How Much to Charge Somebody for Helping With a Start-up?

[M.D. Holloway]

My Brother called today to inform me that one of his clients had a product idea that was chemicla in nature and they wanted to know if he know anyone who could help start up a company and direct the development, manufacturing and even provide distribution insight. He immediately thought of me (bless is soul!). He gave them my cell and then he called me up to tell me they would be calling. Sure enough they did and they may actually have a pretty cool concept.

They wanted to know first off if they should patent it. Knowing the chemicals they are thinking about using and the application I told them they didn't have a chance in the hot place but that really didn't matter. The trick would be product position and distribution. We talked for about an hour and it was made off thet they would e-mail more information. They also told me that they wanted to compensate me for me time and involvement. I told them that was fine and we could work out the details. I told them I would look into some things and draft a feasibility study along with a draft of the business model including the milestones to hit.

I have to figuer out how much to bill for my time on this. My billable to customers is $1800/day ($225/hr) on the top end. For my freelance work I charge $1.5 to $3/word - it takes me about an hour to make $500. The University pays me $5,600 per course I teach - the time commitment roughs out to $150/hr.

So, what are my billable hours for this work? I figuer that somewhere in between it all is fair - I could be spending time doing other things instead of this. So is $300/hr plus certain spiffs in the shape of incentives, sales % and met goals seem reasonable? Mind you, this person has the cash but not the chops to do this. What do you guys think?

[stomachmonkey]

Half your normal rate, trade the other half for equity interest in the company or a nice royalty per unit sold. Percentage of back end is always nice but a small % of gross is tough to get and a nice chunk of net is risky. If the business is not managed well it can eat into net.

Otherwise charge full rate.

[techweenie]

Originally posted by stomachmonkey
Half your normal rate, trade the other half for equity interest in the company ...

Exactly what I've done in the past. And the returns have averaged well over 15X what I would have gotten in 100% cash payment.

[Rot 911]

Ask whomever helped Shaun start up G9 girl. I'm sure they were paid well. I couldn't resist!