How 1 Million Dollar Recruiter Skips the Homework, and Skips the Sale
or
How You can Still Go Bankrupt Earning $80 Bucks an Hour
PART 2: Financial Analysis and Conclusions
Consulting Rate Calculator: Use Case #2 [continued] (all-inclusive rate) scenario
READ PART I: Business Case and Discussion
TESTIMONIAL 1: "This is the ideal, best practice employed by leading consultancies."
TESTIMONIAL 2: "The rate calculator tool was awesome!!! "
I’ve consulted and I’ve recruited. I know what goes on and how both sides work. I know how the consultant makes money and I know how the recruiter makes money and I know how both sides lose money.
This is another real example of how our Consulting Rate Calculator was used in a live Linkedin discussion to avoid consultant Bankruptcy even at $80 bucks per hour.
Get Job Analysis Results in just 7 seconds.
First the Case Study Background.
Via LinkedIn Discussion
Blanket Job Description sent to List of Potential Candidates by Technical Recruiter Manager
Technical Recruiter Manager
Hi,
We have an Opportunity for a Business Objects developer in New Orleans, LA with our Client for a very long term contract position. Please let me know if you are interested and available.
9:50 AM
.png?width=669&name=Turn%20Something%20like%20this%20into%20something%20like%20this%20053117(7).png "Turn Job Descriptions into Revenue Gold")
Candidate
Concerning the Business Objects Developer Job in New Orleans, LA
I have your cost study Results!
Breakeven Analysis of the Numbers Provided
The breakeven rate on expenses is $196/hr. You are offering only $80/hr. You are offering an unrealistically low rate I think.
$196/hr does not include any profit for the Business Objects Developer person. So to be a good offer, you need to offer more than $196/hr like maybe $266-296/hr range.
Job Cost Analysis
As you can see from the Job cost analysis cash flow statements below, at $80/hr, after just 5 months, I will be totally bankrupt having burned through $50,000 of my cash savings that I started with. The job is not profitable from day1 however and the person who takes this job at $80 will only lose money and be unhappy.
Job Is Not Financially Viable
I also looked at all your candidate possibilities from all over America, (if you don't hire me, is there anyone you can hire at your rate?) your best candidate with the lowest travel expenses will go totally bankrupt at month 7 if the rate is $80 if they start with $50,000 cash savings in the bank.
Cash Out > Cash In
Cash out simply far exceeds cash in every month. It starts out as a deep hole. It only gets deeper the longer the project goes on.
Your job offer of $80/hr is Not a good job offer.
Here are the numbers taken for the cost analysis study. Just plug these into the rate calculator and you will get the same result as I did. No magic. Nothing hidden. No secrets.
Taken fresh from Orbitz.com today. Costing is middle of the road case analysis. You may get a better deal, but you may not. Plan on worst case. I chose the middle of the road expense rate. Not the lowest, not the highest. But somewhere in the middle because I felt there were enough choices in the middle to get lucky on those.
Scenario
Traveling: Sunday to Friday (6 days) to onsite. Non-local for me. It's out of town and I have to travel to it each week.
Daily rates. Use 20 days per month for the analysis. 160 hours per month.
Hotel in New Orleans- $88-$162, $118 X6 = 708 x4 = $ 2832
Rental Car in New Orleans - $30-64, $36, x6 = 216 x4 = $864
Airfare:
To New Orleans from these end points. Looks at all possible candidate's cost situation.
HSV to New Orleans (MSY) - $613 - 1112, $616, x4 = $2464
Dallas, DFW = $122-403, $204, x4 = $816 <- this person with lowest cost also loses money.
San Diego, SAN = $313-$516, $516, X4 = $2064
Los Angeles, LAX - $235-751, $385.74, x4 = $1544
Seattle, SEA - $356-774, $584, x4 = $2336
Minneapolis, MSP - $234-608, $403, x4 = $1612
Chicago, ORD = $205- 740, 395, x4 = $1580
Boston, BOS - $273-655, 490, x4 = $1960
New York, NYC - $346-603, 456, x4 = $1824
Miami, MIA = $252-562, 439, x4 = $175
Doug, MBA
Here are the automated consulting rate calculator results. This is the automated Email you get when you fill out the 8 sets of questions and press submit on the consulting rate calculator.
Explaining your
Consulting Rate Calculator results:
The Comprehensive Discussion is Below
Scrooge attribution by Robert Doucette
Don't let Scrooge talk you into a miserly consulting rate
Job Details:
| Hi: Doug Ayers | Email:doug.ayers@sapbwconsulting.com | Phone: 1-256-665-7500 | ||||||
| I live here:Huntsville AL | ||||||||
| Job Details: | ||||||||
| Role / Job Title: BOBJ Developer | Job Location: New Orleans, LA | |||||||
| Duration : 12 | Rate: $80/hr | Currncy: USD | ||||||
| Employment Type : Corp-to-Corp | Job Type : Non-Local(onsite) | Expenses Paid : No | ||||||
| Recruitor: | Phone: | Email: | ||||||
Cash Flow Analysis now available on the online version
Analysis
We’re glad you’re taking the first step in getting the best rate in your new position. When we built the consulting rate calculator and wrote the Blog explaining the results, we were actually building it for ourselves as SAP Consultants to help answer the one question recruiters typically lead with, which is, what is your rate?
So, we looked around and found that though there are plenty of calculators that tell you what you will take home, none told you what rate you must make in order for the job to make financial sense.
As travelling consultants with over 8 decades of combined consulting experience, we have extensive documentation on the expenses you will incur as a consultant, and know that often times, consultants are being pushed to quote an all in all-inclusive rate without the information they truly need to provide an irrefutable answer to the ‘what is your rate’ question.
Expense Category Names + Amounts
We have also provided some benchmark expense item rates from our combined decades of experience, as well as an easy mechanism to adjust the rate and expense assumptions to fit your own unique circumstances..
How you might use this information.
Of course, the easiest way to use this information is to simply use it as a baseline number should you find yourself in a negotiation for an offer. Remember, he who has the best information typically wins the negotiation.
We are also always looking for talent, and you might consider sending us a resume, as we try to get the best acceptable rate for all parties using the power of transparent information.
Please note, this information is not currency dependent. For instance, if you’re from India, you can use this information to achieve better negotiated outcomes just the same as if you were in Silicon Valley.
Interpreting Your
Consulting Rate Calculator Results:
You have indicated your current hourly rate is $10 per hour and that you’re being offered a new rate of $80 per hour in the new role, and that you would like to see a 5% percent increase over your current pay rate.
Our Consulting Rate Calculator has determined that you must make the following minimum rate $ 196 per hour to breakeven on expenses. There is no profit in this number.
The Rate You Must Make To Take The Job
That is the bottom line answer you should be looking for in a phone negotiation, but we wanted to provide you with all the additional detailed information below that you might need to strengthen your negotiation position. That is why we are providing the following comprehensive breakdown of your ‘stay in place’ job scenario as well as the financial scenario of the new job, and then we take it one step further and combine both scenarios into a combined Personal Profit & Loss Statement, which is what you will experience as an actual traveling consultant.
In many situations, the new job is a project based job, even when it is positioned as a W2 or permanent job, and therefore, can and should be evaluated as a project. Given your inputs, you see that:
Your up-front Out Of Pocket. You need:
- To wait 2 months (typical) to see your first paycheck
- You will need $ 33,180 cash on hand to cover all of the expenses you will incur before you receive the first paycheck.
- You will need to earn $ 20,380 cash before you breakeven on your remaining initial expense outlays
- That you will take home $ 1,740 monthly net income or (- net loss)1
- You need to work on this project months to break-even2.
2. A negative break even value means you will never break even. Project duration is too short, Pay is too low, or Expenses are too high.
How did we arrive at these figures?
Based on our actual consulting experience, we have provided various common expense categories with default amounts that you will need to take into account if they are relevant to your situation. We have conveniently provided a form in the online results page so that you can change the default expense assumptions to more closely fit your personal situation.
Local, Non-Local and Combined
The Three Income and Expense Views
To properly evaluate any job offer to make a rational informed decision, it's necessary to compare income from your current in-town job (Local) to your new out-of-town job (Non-Local) that you would like to consider accepting.
LOCAL JOB INCOME and EXPENSE VIEW
(The Current Job)
Income
Based on your current hourly rate of $10 per hour, you will earn $80 per day, $1,600 per month for a total of $19,200 per year.
Local Expenses
The major local expense categories included in the analysis are: Rent, Car Expenses, Mortgage Payments, Food, Utilities, Miscellaneous, and Income Taxes.
Your Total Monthly Local Expenses are: $ 1540 per month.
Tax Rate: 15 %
Total Yearly Net Income
Your Total Yearly Net Income after all expenses and taxes are deducted is: $ 720. (A negative result means you will lose money)
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NON-LOCAL INCOME and EXPENSE VIEW
(The New Job Offer): (New Orleans / LA)
Income
Based on your new job offer hourly rate quote of $80 per hour, you will earn $640 per day, $12,800 per month for a total of $153,600 per year.
Non-Local Expenses
The major non-local expense categories included in the analysis are: Airfare, Rental Car, Hotel and/or Rent, Food, Miscellaneous, and higher Income Taxes.
Your Total Monthly Non-Local Expenses are: $ 9760 per month.
Tax Rate: 25 %
Total Yearly Net Income
Your Total Yearly Net Income or (- Net Loss) after all expenses and taxes are deducted is: $36480.
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COMBINED INCOME and EXPENSE VIEW
(Personal profit & loss statement)
The following analysis combines the expenses from the Local ( Huntsville / AL ) and Non-Local (New Orleans / LA ) scenarios, the higher income and higher tax rate.
Income
Based on your new job offer hourly rate quote of $ 80 per hour, you will earn $ 640 per day, $ 12800 per month for a total of $ 153600 per year.
Combined Expenses
The combined major expense categories are:
- Airfare
- Rental Car
- Hotel
- Rent
- Personal Car Expenses
- Mortgage Payments
- Food
- Utilities
- Miscellaneous
- Income Tax Withholdings
- Health Insurance (not included in this analysis but it can be sizable)
Your Total Monthly Combined Expenses are: $11060 per month.
Tax Rate: 25 %
Total Yearly Net Income
Your Total Yearly Net Income or (- Net Loss) after all local and non-local expenses are combined and taxes are deducted is: $20880
QUICK LOOK So the question is, will you be better off or worse off if you take the new job? The following Net Income Gain or Loss Amount will answer this question. A) Local Total Yearly Net Income: $ 720 B) Non-Local Total Yearly Net Income: $ 36480 C) Combined Total Yearly Net Income: $ 20880 D) Net Income Gain or (- loss) Amount if you take this new job (C-A): $ 1680 /mo E) Project Duration: 24 / F) Months to Break Even: NO BREAK EVEN
Want to modify your inputs? Just press this button below.
Good Luck!And tell O'le Scrooge to take a hike!
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.png?width=626&name=Case%20Study%204%20cash%20flow%20063017(1).png "Case Study 4 cash flow analysis")
Want to know how this story began? Read PART I
More reading:
What Is Shopify & How Do You Use It to Boost Your Business?
How Is IT Consulting Distinct From SAP BW Consulting?
Top 10 Benefits for Financial Analysis in the Latest SAP EP4
