With the slowing economy and layoffs in the IT sector, many unemployed or underemployed IT professionals will be thinking of entering the consulting field. The question is – how do you set your fees?

I’ll explain one method of determining billable hours and fees.

Determining Workable Hours

First calculate your working hours in a year. You’ll need to decide how many weeks of vacation you’ll take and how many days/week you are willing to work.
As an example I’ll take 4 weeks of vacation per year and work 8 hours a day.

(52 weeks) – (4 weeks for vacation) = 48 weeks.
(48 weeks) x (40 hours/week) = 1920 hours / year.

Determining Billable Hours

In my example I’ll work 8 hours per day. But will I be able to charge the client a full 8 hours? How much of this is overhead? Travel time? Negotiating? A long-standing rule of thumb in any singular consulting practice is that you only end up charging 50% of your time to the client – the rest is spent on building your practice, finding new clients, learning, and administration.

Here is how a typical computer consultant’s time will break down:
-25% on administrative tasks, running errands (picking up parts, etc), paperwork, billing, etc.
-15% on marketing, networking, and pursuing clients.
-10% spent on learning or other activities.
-50% on client work.
(1920 hours / year) x (50% utilization) = 960 billable hours

Bad Debt

Now that I’ve figured out the true billable hours of my practice, I’ll need to consider bad debt. Not all clients pay on time, some don’t pay at all. Over an indefinite period, expect about 4% of your clients to not pay the bill. This may be higher in murkier economic times, and may require a shorter grace period between when the work is completed and the bill is paid.

960 hours x 96% = approximately 922 hours

Determining Rate of Pay

I now have a solid figure of 922 billable and collectable hours per year. This is the number that will determine my income in a given year. It is possible to work backwards at this step from what I hope to make, or simply multiply 922 by the average rate of pay for a consultant in my industry.

Suppose I wish to make $100, 000/yr.
$100,000 (gross)/yr / 920 hours = $109/hr

The example above doesn’t take into account renting an office or the overhead of hiring an administrative assistant. It also doesn’t include office supplies, phone, internet, etc. Add up all the annual costs of the items below and divide by the number of billable hours to see the overhead. Add that onto your consulting fee.

Ex. Overhead: $15,000/yr / 920 hours = $16/hr in overhead costs

Resulting consulting fee: Desired income + overhead = $109 + $16 = $125 / hr

After taking into consideration my annual overhead costs and billable hours, I find that $125 / hr is sufficient to average $100 000 / yr before taxes. If you find that $125/hr is beyond what your current market can handle, ask yourself if you can make it work with whatever the average is. You’ll find, as in any situation, some overhead costs are unncessary, and perhaps your desired yearly income is not plausible. What I did not mention was when starting a consulting practice, take into consideration the possibility of months of little to no billable hours near the beginning.

Items that should be taken into consideration when determining a consulting rate are:

1. Medical benefits, life insurance
2. Office equipment (computers, printers, test equipment)
3. Office facilities, mortgage or rent, property taxes
4. Business vehicle, insurance and cost of operation
5. Office utilities
6. Office phone, cell phone, internet connection
7. Office consumables (paper, printer toner, business cards, flyers)
8. Subscriptions/training/professional conferences/professional associations
9. Advertising and marketing costs
10. Business licenses and permits
11. Legal and accounting services

(average: 5.00 out of 5)

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Not all companies have programs or licences for content filtering on their networks. It is arguably worth the $10-$60 per employee/year to licence a content filtering package in terms of increased productivity. What is difficult is selling the idea of spending a large chunk of money to management, especially in this economy. I would imagine a large number of companies can pinpoint their bandwidth and productivity problems to 10 or fewer websites. Facebook, Myspace, Youtube, etc…

Below is a logon script for Windows that will analyze the user’s hosts file and modify it accordingly to block Facebook or any other website you wish. It simply redirects to 127.0.0.1 (home).

Another alternative is to block the IP address of the website using rules on your gateway firewall (Windows or router). The problem with this method is many of the larger sites have multiple IP addresses and adding block lines for each is tedious work. You can block entire ranges of IP addresses. Example: Adding 69.63.0.0/16 would block 69.63.0.0 – 69.63.255.255 (65,536 total addresses – 16bit block). Be careful though, some “good” websites may be in the ranges you block, but in a pinch, it does the job.

Finally, Untangle is an open source gateway that can be run on Windows or on its own dedicated server. It includes content filtering in addition to a multitude of other features. Try it out.

(average: 4.25 out of 5)

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Some might say the greatest requirement of being a consultant is knowledge. While that may be true, there are many other factors that determine a successful consultant from one that is not. Not all consultants choose this line of work for the same reason – some desire more money, some want flexible hours and some need the flexibility of working from home.

I’ve put together a list of questions for myself as well as for others looking to transition to a full-time consulting practice. Answering ‘yes’ to these questions will make the transition from full-time work to consulting easier. You definitely do not need to answer yes to all of them. Reflect on each question and ask yourself whether or not it will truly impact your job satisfaction.

1. Do I have a decent credit rating? You’ll need credit to start up and complete some tasks depending on the field you choose. If you are merely an intelligence consultant, start-up capital will be minimal – cell phone, internet connection, computer – most of which you should have already.

2. Am I self-confident? You will need to sell your services and yourself to potential clients. You must come across being confident in your own abilities in order to land work.

3. Am I organized? In the early stages you’ll find organization will not come easy. You’ll need a good way of organizing your business, contacts, and appointments as well as storing and searching documents.

4. Am I in good health or financial standing? When starting your consulting practice, you’ll have little to no health benefits and possibly several months without a significant source of income.

5. Will my Family support my decision? This is very important. If your family is unsupportive of your choice of work and your ability to produce income in boom/bust cycles, you may find yourself in a poor situation.

6. Do I have the Skills and Knowledge companies will pay for? This is very important. If you are selling your services make sure it is worth it for your clients. Provide value. If they can use Google or their nephew and receive the same or better level of service, you may not be in business long.

7. Am I a self-starter? Can you get out of bed in the morning and start work without any motivation or supervision?

8. Can I work long and/or unconventional hours? Much consulting work results in long days or projects that command a large chunk of your time. Your family may have to adjust to your erratic schedule.

9. Can I deal with all types of people? You may deal with people you do not like or get along with. They may be your clients for months at a time, and if you want referrals and repeat business, you may not have a choice but to take any clients you can get.

10. Can I estimate and manage my time effectively? One of the most difficult parts of consulting will be to estimate job costs and the time-frame. If you estimate too high on costs, you can lose the client. If you estimate too low, it may not be worth your time. If you estimate your time-frame high, you may end up with free time after a job and nothing to fill it with. If you estimate the time-frame too short, you may run into the scheduled start of another client’s work.

(average: 4.00 out of 5)

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I’ve been around the Internet since long before the “Dot-Com Bubble,” when we had to get our MP3s from IRC and use Blade’s Encoder for the command line. Slashdot was just starting up, ICQ was the only instant messenger around, and Winamp really did whip the Llama’s ass. Those were the days…or were they?

Some colleagues and I were contemplating what exactly “ruined” the Internet for each of us. Depending on the era we each signed on to the Internet, we had different ideas of what ruined it. Here are 2 of my own.

1. Inexpensive Domain Name Registrations and the introduction of ICANN

History
Prior to 1999, the only .com registrar was Network Solutions. It was $100 US for a domain. Fast forward to today and there are thousands of ICANN approved registrars (although mostly resellers) selling domains for $5-$10 on average. GoDaddy seems to hover between $6.95 and $9.95.

Why this ruined the Internet
With the arrival of inexpensive domains, it allowed spammers and phishers to setup numerous and ever-changing websites quickly and cheaply. ICANN enforces a 5-day refund policy for domain holders and registrars. What this means is that many people register domain names, use them for phishing, and dump them after 5 days with a refund. Below are two graphs showing the total domains and hostnames registered as of Sept. 2008. According to Verisign – 22% of the registered domains are “parked domains” and roughly 10% are inactive.

2. Pay-Per-Click

History
Advertising agencies in the 90s like Doubleclick, Flycast and Burst paid website owners one of two ways – cost per thousand impressions or pay-per-click. To get approved by almost any agency you needed to prove your impressions and have them audited. Rates were high compared to today’s rates, upwards of $5 per 1000, or $0.10-$0.15 per click. Adwords was started in 2000 and Adsense was purchased shortly thereafter.

Why this ruined the Internet
Adsense is the gold rush of the Internet. If you write a blog, you’ll make money. The promise of almost guaranteed inclusion into the Adsense network by anyone who can cash a check has launched millions of useless websites and parked domains. Because of Adsense’s low payouts, site owners have become increasingly creative in how they manipulate ad space. Duplicate content, misleading ad placement, pop-ups, and pay-per-post blogging (fake reviews) have all contributed to the decline of the Internet and search relevancy. Hundreds of millions of made-for-adsense pages litter search engine results.

Some of the ideas my colleagues came up with were: Flash, RSS, “Cheap” Servers, Frontpage, Marquee/Blink, and anyone with a Slashdot ID over 1,000,000 (ouch!).

References:

http://www.verisign.com/Resources/Naming_Services_Resources/Domain_Name_Industry_Brief/page_002689.html
http://www.verisign.com/static/040767.pdf
http://news.netcraft.com/archives/web_server_survey.html

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When marking comments as “spam” in WordPress, it doesn’t actually remove them from the database.

From my own experience, most WordPress installations have thousands of spam comments in their databases, taking up valuable space.

In the wp_comments table the comment_approved column will show a value of “spam” on any comment marked as spam – and a value of “1″ for any approved comment.

To quickly delete ALL spam comments, execute the following query on your MySQL database:

You can expand the SQL command to delete from multiple databases and multiple tables, quickly and effectively.

(average: 3.00 out of 5)

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