Do You Understand Your Fully Loaded Cost Rate?
If you are a SAP BW Consultant, SAP Functional Consultant, SAP Technical Consultant or are a SAP Customer looking to hire a SAP Consultant, a subject of great interest is your hourly or daily consulting rate.
Key Term - Fully Loaded Cost
One of the terms you should learn to appreciate is your Fully Load Cost (FLC). This is a complicated way of saying how much it cost an employer to put 1 dollar in your pocket. There is another closely associated term, your multiplier, which is another way to arrive at your FLC. To arrive at your fully loaded cost, whether you are an employee of a company or if you are contractor, the process is roughly equal, but with slightly different results.
Employee Perspective of FLC
Your FLC, from an employee perspective, consist of the following, although there can be other costs baked into your FLC rate:
- Basic Salary
- Bonus'
- Medicare
- Medicaid
- Social Security
- State Taxes
- Local Taxes
- Federal Taxes
- Professional Liability Insurance
- Other Insurance fees
- Corporate fees, i.e., incorporation fees, annual renewal fees.
- Overhead-what the owner(s) of your company add to your core cost.
- IT support, Laptops, Software, Maintenance
- Facilities (even if totally virtual)
- Communication fees
- Website Maintenance fees
- Bank Fees (in the background)
- Accounting Support fees.
There may be many others, and how each company ‘rolls-up’ these fees may vary. The other number, the multiplier number, is usually a number that attempts to roll these fees up, and will typically be around 1.3 to 1.55 (can be higher or lower but in my experience, actually runs higher) meaning if you make 100k, you cost your company 100 * 1.55 or 155K.
Want a more precise figure?
Try our Consulting Rate Calculator which will tell you how much you must make to take the job as well as provide you with valuable information for any negotiations you may undertake.
So why are these numbers important?
Simple, they are the base line starting point that the profit margin gets added on to. Those rates can range from a very low 12% on up to a more typical 35% or even higher. So if you're a consultant selling your services, you know the rate you get is influenced by both the selling company (the one you are working for or subcontracted through) and the number of layers between you and the end company. If you are one-man contractor, you already realize you will have to bear all of the above cost without being able to spread them across more than one consultant.
Want an even quicker way to determine your FLC?
Ever need to put together a quick project bid? Then you will need this spreadsheet, which provides some 'rules of thumb' and can get you started quickly.
If you're buying consulting services, you now know why it seems like SAP consultants cost a lot, yet you experience turnover (and if you appreciate the impact of multi-tasking, you will realize just how costly project team turn-over is to you) because you have TOO MANY LAYERS! You should also realize it is the person’s skill and knowledge that is most important to you. As a leading global SAP BW consultancy, we can help you achieve your business goals. To get started, just press the button.
TIP: What is one way to reduce your project cost? Easy; in a right to work society, eliminate at least 1 staffing layer whenever possible.
People Who Read This Also Read:
Understanding SAP Consulting Rates
7 Ways to Influence Independent Consultant Rates
Get SAP BW BI BO HANA Consultant Rates Market Survey Results
10 Advanced SAP BW Project Estimation Techniques [Online Tool]
Working with SAP BW Consulting [Consultation]
14 Remote SAP Consulting Mistakes You Don't Know You're Making
Why You Need Functional SAP Consultants on a SAP BW Project
Learn What Tools To Use To Investigate IS-Mill Functionality
