Rationale For your Rates
JahMic
context. I gave him my standard rate. This is, IMHO, not high at all,
but nowhere near the low-ball rates from various entities in third-
world countries. After some thought, he said he thought that was too
much and countered with almost about half that. His rational was that
he could probably find that rate through some of the online project
bidding sites. We kind of worked through some of issues associated
with that, such as poor quality work and lack of face to face
communication.
Eventually, it came to the point that if he broke his salary into an
hourly amount, it would be less then what I was asking. Apart from
the fact, that he feels that his work is inherently more valuable then
mine, which I didn't get into at all, I tried to explain it's not
quite the same, as my billable hours are only a part of my working
hours, and I need to compensate for my other time, other business
expenses, not too mention simply the risk of doing independent work.
However, I think I explained it rather poorly, and we are at
standstill in our negotiations.
Does anyone have a really good way of explaining the rational for your
rates?
Charles Calvert
wrote in
<65dd33d6-0e33-460e...@l33g2000pri.googlegroups.com>:
[customer thinks hourly rate is too high]
>Eventually, it came to the point that if he broke his salary into an
>hourly amount, it would be less then what I was asking. Apart from
>the fact, that he feels that his work is inherently more valuable then
>mine, which I didn't get into at all, I tried to explain it's not
>quite the same, as my billable hours are only a part of my working
>hours, and I need to compensate for my other time, other business
>expenses, not too mention simply the risk of doing independent work.
>However, I think I explained it rather poorly, and we are at
>standstill in our negotiations.
>
>Does anyone have a really good way of explaining the rational for your
>rates?
You hit the highlights, which are that 1) you have overhead and 2) you
don't bill 40 hours a week, 52 weeks a year. If you want to break it
down for him, here are some bullet points:
o Self-employment (i.e. second half of SS & MC) tax is an additional
7.5%
o Health insurance
o Life insurance
o Disability insurance
o Business insurance (E&O and G.L.)
o Computers
o Software licenses
o Phones
o Internet connection
o Domain name and hosting
o Office space (even if your office is at home, it still costs
money)
o Electricity to run everything
o Heat
o Attorney's fees
o Accountant's fees
o Marketing
o Advertising
o Training
o Taking meetings with potential clients who don't understand the
difference between a vendor and an employee
o Sales calls
o Reading/writing contracts
I've probably missed a few.
He's clearly having a problem distinguishing between hiring a
potential employee and engaging a vendor. This is not uncommon when
hiring someone who is effectively a one man practice, and it is rather
annoying. Ask him if he'd argue the same way when talking to a
representative of IBM's consulting arm.
Frankly, this whiffs a bit. He's either clueless, in which case he
could be painful to work with, or he's an idiot, in which case he
could be painful to work with. I won't suggest that you don't take
the gig, as times are tough, but watch out for this one. I will
suggest that you get a fat deposit up front and get him to sign off on
every little thing, as he smells like the kind of client who will
dispute the bill after the fact. CYA.
--
Charles Calvert
Moderator - alt.computer.consultants.moderated
Submission Address: ac...@celticwolf.net
Contact Address: accm...@celticwolf.net
Robert W. McAdams
Charles has covered it pretty well. The only things I can think of that
he omitted are costs of traveling to client sites (when needed) and pay
for vacations and holidays (and sick days, if you ever get sick).
Employees have a weird way sometimes of computing their hourly wage by
dividing their annual income by 2080 (i.e., 40x52), ignoring the fact
that they don't actually work 260 days per year.
According to my company's accounting system, I get less than 60 cents in
salary for every dollar my company makes in revenues. That means that
$100,000 in annual revenues would give me less than $60,000 in salary.
When you figure in all of the time needed for marketing, sales, getting
training to keep my skills current, etc., I'd be doing very well to have
1500 billable hours per year, which would require charging $66.67 per
hour just to make a salary of $50,000 to $60,000 per year.
Bob