How to Avoid Financial Ruin Using Our Consultant Pricing Calculator: Use Case #1

Consulting Rate Calculator: Use Case #1

(Expenses Not Paid) Scenario

TESTIMONIAL 1: "This is the ideal, best practice employed by leading consultancies."

TESTIMONIAL 2: "The rate calculator tool was awesome!!! "

A real example of how our Consulting Rate Calculator was used in a live discussion to avoid financial ruin: Get Analysis Results in just 7 seconds.

Via Linkedin Discussion:

Blanket Job Description sent to List of Potential Candidates by Technical Recruiter

From Technical Recruiting Manager

Remote Project Manager- PM will use their 8+ years of IT focused exp to lead large scale enterprise initiatives in a senior capacity. Client is a global financial firm. Successful PM's in this space has exp. leading large multi-million $ projects in financial services firms, come from a PMO background and are technical. This is a W2 ONLY role and is 12 months in length.

Reply from Potential Candidate

Douglas Ayers Information Technology Officer

I saw your job advertisement.

Are you paying travel expenses?

Reply From Technical Recruiting Manager

Thanks for the responses. This is a W2 contract and I am not using sub vendors. The role does not require travel so no expenses are paid. Must sit onsite in Minneapolis. Must have recent contracts 12+ months in financial services. Please message me if you are interested!

Reply from Potential Candidate

Doesn't "onsite in Minneapolis" imply there is some kind of travel involved for the person doing the work and therefor expenses need to be paid by someone (either client or consultant)? The only way there would be no travel involved, and therefore no travel expenses, would be you find someone already living in Minneapolis within driving distance to your office.

It is also W-2 Contract 12 months. So in that case it makes little sense for the person to move their residence to Minneapolis because in a year they will have to move again to a new city for the next job. What am I missing here? How is someone from out of town, non-local to Minneapolis, going to make this job work?

This sounds like a "Non-Local(onsite)", "expenses not paid" scenario to me if you want to try out the rate calculator. http://www.sapbwconsulting.com/blog/how-the-consulting-rate-calculator-works

Reply From Technical Recruiting Manager

Hi Doug, yes, most likely the candidate for this role will be local to the Twin Cities. If the position was a niche skill set with a small talent pool in the area, I would look at additional options. Most of our clients provide "all-inclusive" bill rates which cover travel/parking etc. We do have many folks who relo to Minneapolis to accept 12 month contracts but that is not ideal for everyone certainly.

Reply from Potential Candidate

Well I ran the consulting rate calculator as I recommended above:

The calculator’s financial modeling says, the PM can just breakeven on expenses at $210/hr with zero profits for doing the work. If experienced PM’s typically charge a min of $150/hr plus expenses, then a proper all-in rate expectation would be $360/hr.

Is this in line with the all-in rate you initially had in mind?

Reply from Potential Candidate

Looking at the Cash Flow at a rate of $210/hr:

Max out of pocket cash-on-hand needed: -$32048.

At the end of 12 months, the PM will still be -$16,528 in the hole on their cash trying to recover their initial cash outlays (the project does not have a 12 month payback).

They will need 18 months to go totally cash flow positive. The project will end 6 months before then so this person will likely lose money on this project looks like.

Just the onsite Minnesota onsite expenses does not go cash flow positive until month 10 and at month 12 has only put $12072 into the PM's bank account. Not much cash for 12 months of work at $210/hr.

Reply from Potential Candidate [cont.]

Here are the cost inputs taken fresh today (6/7/2017) from Orbitz.com

Job Type: Non-local(onsite), Expenses paid: no, rate: $210/hr,

160 hours per month. Location: Minneapolis.

Costing is worst case assumption: You might get a better deal, you might not, plan on worst case. These prices are beyond the consultant’s ability to control as they are set by Orbitz.com.

Assuming the person ultimately found is not in Minnesota and has to travel in from one of these end points.

Airfare:

• Seattle to Minneapolis $624 / wk *4 = $2496 / month
• San Diego to Minneapolis $727 / wk *4 = $2908 / month
• Houston to Minneapolis $777 / wk *4 = $3108 / month
• Miami to Minneapolis $590 / wk *4 = $2360 / month
• Boston to Minneapolis $592 / wk *4 = $2368 / month

Hotel: in Minneapolis $160/day *7 = $1120 / wk * 4 = $4480 / mo

Car: in Minneapolis = $33 / Day * 6 = $231 * 4 = $924 / mo

Miscellaneous (ie. parking) I threw in $200/month for that.

CONSULTING RATE CALCULATOR TESTIMONIALS AND USER FEEDBACK

TESTIMONIAL 1: "This is the ideal, best practice employed by leading consultancies. The reality facing our industry today is an emergent culture by smaller firms, steeped in garden variety outsourcing practices. They discount the expenses part of the project cost and offer an All-inclusive rate."  by Ted Olaye, Supply Chain Specialist, MBA, CSCP

TESTIMONIAL 1: The calculator tool was awesome!!!  I'm in a slightly different industry from the SAP field, but I filled out the questionnaire and submitted my resume because one never knows where the network leads.  Also, it only took a few minutes to share my personal/professional info after using a tool that probably took many hours to create, write instructions & format it for online usage.  You should be able to grab the stats of who used it.  Seemed fair enough to me.

Again, awesome job!

Rick "

by Richard Easler, Opus BPO

To run the consulting rate calculator and to get your own job analysis, just press the button below to be taken to the start of the consulting calculator.

 ANALYSIS RESULTS

Note: the $210/hr breakeven rate is job description independent. It’s the rate anyone traveling weekly in to Minneapolis for any job will face.

Calculator Output: Consolidated Income Statement (City A + City B)

Calculator Output: Cont

Calculator Output: Consolidated Cash Flow Statement (City A + City B)

Setting Up A Consulting Rate Card

Within the world of Professional Services, you will often hear the term Consulting Rate Card.  What is a consulting rate card?  Usually it is simply a table of job roles which list hourly rates, for example:

• Ecommerce consultant hourly rate
• Engineering consulting rates
• HR consulting rates
• Management consultant rates
• Hubspot consulting rates
• IT Consulting Rates
• Project Management consulting rates
• SAP ABAP developer rates
• SAP Project Managers
• Interim Executive Rates, i.e., CEO, CIO, CFO, CMO

We designed our consulting rate calculator to allow both sides of the equation to determine a 'fair rate', based on facts.  We then had it validated by a finance professional to ensure our methodology and approach was correct in fact and principle.   We now know and so do clients, whether the offer makes sense for all involved.  

Shouldn't you make use of the same technology?

More reading:

14 Remote SAP Consulting Mistakes You Don't Know You're Making

Top 10 Benefits for Financial Analysis in the Latest SAP EP4

Learn What Tools To Use To Investigate IS-Mill Functionality

Leverage SAP BW to Increase Supply Chain Inventory Accuracy