[LINK] private question for off list - consulting

[Robert Brockway]

On Fri, 6 Dec 2013, Rachel Polanskis wrote:

> Hi Linkers,
> I have finally accepted a redundancy from my job at <some uni> and my last
> day is just on the new year.
>
> I have put together a little business plan, getting an ABN and putting together
> a little website we will host on our NBN FTTH connection, hopefully making
> a small business out of it.

Hi Rachel. I tried this few years ago in Canada.  I learnt a lot about 
business (and tax law).  Here are a few thoughts:

(1) A lot of small businesses would try to save money by designing the 
solution themselves (badly usually) and then bring in a specialist to 
implement.  Try to encourage them to involve you in the design stage.  You 
can probably save them implementation costs.  A happy client will use you 
again - there is always stuff to do.

(2) Late payment was a real problem.  I ended up offering significant 
discounts (up to 25%) for pre-purchasing large blocks of billable time. 
Of course you work out your base rate taking this in to account.  Even for 
post-paid work I offered a discount for early payment.  These strategies 
did help with the late payment problem.

(3) I spent a lot of time writing quotes.  You need to factor that in to 
your rate.  Only a proportion of quotes will turn in to billable work.

(4) General IT consulting like this can be problematic.  Without 
specialising, a lot of jobs are effectively 'one off' so there is 
generally more over-head. Quotes, Statements of work (SOWs), and set up 
for example.

(5) Outsource your accounting.  Really.  It is a time sink.  You would be 
better off spending the time writing quotes or doing just about anything 
else.

(6) I used the 'accrual method' of accounting.  I consider this to have 
been a mistake.  When it comes to late payments you may find yourself 
paying tax on money you haven't received yet.  I did.  The alternative is 
called 'cash accounting'.  Obviously there are pros and cons.  Talk to 
your accountant about which system is right for you.

As for the rate.  I'm not up with current T&M (time and materials) 
consulting rates in Australia but $70 is definitely too low.  $100-150 
wasn't unusual many years ago.  Remember you can entice with discounts off 
the base rate.

Good luck and remember, work smarter not harder.

Cheers,

Rob

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