Salaries And Pricing: How Do We Consultants Do It?

What’s the right price to charge for consulting? How much should I pay an experienced web analyst? How do I put those two things together?

I attended the Money, Jobs and Education WAA webinar last Thursday (9.20.07) for the sole purpose of learning the answer to that problem. Here’s the question I asked the panel who presented at the webinar:

Let’s assume that an experienced web analyst gets paid $100,000. Common wisdom says that you, the business owner, need to get 3-4 times an individual’s salary back in order to make a profit. Let’s just say, 3x. That means, s/he needs to bill $300,000.

But if the company bills at $150/hour, the analyst needs to bill out 2000 hours, i.e. ALL of his hours. If the company bills at $200/hour, the analyst needs to bill out 75% of his hours. Still difficult.

Is the problem a) Consultants should be expected to work more than 40 hours/week. b) Consultants who make $100k should be billing out at more than $200/hour or c) consultants who make $100K are not that profitable. They bring the business in and the less expensive employees are the profitable ones?

I didn’t get much of an answer, but I did get some offers for offline help. After the webinar, I had a queue of phone calls to answer (“Great question, can’t wait to see the answer”) and then a stack of emails to answer with the same comment.

If you want to read the answer that I put together, with Seth Romanow’s help, click through here, to the WAA website. You have to be logged in to the site as a member (but you’re a member, right?) I set up that article so that comments are enabled, and you can comment there. I’m sure there are a lot of other ways to make the numbers work, and hope that a few other people will chime in.