Independant Consultants - What is your overhead rate?

VaSteve · 04-07-2006, 09:27 AM

Just curious for you knowledge "gig-workers", what is your overhead?

For instance, if you do work and your only real expense is driving to the client and printer paper...what is your overhead rate? Have you developed this by actually studying it or accounting or just a SWAG?

Thanks

Milu · 04-07-2006, 09:40 AM

I refuse to answer on the grounds that some of my clients may be reading this and the answer may incriminate me

widebody911 · widebody911's Garage

My overhead rate is .01 less than the client is willing to pay

Joeaksa · 04-07-2006, 10:13 AM

My overhead is driven by the fact that we have to retrain every six months. Cost for this training is "only" $14,000 per session plus the hotel, meals and transportation there and back.

It means that we have to stash quite a bit away while we are working to cover it.

VaSteve · 04-07-2006, 10:14 AM

Oh, sorry. That's not exactly what I meant. Not what you charge to the client, rather what it *really* is.

I did a side job for someone and didn't bother keeping track of small stuff like local car trips, phone calls, paper. I SWAG-ed that 5% of revenue on the job was overhead.

Curious to see if that was realistic....certainly I know some of you do this stuff full time, so there's probably a difference there...

Milu · 04-07-2006, 11:51 AM

My overheads include an office, a part-time assistant, a 911 for transport, computers, printers, scanners, hotels, restaurants, flights, specialist publications (think $500 for 50 badly written pages sometimes) client freebies, entertaining boring people when they're in town etc. etc. etc.
I work as a one-man operation but it's a business, not a part-time second job. To state the obvious: Take your billing rate (include expences if you bill that way), multiply by how much you will work for the next 12 months and deduct all your costs.

RoninLB · 04-07-2006, 01:23 PM

fwiw

When outside auditors come in the price paid/hr reflects 1/3 CPA salary, 1/3 partnership profit, 1/3 in house overhead costs. Other costs are bonus coupons paid by the client like airfare, hotels, food, car rentals, etc.

Hugh R · 04:11 PM

Used to be an Environmental, Health and Safety consultant working out of my house. General Liability and E&O insurance $10,000/year, medical insurance for family/employees of the corporation $10,000/year, employer side of social security $6,400/year, Celll phone $1,000/year (which was essentially my office), email $300/year, computer, printer, office supplies figure another $1,500-$2,000/year which put something aside each year for upgrades every few years. Mileage that wasn't billable $0.50/mile @10,000 miles/year=$5,000. That's just getting started. You could include other things like 401k matchng for the one and only employee (me) of another $4,000.

Your up to about $30K per year. Add in each year another piece of sampling or testing equipment which I decide to buy versus rent for the ability to have it when I need it and your moving up on overhead nicely. Add in home office expenses, which you don't want to write off because its an IRS red flag, but rather a percentage of the utilities and mortgage and kick in another $5K. My last year of consulting I figure about $45-50 for "overhead" and thats just me working out of my house. That equates to about 20-25% overhead, which is pretty standard. I'm figuring these expenses like medical because many companies in my field over some form of medical. Didn't include sick time or vacation, because as a sole practicioner, if I don't work, I don't get paid for sick or vacation.

Oh, I left out professional licenses, and fees, publications and required continuing education requirements to maintain those certifications, toss in another 5k.

I make less working for my current employer than I made (Gross or Net) as an independent consultant, but all those avoided costs like insurance and the education costs and employers side of social security add up pretty quick.