1. Pricing Your Con$ulting $ervice$
Presented to
The IEEE Consultants Network of Northern NJ
February 28, 2003 by
Jim Boyd
XL Research Inc.
PIC Microcontroller Based Designs for Consumer and Industrial Products

2. Major Parameters Affecting Price Strategies
First Client = Previous employer?
Type of contract
Fixed-Fee (Risk-based)
Time & Materials (Short Term - “Consulting”)
Time & Materials (Long Term - “Contract Engineering”)
Equity Participation
Type of Prospect
Referral
Direct Mail Response
Cold Call
Potential for Repeat Business or Referral
Urgency Level of Client’s Need
Availability of Similar Expertise Elsewhere
Feb J. Boyd

3. “The More Things Change, The More They Stay The Same . . .” French Proverb
Fee chart originally prepared in 1994 by CNNNJ member, Werner Engelmeir
Feb J. Boyd

4. Basis of Some Popular Pricing Methods
Actual cost of operating your practice
Client’s actual cost of using alternatives
Market Pricing (Supply & Demand)
Size of Client’s Wallet
Size of Consultant’s Wallet
Feb J. Boyd

5. Using Your Actual Cost Basis . . .
Feb J. Boyd

6. When Using Client’s Replacement Cost . . .
Estimate the client’s overhead, including all of the factors listed in the previous slide:
“Loaded Labor Rate” is anywhere from 1.8 to 3.0 times an employee’s annual salary
Typical Loading factor : 1.8 to 2.2
Ask the client “What’s your Loaded Labor Rate?”
Rule of Thumb:
Break-even Hourly Consulting rate: = Equivalent Annual Salary / 1000
ENTREPRENEURS HAVE THE ABILITY TO TAKE IDEAS AND TURN THEM INTO A BUSINESS
Feb J. Boyd

7. My “Negotiating” Tips for Hourly Consulting
Use a pre-printed Fee Schedule.
Send the Fee Schedule with your Promotional material as early as possible in the inquiry cycle.
Never negotiate your rate without getting something in return.
Enter the negotiation process with a firm concept of your fee requirements. Be prepared to say “NO”.
Never give the impression that you need the work, even if you desperately do.
Feb J. Boyd

8. My “Profitability” Tips for Hourly Consulting
Whenever possible, arrange two or more active clients to avoid work gaps.
Consider switching to a Pre-Paid Retainer basis - Not getting paid on time or being paid late is the biggest profitability drain in consulting.
Never agree to an unpaid technical proposal - it’s the second biggest profitability drain in consulting.
Add 10-15% charge on travel & material expenses.
Set a Minimum Daily charge for client site work.
Feb J. Boyd

9. About The Speaker . . .
Jim Boyd, XL Research Inc., [ designs microcontroller-based products for consumer and industrial applications. Since 1978, XL has delivered designs for arcade games, cordless telephones, experimental solar homes, high-speed printing machinery, fire alarm systems and a control system for a U.S. prison. Jim specializes in PIC-based applications and is an Authorized Consultant for Microchip Technologies.