CXO

Billing for research on IT consulting projects

Chip Camden gives a TechRepublic member advice about billing clients for research, which he notes can be hard to estimate.

I received an email from a reader who prefers to remain anonymous, which read in part:

I am interested in finding out if/how you charge your clients for time researching for their projects. I'm just starting to work with a company and they want me to start up a new division of their company, want to pick my brain on how I would do it...but we have no contract in place. I currently just get paid for specific projects but this research and developing is totally different. Should I charge by the hour...?

First and foremost, this consultant needs to establish a contract with her client. Working without a contract not only relies upon the good will of your client, it can also create ill will through misunderstandings of undocumented agreements. While you're crafting that contract, make sure it addresses research work.

As far as charging for research, the short answer is "Yes." It depends somewhat on how much research the job requires, and what kind. Research-based projects form the majority of my consulting work, so of course I bill for that; it's one of the most important sources of value for my clients. Some consultants might not charge for a brief conversation along the lines of "Can you do this for me? / Yeah, sure" because they're going to make their money from the implementation instead. I've found, though, that if you establish a pattern of not charging for informal consultations, they increase in frequency. You are, after all, a consultant. You should get paid for consulting.

I have, on occasion, made exceptions for initial research when the client could easily find someone who already knew the answers, but decided to give the business to me anyway. In consideration of their loyalty, I didn't charge them for educating myself. Even that, though, should not become a codified policy. Otherwise, the edge cases will grow. It's amazing to me how often a client will ask for something, expecting that it should be no big deal because surely someone has already solved this problem, only to find out that either nobody's ever done this before or they didn't leave any trails. You don't want to be in the business of continually justifying your bill, so state the policy that you bill for all research, and reserve freebies for exceptional favors.

Of all types of consulting work, research is probably the hardest to estimate. You can't know what it will take until you research it. Therefore, I usually bill by the hour or by the day. If the customer needs to budget it, I'll offer to spend a fixed amount of time on it and report back to them to see how they want to proceed. It's usually a good plan anyway to report back often, so the client can see where you're going with your research and change your direction if necessary. The last thing you want to do is submit an invoice for thousands of dollars of research only to be told, "You misunderstood the question."

Just because you bill for research based on time spent doesn't mean that you can't bill implementation by the job. You just need to spell that out in your agreement, and be ready to dicker over the distinction. What if the project requires additional research after the implementation has begun? I find it easier for everyone involved if I just bill for time spent throughout the project, including post-implementation support and revisions.

As far as how much to charge for research, I find it simplest to charge the same rate as for other work, for the same reasons of simplicity.  If you're billing implementation by the job, then you need to come up with a separate figure for research. Just like any other price determination, you need to base it on the value you're providing to the client. If you don't get any price resistance, then you're too low — because nobody likes to part with their money. Examine, if you can, what their alternatives would be. Consider the ratio of affordability to value that each one of those alternatives would provide, then scale your price accordingly. There is no right answer — in some markets you might be able to get $500 an hour, in others only $50. Then once you've determined what you can reasonably charge, you can decide whether you can afford to do business at that rate.

About

Chip Camden has been programming since 1978, and he's still not done. An independent consultant since 1991, Chip specializes in software development tools, languages, and migration to new technology. Besides writing for TechRepublic's IT Consultant b...

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