
Ask HN: How to determine fair salary for consulting job? - Irregardless
Hey HN, how would you go about determining a fair salary for a permanent position at a consulting firm? Would it be related to the hourly/daily rate they'll bill clients for your work? Some kind of salary + commission or bonus structure? None of the above? And is it normal to take travel time into consideration?<p>I've read a lot of articles on here about billing for independent consultants, but I can't seem to find anything about working for a consulting firm. This is for a small firm that serves a very niche market, so I'm not even sure where to begin looking for salaries to compare. Any help would be appreciated.
======
lifeisstillgood
Independant consultants are advised to bill on _value-added_. So for example
patio11 consults on how to improve the conversion rate of visitors to a site.
Using his light grey arts, he can go from 2% conversion to a 4% conversion.
For a site turning over 10million a year he has just made them an extra 10
million a year.

So he can charge commensurately.

The question I would ask you is how does your prospective employer charge? Are
they just billing hours and charging? Are they delivering projects that have
clear value outputs like patio11? Is their profit related to the number of
hours you work (bums on seats), or could you do a days work and move them from
2-4% conversion as well?

Now ask how does your prospective employer make its money - usually they
charge the client X and pay you .6x and pocket the difference.

Their risk is not having projects to charge X and still paying you .6X.

So - you could do three things

1\. take the usual salary of X - employee consultants tend not to get paid
much differently to actual employees - so try glassdoor.

2\. Are they open to you taking on risk - that is can you get .9X for the
willingness to get 0X if no projects come in the door? You are then a
freelancer, and they simply find the jobs.

3\. Are you willing to take on that risk? If so you probably dont want to be
an employee

~~~
1337biz
_For a site turning over 10million a year he has just made them an extra 10
million a year._

Now here is my question: From what I understand consulting is different from
implementation. If you go into project management and supervise the process of
implementation everything can be value based.

But what happens when you stick to a classic consulting perspective i.e. leave
the implementation for others to do? Meaning when patio11 would pack his bags
after running through his presentation and recommendations, what is he going
to bill his value on? Based on "predicted" savings/revenue?

I somewhat fear that value based consulting draws the consultant into the
nitty gritty of implementation, almost becoming a project manager of his
suggestions for optimizations. And if somebody else screws up along the
implementation process, it is going to stick with the consultant's reputation.

Can anybody comment on that?

~~~
lifeisstillgood
I do not know patio11 but I am pretty certain he does more than present and
run, and so can charge more. I get the impression from his blog that it is
more a case of the client committing to a certain project (ie 250k worth of
developer time, plus his fees, in order to increase metric x). He leads the
project, enthuses the developers, puts the charts on the wall and basically
earns his keep.

Three months later they have enough of his brain cells in their heads they can
wave goodbye.

Personally I would love to sit in an armchair at the Diogenes club and have
people come pay me for my opinion on what they should do. If that was ever a
consultants role I think it is long dead.

Yours

Mycroft

~~~
1337biz
But doesn't this lead to a culture of quick fixes? Meaning no long term
perspective, but just squeezing out any short term quantifiable result while
completely ignoring the long term impact of that?

Just imagine what would happen if this were about customer segmentation or
something like that. A super short term focus would suggest a client to drop
all contracts that are relatively unprofitable, even so on the long run these
are there for relationship building. That would be disastrous for gaining
larger contracts as these are mostly gained through building up a reputation
by fulfilling smaller, less profitable contracts. But for the consultant there
would be no motivation to bother about anything that does not result in an
immediate benefit.

------
audemus001
I always examine PRECISELY how much (money), the firm in question will profit
by my input. Then after nailing that down as closely to accurate as I can
possibly do...I currently charge on a Contractual Basis 33 and 1/3rd percent
of the ACTUAL projected profit they will make. There are the few rarest of
folk that will be straight up with you and tell you EXACTLY how much your
services will benefit them....tho not always dependable (even tho they will
swear on a stack o Bibles and whatever else that they are being Truthful and
Open with you...you cannot always count on it to be Honest. So, bottom line
is; do your homework, figure out as closely as you can based on your personal
knowledge of THEIR business Models as you can, and then charge
accordingly....as I said before...currently my rate is 33 1/3 percent of
anticipated profit.

As in ALL things, you will only get what YOU think YOU are worth....do not
expect others to pay you a nickel more than what they believe YOU BELIEVE YOU
are worth. Good Luck !!! Much Success.

Regards, J

~~~
lifeisstillgood
so in my imaginary patio11 example above - he makes them 10million in revenue
(at say 50% EBITDA), he should send in a bill for 1.66 million (5m x 1/3)?

------
notahacker
The market rate for a person with your skillset (which is only likely to
include a commission or profit-share if you're expected to take responsibility
for getting clients to spend more, or they can't afford to promise market
rate)

The fact the firm might bill a client a large multiple of that for your time
is irrelevant: they take on the risks and responsibilities associated with
winning the business and overheads and probably add value to your time with
some combination of reputation, proprietary data/software/methodology, other
team members, training and support etc.

