Overview

I don't think I've ever seen anyone write up something like this before, so I thought I would.  There's a perception out there that consultants are just like employees with the main difference being that they rake in all kinds of money. Also, many recruiters and staffing firms desperately try to ignore the realities of being a consultant. To everyone I simply say: get real. Consulting is a business and we incur expenses running our businesses.

What expenses, you ask?  Here's a breakdown of mine. Other than rounding these are real. I'm probably leaving a few out but what follows gets the point across.

Background

I'm a consulting IT project/program manager with 10 years of PM experience and over 30 years of industry experience.

Breakdown

Payroll

Total about $146650

• [salary] = Average salary from Salary.com: $110,000
• Employers tax = 0.08 * [salary]
• Retirement: 0.25 * [salary]
• Payroll service: $350

Insurance

Total about $20000

• Life: $600
• Health (family): $14000
• Disability: $3000
• General Liability: $600
• Workers Comp.: $200
• Professional Liability: $1500

Training

Total about $11150

• Classes: $7200 (2 classes, 7 days total, about $700/day, $1500 and $800 for travel)
• Local travel, meals, hotels, etc.: $2500
• Books, magazines, journals, etc.: $700
• Webinars: $150
• Professional Organizations: $600

Equipment

Total about $2050

• Laptop: $1000 (per year, average)
• Cell phone: $100 (per year, average)
• Miscellaneous, e.g., cell phone battery, headset: $200
• Software, e.g., MS Office, Mathematica, other tools, maintenance: $750

Services

Total about $4470

• Internet: $600 (about $50/month minimum)
• Web site hosting, e-mail service, domain registration, etc.: $150
• Monthly cell phone service: $1320 (about $110/month)
• Accountant & Legal: $2000
• Teleconferencing and related: $400

Sales & Marketing

Total about $3800

• Materials: $1000
• Printing: $1000
• Supporting stuff, e.g., pens, envelopes, postage: $1800

Miscellaneous

Dry cleaning, coffee, miscellaneous trip expense, etc.: $500

Expenses Grand Total

About $188,620

Hourly Rate

To break even I'll need an hourly rate sufficient to generate $188,620 in revenue. How many billable hours should a consultant budget for per year? I could write a separate article on just that. Rather than pick a number of hours I'll list a range and the corresponding rate for illustration. Each is $188,620 / (# of hours).

• Rate with 1400 billable hours (35 weeks) = $135 / hour
• Rate with 1600 billable hours (40 weeks) = $118 / hour
• Rate with 1800 billable hours (45 weeks) = $105 / hour
• Rate with 2000 billable hours (50 weeks) = $95 / hour