Last night I participated in a panel discussion about the career of consulting at Santa Clara University, put on by the newly formed consulting club of the MBA program. My fellow panelists were Ken Wirt and Megan Shields. Mike Levenhagen moderated the panel.
Megan was very familiar with the world of big consulting and explained the differences between strategy firms such as McKinsey and Boston Consulting, implementation firms such as Accenture, and boutique shops such as her own firm ARGOS Consulting Group.
Ken and I represented the smaller one-person operations. Ken advised the prospective consultants to plan to spend 1/3 of their time on billable activities, 1/3 on business overhead such as billing, and 1/3 of their time networking and selling. This led to a discussion of setting rates, where I pointed out a common model of tripling the typical hourly rate for the same activity when it is done as a fulltime job. For example, if you would make $100,000 as a fulltime employee, you could calculate the consulting rate as follows:
$100,000 / 2000 hours = $50 / hour * 3 = $150 / hour
Don’t forget to factor in the value of benefits!
Some in attendance thought that this seemed high, but Ken was quick to point out that a company will be willing to pay a premium for the flexibility they get by bringing a consultant on for a short-term assignment. The salaried employee is getting the security of a permanent position, while the consultant will have to find work again in a few months.
I want to thank Steve Hawker for inviting me to be a part of the panel. Steve is one of the founders of the club, and obviously a go-getter.
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