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salary correlated to projected billable

 
#1 salary correlated to projected billable
18/03/2007 20:11

returning consultant

Hi,

I just finished my master's and am returning to full-time work. I am in negotiation with a prospective employer. This is a tiny consulting firm, and in fact, I'd be one consultant hired as an employee; the others are associates. The prospective employer has projected my annual billable. Should my salary be correlated to that projection, and if so, at what ratio? Should I also expect any compensation for my non-billable hours?

Thanks!

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#2 RE: salary correlated to projected billable
18/03/2007 20:17

Hurrumph to returning consultant (#1)

Be careful with this. Your salary should comprise a risk free element that you get paid whatever you bill. This amount should be enough for you to live on.

As a business, the consultancy will obviously project what it can earn from you and apply a margin to work out what it can afford to pay you. However, your salary should really be determined in the marketplace by the oldest mechanism of all - demand and supply for your skills and not the ability of a small firm to charge their clients for your services. Consultancy rates can vary with market conditions and your billability should ideally determine the bonus element in your compensation package - not your base salary.

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#3 RE: salary correlated to projected billable
19/03/2007 07:40

well, der! to returning consultant (#1)

Did they not teach you to plan and think at this master's degee? What was the M. in??

reminds me of that bank's ad: Oh! Line up Will!!

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#4 RE: salary correlated to projected billable
19/03/2007 13:00

hardhat to well, der! (#3)

The last post is painful. Reminds me of a piece of advice that came to me on the spur of the moment: Dont use that strapline in a presentation unless you want to lose most of the audience!

The simple answer to Q1.a. is yes it probably should in your case. Why else would they be giving you the figures?

Q.1.b. good question! Establish a dialogue with the employer on this. Why not ask a question like 'Is 2:1 a fair ratio?' They might come back with something like. 'We always structure it around 3:1 for this role.' It is a negotiation situation.

Q2. This is not really about us. Some jobs have a large bonus element (example roles with an agreed sales and performance correlation). Others dont (often roles that incur necessary costs for running a profitable business). Many roles actually involve some element of both.

I like Hurrumphs point about a risk free element - lets face it slavery was abolished a long time ago!

Well done with getting a Masters anyway. Your posts shows that you still have an ability to plan and think!

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#5 RE: salary correlated to projected billable
19/03/2007 15:15

hh to hardhat (#4)

What does this mean? ---> The last post is painful. Reminds me of a piece of advice that came to me on the spur of the moment: Dont use that strapline in a presentation unless you want to lose most of the audience!

Re: original question, basically your salary is a separate discussion to what your employer bills you out at. Think "what am I worth" by reference to value-add and what you could get elsewhere, and negotiate accordingly.

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#6 RE: salary correlated to projected billable
19/03/2007 15:17

Don't do it! to returning consultant (#1)

Associates or contractors earn twice the remuneration of a permanent employee - precisely because they are taking the risk of being out of a job if the consulting firm fails to make the sales it has been aiming for!!

It sounds like what you are being asked to do is work as a permanent employee but accepting the earnings volatility of being a contractor?!?!

I would suggest you either:

i) negotiate a rate with them to be a contractor (half the day rate they are charging for you would be about the norm)

ii) negotiate a permanent role where 3/4+ of the remuneration is a guaranteed basic salary

Your ability to raise a mortgage and your negotiating position with a future employer (to name but 2 factors) will both be badly hit if you accept a position on a low basic salary....

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#7 RE: salary correlated to projected billable
19/03/2007 17:12

hardhat to Don't do it! (#6)

N.B. Put simply it meant that the post before mine lacked sufficient meaning as a response to the original questions. No harm in learning to spell degree if you want to question thinking! Sorry but the dumbing down before answering the questions gets a bit tiresome sometimes.

Anyway the result seems better-------> Think "what am I worth" by reference to value-add and what you could get elsewhere, and negotiate accordingly.

Get into negotiation discussions on these projected figures with them rc if necessary. We don’t actually know if these projections are simply guidelines, or if they are to be stipulated in a contract (if so is that a bonus element in addition to a basic?)

Please let me emphasise that our figures are some examples. Afterall Ddi's warning sign could be appropriate if in reality you are to live off what you might agree.

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#8 RE: salary correlated to projected billable
19/03/2007 19:17

dl to Don't do it! (#6)

Don't Do It!: Careful with assumptions. The OP did not say anything about how much he is being offered or at what conditions compared to the associates.

In a very small firm I would expect a significant correlation between your projected billings and your salary, but it's also a question - as others have said - of total package, risk vs. return and variable vs. fixed.

Ratios would vary depending on so many factors that it's impossible to assess, I have seen a minimum of 2:1 to a maximum of 5:1

Your non-billable hours would typically be remunerated as part of your fixed component, not as an outside "variable" element unless there is some specific task (e.g. delivering a specific piece of work for the firm such as a saleable piece of software/concept/article) that could be construed as an "internal project" and remunerated according to "results" (e.g. "you'll get 10% of all sales of this)

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#9 RE: salary correlated to projected billable
20/03/2007 00:55

Returning Consultant to dl (#8)

Thank you for your responses.

I will try to assess my market worth; however, both my skill set and the job offered at this particular OD firm are pretty specialized in the area of process consultation. My master's is in counseling - I'm currently a therapist. In addition, I've been trained by him as a group facilitator and OD consultant. However, I will continue to determine my value-add and worth elsewhere.

I'm including additional info, if it will help clarify my situation.

He is offering 31k with bonus not yet specified. With my current lifestyle, it is more than enough to live on. That's not the issue for me. It's about equitability. I won't be happy on the days I am earning 12% of my billings.

Minumum projected billings = 77K first year, but I suspect it will be higher as the 77K assumes a utilization rate of 30-60%

Associates receive 40-50% of billings. If I were to work as an associate, I'd receive much less work than as an employee.

I just wanted a reality check from others before responding to his offer.

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#10 RE: salary correlated to projected billable
21/03/2007 02:19

dl to Returning Consultant (#9)

You may also want to investigate what it would take for your prospective employer to consider giving you an equity stake, which may alleviate some of the "exploitation" feelings against a bigger "skin in the game"/commitment on your side. (There's sweat equity too, BTW.)

I don't understand something - how can a billability of 30-60% (i.e. a 1:2 range) result in a precise number of 77k? Would you be billed out at different rates depending on who buys/what work?

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#11 RE: salary correlated to projected billable
21/03/2007 16:14

Returning Consultant to dl (#10)

Yes, the rate is on a sliding scale depending on the client (nonprofit, government, corporate, foundation).

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#12 RE: salary correlated to projected billable
23/03/2007 14:34

hardhat to Returning Consultant (#11)

When doing these projections work out which variables are estimates in the projected model:

Estimates (for example you might use a:

- mean average, or

- weight the client rate by the proportion of client revenue from the client types that you describe and use that weighting for future projections).

With estimates make sure that you are in agreement with the prospective employer on assumptions used.

AND/OR use actual rates (e.g. a client type agreed already with the employer).

The model will have actuals and estimates in it as it is a projection model. Key is to understand the dynamics of the model and agree assumptions with the employer....... in this type of situation.

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