Help! Consulting Fees Question

In My Humble Opinion
1

I know I had a thread on this before it even came up, but now it’s come up, and I need opinions if possible.

I’m now self-employed in a totally unrelated field to my previous job. I’m very busy and things are going well. Of course, we can all use more money.

My previous employer has asked me to do a day project of consulting (technology/computers). This project is a review of needs with the client, testing/and probably some final programming. I set up their system initially and they want some report enhancements. It integrates a proprietary front-end & MSSQL as the database (we’re doing some end-user reports in Access).

It may or may not require some programming on the proprietary front-end, which is a very unique skill, but of course, SQL & Access are not.

They’re getting paid $1500 for the day. I asked for $1000.

They said OK, but if we give you future work, we can only do 50/50 with you because it’s the industry standard (cite, please?) and we are doing the account maintenance, billing, sales, etc, not just turning the work over to you.

Honestly, I don’t really want to do the work, but the money is nice, and as long as it’s only a day at a time, it’s not too disruptive. Also, it would be very difficult for them to get someone to do the work, and if they do, the person would need quite a bit of training. Since I left, they’re not doing too much work in my specialty (they weren’t before either, part of the reason I left).

I really like these folks and want to do right by them. I’ve bought equipment specifically from them (and paid a few dollars higher) because I know they need to sell a certain number a year to keep their certification (of course, I needed the equipment, too).

My primary concerns are:

-not lowballing myself
-not being unfair to them

I would really appreciate any opinions on “industry standards”…I’m not convinced that there really are any; and any other thoughts.

Thanks much!

2

I work as a consultant for a software company, doing things similar to what you’re doing, with a little bit of highly-specialized subject matter knowledge thrown in. Our target rate to our customers is $1600-$1800/day, though we sometimes agree to less. There are times when the nature of the work or the workload leads us to flip work out to subcontractors or other third parties. In those cases, our rate to the customer generally stays about the same, and we have a target margin rate that we try to mark up the sub’s rate. It’s nowhere near a 100% markup, however, which is what your former employer is suggesting. The 50% markup they’re getting on your current project even seems steep, but not extreme.

I’d say your rate ($1000/day) sounds reasonable given the nature of the work, and if they’re at all well-run then a 50% margin should be ample to cover their administrative costs and leave them a fair profit. Essentially, the question is what you regard as a fair rate for the work you’re expected to do – what they charge the customer is up to them, and not your problem either way. If they want a 50/50 split, then they can convince the customer to pay $2000/day. If they can get the work done as effectively for less than $1000/day by someone else (taking into consideration the special knowledge and skills pertaining to this project you seem to possess), then you get in a bidding war if you want the work or let someone else do it for less if you don’t.

3

‘Because it’s the industry standard’ doesn’t cut it. This sounds like an initial bargaining position. Why don’t you suggest that you consider each case on its own merits?

4

Thanks for your replies, folks.