Wages....

I really hate to bring this up but Ill see if anybody starts taking pop
shots at me. Im starting to get some offers for contract work. Mainly taking
drawings off paper napkins, autocad, TIF, ect and building SWX models. A few
of these offers seem to have some pretty big projects. Now I know for a fact
that Im underpaid at work, but thats besides the point. I do get good
benefits, bonuses, 401K, ect. But my ultimate goal is to work from home full
time within a few years and I am just starting to network. I will be using a
legal seat at my current employer after hours to do this extra work. After
that, If I leave my job, I will have to purchase a legal seat for my Home
Office. I want to make a fair wage, and I dont want it so high that I wont
get the work. But on the other hand, I dont want to cut anybody elses
livelihood off either because I underpriced them. You know what Im trying to
say. Unfortunatly Uncle Sam will want his share off the top One firm
would like me to give them a bid on the entire project. Thats kinda tough
for me to do. This work will be done in Florida...Im sure there are wage
differences throughout the country with us hillbillies being about the
lowest. Thanks for any help you can provide. Sincerely, Jake Barron

 

Jake:
I live in Oviedo and would be willing to help if you need.

You need to look at yourself and decide what kind of money makes you
happy.
If you feel like the king of the world while at home working for 10
bucks an hour then I think you will have a lot of work. If on the
otherhand you price yourself at a level that makes you disgruntled, do
not accept the work.
When you work for yourself, allow yourself to be happy. Do not make
excuses for your wage and do not appologize.

Now that my soapbox is kicked out from under me, concider this.
employers must match what you pay to social security. They must pay for
benefits. there are other costs associated with your employment. with
that all said, 35 to 40 /hour is not to pricey.

You should try to get the person to pay you on the project. Just be
sure that YOU define what you will do. If there are unknowns, push them
back on them. Tell them exactly what you will do for XXX money. More
likely than not, you will finish what you said you would and the project
is not complete. Now you can ask for more money knowing exactly what
needs to be done and make up your price then.

HTH,
Colazi

 

Rough rule of thumb for "consulting" type work- take the hourly wage
you'd be paid working in an equivalent full-time job in your area and
double it and that's an indication of what you should be charging per
your. Of course if you have special experience in some area,
competition is light or intense, or you have to do a lot of learning
you may have to/want to adjust things up or down. Consider what the
shop rate is at your local garage, what a service call for your
washing machine costs, etc.

Best regards,
Spehro Pefhany

 

I'd be REALLY careful about doing outside work at your current
employers--that's a minefield you're walking into. It's not a good idea to
try to mix consulting and a job in the same chair; there are just too many
conflicts of interest.

You might want to try working from home instead. Under the terms of the SW
liscense, you may be authorized to put a legal copy of the program on your
home machine....

quoting from the liscense---"If the Software is permanently installed on the
hard disk or other storage device of a computer (other than a network
server) and one person uses that computer more than 80% of the time it is in
use, then that person may also use the Software on a portable or home
computer."

 

Just for talking purposes, a good rule of thumb for you to be able to
take home what you do now as a regular paid employee is to charge
twice your hourly wage. IOW if you make $10 an hour, then charge $20
an hour. Don't forget about an Errors and Omissions insurance policy.
That will cost you about $15K for $1M worth of coverage with a $10K
deductible. A lot of clientèle require it and I wouldn't do
consulting business without it. It will minimize the chance of losing
everything you own if something turns sour. Let's face it things
happen that are beyond our control that can severely impact your
project. Some insurance companies will allow you to bootstrap this
onto your existing homeowners policy. As them about a personal
unlimited liability policy. It will cost you about $500 for $1M worth
of coverage. Some insurers excluded engineering development, some
don't. Unfortunately mine did so this wasn't available to me.

Do yourself a BIG favor and look up your local SCORE office (Service
Corp of Retired Executives). They provide free counseling and
information for people like yourself to maximize your chances of
success. They will be able to give you great insight into all the
legalities involved in what you are attempting to do. Do your
homework first, BEFORE you walk out on your current employer.

E-mail me off line if you want more information.

Chris

P.S. You WILL need an accountant. Consider it the cost of doing
business. You don't necessarily have to incorporate, but I would.

 

Having done this in the past, I would NEVER do development work on a
lump sum basis. The process you describe will most certainly create a
great deal of tension between you and the customer. Been there, done
that, got the scar tissue.

I know a lot of customers blanch at the idea of a blank check, but
there are a world of unknowns waiting to bite you on the backside in
development projects. Unless you have done projects almost identical
to the one you propose, then you are making a wild guess to the time
it will take to complete the work. Some you will win, some you will
lose. Unfortunately it doesn't take many losers to bankrupt you. One
loser will eat up the profit from 5 winners if you get my drift.

Good luck,

Chris

 

Not to necessarily disagree with Chris Dubea, but I think a couple
caveats are in order to exand on what he wrote:

1) If you are working full time on your own AND you have no trouble at
all staying busy ALL the time, then you could add around $8 or $10 per
hour to the rate you're earning as an employee and consider that is
pretty much an equivalent. Differs by area and also by how much health
insurance costs are for you (and your family). A decent health
insurance plan for a family now will cost you around $1000 per month --
and you can count on the premiums going up substantially next year (will
be 100% deductible next year, however). If you don't have a well
established network of businesses which are doing well, and you're
having to drum up work for yourself, you can pretty much count on
spending half your time (or even more) GETTING work and the other half
DOING the work. In that case doubling your hourly rate would be more
like an equivalent to your salary. But consider that the higher you
charge the less business you'll be likely to get, unless you just happen
to be lucky, or extremely good at sales, or have a good network with a
good reputation in an area rife with business.

2) E&O insurance is more often necessary with structural work or machine
design where you may put others at risk by making mistakes. Although
it's true that some companies will require E&O insurance in order to
business with them, typically you don't need it and companies won't
require it if you're basically just contracting. Unless you're handling
entire projects you seldom will be asked about it.

3) If you DO get into handling entire projects don't make the mistake of
HIRING people as employees unless you absolutely must. The expenditure
in time and red tape and other insurance coverage (workmen's comp and
unemployment insurance mandatory, just as a start) will not make it
worthwhile. If you have to subcontract work with zero profit from other
contractor's efforts (because their rates match your own) in order to
get business then consider it well worth the cost.

Best regards,
'Sporky'

 

Even more fuel to the fire, and I'll get to the bottom line first:

The economy has been very poor, it's been a buyer's market, but it is
getting better (the advantage will shift to the seller soon I hope). I have
found that under these conditions it has been difficult to charge more than
what contracting houses are charging. In this area (Upstate SC) SolidWorks
designers are going for as little as $18/hr up to $28/hr, but not much more
for *_designers_*. Design Engineer contract positions are hard to find, but
they command more. But the contract house still has to take their cut.
Price yourself accordingly until the economy picks up, and that'll get you
the jobs.

I've read several "how to be a consultant" books and they all pretty much
describe a spreadsheet method of calculating your required hourly rate.
Total expenses must be covered by some hourly rate times the number of
available hours you can actually bill somebody versus marketing time,
downtime, admin time, potty-break time, take your wife out to dinner before
she divorces you time. Like Spork said, you'll probably spend a bunch of
hours soliciting business. Can you generate enough revenue doing SW design
work to cover your expenses? Run the numbers and estimate it to see. When
I started this game, my calculated required rate scared everybody off
because it was way too high compared to the market. I have since developed
a graduated scale based on what it is that I do. I charge different rates
for designer work, programming work, and actual "I'm responsible for the
numbers" engineering work goes for the outrageous rate...but it's typically
only 5%-15% of any project. It helps that I have the BSME+Master's + PE
license, so some companies look at that as a legitimacy and value thing.
With SW, the grunt work (drawings) is highly automated anyway.

The jewel of this game is getting the long term contracts so the marketing
time is minimized and the revenue-generating time is maximized. It all
depends on your reputation, your background, and controlling your expenses.

Moe

 

Thanks for all the good advice and hints. Ive gotten so many different
stories and rates from so many people by word of mouth, Im not sure what to
do. It is all side money, but that also means I have to watch taking on the
bigger projects since the customer wants their work on time...and lately Ive
been doing alot of overtime from my employer.......We will see what happens
I guess. Il probably just go to my existing wages plus a percentage to cover
expenses. But the hard part is, when Im working for my current employer at
home, I am earning 1 1/2 times regular pay. So who wants to sit there and do
extra stuff for $25-$28 when I can make alot more with the overtime. But you
never know when that will come to an end either. So...thanks for all the
help and suggestions Jake Barron