Advice on consulting fees

wizdum

[H]ard|Gawd
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So, in business terms "a recent budget shortfall has resulted in a reduction of human capital" at my workplace. My role with the school was a cross between a project manager and server administration. We all work the helpdesk, but my focus was finding new systems (Phone systems, wireless technologies, virtualization platforms, etc.), or stabilizing existing ones, for the long term.

I have 30 days remaining with the school, but after that they want to hire me as a consultant to continue to support the projects that I have implemented, as well as continue to work on new projects. I have never really done any consulting work for an organization before (I have been mostly involved in residential work), so I figured i'd ask here to see what you guys think is a fair price, based on the fees that you charge or have been charged in the past.

They are looking for a yearly support contract for the following:
  • A CPanel host (~50 accounts, 8 critical), with two CPanel DNS servers
  • 4 websites running the Joomla CMS
  • An Asterisk based phone system (5 buildings, 150 phones total, plus intercom/paging)
  • VMWare VSphere cluster, 2 nodes (16 cores each), and one iSCSI storage array
  • Citrix XenServer cluster, 2 nodes (16 cores each), and one iSCSI storage array
  • Ubiquiti UniFi wireless deployment, 15 devices, 1 controller
  • Spam Email filtering device (currently looking at open source solutions) for ~1000 email accounts
  • IP Camera controller and DVR, 36 cameras.
This should include max 4 hour response time, phone support, and on-site support (I am a 10 minute drive from their office). They will also want some sort of break/fix pricing for things that are not on the list.

I have also been acting as a purchasing agent for them, picking up surplus equipment from sources that don't fit well with their accounting system. While I worked there, I did not charge them any fee for this. What is a typical markup for a purchasing agent?

Keep in mind that this is for a public school in a rural area (average yearly income for a person is ~$30k, average income for IT is ~$50k). I am also not terribly experienced. I have about 3 years of relevant work experience, a B.S in Computer Information Systems (covered the business aspects and A+/Network+/Server Administration) and a few years of experience in both hardware and software development. I do not have any certifications.

Also, i'm not asking anyone to spend the time to write up a quote or anything, just trying to provide as much information as possible.
 
What are your plans for the hours you spend that are non-billable to the school? Consult for other firms?
 
What are your plans for the hours you spend that are non-billable to the school? Consult for other firms?

That would be the ideal solution. For now I have a part-time job with a local WISP.
 
That would be the ideal solution. For now I have a part-time job with a local WISP.

I can't help you determine what your rate would be, partly because I haven't done official IT work in years (just as a hobby and as-needed at work), and I don't know your market very well.

However, first I would determine a flat rate for what you'd charge everyone, to keep things simple. I would not give the school a "special rate" or anything (just IMHO). I guess I would try and see what other consultants in the area are doing. If there aren't any other consultants around since it is rural, I would try and gauge similar markets. Make some calls, ask what their rates are, etc. For obtaining materials for them, you could consider doing just a small markup on materials, and charge an hourly rate for the time. If you are basically getting them surplus equipment for free, charge them an extra hour or two than what you actually spent on it.

I would also make sure and take into consideration the expenses that you will incur. Sometimes with some business ventures those are forgotten--like insurance, fuel, wear & tear on the vehicle, continuing development of your skills/business, etc. At the very least, if you don't have an umbrella policy along side your auto/homeowners, I would definitely get that. It's not expensive.

Definitely, positively, don't sell yourself short. They're tossing you out on your rear, so they're not doing you any favors. If you want to start a business, start a business and charge accordingly. I've been there and done that. In fact, I've done plenty of work for free or extremely cheap for people that became friends out of "consulting" work, because really I just determined I didn't have the passion for it, but knew their businesses needed the help. It's really easy to get caught in a trap of "well, I was happy at $XX an hour, so I can just charge them $XX+$15/hr" or whatever. Charge the market rate in your area, and make sure it's enough to cover the risks of unstable employment (like non-constant income).

If you're not ready to work seven days a week like a dog getting phone calls at the most inopportune times, I would seriously consider just consulting with them until I found gainful employment within your career goals. I've come back as a consultant to businesses before with mixed results. They usually aren't huge moneymakers, but this could be a good jumping-off point for your own business.

None of this is anything new to someone around for a while, but they are a few things I've learned as I go along.
 
Definitely, positively, don't sell yourself short. They're tossing you out on your rear, so they're not doing you any favors. If you want to start a business, start a business and charge accordingly. I've been there and done that. In fact, I've done plenty of work for free or extremely cheap for people that became friends out of "consulting" work, because really I just determined I didn't have the passion for it, but knew their businesses needed the help. It's really easy to get caught in a trap of "well, I was happy at $XX an hour, so I can just charge them $XX+$15/hr" or whatever. Charge the market rate in your area, and make sure it's enough to cover the risks of unstable employment (like non-constant income).

If you're not ready to work seven days a week like a dog getting phone calls at the most inopportune times, I would seriously consider just consulting with them until I found gainful employment within your career goals. I've come back as a consultant to businesses before with mixed results. They usually aren't huge moneymakers, but this could be a good jumping-off point for your own business.

None of this is anything new to someone around for a while, but they are a few things I've learned as I go along.

This is my biggest problem, which is why I decided to post here. I undervalue myself far too often. I do have experience running my own business, and am familiar with the idea of working 7 days a week.

Thank you for your responses.
 
Once your running your own business you have a lot more expenses that many first timers don't consider:
health insurance
liability insurance
Increased taxes, you employer matches your fica/medicare payments, now you must pay both halves.
Some states you have to pay unemployment tax depending on how you structure it.
Legal fees to at least read over contracts and maybe write some.
Then you have gas and transport for remote calls.

Imho anything less than $100 an hour is too little.
That is my non-profit and lowest rate it is a flat rate for both onsite(local) and remote.
I charge more for onsite than remote for regular business clients.
 
Once your running your own business you have a lot more expenses that many first timers don't consider:
health insurance
liability insurance
Increased taxes, you employer matches your fica/medicare payments, now you must pay both halves.
Some states you have to pay unemployment tax depending on how you structure it.
Legal fees to at least read over contracts and maybe write some.
Then you have gas and transport for remote calls.

Imho anything less than $100 an hour is too little.
That is my non-profit and lowest rate it is a flat rate for both onsite(local) and remote.
I charge more for onsite than remote for regular business clients.

I have not yet had to get liability insurance since I am just handing off hardware to the on-site tech support, but that it something I will need in the future.
 
I have not yet had to get liability insurance since I am just handing off hardware to the on-site tech support, but that it something I will need in the future.
yea liability and errors and omissions insurance and for some public projects you have to be bonded.
 
You have to factor in the following:
You are paying 15.3% of Social Security & Medicare taxes now instead of the 7.65% you were paying as an employee.
You may need to pay your own health insurance.
You likely need liability insurance.
You likely want to contribute to a retirement plan.
You are likely to incur professional fees in the form or legal and accounting fees in order to establish the business and remain in compliance with state and Federal tax law.
You may incur some equipment costs.
You will incur some traveling costs.

Ultimately how much you charge is going to be dependent on the market. If they can pay your competitor $75/ hour and you charge $150/ hour you priced yourself out of the market. The one advantage you have is you know the job better than anyone else. So even though you lack experience and certifications, it likely will take someone else significantly more time (at least early on) to fix the problems. Do some research and see what the going rates are for the services you plan to provide and than price yourself comparably.
 
weren't you just recently talking about how much job security you had?

that's scary

I'm not sure if that was me or not, but it could have been. I was very confident until this happened. Theres not much you can do when the Governor of your state says you need to cut $100k out of your budget. Both my boss and myself have very good connections in the area, so i'm not too concerned about finding a job, I just wanted this job. They are doing some really cool things with community wireless, thin/thick clients, and virtualization. A student can go anywhere in the town, sit down at any computer, and have access to an Ubuntu, Windows, and Mac OSX desktop, with all their files and settings. And its all built on ancient servers and surplus SFF machines that we get for less than $18 each.

I want to help them, but upper management can only see how much money they could "save" by selling off all our technology. Until this point, I had been on an "extended internship" making a few cents above minimum wage.
 
Heh, one administrative position would probably cut a lot more than $100k from their budget. :)
 
I'm not sure if that was me or not, but it could have been. I was very confident until this happened. Theres not much you can do when the Governor of your state says you need to cut $100k out of your budget. Both my boss and myself have very good connections in the area, so i'm not too concerned about finding a job, I just wanted this job. They are doing some really cool things with community wireless, thin/thick clients, and virtualization. A student can go anywhere in the town, sit down at any computer, and have access to an Ubuntu, Windows, and Mac OSX desktop, with all their files and settings. And its all built on ancient servers and surplus SFF machines that we get for less than $18 each.

I want to help them, but upper management can only see how much money they could "save" by selling off all our technology. Until this point, I had been on an "extended internship" making a few cents above minimum wage.

Just wow....it's time for the state to eat it, pretty much.

1. Cut minimum wage employee doing IT work for way cheaper than consultants.
2. Show public that you are cutting spending.
3. ????
4. Re-hire same employee at 10-20x previous cost.
5. ???
6. PROFIT!
 
You may consider bundling in a certain amount of support hours per month/week depending on how you do your contract. Say they get 40 hours of support per month from you for $4000 and any time you spend over that 40 hours is another $125 an hour and if you don't hit 40 hours that month, you still get paid.*

I have no idea what you should be charging an hour in your market, you'll need to tweak them to what your market supports.
 
Just wow....it's time for the state to eat it, pretty much.

1. Cut minimum wage employee doing IT work for way cheaper than consultants.
2. Show public that you are cutting spending.
3. ????
4. Re-hire same employee at 10-20x previous cost.
5. ???
6. PROFIT!

True, but if they only pay him for 10 hours a week, they'll be at a net gain. Insurance and other benefits add a lot on top of a worker's salary.
 
You may consider bundling in a certain amount of support hours per month/week depending on how you do your contract. Say they get 40 hours of support per month from you for $4000 and any time you spend over that 40 hours is another $125 an hour and if you don't hit 40 hours that month, you still get paid.*

I have no idea what you should be charging an hour in your market, you'll need to tweak them to what your market supports.

Agreed, As ND40oz said, I'd definitely approach this as a maintenance contract. If you bundle what they've asked for with some value-added services like MSP-style monitoring you can make it attractive. Look into GFI MAX for a pretty decent monitoring platform on the cheap.
 
I've talked with some local shops, and I think I have figured out a price. Thanks everyone!
 
I think you'd want to structure a variable service level agreement that fits into your perceived vision of your new consulting company's future. I think it is safe to say that the school is not going to be where you make your money.Your SLA should factor in the possibility that when they call you will be working with a more lucrative client. 'Emergency' fees should factor in the possibility that they will call you after hours or on a weekend, and they should be charged accordingly.

I would probably start with your hourly rate when you were employed with the school. You should bump it up roughly 35% to factor in things like your overhead and benefits. Then put in place extra fees and higher rates (such as the emergency, after hours/ weekend rates). Creating a LLC is not a huge expense. But having one setup will allow you to contract your services out between the company and your LLC... which mean, eventually you can hire some high school student, train them on the process, and make a larger profit on that kid all while you're working with another client.

You dont want to nickle and dime the school, but at the end of the day, you're hours will be significantly cut when compared to the work you were doing for them when you were under the school's employ. This is why your rate will need to be higher when your rate when you were employed by them.

I think it would be in your interest to have the longest term contract you can, with very little increase to prices. This guarantees you'll have work, but again, the goal would be to train someone else at a lower salary to do it so you'd collect profits on someone else's work.In this scenario- this client pays the overhead and payroll, while another client is bringing home the bacon.
 
I think you'd want to structure a variable service level agreement that fits into your perceived vision of your new consulting company's future. I think it is safe to say that the school is not going to be where you make your money.Your SLA should factor in the possibility that when they call you will be working with a more lucrative client. 'Emergency' fees should factor in the possibility that they will call you after hours or on a weekend, and they should be charged accordingly.

I would probably start with your hourly rate when you were employed with the school. You should bump it up roughly 35% to factor in things like your overhead and benefits. Then put in place extra fees and higher rates (such as the emergency, after hours/ weekend rates). Creating a LLC is not a huge expense. But having one setup will allow you to contract your services out between the company and your LLC... which mean, eventually you can hire some high school student, train them on the process, and make a larger profit on that kid all while you're working with another client.

You dont want to nickle and dime the school, but at the end of the day, you're hours will be significantly cut when compared to the work you were doing for them when you were under the school's employ. This is why your rate will need to be higher when your rate when you were employed by them.

I think it would be in your interest to have the longest term contract you can, with very little increase to prices. This guarantees you'll have work, but again, the goal would be to train someone else at a lower salary to do it so you'd collect profits on someone else's work.In this scenario- this client pays the overhead and payroll, while another client is bringing home the bacon.
Did you read the post or just open up a webpage about running your own IT consulting firm? He was making close to minimum wage while working part time and earning his degree. If he comes in and asks for 35% more than he was making hourly they are going to have to contain their laughter because he's at least 300-400% below market value.

The best advice anyone can give this guy is charge market value and look for a full time job immediately. Don't commit to anything outside of an hourly fee to help them and the hours that you are available. Don't sign a contract guaranteeing any number of hours. Your only advantage currently is that you know their systems. Trying to start a consulting business to support yourself immediately after you finish school will not go well. Get a full time job, learn everything you can and keep the consulting job with the school in place to provide extra income.
 
Did you read the post or just open up a webpage about running your own IT consulting firm? He was making close to minimum wage while working part time and earning his degree. If he comes in and asks for 35% more than he was making hourly they are going to have to contain their laughter because he's at least 300-400% below market value.

I suggested that as a method so he could start working out the numbers. I also said to add in additional fees. I have a feeling that he cannot come in at whatever market value is for that area, as if that is a figure easily calculated.

I think he will have to come in under market value, but also realize that they are probably stuck with him as their choice consultant for the area's he worked in the first place. I do like the suggestion of finding a full time job, and working the consulting gig on the side- however that could get tricky if he's at work and the school calls asking him to come out and fix an emergency.
 
Many MSP companies will charge by the device that is supported with the goal being that if you execute well, you'll just collect the monthly fee without having to touch the box more than a few times per year. $300-1k per server per MONTH is not unheard of, then you've got all of the other devices to add on to that. For purchasing things, there's a couple of approaches - a straight pass through makes your life easier from a sales tax perspective or you could mark things up 25-50%+ but have to deal with sales tax.

I've talked with some local shops, and I think I have figured out a price. Thanks everyone!

How did you arrive at it? Curious minds want to know.
 
I am late to the discussion but I'd like to point out a couple of things.

You are in a bad position because you need the work, so that will lower your rate to ensure that you can actually get it vs. them hiring someone else. Also, if I were you I'd look into whether there are some state rules/regs/laws because at least my perception of not renewing a contract just to hire the same person as consultant is that this type of arrangement is at the very least unethical.

Here's the advice I always give friends when they ask me; what rate do you pay your auto mechanic? What rate do you pay your plumber? IT is like any other professional trade, rates have to reflect that.

Rates also need to reflect the value you provide. They paid you something at your job, the cost to them was your hourly rate as employee * 1.5 for benefits/leave. So if you made $50/hour, they had to budget $75/hour (roughly). With that in mind, contractors are always much more expensive than employees, but the understanding is that contractors need fewer hours to do the job than employees do.

I work full-time and I don't need to do consulting, but I do it on the side at times anyway and I charge new clients $185 for the first project, and established clients $125. I haven't had anyone question those rates. The new client rate is higher because I assume that the client is either unaware that their environment is not as well set up as they think it is, or they are flat out lying about it. The $185 is to protect me from shitty clients with shitty jobs, or at least make shitty jobs worth my while if they do pay up. These are virtualization projects only, VMware hosts + storage, either design, deployment, upgrades, stuff like that.

I bill about 200 hours per year and my suggestion is to just pay an accountant to deal with the taxes rather than try to screw around with it yourself (if you create an LLC and don't just do a d/b/a and report on your 1040-whatever it is in that case). Don't be lax about the taxes.

On a side note; trusting that environment to a 1-person consultancy is madness. It doesn't matter that they did that for an employee, but engaging a 1-man show consultant is ridiculous from a business continuity perspective.
 
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I'll just chime in here that I do IT consulting for a living with a small MSP. My job description is essentially your list of services; I handle asterisk PBXs, website hosting, VMWare and Xenserver clusters, firewalls, WiFi networks, blah blah blah. My company bills me out at $145/hr.
 
Many MSP companies will charge by the device that is supported with the goal being that if you execute well, you'll just collect the monthly fee without having to touch the box more than a few times per year. $300-1k per server per MONTH is not unheard of, then you've got all of the other devices to add on to that. For purchasing things, there's a couple of approaches - a straight pass through makes your life easier from a sales tax perspective or you could mark things up 25-50%+ but have to deal with sales tax.



How did you arrive at it? Curious minds want to know.

Server work is around $80/hr, high end networking (Cisco certified) is around $120/hr, cabling is around $25/hr

They seemed sort of surprised that I was leaving today...should I have reminded them that they were kicking me out? They also softened on their "no way to hire you" stance, now that they are looking at all the projects that need to be completed in the next 40 days. One of their three remaining IT staff has a back injury and wont be doing any cabling or lifting for a while.

I did end up landing a job with a local IT consulting company. I start tomorrow.
 
I do consulting ontop of my real job, my general rule is whatever my base salary is plus 90% of the salery if there is no middle man
 
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