Entrepreneurship and Project Management

In IT consulting, you are able to provide the services you provide to many different sized businesses. In this article, you’ll find out about how you can participate in the IT consulting needs of large/small businesses.

Pick 2 or 3 of the networking skill sets that you need for that sweet spot. For instance, you may pick advanced virus protection, firewall intrusion detection, VPNs and routers. Which means you are going to focus on security and border access kinds of things which could be your IT consulting specialty. That’s all you’d do.

In Large/Small Business IT Consulting, It is all about Specializing

You would get extremely deep and specialize by product platform. At that size, these companies generate a real IT manager and put them on payroll for 40 hours per week. So these companies will want to handle a lot of the bread and butter infrastructure in-house.

When Would In-House Staff Use You?

When companies are paying a lot of outsourcing expenses, they’ll often decide to put 40, 50, $60,000 a year person on the payroll. Once that individual is on-staff, he will have a lot of pressure to keep their outsourcing expenses down, until they absolutely have to go far above. Then they use deep niche specialists – an excellent opportunity for IT consulting.

One of the most frequent questions I receive
from those who are trying to start or grow
their very own consulting business is: “How and
what do you charge clients for your consulting
services?”

The ways of billing clients are numerous.
You will find hourly rates, by-the-job fixed rates,
contingency or performance arrangements,
flat rate plus expenses, daily fee plus expenses,
and several other methods of charging for your
consulting services. Which is best?

Let’s consider some ways of billing for your
time.

1. Hourly or Daily Rate

Many consultants charge on an hourly basis or day.
To establish an hourly or daily rate, they struggle
to calculate the amount of billable hours inside a
year. Several hours is going to be spent marketing as well as in
administrative and other functions, so this
time is not chargeable to the client. Too,
vacation time, holidays, sick days, and so forth,
cannot be directly billed towards the client.

Consultants, like other businesses, must charge
enough to cover their overhead expenses and also
earn an income. If your consultant wants to earn
twenty-five dollars each hour of working time,
he (or she) may need to charge one hundred
dollars each hour towards the client. This assumes
half billable hours and fifty percent
overhead and profit.

Your hourly or daily rate might be limited by
what your competitors charges, particularly if
you haven’t positioned yourself as different
from them.

2. Fixed or Predetermined fee

Some consultants charge by the job or a predetermined fee.
For instance, a tax consultant might charge three
hundred dollars to prepare a taxes for
you and your spouse, including an unaudited
income statement for the business from information
supplied by you. When the consultant takes only one
hour to do this, he grosses $ 300
per hour. If, though, the tax consultant
miscalculates the time required, he could take
twenty hours to complete the task and make only
$ 15 per hour.

Of course, consultants may also make a profit on
the labour of their employees or subcontractors.

Many consultants claim that they can make more about a flat rate
than you are on a hourly basis. Advantages include being
capable of giving a quote towards the client in advance and
less disputes on price (as the total bill was
decided in advance).

To protect yourself on predetermined fee assignments,
always limit the scope of the engagement to
something you can calculate easily.

For example, if you are inspired to give a quote
for setting up a website for any business, you
might break this project into smaller assignments.

First, you can give a quote for preliminary
research and recommendations. Estimate time
required to talk with the client, find out about
his business and goals, develop strategies along with a
budget, and prepare tips about how you can
proceed. Then, give the client an estimate (perhaps
in the form of a 1 page letter agreement or
proposal). Upon acceptance of the offer by the
client in writing, you may proceed with this particular
phase of the project.

Some consultants collect one-half of the fee
in advance and half upon assignment completion for
each phase from the consulting project.

When the client doesn`t like your recommendations,
a minimum of you receive taken care of the work you probably did.
Perhaps you can charge him to prepare
alternative suggestions.

If your website project wasn’t broken into
smaller steps or assignments, you could find
that you spent a lot more time on the project
than anticipated.

Also, you might not find out until you present
your bill for the entire project that the client
won`t pay, either because he is not satisfied
using the results or because he cannot or
unwilling to pay for.

Wearing down a project into smaller assignments
can help you estimate better and limits
your financial exposure.

3. Contingency or Performance Arrangements

Sometimes clients asks you to become their
partner. Should you choose, you are no more an
objective consultant.

Let’s say your client insists upon do management
consulting for twenty-five percent from the net
profits? Will there even be any profit by the
time he writes off his car, office at home,
entertainment, travel, wages to self and
family members, along with other expenses?

On the other hand, if you are a marketing
consultant that is very sure
that you could increase a client`s sales, you
may go through confident charging a fee based on the
increased sales volume from the client. Are you
sure your client will co-operate along with you in
the attaining of this goal?

Some consultants charge a set rate along with a
area of ownership or profits for their
services.

Fees based on contingency or performance
arrangements are risky. Most consultants are
better off charging a reasonable price for their
services and leaving the chance of the client`s
business to the client.

4. Value Based Fees

Sometimes consultants can justify fees based on
their value towards the client. For instance, if you
save a customer one million dollars in taxes, your
fee might be higher than normal to reflect the
value of the help rendered.

You might pay an accountant or lawyer a fee of
fifteen hundred dollars based on time for several
tax related services. What would you be prepared
to pay for to legally save an extra million dollars
in taxes? 10000 dollars, a hundred
thousand dollars, or even more?

Can you apply this information for your own
consulting practice? Is there some particularly
valuable service that you can render that would
justify premium rates?

However and whatever you charge, be sure that
your fee is a good value for your client
and also compensates you fairly.