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Annual IT Consulting rate

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by catchacold

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I have read about how to charge hourly for consulting rates and I know my rate. Here is my issue - For the past seven years I worked for a company where I built the entire network with Exchange, SQL, AD, DNS, DHCP, multiple internal networks, Firewalls, everything - 3 offices on a MPLS, VOIP phone systems - I mean everything, smart phone active sync - I would say I pretty complex set up that took me 7 years to build. Well, over the past 1 year or so that owner and I have discussed me just contracting for this company - same set up 3 offices in two different states. Long story short. That's what I did, I am now a full time contractor, LLC. This saves the owner some cash cause he has no employee burden on me now. I have basically under cut myself - Meaning I am only charging what my annual salary was, minus the employee burden. Seems to me I should of charged more. But, there is a you scratch my back I will scratch your back thing going on also. This owner is helping me a bit (I think). So, I am asking, because the owner keeps dropping little hits here and there that he thinks my rate should be even less then what I am charging now. You also have to understand we have a pretty good relationship (personally), but he is all business and means business. So, I am kind of scared about when my contract is up and we go to renew. What do you think?

3 replies

by cmiller5400

Yes, you may have setup the network and consider it "your baby", but you don't own it, the owner of the company does. You are not obligated to stay if your contract is up and especially if you aren't making a profit in the contract, why bother extending the contract unless there is absolutely no other work that you can wrangle up? Business is Business, Friendship is Friendship. Don't mix the two if you are not willing to give up the Friendship if the Business part goes sour.

by magic8ball

I would first compare the going rate in your area, as I assume you have. Lets assume that the average rate in your area is 100/hr. That would be the absolute lowest that I would charge if you are billing them per hour, but since you signed a contract you are tied to the rate that was agreed upon. It really depends on how you your contact is worded as to how I would approach them for a rate increase. Also it might work to your advantage to lower your rate slightly if that client signs a long term deal with a guaranteed number of hours per week.

If you only bill for the number of hours worked in a given week then they are what I consider a time and materials type of client. Even though you may have the set rate that you bill them your monthly bill to them can fluctuate quite a bit depending on hours worked. Never lower your rate for a time and materials client. If you are going to raise your rate it can work best if you send an email to your current clients stating that in 3 months your rate is increasing to yy/hr to cover increasing costs of doing business.

If you bill them based on xx number of hours per month at yy rate, then they are what I consider an sla (service level agreement) type client. Their bill is more consistent because you have a predetermined number of hours that you work for them per month. For example 40 hours per month, or 10 hours per week. Yes they can calculate what the hourly rate would be under this type of agreement but their bill is more consistent and therefore easier for them to budget. These are the types of clients that you can consider dropping your rate slightly for because of the amount of work they give you.

I do think that if they are an sla type of client getting a rate increase can be easier than strictly time and materials, however this also depends on the client. This can be done one of two ways: either keep the number of hours assigned to them per week the same and raise the monthly rate, or keep the rate the same and decrease the number of hours per week; which in effect gives you a rate increase. It also gives you the benefit of being able to bill more hours towards another client at what your rate should be instead of working for less as well as market yourself to other potential clients even though you can't bill for that time. It will let you grow your business however.

by catchacold

Thanks for the comments - I was just wanting to make sure I am being honest and from the sounds of it I am under charging. But, that's okay -

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