Tuesday, March 12, 2013

How much should you charge for your services as a consultant?

Let's say that you had a unique skill set, one that gets you paid $50,000/year. If you decided to leave your field but be willing to take occasional consultant gigs, how should you charge for it?

If it were me, I would take my hourly rate, say, $25/hr, and use that as a benchmark and then move that number up and down as I felt like it. It seems to me that it would be okay to bump it up a little bit, say $40-50/hr just to make it worth your time (if, for instance, you had decided to take a job in another field and would be using your spare time to take the consulting gig.)

But that's probably foolish, and why I would starve quickly if I were a consultant. So, readers, if you're a consultant, how should you charge for your services?

I've used a chemistry/chemistry-related consultant for regulatory affairs, once, where the white knight life saver gentleman in question charged $80/hr, but I suspect he was cutting us a break. (This was a lifetime of experience that he was charging for, mind you.) 

UPDATE: Let's just say that the comments are in agreement that my suggested rate is far too low. You should read them, and ignore me. 

17 comments:

  1. I'd say more than that--$50/h is what I charged for tutoring in grad. school (after I found out that local professional tutoring services were charging $100).

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  2. CJ,

    I gotta take you to task for this one. Remind me never to go into business with you (although I would gladly hire you on a consulting basis). You are cheap. Dirt cheap. 2-bit ______ cheap.

    If you were to hire a contract R & D firm such as my former employer, you would be charged hundreds of dollars an hour.

    Also keep in mind that as a consultant, you are going to pay your own employment taxes - that's 15% right off the top (Schedule C or C-EZ). You also don't have a company supported 401k, any healthcare benefits, paid vacation... All of those are costs that you don't seem to think your clients should pay for. Why not? When you buy chemicals from company X, you are paying for the employees benefits package and their employment taxes. The same is true when you buy labs supplies from company Y, waste disposal services from company Z...

    So don't quit the dayjob, o.k.? Not until you do a lot, A LOT more homework.

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  3. My company has a well known prof come in for a 2-3 day consultation each year, and I think he gets ~$5K for it each time. Sure that's for someone at the top of the field, but still...

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  4. Specialty consultants for toxicology, ADME and manufacturing command $125 to $175/hr. The MDs can command $500+/hr. People charge this amount to cover their costs, benefits and taxes leaving them a little jing in their pockets.

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  5. I have to agree with Anon@12:05 and John@12:31. You would be selling yourself short. As a rough approximation, to break even with your current job, you would probably have to multiply your current hourly rate by 3 to break even as a consultant. I billed my hours at $50/hr when I was in grad school. A previous job I had billed my time out at $200/hr. I figure that somewhere between there would be a reasonable rate for me.

    Plus, there is the added fact that if your hourly rate is too low, some see that as a reflection of your knowledge and you would actually get more business at a higher rate.

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  6. A billing rate = 3 x your salary is the rule of thumb. For your example, you'd bill at $75/hr to earn $50,000/yr. The extra 2x covers your overhead, benefits, etc.

    The disadvantages earlier posters provided have caveats - you may write off many business expenses from your taxes, and you're allowed to set aside considerably more income for retirement - again untaxed.

    The scary part of consulting is business generation. How many clients would you need to stay busy 35-40 hours a week?

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  7. You are all missing the actual question here in CJ's for instance:
    ...(if, for instance, you had decided to take a job in another field and would be using your spare time to take the consulting gig.)
    The researcher in this hypothetical would not need to cover overhead and benefits, only applicable taxes. Thats the question of the hour. Though I still like anon 2:44 with the 3X current base salary as it does take into account you would be working less time on the consulting gig and thus would need to charge more to make it worth while.

    If this can be done without having to pay for an independent SciFinder account and subscriptions to journals, then the consultant is taking home even more. Those are things that would weigh on my decision for billing rate.

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  8. Going rate in my field (chem eng) is >$250/hr, all expenses included (travel costs covered obviously--plane, hotel, meals & entertainment as $50-100 per diem, rental car etc), minimum 4 hour charge if you're starting out, minimums for serious experts more like 8 hours. Travel time is also considered work time, so if you want me to travel to Opposite Coast to spend 3 days poking around your pilot plant, I will charge you for 5 days' worth of work. Therefore you have a strong incentive to think of ways in which I can work from home--sending P&IDs and process data ahead of time, for example. This is important because I may have other clients locally I can work for, while if I am on a cramped plane sipping ginger ale and praying to the Gods Of Luggage Tracking, I am not able to do anything else for these other clients.

    If I am in the middle of a project for Other Client and you beg really hard for me to postpone it and work for you, the price doubles, because in real life I'm going to use the money to hire a dog-walker and cleaning lady and order lots of take out so I can carry out Other Client's project on schedule by working 80+ hour weeks. Also because you are desperate and if I really don't want to do it, I will send you to a colleague.

    Pricing also subject to change based on scope of project and depth of pockets. If project is related to a regulatory filing, price goes up. If project is for Pfizer as opposed to Tiny Startup Inc, price goes up. If project requires working with a known jerk, price goes through the roof. I have known contractors who simply refuse jobs for bosses who have a reputation for being difficult to work with, or they charge extra.

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    Replies
    1. Thanks so much for the detailed information; it is enormously helpful.

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  9. I saw a chemistry tutor (a Ph.D. student) ad on the school board. It was $150 per hour. I wonder if he had any students to tutor.

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    Replies
    1. Pre-meds get desperate sometimes :)

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  10. Most private lessons for fitness related things (yoga, personal trainers, dance, martial arts, etc) around here go for $50-$75 an hour for programs intended for average citizens (not people training for an international level who would need professional coaches). I am told music lessons are more. Do you think pilates is that much harder than chemistry?

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  11. Anyone have any experience the other side of the Atlantic?

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  12. I'm starting out as a chemical consultant here in New Zealand. I appreciate the above dialogue. It is most helpful. I hope there's enough toxic material here needing a good clean up too, to keep bread and butter on the table. I don't know much about the chemical consultancy business. I'm an Industrial Chemist graduate from BYU but a native New Zealander. I've had a diverser range of jobs which thankfully have prepared me for the varied work role as a consultant. I should be thankful now for all those layoffs and redundancies. Thanks for the pointers.

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  13. I am an interior designer. I recently left a job that paid $ 50,000 yr for 4 days a week (approx. $30 hr not including benefits). I also have my own business, where I charge $ 135-$150 hr fee, but of course business runs hot and cold. I am meeting with my old boss to see if we can work something out with me as a consultant, what should I charge? What if she can guarantee me 3 days work?

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  14. I know this is a chem blog, but your comments are really helping me!

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