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Advice on determining my rate
Personally, I don't worry about the travel rate. I'm happy if the client picks up all the expenses. I only charge for when I'm doing work for them. So if that is on a plane - I charge for that just like any other part of the engagement. It seems to work for me.
Great discussion. A few comments:
- I did the math, and Jim's recommended formula (x 1.4; divide by 2080) will always give a much lower rate compared to Michele's simple division by 1000 approach. In fact, it will be significantly lower.
- Jim's formula has a logical and defendable basis, whereas Michele's may seem somewhat more arbitrary. However, Michele's formula is the exact equivalent of multiplying by 1.8 for benefits and dividing by 1800 hours. This may also be defendable, depending on your circumstances.
- I would recommend starting with a benefit factor appropriate to you - 1.4 is the low end, and you may want to go higher. Do an actual estimate of your benefits - as an independent contractor they may cost you more than when you were with a corporation - so, maybe 1.8 is appropriate. Divide by 1920 instead of 2080. This way, you are allowing yourself 4 weeks vacation (which you would have got if you were working for a co.).
So, what you are doing with this approach is dividing your gross salary number by 1067 instead of 1000 as Michele suggested. Your magic number could be anywhere in this range (1000 to 1067) or maybe even completely different.
Hope this is helpful and not too confusing. Would love to hear what you think.
One other comment / question:
The discussion is about rates, but has anyone ever used fixed-price quotes for well-defined scope of work? I am considering using that (providing the basis in hours if asked for), and even including all travel and living in the lump-sum. I am fine with taking some risk - I think it will balance out over time - and it's so much easier for the client.
I know that most clients are used to negotiating on rates, and may not be open to this approach, but having been on the buying side, I would definitely prefer fixed price.
What do you think?
I will offer a perspective based on having worked with McKinsey and worked for Booz•Allen & Hamilton, KPMG, Ernst & Young, and built several boutique practices as well as been a "single shingle." Also, I've been a corporate officer and CEO of six companies - i.e., I've been "on both sides of table."
First, I generally don't quote hourly rates - I quote the engagement though my engagement price is based on my estimated hours and rates. The Client never sees that worksheet. I feel that giving the Client an hourly rate is "job shop" like. Also, if I'm traveling I normally estimate at 10 hours a day but generally give them 14 to 16 because I've nothing better to do in my hotel room.
As to what rates it depends on the nature of the work. I do everything from project "software selection" type work to high-level Strategy work. The former is around $175 to $225, the latter upwards to $400.
Also, I do "value-based" pricing if I'm using my VOGI® Strategy Methodology where I charge an additional fixed fee to use and produce a Strategic Roadmap.
I will also charge higher for a Workshop then a "standard day."
I know this is not specific and may not be of much help but this my two cents.
All the best...