Behind most successful managers are the successful projects where they have been able to obtain leverage from using consultants properly. You have a choice: Learn to achieve through getting the right consultants “on the bus” or hire unwisely and set yourself up for failed projects. From my observations and first hand experience in being a consultant I set out some pointers to help you use consultants successfully.
Understanding the consultants’ chargeout rates
Some organizations have an anti-consultants culture. This commonly starts from the top and seeps insidiously all through the organization, possibly based on previous bad experiences or misconceptions about the charge-out rates. Exhibit 1 looks at how charge-out rates are calculated.
Exhibit 1 Consultants’ Charge-out Rate Calculation
| A consultant year may look like this |
Weeks |
| Vacation/holidays |
6 |
| Sick leave |
2 |
| Training and updating |
2 |
| Marketing (visits, delivering presentations, phone calls) |
5 |
| Unsuccessful proposal time (non recoverable) |
5 |
| Time written off (consultancy time that is not billable) |
3 |
| Balance being consultancy time |
29 weeks |
| At 45 hours a week this comes to just over |
1300 hours a year |
| Senior consultant’s salary and benefits |
£100,000 |
| Budget revenue is typically at least 2.5 time the salary |
£250,000 |
| Charge out rate (consultants round up!) |
£200 per hour |
A major consultancy firm needs a factor of 2.5 to 3 times salary to cover overhead, such as training, administration support, accommodation and equipment costs, non recoverable flights, recruitment costs, and a contribution to the owner’s return on investment in the business.
Far too often management and staff think that every working day in the year is chargeable. This is far from the truth.