Consulting Rates?

After applying and interviewing for a Marketing Director position at a
small high-tech company, I was told they've decided not to fund a
full-time position now but may wish me to work with them as a
consultant on specific projects. I'm open to such an arrangement, but
having never consulted in this field I'd like some feedback on what
rates might be considered standard and/or reasonable under the
circumstances.

For the sake of argument, let's say that the full-time position would
have paid $80,000. That would be $40/hour bsed on a standard working
year. Add the benefits that a self employed person must provide for
him/herself plus the other costs of part-time self employment, and it
seems to me that twice that, $80/hour, could easily be justified. On
the other hand, I know that the company views this in part as a kind
of internship in their industry, with which I am not familiar. And
they're trying to save money with the consulting arrangement.

Add this all up and I'm uncertain what to ask for or agree to. Any
thoughts would be appreciated. Thanks.

I think you'll get a better discussion by asking your questions in
misc.business.consulting.

Scott Jensen
--
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Volunteer your computer for folding-protein research for when it's idle.
Go to http://www.distributedfolding.org/ to sign up your computer.

FWIW - consultants billable time is usually computed at twice the 'standard'
yearly wage of an employee.
hth - mondo regards [Bill]

--
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email.
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"SolarCat" <Not_Revealed@private.com> wrote in message
news:bj8evb01i97@enews2.newsguy.com...
>
> After applying and interviewing for a Marketing Director position at a
> small high-tech company, I was told they've decided not to fund a
> full-time position now b[snip]

Wouldn't the rate depend on the term of contract. Do you have any idea how
long the contract is going to be for ?

"SolarCat" <Not_Revealed@private.com> wrote in message
news:bj8evb01i97@enews2.newsguy.com...
>
> After applying and interviewing for a Marketing Director position at a
> small high-tech company, I was told they've decided not to fund a
> full-time position now but may wish me to work with them as a
> consultant on specific projects. I'm open to such an arrangement, but
> having never consulted in this field I'd like some feedback on what
> rates might be considered standard and/or reasonable under the
> circumstances.
>
> For the sake of argument, let's say that the full-time position would
> have paid $80,000. That would be $40/hour bsed on a standard working
> year. Add the benefits that a self employed person must provide for
> him/herself plus the other costs of part-time self employment, and it
> seems to me that twice that, $80/hour, could easily be justified. On
> the other hand, I know that the company views this in part as a kind
> of internship in their industry, with which I am not familiar. And
> they're trying to save money with the consulting arrangement.
>
> Add this all up and I'm uncertain what to ask for or agree to. Any
> thoughts would be appreciated. Thanks.

I've no clear idea of how long. We haven't had any discussions yet
beyond agreeing in principle that a consulting arrangement is worth
talking about. They said it would be for "selected projects," whatever
that means. Potentially it will lead to an offer of full-time
employment. What differences do you expect based on the contract term?

On 5 Sep 2003 21:56:12 GMT, "Nitin Gupta" <nitingupta@sbcglobal.net>
wrote:

>
>Wouldn't the rate depend on the term of contract. Do you have any idea how
>long the contract is going to be for ?
>
>"SolarCat" <Not_Revealed@private.com> wrote in message
>news:bj8evb01i97@enews2.newsguy.com...
>>
>> After applying and interviewing for a Marketing Director position at a
>> small high-tech company, I was told they've decided not to fund a
>> full-time position now but may wish me to work with them as a
>> consultant on specific projects. I'm open to such an arrangement, but
>> having never consulted in this field I'd like some feedback on what
>> rates might be considered standard and/or reasonable under the
>> circumstances.
>>
>> For the sake of argument, let's say that the full-time position would
>> have paid $80,000. That would be $40/hour bsed on a standard working
>> year. Add the benefits that a self employed person must provide for
>> him/herself plus the other costs of part-time self employment, and it
>> seems to me that twice that, $80/hour, could easily be justified. On
>> the other hand, I know that the company views this in part as a kind
>> of internship in their industry, with which I am not familiar. And
>> they're trying to save money with the consulting arrangement.
>>
>> Add this all up and I'm uncertain what to ask for or agree to. Any
>> thoughts would be appreciated. Thanks.

I think it depends how much time one thinks it would take him to get the
next project. When you are between the projects you may want to cover
yourself at the rate of your yearly salary. For example if you the target
salary is $80K and you add say 20% extra for the cost of parttime
employment. It comes out to be $50/hr.

Now if you get a project say for 3 months and you think you should be able
cover yourself at the normal salary for say next 3 months, because you
expect it would be the time for you to get your next project. Under such
conditions you should be able to charge the 6 months salary in 3 months
project. Based on the numbers mentioned above that comes out to around $50K
for the three month or $100/hr.

Following are the factors

1) The target salary (Say $80K)
2) Cost of parttime employment (medical, taxes etc, say 20%)
3) The risk period to find a new project (Say 3 months)

Thats all I can think off right now. Has any one else has anything to add
???


"SolarCat" <Not_Revealed@private.com> wrote in message
news:bjc19q027s0@enews1.newsguy.com...
>
> I've no clear idea of how long. We haven't had any discussions yet
> beyond agreeing in principle that a consulting arrangement is worth
> talking about. They said it would be for "selected projects," whatever
> that means. Potentially it will lead to an offer of full-time
> employment. What differences do you expect based on the contract term?
>
> On 5 Sep 2003 21:56:12 GMT, "Nitin Gupta" <nitingupta@sbcglobal.net>
> wrote:
>
> >
> >Wouldn't the rate depend on the term of contract. Do you have any idea
how
> >long the contract is going to be for ?
> >
> >"SolarCat" <Not_Revealed@private.com> wrote in message
> >news:bj8evb01i97@enews2.newsguy.com...
> >>
> >> After applying and interviewing for a Marketing Director position at a
> >> small high-tech company, I was told they've decided not to fund a
> >> full-time position now but may wish me to work with them as a
> >> consultant on specific projects. I'm open to such an arrangement, but
> >> having never consulted in this field I'd like some feedback on what
> >> rates might be considered standard and/or reasonable under the
> >> circumstances.
> >>
> >> For the sake of argument, let's say that the full-time position would
> >> have paid $80,000. That would be $40/hour bsed on a standard working
> >> year. Add the benefits that a self employed person must provide for
> >> him/herself plus the other costs of part-time self employment, and it
> >> seems to me that twice that, $80/hour, could easily be justified. On
> >> the other hand, I know that the company views this in part as a kind
> >> of internship in their industry, with which I am not familiar. And
> >> they're trying to save money with the consulting arrangement.
> >>
> >> Add this all up and I'm uncertain what to ask for or agree to. Any
> >> thoughts would be appreciated. Thanks.

One correction the calculations here have done using the "% Cost of parttime
employment" as 25% no 20-% as mentioned.

"Nitin Gupta" <nitingupta@sbcglobal.net> wrote in message
news:bjela00238f@enews2.newsguy.com...
>
> I think it depends how much time one thinks it would take him to get the
> next project. When you are between the projects you may want to cover
> yourself at the rate of your yearly salary. For example if you the target
> salary is $80K and you add say 20% extra for the cost of parttime
> employment. It comes out to be $50/hr.
>
> Now if you get a project say for 3 months and you think you should be able
> cover yourself at the normal salary for say next 3 months, because you
> expect it would be the time for you to get your next project. Under such
> conditions you should be able to charge the 6 months salary in 3 months
> project. Based on the numbers mentioned above that comes out to around
$50K
> for the three month or $100/hr.
>
> Following are the factors
>
> 1) The target salary (Say $80K)
> 2) Cost of parttime employment (medical, taxes etc, say 20%)
> 3) The risk period to find a new project (Say 3 months)
>
> Thats all I can think off right now. Has any one else has anything to add
> ???
>
>
> "SolarCat" <Not_Revealed@private.com> wrote in message
> news:bjc19q027s0@enews1.newsguy.com...
> >
> > I've no clear idea of how long. We haven't had any discussions yet
> > beyond agreeing in principle that a consulting arrangement is worth
> > talking about. They said it would be for "selected projects," whatever
> > that means. Potentially it will lead to an offer of full-time
> > employment. What differences do you expect based on the contract term?
> >
> > On 5 Sep 2003 21:56:12 GMT, "Nitin Gupta" <nitingupta@sbcglobal.net>
> > wrote:
> >
> > >
> > >Wouldn't the rate depend on the term of contract. Do you have any idea
> how
> > >long the contract is going to be for ?
> > >
> > >"SolarCat" <Not_Revealed@private.com> wrote in message
> > >news:bj8evb01i97@enews2.newsguy.com...
> > >>
> > >> After applying and interviewing for a Marketing Director position at
a
> > >> small high-tech company, I was told they've decided not to fund a
> > >> full-time position now but may wish me to work with them as a
> > >> consultant on specific projects. I'm open to such an arrangement, but
> > >> having never consulted in this field I'd like some feedback on what
> > >> rates might be considered standard and/or reasonable under the
> > >> circumstances.
> > >>
> > >> For the sake of argument, let's say that the full-time position would
> > >> have paid $80,000. That would be $40/hour bsed on a standard working
> > >> year. Add the benefits that a self employed person must provide for
> > >> him/herself plus the other costs of part-time self employment, and it
> > >> seems to me that twice that, $80/hour, could easily be justified. On
> > >> the other hand, I know that the company views this in part as a kind
> > >> of internship in their industry, with which I am not familiar. And
> > >> they're trying to save money with the consulting arrangement.
> > >>
> > >> Add this all up and I'm uncertain what to ask for or agree to. Any
> > >> thoughts would be appreciated. Thanks.
>

SolarCat wrote:
> I'd like some feedback on what rates might be
> considered standard and/or reasonable under the
> circumstances.

As someone else mentioned, a starting point is 2x an employee's salary.
Then there are the factors. High-demand skills go for more. Long-term
contracts draw less because utilization is high.

A rule-of-thumb for budgeting is that you'll only spend 60% of your time
billing as a solo practitioner (and that's optimistic unless you've got
a good network of contacts); the other 40% is networking, marketing,
sales, proposals, and admin. So full-time gigs are very attractive and
have room for negotiating down.

In your case, they aren't talking about full-time contracting, so it
doesn't have the same appeal to drop the rate.

Consider starting at the 2x multiplier as a baseline rate, then decide
how much it's worth to you to get into their space (and whether this is
your sole source of income).

One approach we've used for perception reasons is to offer free hours
(e.g., 2-for-1) in special cases, rather than dropping the rate. It
makes it much easier to "raise" the effective rate later by
discontinuing the one-time deal (vs. trying to increase an hourly rate
the customer's come to expect).

As a side note and yet one more thing to think about. Whatever your rate,
remember that you should put aside 50% of your gross for the following:

1) Medical expenses, insurance, self-paid benefits, etc.
2) Quarterly taxes at 25% to 30% depending on your deductions
and rate.
3) Downtime, networking, marketing, etc.
4) Unexpected cancellation of your contract. (Yes, it happens even
if you have a nice clause in there that they must pay you x weeks
if they cancel without notice. Good luck with that!)
5) Misc. unforeseen and travel expenses.

If you do this, you will have money left at the end of the year to play
with.
I've used this rule for years and very rarely have I run into any problems
with
cash flow, although it does happen and you can't plan for everything.

Hope this helps.

David Hamilton
Author/Artist
http://www.dlhamilton.com
Co-Author
What's Killing You and What To Do About It!


"SolarCat" <Not_Revealed@private.com> wrote in message
news:bjc19q027s0@enews1.newsguy.com...
>
> I've no clear idea of how long. We haven't had any discussions yet
> beyond agreeing in principle that a consulting arrangement is worth
> talking about. They said it would be for "selected projects," whatever
> that means. Potentially it will lead to an offer of full-time
> employment. What differences do you expect based on the contract term?
>
> On 5 Sep 2003 21:56:12 GMT, "Nitin Gupta" <nitingupta@sbcglobal.net>
> wrote:
>
> >
> >Wouldn't the rate depend on the term of contract. Do you have any idea
how
> >long the contract is going to be for ?
> >
> >"SolarCat" <Not_Revealed@private.com> wrote in message
> >news:bj8evb01i97@enews2.newsguy.com...
> >>
> >> After applying and interviewing for a Marketing Director position at a
> >> small high-tech company, I was told they've decided not to fund a
> >> full-time position now but may wish me to work with them as a
> >> consultant on specific projects. I'm open to such an arrangement, but
> >> having never consulted in this field I'd like some feedback on what
> >> rates might be considered standard and/or reasonable under the
> >> circumstances.
> >>
> >> For the sake of argument, let's say that the full-time position would
> >> have paid $80,000. That would be $40/hour bsed on a standard working
> >> year. Add the benefits that a self employed person must provide for
> >> him/herself plus the other costs of part-time self employment, and it
> >> seems to me that twice that, $80/hour, could easily be justified. On
> >> the other hand, I know that the company views this in part as a kind
> >> of internship in their industry, with which I am not familiar. And
> >> they're trying to save money with the consulting arrangement.
> >>
> >> Add this all up and I'm uncertain what to ask for or agree to. Any
> >> thoughts would be appreciated. Thanks.
>