when you bid the job. Travel expenses (airfare / hotel) are usually explicitly covered in the contract (and paid by the client in most cases), but time for pure transit is virtually never billable.
Two angles - as a buyer, I don't care. Wardrobe needs to be on par with the company code (e.g., "business casual" is typical - dockers & polos). If someone dresses sharp (regardless of suit), they definitely make a better impression regarding attention to detail (a tie breaker maybe, all other things being equal). It would never affect their rate.
As a former consultant, the goal was always to dress one notch above the client. If they wear jeans, you wear slacks; if they wear polos, you wear shirtsleeves; if they wear ties, you wear a tie & jacket. It never caused a direct increase in rates, but it helps ease the pain of a "high" rate when you present yourself more professionally than they're accustomed to.
But overdoing it can be bad - first, you might just stand out like a clown. It can make you seem unapproachable, and the client may feel awkward because you're clearly besting them. And if a technical person is dressed too well, they'll be labelled as a marketing weenie by the tech folks and won't be respected from the start.
I'll state the obvious that good hygiene is paramount (amazingly, a frequent failure); I've had some candidates I couldn't get within 6 feet of for body odor or unbearable breath. Absolutely a deal killer.
I charge *way* too little. I guess I'm dumb but I like working for the interesting small companies that can only afford modest rates. Also I only actually know poor companies ! ;-)
My top rate - working directly for the client, no agency - is still £25 / hr.
When I was working for a firm of consultants way back , they used to 'charge me out' to clients at £42 / hr and that was 15 yrs back. Inflation is historically around 100% per decade so that would be about £100 / hr now or more ! WOW ! That's insane ! On the other hand if you can get it it's GREAT ! In that instance the company did obviously provide nice services to the client including super offices for meetings with a proper conference room and filter coffee on tap of course. Pretty girl in reception etc.... Plus you're also indirectly paying a small amount for the back-up support and admin staff too.
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