NYCPHP Meetup

[Chris Shiflett]

Allen Shaw wrote:
> Chris Shiflett wrote:
> > $60 / 2.4 = $25
> 
> Respectable post to be sure, but I couldn't figure out what
> the "2.4" is.

It's a common factor used in the consulting industry, and although a
quick Google search reveals many other people using this same number in
similar calculations, I can't find a definitive reference or even a name
for it. Anyone know what it's called?

We audit our own expenses frequently, and this number isn't too far off
from reality. It errs on the side of caution, but the idea is that if
you want to make $50,000/year as a consultant working 40 hours a week
(which is about $25/hour), you need to multiply that by 2.4 to calculate
your rate ($60/hour). Stated differently, if you want to make about
$25/hour, you need to bill your time at $60/hour, because not all of
your time is going to be billable, and there are other expenses to
account for.

If this factor seems too high, it might be because you're not factoring in:

1. Overhead such as rent, utilities, office supplies, equipment, etc.

2. Non-billable hours such as writing proposals, answering emails and
phone calls, bookkeeping, marketing, etc. Some companies have
non-billable staff that handles a lot of this stuff, but if you're an
independent consultant and want to bill 40 hours a week, you're going to
have to work many more hours than that. (In other words, you can make
$50,000/year with a rate less than $60/hour, but you're going to have to
work a lot more.)

3. Expenses such as legal, accounting, etc.

Of course, this is all in addition to per-employee expenses such as
benefits. I'm probably forgetting a few things, too.

Hope that helps justify my math and position a bit. :-)

Chris

-- 
Chris Shiflett
http://shiflett.org/