One of the trickiest things about contracting is setting your rates. Too high and you’re likely to lose out on a project; too low and you won’t be compensated fairly. Bidding too low can also make you look like you don’t know what you’re doing. Even if you win the bid, such a mistake might mean you won’t be treated as the professional you are.
Of course, you can alleviate this dilemma by determining what contractors with similar experience and skills are charging in your area. But this can be more difficult to determine than it seems. You’re likely to find other contractors to be tight-lipped about their rates, or they may not give you an honest answer.
Online rate surveys to the rescue
Instead, turn to the Web. Although information on contracting rates is much harder to locate than salary survey information, it is out there. Sometimes you’ll have to pay for it, but it’s also available for free. The following sites provide rate information that’s most applicable to independent contractors, although it’s also helpful even to contractors working through an agency or for a consulting firm.
The most well organized, detailed, and comprehensive rate information seems to be at Realrates.com, which had data from more than 1,600 contractors when I visited the site recently. The detailed information includes the following, and it’s searchable by most of these criteria:
- Contractor specialty (Access, C++, Java, and so on)
- City and state of the client of the contract
- Whether most of the work was performed on- or off-site
- Date the rate was posted
- Contractor’s rate on the previous job (great for comparison purposes)
- Rate paid by the client if that rate was different than what the contractor made (such as if the contractor was working through an agency)
- Whether the contract was brokered or found through a firm or agency
- Contractor tax status on that project: W2 (temporary employee paid on an hourly basis), 1099 (independent contractor), whether the contractor was self-employed, and so on
- Length of the contract
- Industry of the client company (telecommunications, pharmaceuticals, and the like)
You can also look at a detailed breakdown of the rates reported in January 2000 on the site’s Survey Analysis page. In addition to statistical analysis, you’ll find a discussion of trends, patterns, and rates by experience, age, and immigration status.
All the information comes from contractors who visit the site. While you’re here, you can submit your own rate information and list yourself in the site’s consultant directory. The abundance of information on this site is no accidentŸit’s administrated by Janet Ruhl, author of numerous books on contracting. You’ll find links to her books and tapes and other resources as well.
Contract Employment Daily
Although not quite as comprehensive, Contract Employment Daily provides similar information. Contractors can supply the actual name of the company for which they’re contracting. Those contractors working for larger companies might find themselves bidding on multiple jobs with the same company.
Besides the hourly rate, other information includes the contract location, a job description, and whether the contractor was paid overtime at time and a half. You can contribute your own rate information to this site as well.
Professional and Technical Consultants Association
Although Professional and Technical Consultants Association (PATCA) doesn’t offer its rate survey online, you can purchase it from the organization for $25—far less than the several hundred dollars requested at some other sites. The Web site says the survey contains information on consultants’ expertise, client base, and educational background.
Salaried consultants who work for a firm
Obviously, not all contractors are independents. Many work for contracting or consulting firms. Unfortunately, firms are even more secretive about their rates than are contractors themselves, but there are a few resources out there. Also remember that you should always have the right to know what that firm is charging the client for your services, not just the amount of your cut.
Management consultant salaries
If you’re more into management than the technical side of consulting, you might want to peek at the range of what 12 consulting firms offered their entry-level management consultants during the 1999 to 2000 season, broken down for undergraduates and new hires with an MBA. You can do this at WetFeet.com. When available, this site also provides information on signing bonuses and stock options.
Ohio State University’s MBA program offers similar information. This site also provides national salary ranges for management consultant positions all the way from research associate to senior partner.
Using information in salary surveys
Of course, lots of people do many of the same tasks that you do but work as full-time employees. You can find a lot of data about these folks in the form of salary surveys. This information can be useful to you as well, if you know how to use it.
A very rough rule of thumb is to divide a salary by 1,000 for an approximate hourly rate. For example, if full-time employees in your specialty earn $65,000, then $65 an hour is a reasonable starting point for a rate. Somewhere within 10 percent of this figure should put you in the ballpark. Of course, you should confirm this information as much as possible with local sources. Note that I’m not suggesting that you add benefits and other full-time perks to this figure, then divide by however many hours you think you’ll bill, and so on. The point here is to find out what your services might be worth, not what you want or need to earn.
You can find dozens of IT salary surveys all over the Web. Here are a couple that offer particularly helpful or detailed information:
- At the Pencom Interactive Salary Guide, you fill out a form to provide your location, field, and years of experience to retrieve salary information that is most relevant to your situation.
- The Bureau of Labor Statistics’ site offers earnings averages by income level plus helpful information such as employment forecasts.
To find out more about what others in your field are charging, be creative. Whatever you do, there’s probably a professional organization devoted to it. Look on both the national and local levels. Search the Internet, the library for trade journals, in the business section of your town’s daily paper, and in smaller local newspapers. You can find some organizations from the links pages of sites mentioned earlier. Organizations in your specialty often provide the most accurate rate information of all.
You may be able to gather information from other contractors in your area. Here’s a tip, though: Never ask someone how much he or she is making on a particular project. Instead, mention a specific skill or type of work and ask the contractor what is the fee range that he or she thinks would be appropriate for that skill or that job in your area.
If local consultants aren’t willing to give you much information, try gathering rate information over the Internet by posting to bulletin boards. You’ll find that consultants feel they have less to protect when they can be anonymous—and when they know you aren’t competing with them for clients. Here are a couple of places to do that:
- Realrates.com has a well-visited consultant message board, where the administrator has been kind enough to group flame wars in their own category.
- NetProCon’s Consulting Forum has a lot of posts, even if they aren’t quite as helpful as those at the Realrates site’s bulletin board.
One caveat when gathering information this way: On the Internet, nobody knows if you’re a dog of a contractor. If someone quotes a rate that seems outrageously high or low, feel free to throw it out. People on extreme ends of the scale may have no clue what they’re worth in the marketplace, or they may be inflating their rates.
Clients themselves are a third excellent and underutilized resource. When appropriate, attend trade shows and conventions and talk to employers who use contractors to find out more about what they pay. You should use this opportunity to listen to employers, too. Ask what they see as the pros and cons of using contract help, what problems they’ve encountered by using contractors, and how they find contract help. It isn’t a bad networking opportunity either.
Meredith Little has worn many hats as a self-employed writer, including technical writer, documentation specialist, trainer, business analyst, photographer, and travel writer.TechRepublic is seeking IT consultants with intriguing stories. Have you identified an obscure solution to a common problem or discovered a unique consulting tip? Maybe you have an opinion on a current IT issue. Send us a quick note, and we may contact you for an interview. If you appear among our featured members, you'll receive a cool TechRepublic polo shirt, not to mention accolades from your IT brethren. Share your tips and opinions by sending us a note.