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. I have both PMP and CSM certifications.
Breakdown
Payroll
Total about $140,000
- [salary] = Average salary from Salary.com: $105,000
- Employers tax = 0.08 * [salary]
- Retirement: 0.25 * [salary]
- Payroll service: $350
Insurance
Total about $18,000
- Life: $600
- Health (family): $12,000
- Disability: $3,000
- General Liability: $650
- Workers Comp.: $200
- Professional Liability: $1,550
Training
Total about $8150
- Classes: $5,700 (2 classes, 7 days total, about $700/day, $800 for travel)
- Local travel, meals, hotels, etc.: $1,000
- Books, magazines, journals, etc.: $700
- Webinars: $150
- Professional Organizations: $600
Equipment
Total about $1,950
- Laptop: $900 (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 $3,750
- Internet: $600 (about $50/month minimum)
- Web site hosting, e-mail service, domain registration, etc.: $150
- Cell phone service: $1,100 (about ~ $90 something/month)
- Accountant & Legal: $1,500
- Teleconferencing and related: $400
Sales & Marketing
Total about $1,800
- Materials: $800
- Printing: $500
- Supporting stuff, e.g., pens, envelopes, postage: $500
Miscellaneous
Dry cleaning, (lots of) coffee, miscellaneous trip expense, etc.: $500
Expenses Grand Total
About $175,350
Hourly Rate
To break even I’ll need an hourly rate sufficient to generate $174,150 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 $174,150 / (# of hours).
- Rate with 1400 billable hours (35 weeks) = $124.4 / hour
- Rate with 1600 billable hours (40 weeks) = $108.8 / hour
- Rate with 1800 billable hours (45 weeks) = $96.8 / hour
- Rate with 2000 billable hours (50 weeks) = $88.1 / hour