What should I charge to help assist a Network Crossover?
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@MrWright4hire said:
@Minion-Queen said:
Oh most everyone around here is "Special".
When we (NTG) do a job like this that is a one time thing. Our rates are based on a hourly prepaid block of hours. The larger the hour block they purchase the cheaper it gets. Our bottom rate is $150/hour. If they are looking of a long term contract than the bottom rate is more like $100/hour.
Hello M. Queen. As a company you may be able to justify $150/hr due to overhead cost. However, as an individual, I don't have to pay employees, vehicles...etc. I just quoted him $80/hr. He was fine with that. As I grow, pray for me, I may have to bump up the price.
Does that make sense? If there is something I'm missing, please do educate me.No, does not make sense. You have it backwards. As you are not a company you have MORE costs. You have an employee to pay, you. What $80/hr says is that you are only charging for the overhead and doing the work for free - you don't value your own professional time. As a company we are more efficient with the "overhead" being handled by full time billing and project professionals and the IT work being done by people specialized in that specific work. If it is entry level work and a company can use an entry level resource, the company can do the work cheaper. As an individual, you cannot. You can only get cheaper by devaluing yourself.
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Also, when doing work as a company there is protection - lawyers, accountants, tax professionals, incorporation and other mechanisms. As an individual you take on much more risk. You lack the mechanisms and resources to protect yourself. You need to charge far more to make up for this.
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Just did the currency conversion, yeah the $80 is insanely cheap. I'd go bust at that. Mine is $130 for comparison as standard, discounted if it's bulk hours project work but for a one hour drop in and fix something it's $130.
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To help you out, because I'm in the exact same boat.
My process for any job/task is a spread-sheet with macros, the fields are.
Freelancer cost (Am I paying someone else)
Travel Costs
Misc Costs
My cost of time per hour
Hours needed
Current costs
Sale Price
Gross profit
Minus overhead percentage costs
Minus unforseen expense costs
Minus tax
= Net Profit.It does the hard work for me, I just need to get the figures correctly, then I can price up an entire project.
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@Breffni-Potter said:
Freelancer cost (Am I paying someone else)
Just be sure to include yourself here if you are the one doing the physical work. Never treat yourself as a "free" resource or that is exactly what you become.
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@scottalanmiller - Note the bit about your time per hour above, I treat freelancers/consultants as one cost, my time as another.
Now your time per hour WILL be higher than the actual hours worked. So do include the cost of that.
Also include buffer time for when it hits the fan. When it does not hit the fan you have some cash-flow for when times are tough, It also means that if you need to work extra hours because you screwed up, or call in another freelancer, the sting is not as big as it could be.
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Nearly every IT pro who does the "testing the waters" of consulting on their own has this feeling like the cost of consulting is too high and fears that they are asking a ridiculous amount for themselves and ends up doing the IT work for free at first. If you do, those customers are lost. No customer who gets work from you for free is going to understand when you attempt to make the leap to a paid resource and you won't be able to afford to keep servicing them.
Remember that in a normal company your salary is less than half of your costs. They have to pay your taxes, HR, payroll, insurance, legal, ancillary support, real estate and more for you.
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Also remember that costs like your home office, your compute and any tools that you use are part of the cost that have to be passed on to the customer. You don't charge a one time customer the full price of Excel because you use Excel during their project. But if you need a new copy of Excel for every 150 customers then each customer needs to cover 1/150th of that software cost or you aren't covering the cost of doing business.
It's very easy to think in terms of using your own money to pay for tools, software, computers, real estate, etc. but that is not how a business operates. If you were to consult like this full time there would be no other job to supplement the revenue stream and you would quickly see that running at $80 is impossible to maintain the training, equipment, software, etc. necessary to do the job.
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Be very careful about time, treat it as the biggest expense and asset you have.
I can spend 8 hours on a job for $80 an hour = $640
Or I can spend 8 hours on a job for $130 an hour. = $1040The number of hours I can work will never increase. There are only so many hours in the day and you need to be properly rested to deliver a great service which justifies the price the client will pay. I cannot work every hour I have on site making the money, I need to be in the office doing the less than fun stuff as well OR I need to hire someone to do that. (I've suddenly doubled my annual over-heads. Yikes.)
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Think of the soft hours, the phone calls, the email answering, time that you effectively lose and cannot bill for. The paid work needs to account for this as well. The math can get a bit scary when you dig deep into it.
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And remember that a normal company (internal IT) pays for you to be there every day, whether they need you or not. You are paid a flat rate (more or less) and when you are training, having a bad day, sick day, holiday, vacation day, etc. you are still paid. When you are sitting around waiting for new work to come in, working slowly because you are tired or whatever you are still paid.
When you consult customers don't pay for vacation, holidays, training, sick days, etc. They expect you to be working at easily 400% the productivity rate of an internal IT professional (and in many cases 1,000% or more!!) so you have to account for that too. You have to build in all of that time or else, again, you are paying to work.
Companies that have staff doing the work work these numbers into the rates and it evens out over time. They figure out how it figures into an hourly rate.
There is a reason that you are close to half the rate that people are stating as a minimum. There is a ton of costs that you are eating here on behalf of the client. You are looking at them as a charity case - which is fine as long as you realize that that is what you are doing and that this isn't a job for pay but a job to help someone out. And you had better make sure that your client is aware that you are treating them as a charity case and not charging for your time because if they don't know that up front they will be pretty upset when you don't have unlimited funds to deal with issues with this work down the road.
Mismatched expectations are always bad, even when you are doing work "as a favour."
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@Breffni-Potter said:
Think of the soft hours, the phone calls, the email answering, time that you effectively lose and cannot bill for. The paid work needs to account for this as well. The math can get a bit scary when you dig deep into it.
This is why most MSPs that I see, the ones starting out without the business people involved and trying to run with just IT people who don't understand the business aspects, fail miserably. They think in terms of them doing work and forgetting the "company" and that that always exists whether they remembered to set one up or not.
Unless you are doing free work in exchange for a six pack, you are really consulting and no matter how simple you think your setup is, you have all the same overhead as everyone else.
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In the times that you are doing a favour or charity, Note the actual rates on the invoice, Then mark a substantial discount so that it is clear. When you are billing $100 for what should be a $500 job, you should make a note of how much of a saving they are getting, If they ask you to do yet "another" thing and query why the rate is so high the second time, you can point them to the favour you did. Though in some cases you might decide to donate the work completely for free, still send them the invoice with the payable total as $0. Just make a note of what you did and the list price of each time.
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@Breffni-Potter said:
Just did the currency conversion...
Did you do to USD or CDN? He's in Canada.
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@Breffni-Potter said:
In the times that you are doing a favour or charity, Note the actual rates on the invoice, Then mark a substantial discount so that it is clear. When you are billing $100 for what should be a $500 job, you should make a note of how much of a saving they are getting, If they ask you to do yet "another" thing and query why the rate is so high the second time, you can point them to the favour you did. Though in some cases you might decide to donate the work completely for free, still send them the invoice with the payable total as $0. Just make a note of what you did and the list price of each time.
This is very good advice.
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Also keep in mind that the people suggesting $125/hr might be okay are companies that have some of their staff in low cost US regions. This is one of the ways that some companies, especially larger ones, reduce cost in ways that you cannot. Look at @Hubtech or @ntg which both to you seem like big companies with lots of overhead but in reality they can cut costs dramatically compared to you. @hubtech is in southern Mississippi where the cost of labour, taxes, real estate and fuel are very low. They are able to run more cheaply than you because they offer their services from a very low cost market.
@ntg is bigger and has staff all over. For doing a project like there they have staff coming out of very low cost locations as well. Cutting overhead and making the cost of delivering services lower.
You, however, are stuck in Canada with higher taxes and higher technology costs, a lower rate currency (currently) and are in a big city (the ones with the lowest costs here are not city-based specifically for this reason) where the overhead is insanely high. The cost of you delivering one hour of consulting is drastically higher than for most of us. You have no "company" to offload the work when possible to a low cost location.
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@scottalanmiller said:
@Breffni-Potter said:
Just did the currency conversion...
Did you do to USD or CDN? He's in Canada.
WOW.
I'd need 160 dollars just for my starting rate.
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The lowest US rate was really around $125. In CAD that is $154.50/hr.
$80CAD is just $64.60USD per hour.
You are literally at half the hourly rate of GeekSquad unskilled, non-IT work.
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For this particular client, it is probably too late. No wonder they were happy with the price, they are getting you as an outsourcing firm to accept all of the risk and overhead of the work for less than they probably spend to have an employee to do the same work per hour. Companies pay a big premium to outsourcing firms because the firm takes on huge risk and is only paid while working whereas an employee has to be paid when there is work or not. But in this case, you are so cheap that they can't possibly turn you down.
Assume that this client is a lost cause, they will never be okay paying real rates, the rates needed to keep eating while doing this kind of work, after getting you for this price. Nearly everyone does this with the first client or two. Sadly, it's a burned bridge, but it is good learning. Most of any IT consulting is the business side. There are plenty of good IT people out there to do the technical work. It's the business setup, marketing, sales, billing, accounting, etc. that is hard to get and what makes all of the difference.
