Monthly Archives: April 2013

Question on fees…

As a follow up to an earlier post on LLCs, reader C asked about fees. Here is my response:

Hi Daryl,

Thanks for the advice on LLCs…

Another quick question — how do you go about setting up your fees?


Hi C,

Glad my advice helped. Still remember the questions I had many years ago and how others helped me.

Ah, fees. The number two question I hear, after “How do I get clients?”

I plan to do some detailed posts on fees, but here are some quick comments:

– Three popular methods are hourly/daily, project based, or value based. Starting out, you’ll likely use a combination of hourly/daily and project based fees.

– You will need to establish an hourly rate for internal use. It is also helpful when someone just wants a few hours of your time. For longer term projects, you want to move into project based fees.

Most people want to know a project estimate, not your internal billing rate. Think like a remodeler — how much will it cost to redo my bathroom? Not, how much do you charge by the hour?

– Incidentally, value based fees are great if/when you can get them. I think they are better suited for management consultants, where you can charge based on anticipated ROI.

This is a bit harder for technical consultants, which is where you would seem to fit. In those cases, most people want a solution to a specific problem, and want an idea of the overall project cost.

– Back to the hourly rate. You fee should include your salary, overhead, and a profit.

For a very quick estimate, take your existing salary and multiply by 2. Then add a profit of 20% — after all, you are in business and entitled to a profit. These numbers are typical of many businesses today, and should put you in the ballpark.

As such, this is what it would cost a client if they hired you outright (except you get the profit…) These figures can be refined, of course, but are a good place to start.

So, if your salary is $100,000/year, figure $240,000. Divide that by 261 days, and you have a daily rate of¬† $920/day or $115/hour. This is a MINIMUM — if you work for less than this, you might as well stay employed.

Even if you are part time, you should shoot for this as a minimum, as the market already shows you are worth this to an employer. You can use this rate to estimate project costs.

– Another method is to ask others in your business area. Most consultants will share that info if they don’t see you as a threat. You can also often get that info through professional organiztions.

Once you get a range, shoot for the 1/2 to upper 2/3 point when starting out. You want to be neither too cheap nor too expensive.

Whatever you do, do NOT lower your rates to buy business. A client that buys solely on cost is NOT a good client, and often more trouble than they are worth. (Incidentally, that is a little experience speaking there.)

– If you can charge more, then by all means do so. You do need to charge a premium for short term projects, as your down time and marketing costs are higher.

For example, we do a lot of short term (week or less) projects, so we charge about double what long term consulting or contract engineers charge.

We also charge a premium above that for training projects. Occasionally I’ll get a pushback, but I point out that we “hit the ground running.”

– If you are bidding projects, you need to spell out very specifically what IS covered and what IS NOT covered. You can always do extra work, but only for an extra fee.

Along that line, if someone wants to negotiate, NEVER reduce the fee without reducing the scope. Sometimes people are just fishing around (particularly if you are new,) so hold your ground.

If they do agree to a lower scope, that is fine — maybe they truly don’t have the funds to do everything they wanted to do in the first place.

Anyway, hope this helps. Looks like I have the makings of another blog post here ūüôā

Best Wishes,


Thanks for the response and all the great information. I’ve got a lot to think about and get prepared.


My pleasure.¬† Stick with it – I’m sure you will do well.¬†¬† — Daryl

P.S. To my blog followers:

–If you have a quick questions, please drop me an email – which may get answered in a future post (disguised of course.) NO CHARGE for brief questions – they make great post fodder! Plus I simply enjoy hearing from my readers.

–If you want in-depth personal help, I’ve decided to add individual “telephone advising” for a nominal fee. See the new Services page.

–As an alternate to the above, I’ll also soon be including a FREE monthly group call-in session. (Watch my blog – still setting that up.)

© 2013, All rights reserved.

Blog Post #100… What next???

Can’t believe we just hit 100 blog posts! Who would have thought there were a hundred things to say about starting and building a small consulting practice?

Well, after two years, there are still plenty of ideas to share and explore. In fact, my original list of possible posts has actually grown.

As soon as the Lead Generation series is done, we’ll begin a series on selling your services — something that seems to scare a lot of people. But is no big deal, as I learned in ten years as a sales engineer working with my technical colleagues.

We’ll also explore fee setting, the number two question I hear after “How do you get your clients, anyway?” We’ll address start up issues too.

Been musing over a few other ideas on where to go with this blog. So check out the new page titled Services.

Some free, some for a nominal fee. Not trying to make a fortune, but any revenues we get will help pay the expenses for running the site, along with adding some new features down the road.

Here is a quick overview:

  • If you have a quick question and are not in a hurry for an answer, drop me an e-mail. If time allows, I’ll give you a personal answer. If not, I’ll at least sanitize it and answer in a future post. FREE
  • Or, join me for a monthly teleconference. Still working on the details, but watch my blog.¬† Also FREE. (Borrowed this idea from Pam Slim at Escape From Cubicle Nation. Fellow Arizonan Pam was an inspiration for this blog. )
  • Watch the blog for on-line classes. Initially will be done as a series of webinars. Two are already prepared. May add discussion sessions and forums for subsequent offerings. INTERESTED? Please let me know.
  • The book. Still a goal, but not sure it is the best use of time for now. The blog and on-line classes might help more people in a shorter time frame. Don’t need it for the ego boost — have already written or co-written several technical books, plus hundreds of articles.¬† So the book deadline is now TBD.

Caution Рif you are receiving my blog  by RSS subscription, please change to an e-mail subscription. Google will be dropping RSS in July 2013, so the future is uncertain. As always, our e-mail lists are PRIVATE, and will not be shared, rented, or sold.

Finally, a big THANK YOU to my readers! Several have commented privately, and I appreciate hearing¬† from you. A comment or short e-mail always gives me a boost and the incentive to keep going.¬† If nothing else, it is proof I’m not just babbling to myself.

And now that the house remodeling is finally done, on to the next 100 posts!

© 2013, All rights reserved.

You don’t need to outrun the bear…

One of my favorite stories, I often share this with wanabee or newbie consultants. It goes like this:

Pat and Mike are out in the woods hunting. They hear a lot of noise in the brush, and suddenly a bear appears fifty yards away.

They decide to run. But after a few yards, Pat stops, drops his backpack, and removes his heavy boots.

Mike says, “Fool, you can’t outrun the bear that way.”

To which Pat replies, “I don’t have to outrun the bear. I just have to outrun YOU.” (With apologies to me Irish friends and ancestors.)

Yes, it is an old story, and a bit corny too. But it does capture the essence of what we do as consultants. You don’t need to know everything about everything — you just need to know enough to help your clients.

Too many people worry about the bear. Rather than jump in, they hold back. They already know enough to be a successful consultant, but they keep spending more time and more money on more seminars, more workshops, more books, more programs, more CDs, more DVDs, or more ???

And there are plenty who feed on those insecurities — particularly in the on-line world.¬† Ever wonder why they aren’t out there doing it for themselves?

In fairness, there are a few (VERY few as near as I can tell) who have actually done what they promote, and who are willing to share what they know at a reasonable price (sometimes even for free.) Those are the ones you want to follow and learn from!

No, you don’t need to outrun the bear. But you do need to get into the hunt. And best to do so with those who already know how to hunt, and how to outrun the other guy in the first place.

Happy hunting!

© 2013, All rights reserved.

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