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How much to charge as an independent consultant?

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How much to charge as an independent consultant?

Postby Sporkin » Thu, 26 Oct 2017 3:16 pm

So apparently if you do the same thing often enough you become an expert in it... Recently I was asked to be a consultant on a project, and to give a price. It's a rather niche area, and I have not an inkling how much to ask for, how does one go about valuing their knowledge? Oh and what exactly do consultants do?


The people that contacted me are pretty sure they needed a consultant but are rather vague on what concrete things they want from me apart from this 'aiding the team' line.

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Re: How much to charge as an independent consultant?

Postby Strong Eagle » Thu, 26 Oct 2017 10:26 pm

Sporkin wrote:So apparently if you do the same thing often enough you become an expert in it... Recently I was asked to be a consultant on a project, and to give a price. It's a rather niche area, and I have not an inkling how much to ask for, how does one go about valuing their knowledge? Oh and what exactly do consultants do?


The people that contacted me are pretty sure they needed a consultant but are rather vague on what concrete things they want from me apart from this 'aiding the team' line.

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Obviously, they think you have knowledge which is worth paying for. Congratulations! If it's a niche area, that's good news as it means that your skill set will be hard to find and you can charge more.

You price yourself by determining what a full time employee would be paid doing that kind of work. For example, a senior project manager who really knows her stuff can make a $100,000 per year. But, she also gets vacation, sick days, insurance, etc... stuff you won't get as a consultant on contract. So, add 30 to 50 percent on top of the full time rate to get a sense of what your overall rate should be.

As a consultant you have to decide whether you will be hourly, half days, or days. Lawyers, accountants, and folks like that bill hourly because of the piecework nature of the job... this document, that phone call, this tax return. I preferred to bill in half day increments, as my tenure was fairly long term... 12 to 18 months, and the work I did entailed many chores.

Without knowing anything about the industry or level of expertise you have, my SWAG is that you should be thinking in the $125 per hour range as a starting point, or ask for $1000 per day. If you have some reasonable sense of the nature of the problem and what it will take to cure it, then make a SWAG at total costs but never agree to a fixed price deal to perform the work.

As to what you will be doing... well, that's easy... you are going to use your expertise to fix a problem. More specifically, you'll want to setup a project that covers these essential steps.

For yourself: Make sure you have a clear statement of work (SOW) as to what you will do and what your end products and deliverables will be. Be sure to include what is in scope for your consulting gig and what is specifically not in scope. For example, if I were to be installing a 100 PC's into an office, I might say that adding them to the company's inventory system is out of my scope because they have muppets who will tag and enter the inventory.

This is really an important part of the gig... otherwise you don't have any kind of agreed upon yardstick to measure your performance, and people will come back and say that you didn't do this or that.

Now to the project itself: What is the problem? You uncover this through a due diligence review. You look at systems, you look at budgets, you interview people, you study processes, until you have a clear picture of why they really hired you. Modify your SOW as required based upon your findings

Where do you want to be? Through interviews, research, and your own knowledge, you build a picture of what things should really look like. Don't be surprised if it doesn't look like everybody's first guess at a solution. Again, if this changes your SOW, make sure it gets updated and you get buy in from your client.

Next, you create a gap analysis... what's the difference between where you are right now and where you want to be? This might be technology that needs to be implemented, a change in process, or the hiring of certain people. This is a list of things that must be accomplished in order to solve the problem and get you where you want to be.

Now comes the remediation plan, the way you are going to do all the things that you have identified in the gap analysis. You should be able to identify work packages that need to be performed and the people, materials, and technology needed to do the work. Identify dependencies for tasks and assign time frames and costs, if that is within your SOW.

By the time you get here, your project and deliverables as stated in your SOW should be pretty well locked in. Any changes from this point forward should require a change request which may affect scope, costs, and time frames.

Now, execute the plan. Sometimes, consultants are complete when they have prepared the plan. The company then implements. But, you can also be responsible for directing all the resources to complete the plan. Execution usually includes progress reporting and meetings as well as directing the activities of those doing the work.

Finally, you close the consulting gig. With your client, you go through all the deliverables in your SOW and prove up that you have completed them as agreed. Then ask for a sign off and your final check... or better yet, your check and your next consulting gig.

This is a rather simplified response to how to be a consultant but it contains the essentials for you to define the work (and protect yourself in the process), and to prepare a plan to get the work done. You may have a more casual relationship with the client whereby some things aren't quite as well defined, but it is always in your interests to have a clearly defined SOW.

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Re: How much to charge as an independent consultant?

Postby Sporkin » Fri, 27 Oct 2017 2:23 pm

Firstly thank you for the detailed reply, it was more than what I expected and is most helpful for me to get a bead on things.

I'm not looking to replace my job and go strike it on my own, luckily my employers are pretty open to this as the project is in a different industry and there isn't a direct conflict of interest apart from the scheduling of my time. The good thing about this is it opens up the possibility of doing it on my own in the future when i get to a semi-retired point. Congratulations are premature, I'm still in the discussion stage, but thanks nonetheless!

Strong Eagle wrote:Obviously, they think you have knowledge which is worth paying for. Congratulations! If it's a niche area, that's good news as it means that your skill set will be hard to find and you can charge more.


You price yourself by determining what a full time employee would be paid doing that kind of work. For example, a senior project manager who really knows her stuff can make a $100,000 per year. But, she also gets vacation, sick days, insurance, etc... stuff you won't get as a consultant on contract. So, add 30 to 50 percent on top of the full time rate to get a sense of what your overall rate should be.



I'm looking at a simple X times my daily income ATM which falls nicely around the $1000/day rate you mentioned. For reasons of confidentiality I'm keeping actual duration and reporting days vague, a quick google and people can put two and two together.

As for the sense of the problem that was what I asked them, to give me specifics, but it seems they are at the waddle pool stage, and things are exploratory at the moment. I feel uneasy about this, I don't want to be roped into building a 400 ton mining truck because I have built 10 cars before, or squeeze blood from stone.

Strong Eagle wrote:As a consultant you have to decide whether you will be hourly, half days, or days. Lawyers, accountants, and folks like that bill hourly because of the piecework nature of the job... this document, that phone call, this tax return. I preferred to bill in half day increments, as my tenure was fairly long term... 12 to 18 months, and the work I did entailed many chores.

Without knowing anything about the industry or level of expertise you have, my SWAG is that you should be thinking in the $125 per hour range as a starting point, or ask for $1000 per day. If you have some reasonable sense of the nature of the problem and what it will take to cure it, then make a SWAG at total costs but never agree to a fixed price deal to perform the work.

As to what you will be doing... well, that's easy... you are going to use your expertise to fix a problem. More specifically, you'll want to setup a project that covers these essential steps.


The legal ramifications should the project go t!ts up is one of the areas I'm concerned with. Basically with vague expectations at this point(until i hear from them again), say "aid in producing a product prototype", how liable are consultants for the failure of projects? Without knowing the stakeholders and their expectations, would it be safe to say no sane person would give them a quote would they?

More and more it seems they need a consultant to figure what kind of consultant they need....it's either a pit of gold or a cesspool.

Strong Eagle wrote:For yourself: Make sure you have a clear statement of work (SOW) as to what you will do and what your end products and deliverables will be. Be sure to include what is in scope for your consulting gig and what is specifically not in scope. For example, if I were to be installing a 100 PC's into an office, I might say that adding them to the company's inventory system is out of my scope because they have muppets who will tag and enter the inventory.

This is really an important part of the gig... otherwise you don't have any kind of agreed upon yardstick to measure your performance, and people will come back and say that you didn't do this or that.

<snipped>

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Re: How much to charge as an independent consultant?

Postby PNGMK » Fri, 27 Oct 2017 3:18 pm

what the market will bear....
IANAL. IANACPA. IANA Teacher.
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Pay me $5k for 100% success filling in PR form!

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Re: How much to charge as an independent consultant?

Postby Strong Eagle » Fri, 27 Oct 2017 10:48 pm

Two thoughts: First, every consulting contract I have ever signed specifically says that I am not liable for consequential damages. If I f*ck up your project, you can fire me, you can refuse to pay me, but you cannot insist that I owe you any additional money for alleged consequential damages I may have caused.

This only makes sense because you will never be in control of all the moving parts of a complex project. If you have a critical time dependency and a senior shithead manager drags his feet about writing a check until that dependency is missed, whose problem is it? Technically, it's yours because it's your project. In reality, you know it is the shithead manager; hence the need to the clause.

And... point 2: What is your legal status in Singapore? You know that if you are on EP and even if your current employer were to give you the green light, MoM still prohibits you from doing any moonlighting work on an EP, except as a director to a related company.

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Re: How much to charge as an independent consultant?

Postby Sporkin » Mon, 30 Oct 2017 9:11 am

Thanks I'll make sure to check for that clause if and when it gets that far.


As for my residency, I'm what some would call a non exotic local produce. This bar on moonlighting applies only to those on EP/SP/WP?

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Re: How much to charge as an independent consultant?

Postby Strong Eagle » Mon, 30 Oct 2017 10:17 pm

Sporkin wrote:Thanks I'll make sure to check for that clause if and when it gets that far.


Let me know when that time arrives and I'll send you a copy of a services contract that I had professionally put together by some Hong Kong lawyers.


As for my residency, I'm what some would call a non exotic local produce. This bar on moonlighting applies only to those on EP/SP/WP?

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Correct. SC and PR can take whatever jobs they want. The only limitations would be those your employer may have put in your employment contract.

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Re: How much to charge as an independent consultant?

Postby Sporkin » Wed, 01 Nov 2017 7:55 am

Strong Eagle wrote:
Sporkin wrote:Thanks I'll make sure to check for that clause if and when it gets that far.


Let me know when that time arrives and I'll send you a copy of a services contract that I had professionally put together by some Hong Kong lawyers.


As for my residency, I'm what some would call a non exotic local produce. This bar on moonlighting applies only to those on EP/SP/WP?

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Correct. SC and PR can take whatever jobs they want. The only limitations would be those your employer may have put in your employment contract.
That's most kind of you, much appreciated Strong Eagle, I'll take you up on that offer when the time comes.

Cheers!

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