Outsourcing

Readers say consultants' average rates are on the money

When it comes to rates and salaries, IT consultants are ready to talk. A number of TechRepublic members participated in a recent discussion to sound off on the money issue. Find out what your peers are earning.

Nothing generates comments like consultants’ rates, a reader told us recently. An Oct. 31, 2000, article by Pam Gersh received an overwhelming amount of reader discussion on the subject. In “Going solo? Get top dollar for your services,” Gersh cites a 1998 study by the Consultants Bureau of New Brunswick, NJ, which estimates the average rate for an independent IT consultant at $90 an hour, with rates ranging anywhere from $65 to $195 an hour. Many high-level consultants who work for Big Five firms, on the other hand, earn up to $600 an hour and receive substantial fringe benefits.

These figures generated a discussion with more than 70 posts, as of this writing. Here’s what readers had to say.

Are the statistics realistic?
A number of readers responded to say that no client is willing to pay such high rates in the real world. Vladan Marinkovic believes a $90-per-hour average is unrealistic. “Please get serious, or put your money where your mouth is,” Marinkovic wrote. “I'll give you 10 percent of my salary if you find me a job for that ‘average.’”

Gerry added that the article referred more to salaries earned by employees of the Big Five consulting firms, not those of the solo practitioner. “If you have the ‘hot’ skill set, you might be able to squeak in at $90 [an hour], but generally, I think you are looking at less,” Gerry wrote.

Ed Gooding pointed out that the problem with studies and rate surveys is that they don't take location into consideration. “In some areas, the market just will not bear what it will in others. If you use figures from a survey or Web site that don't apply to your area, then you may lose some business by basing quotes on those surveys,” Gooding wrote. “For example, in Richmond, VA, where I do consulting, you just can't get the same rates as you can 100 miles north in the Washington, DC area.”

To really get a feel for your local market worth, Gooding suggests networking with other consultants or simply asking clients what they are paying competitors for similar services. “Most clients are sophisticated enough these days to know not to low-ball you, or you'll just bail on them in the middle of a project to get a fair rate elsewhere,” Gooding said. “If you've done a little local homework before asking this, you'll also know if the client is in the ballpark with their answer.”

Earning the average, and more
The majority of discussion participants noted that they indeed earn the rates quoted in Gersh’s article, if not higher.

Paul G. said it’s not at all unusual for a freelance consultant to start at $75 per hour, “and rates do go up from there, depending on expertise,” he wrote. “When a consultant takes the time and energy to research a new client and understand what the need really is, it is not at all uncommon to ask for 2.5 times a full-time employee’s rate for the same position.”

Mwalker charges $125 an hour and has no problem retaining clients. “There is a ton of work out there, and not all clients are able to pay that rate. You should not want all the work, just the top 10 percent of the work in your area.”

E_freestuff emphasized the notion that if you are a consultant, you should bill as such. “Too many consultants are billing as if they are still employees, trying not to offend the client. The client could give a rip about you. They just want the work done,” E_freestuff wrote. “My word to all consultants is to stop short-changing yourself. Get your self-image up and your income with it.”

Fasthands pointed out that a consultant can always lower his or her rate in a negotiation, but it’s nearly impossible to raise it. “Customers like to feel like they're getting a deal, so tell them your normal rate is $110 an hour for piecemeal work, then offer to charge them $90 if they'll commit to a minimum number of billable project hours,” Fasthands recommended. “They'll think they're saving $20 an hour.

“Businesses are paying $100 and up per hour for electricians, plumbers, and lawyers. $90-plus per hour for quality IT consulting is cheap in some markets. I have a day job, and I consult on a part-time, as-often-as-I-feel-like-it basis,” Fasthands continued. “If someone balks at my measly $75 hourly rate for Xbase programming, I thank them for their time and wish them well. Only one client has ever tried to talk me down. I wouldn't budge, and they called me back two weeks later, humbled after they found out how much more other full-time consultants were charging.”

It’s not what you charge, it’s what you can deliver
Other readers urged their peers to look beyond rates alone and consider the value they offer to clients. Lwoolsey, for instance, said the issue isn't rates, it's results. “Clients don't mind spending $90 dollars an hour if you can produce serious results in a ‘fixed’ period,” Lwoolsey wrote. “No one will pay top dollar to watch a consultant wander around. They are paying for streamlined, no-nonsense efficiency. If you can produce the desired result for the price they are willing to pay, the hourly rate is inconsequential.

“You need to be realistic about your ability to produce and know your customers' needs, then the rate will set itself.”

Consultants should put their worth in something other than a per-hour rate, recommends Craigerstar. “If you know your trade and can show your confidence, the money that a client will pay is secondary to their faith in you,” Craigerstar added. “This has worked for me on every [project]. The last thing that a company wants is to get a low quote, then have to do it over again with another person. They would rather pay someone who knows what they are doing in the first place.”
Do you agree with any of the opinions expressed above? Can a good consultant earn top dollar anywhere in the world? Post a comment below or send us a note.
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