Mind in the marketplace (Part 4): All about money
25 September 2012 – Christopher Clarke
Public historians who enjoy a regular paycheck find certain aspects of consulting curious–none more so than the issue of money. I expect that this curiosity also extends to the ranks of those who are considering a leap in the consulting direction.
I hope I will be forgiven for devoting the next several hundred words to this subject. I promise that I will return to a more high-minded level of disquisition in my next post.
Questions about the money side of independent consulting seem to fall into two general categories: “How much should I charge?” and “How much can I make?” Not surprisingly, the answers to these two questions are related.
Most independent consultants provide services on an hourly basis. This makes for a relatively clean transaction–the client’s money for services actually performed. The hourly rate that a consultant can charge depends on several factors. It is determined partly by the “market,” which is to say what other consultants charge, and partly by the consultant’s own combination of relevant experience and reputation. In general, the consultant sets the lower limit on price (“I won’t do that for less than X”); the market, and the size of the client’s bank account, set the upper limit.
Many consultants charge too little per hour when they begin. I know I did. It takes a while to figure out exactly how much operating overhead you will have to carry, how much down time you are likely to experience, and how many expenses (like health insurance purchased at retail–my current annual bill for three people is nearly $13,000) you will need to pay. It’s also true that historians who “consult” as an add-on to a salaried position can set an artificially low floor for consulting rates, because their consulting income is gravy rather than the life-blood of their household economy.
Do we need to mention a number? Fair enough. A ballpark figure for an experienced public history consultant would be $100 per hour. This number will vary widely by size of market, the depth of your credentials, your inclination to offer discounts, and the clients for whom you work. These factors could push this number down by as much as 50 percent or up by the same increment or more. Note that we are not starting with a rate of $25, $35, or even $50 per hour. Consulting is a business, not a charity, and no one should have to starve to work as a consultant. You should earn as much in real terms as someone with your credentials and experience can earn in a salaried position — or more, because you are carrying more risk and more responsibility.
To this point, the answer to “How much can I make?” is determined by how many billable hours you can invoice and how high your expenses are. Generally speaking, a not insignificant percentage of your gross income will go to toward “overhead;” this includes operating costs like rent, utilities, supplies, insurance, subscriptions, travel, membership fees, and so on. You will also spend a portion of most working days on tasks for which you can’t bill your clients (compiling and sending invoices, searching for work, writing email, submitting bids and proposals, fixing the computer, doing your taxes, purchasing supplies, taking your child to the dentist, and so forth). If I spend 8 to 9 hours in the office and can bill for 6, I consider it a very good day. (Today I spent most of the day developing a detailed work proposal on spec and writing this blog post. Billable hours? Zero.)
Especially if you are a one-person business, you will find that it’s very difficult to maintain an optimum level of “busyness.” The demand for your services can be puzzlingly variable. There will be some days and weeks when you have plenty of (unpaid) time to read a novel; there will be other days and weeks when you are certain the world will end before you can finish what needs to be done.
The bottom line is that your annual income is likely to fluctuate widely (or wildly) from one year to the next. Over the past 15 years I have seen my annual income vary from the median by as much as 40%. This can be by turns unnerving or exhilarating. Dealing with it requires both patience and an appreciation for the longue durée. I should add that I have consistently earned significantly more as a consultant than I earned in my last salaried position (even after adjusting for inflation and assuming regular raises in that salary).
Alas, there is yet more to say on the subject of money and consulting. Perhaps I will return to this topic later in this series. Next time, however, I will be writing about different ways to define success as a consultant.
— Christopher S. Clarke, Ph.D.
Exhibition Developer and Consulting Historian
Rochester, NY
Hi Christopher, as someone looking over the edge of the cliff myself, I quite enjoyed this article (it reminded me in a way of a recorded discussion by a NWH panel from earlier in the year). At least from my point of view, these nitty-gritty questions are more the ones that worry me than the more high-minded ones.
Thanks again!
Thank you, Peter, and good luck! As Butch and Sundance would tell you, it feels great once you are in the air.
Chris, your blog posts are terrific! Thank you for writing clearly about the nitty-gritty of running a small business, which is exactly what a consulting historian does. I especially appreciate your willingness to use an actual dollar sign. One important category to add to the list of expenses is taxes, which can take nearly a third right off the top of a sole proprietor’s gross income. Make contributions to an IRA, and suddenly, $100/hour doesn’t seem so grand. Thanks again for your superb commentary. I’m already looking forward to the next one! –Dana
Right you are, Dana. We independents have the privilege of paying double the regular amount for social security / medicare, which makes for a hefty tax bill.
Thanks for your kind words about these posts. I’m enjoying meeting new consulting colleagues who are piping up to say hello and add their own perspectives.
I really appreciate your insight into being a consultant. I am in my first four months of being a full-time consultant (after three years of part-time consulting, part-time employment) and at least once a week, I have a small heart attack about money flow. It makes me feel better to read it is all a part of consulting work and something I need to get used to. Also, I appreciate your using numbers also. I am charging no where near $100 because I don’t think museums will hire me at that rate. But charging less is making my work schedule harder because I have to carry more work. Something I need to weigh…
Heidi — This is the part of jumping in that doesn’t feel so good. A baseline anxiety about your income stream goes with this territory.
It takes a while to get your pricing right. There’s nothing magical about the $100 figure — I’ve done my share of work for less. However, if you are not regularly testing the upper limit in your market, you may be missing out on opportunities for higher compensation. If everyone says yes to your price, it’s probably too low.
Good luck — and congratulations for taking the plunge.
Christopher,
I, too, would like to thank you for being willing to put a number out there. It is impossible to learn the market rate when no one will tell you what they are charging! There was a panel at the 2012 NCPH conference on how to price consultant work and no one would give numbers–it was one of the biggest complaints that I heard from colleagues interested in consulting.
Of course, your qualifying statements are important, and I can understand why people would be hesitant to tell others what they are charging for a variety of reasons.
Thanks again for your perspective!
-Kristen
Kristen — I also attended that panel and shared your frustration. In fact, the experience of listening to that panel was one of my primary motivations for deciding to write this series of blog posts. It was clear from that discussion that independent consultants need an opportunity to have a separate dialogue about their work. I’m glad that you are finding these posts helpful. Thanks for contributing to the conversation.