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Advice on determining my rate

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Dan Zautis
Patina Nation Member Forum Admin
Joined: 3 years ago
Posts: 27
Topic starter  

How did you determine your rate and what factors did you consider? A specific formula? Benchmarking?


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Holly Johnstone
Patina Nation Member
Joined: 3 years ago
Posts: 6
 

Hi Dan,

Great question! My rate varies depending on a number of factors - complexity of the project, where the client is located (coasts, or local), what peers are charging for similar work, etc. You'd think that for virtual clients on the coasts, you would need to charge less because you're usually not required to travel and they have access to unlimited resources (supply/demand), but I've found that larger clients on the coasts are used to working with consultants (who generally charge more than I do) and my Milwaukee clients pay less and usually want you to physically be on-site (which makes it difficult/impossible) to have more than one client at a time if you're in the position to manage multiple clients simultaneously. I hope this helps!

Holly Johnstone


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Rick Planos
Patina Nation Member
Joined: 3 years ago
Posts: 10
 

It truly depends on the project. I suggest asking peers first in your industry. A few things I have encountered:

there is a sweet spot for each project. Go too low and you are seen as a rookie, go too high and you price yourself out of the equation. 

Be willing to negotiate, some. If they want you but can’t afford you it’s not a crime to negotiate

dont get offended if the client or middle man asks you to rethink your number, it’s usually a sign they like you

good luck! 


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Holly Johnstone
Patina Nation Member
Joined: 3 years ago
Posts: 6
 

Great adds Rick - I forgot to include the negotiating aspect - good call. Have a "lowest" rate in mind, but go in with what you think is fair for that project/industry/client.  You want to try not to overcharge or undercharge a client - I've accidentally done both -- and they both leave you feeling bad for different reasons.  But, those experiences also gives you more data to get it right the next time. 

Holly Johnstone


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Jim Thomas
Patina Nation Member
Joined: 3 years ago
Posts: 4
 

I establish a "gross rate."  I look at what I was getting paid annually all in  e.g. salary, bonus, commission as an employee multiply it times 1.4 (benefits are usually 40% of total comp) and divide it by 2080 to get my hourly rate.

This gross rate is the rate I use in my Statement of Work (SOW).  I also estimate expenses e.g. travel/overseas phone in  the statement of work and bill them at actual.  Anything over and above would require approval >$500.  Actual should always be lower (within 20%).  Deliverables in the SOW are just as important as the rate.

I then provide the client  a discount % from the gross rate depending on the competitive nature of the relationship, whether I see it as a strategic client,  one in which I will get ongoing projects or if it may be a retainer relationship.  This is not science it is art.  Keeping pricing more complex increases project profitablility.

 


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Dan Zautis
Patina Nation Member Forum Admin
Joined: 3 years ago
Posts: 27
Topic starter  

Good ideas, Holly, Jim & Rick. Deb S. has some thoughts here, too, in this webinar replay if anyone wants another point of view:  https://www.patinanation.com/professional-development/webinars/boost-your-coaching-revenue-through-increased-client-retention/

 


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Michele Emerson
Patina Nation Member
Joined: 3 years ago
Posts: 3
 

I was once told to take my total compensation (base salary, cash bonus, value of annual stock award) and divide by $1,000 to get an hourly rate.  I did not include benefits.  It has been quite accurate to what others doing a similar type of consulting are charging. If work is coming through an agency, I negotiate my rate lower to something we both feel comfortable with. Has anyone else heard of using this calculation?

I usually charge an hourly rate, but charge a daily rate when facilitating.

I have not charged for travel locally (mileage), but would negotiate travel costs if asked to travel outside of the city I am working in.


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Holly Johnstone
Patina Nation Member
Joined: 3 years ago
Posts: 6
 

Hi Michele,

I wasn't familiar with that formula, but I just did it and it comes out to the lower end of my rate options. (I was worried I'd be way off!). I agree that it's pretty competitive with what others are doing. I also don't charge for local travel, but charge actual costs for client travel out of town and try to use hotels where my clients have discounts to save them money.

Holly Johnstone


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Michele Emerson
Patina Nation Member
Joined: 3 years ago
Posts: 3
 

I am actually encouraged by you saying the formula was on the lower end.  I also have been hearing that some of my colleagues are higher, but clients many times push me to be lower.  Makes me feel like I am somewhere in the middle.  I think the calculation also depends on how long you were at your prior employee and how well you were paid compared to others in your industry.


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Holly Johnstone
Patina Nation Member
Joined: 3 years ago
Posts: 6
 

And how long you've been consulting - I have been consulting for 15 years, so I had to go back 15 years for an actual salary and then try to adjust to what I think it would have been now. (Didn't factor in growth in my industry, which would have made it even higher). But I think your formula is a good one! If I were starting out, it would definitely be a valid way to calculate. Oh, and you should probably factor in where you're consulting. You'll get paid more by companies based on either coast or in larger cities than you will in smaller Midwest cities.

Holly Johnstone


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Jim Thomas
Patina Nation Member
Joined: 3 years ago
Posts: 4
 

Lucky for me I go between consulting and working > part time so have a good market sense.  I find the corporate gigs pay more, but don't want  a headcount.  Most of my work is for manufacturers $50M-$200M located in the center  of the USA not the coasts.


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Jim Thomas
Patina Nation Member
Joined: 3 years ago
Posts: 4
 

Lucky for me I go between consulting and working > part time so have a good market sense.  I find the corporate gigs pay more, but don't want  a headcount.  Most of my work is for manufacturers $50M-$200M located in the center  of the USA not the coasts.


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Andre Luecht
Member
Joined: 3 years ago
Posts: 1
 

Is anyone quoting an hourly number if travel to/from the site is required? I actually prefer daily rates in these circumstances. Thoughts?


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Eugene Baxendale
Patina Nation Member
Joined: 3 years ago
Posts: 3
 

Sorry, I just noticed this conversation. I established my base rate similar to Jim's, using my last salary, bonus and benefits and dividing by the 2080. Estimated not-to-exceed expenses are spelled out separately. Then, like everyone else has noted, that base rate can be adjusted based on scope of the work, client, locale, etc.

One adjustment I make regarding travel:  If I estimate that I will be using 250 hours and that my travel hours will be 25 hours (10%), I'll increase my base rate by up to 10% and not specifically charge for travel time.


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Michael Karaman
Patina Nation Member
Joined: 3 years ago
Posts: 1
 

The calculation that Michele Emerson lays out gets me to the hourly rate that I've been charging. I adjust that rate up or down depending on company size (i.e., a start-up is typically less able to stomach a higher rate than a multi-national company), the type of work (i.e., a higher rate for Board-level work; my base rate for strategic work; a lower rate for operational projects), and then a discount for duration. I do not bill for local travel, but bill for travel expenses (not travel time) outside of my metropolitan area. I have been fortunate to not have to compete with other consultants, but that could depress your rate in a competitive environment. I may also apply a slight discount to my hourly rate if it is an interesting engagement and I believe it could turn into something larger.

This post was modified 3 years ago by Michael Karaman

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