Clarification of Answer by
wonko-ga
on
03 Jul 2003 22:34 PDT
OK. I appreciate the direction. Let me try to further assist you.
Utilization is typically expressed as a percentage of the hours billed
to a customer versus the hours available. So, if I bill 30 hours in a
week to a customer, and my standard workweek is 40 hours, then I could
be said to be 75% utilized. A variation on this theme would be to
include a standard billing rate so that if I am billing at a
discounted rate, my utilization is lower. One may also have to adjust
the denominator for travel time if one is allowed to bill travel time
and travels frequently to avoid having utilization in excess of 100%.
As far as a typical hourly rate for a consultant goes, I would need to
know a great deal more about your particular niche and what types of
services you are providing to even be able to hazard a guess. In
order to obtain a benchmarking of your consulting rates, you might
consider posing a new question on Google Answers with specific details
about the type of consulting your firm does. I will offer an overview
of my former employer's rates as of 2000, although this, of course,
was during the boom in IT, so I would be skeptical that they have been
able to maintain these rates at these levels. Also, they had a
well-known product that was in high demand at the time that few people
could implement, which increased consulting rates.
Application Engineers, who install the software, were billed out at
anywhere from $150-$250 per hour depending upon experience. Project
Managers, who oversaw the project and worked with the customer to
develop their business process using the software, were billed out at
anywhere from $200-$275 per hour depending on experience and the scope
of the project. Group Leaders and Industry Experts were billed out at
from $300-$500 per hour. Of course, large customers with complex
projects frequently were able to negotiate 25 to 40% discounts on
these rates as part of a large software license purchase.
Another number to look at is expenses incurred by the consultants,
particularly if these are not being billed back to the customer. Even
if they are billed back to customers, it is a good idea to keep an eye
on them so that customers don't reject your invoices. There can be an
enormous amount of waste here. Expensive meals that don't involve
entertaining clients, expensive hotels, and inefficient use of air
travel and rental cars can significantly damage profitability.
Cellular telephones can also add up, particularly if people have
unnecessarily large allocations of minutes. If your firm uses a lot
of these services, have you negotiated bulk discounts from the
providers? My firm had a sizable discount on airfare, rental cars,
and cellular telephones since we concentrated our business with a
single provider of each as much as possible.
In general, the key numbers to be focused on are revenue per
consultant, margin per consultant, consultant utilization, and
ensuring that sufficient consulting resources are available for
current and anticipated near-term projects.
One would want to look at revenue per consultant to see if it is
comparable with what other firms are able to get for similar services.
Margin per consultant can identify either poorly utilized consultants
(when compared with the consultant utilization figure) or consultants
potentially incurring more expenses than they should. Of course,
allowance needs to be made for the cost of living in various locations
since they can differ widely. Having resource plans developed for
near-term projects and having resources assigned to them in advance is
also critical to both ensuring that the right resources are available
and that they can get to the project as efficiently as possible
(purchasing advanced airfare versus a walk-up fare, for example).
Finally, to ensure a healthy consulting practice, one wants to look at
personnel development. Is there a high level of turnover in the
organization? If so, why? Are people getting the training that they
need in order to serve customers well and to advance in the company?
How successful is the company at developing application engineers into
project managers and group leaders? If it isn't successful, why not?
Are there particular individuals who have critical technical skills
that the company really needs to retain and pay extra attention to in
order to keep them happy and in place?
I hope this discussion of tactical and strategic areas to examine was
helpful. If you require further clarification, please ask.
Sincerely,
Wonko
,
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