How To Turn $150 An Hour Into $50 (And Back Again)

In the consulting world there’s no shortage of people claiming to bill $150, $175 or $225 per hour. To talk with them you’d think they were invoicing an average of 40 hours  every week with no slack in their schedule.

What I’ve found is that one portion of the story is true – they have no slack in their schedule.

They probably don’t sleep much either.

That’s because they’re working 120 hours – and billing for 40.

Are they really collecting $150 an hour (or pick your favorite rate) for EVERY hour that they work?

No.

There’s one big part of the story that you’re never told though. Their average rate is somewhat closer to $50 (or less per hour). Why?

They’re Not Charging or Collecting For All Their Time

The dirty secret of the claimed big biller is that while the rate may be high — approaching $200 in many cases  – the number of hours they charge are far less than what they really work.

How does this happen?

  • Working after hours to manage client conversions
  • Phone conferences with “Our IT Guy/Gal” that aren’t billed
  • Quick questions about unrelated project items
  • Weekend time to “check up on ” system administration tasks
  • Time spent revising, creating and explaining a proposal (often multiple times)
  • Discussions with the software publisher over undocumented features (aka bugs)
  • Mandatory attendance at live connect sessions with the software publisher

Is this happening with you? Do you know how much un-recovered effort are you gifting to your client?

You have un-recovered time when your proposals always “best case” despite knowing that all projects have some time consuming hurdles to overcome?

You have un-recovered time when you fail to factor in overhead items such as travel, proposals, project management, publisher interactions?

If you are not factoring these things in – then you’re working for less than what you think.

Fixed Pricing Always Seems Higher When Done Properly

Every one of my fixed prices has generated stares of disbelief. Both consultants and customers can’t imagine that an upgrade could take $ 5,000 from start to finish.

Certainly an hourly quote would be less?

That depends.

Does your hourly quote (tell the truth) allow for:

  • Initial meeting
  • Proposal time
  • Extra tasks other than the project you’ve quoted
  • After hours work (at a premium)
  • Travel
  • Time spent chasing bugs with the software publisher?

I’ve found most hourly quotes don’t allocate for anything except a best case scenario of the time a consultant expects to spend. The quote assumes everything goes perfectly, that there’s no administrative or project management, that you never call the software publisher or need to look in the knowledgebase.

The problem is that’s almost never true. There’s no perfect engagement in the increasingly complex world of consulting.

My advice? Drop the rate to zero. Give the client a fixed reasonable cost for a well defined project. You’ll be surprised how quickly you can turn that $50/hr into $150 again.

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Comments

  1. Agree, very often many hrs of billable becomes non-billable as the client will arbitrarily dispute them.
    So a fixed rate project with a well define scope seem to better way to go.