It always amazes me when consultants talk about what is enough for a consulting firm to earn. Many consultants put an "Inc" after their name and believe themselves to be Warren Buffett.
No one really spends the time to analyze what it really takes to run a business. Selling costs alone can send a company into the poor house. Couple that with account maintenance, rent, insurance, etc etc, is where most of the profit goes to.
What about recruiting costs? How about failure of interviews vs placement? What about when the client doesn't pay the consulting firm for 90 days or more while you get paid net 30 or bi-weekly? What about when the client does not pay at all due to your poor performance and yet you have already been paid? What about if I sell you for no profit at all to open an account, will you take less so I can make money? I can go on and go on but what is the point. The questions you need to ask as a consultant are these:
1. Am I being paid the rate I wanted, liked or accepted?
2. Am I being paid on time?
3. Could I function without a consulting firm finding my assignments?
If I hear two yes answers and one no answer then stop complaining and simply do your job!
Sorry, but that subject really gets me going!!!
ProStar Partners, Inc.
Executive Search and Consulting
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----- Original Message -----
From: Glenn Gundermann
To: Consulting on the iSeries / AS400
Sent: Wednesday, November 28, 2007 3:44 PM
Subject: Re: [Consult400] Compensation for Referrals
This is a touchy situation. I'll give you a couple of scenarios that
happened to me:
1. Consulting company X had an opportunity for 80 hours of business but
with no resources, called me out of the blue, who I never did work for
before. They took my rate at the time of $75 per hour and charged me out
at $125 per hour. They did nothing but one phone call and one very short
meeting. No business cards, office space, etc. But I wouldn't have had
the work if I didn't agree to it, so I did. We both made money so it's a
It can be upsetting that someone makes so much money on every hour of your
hard work so I would try to put upper limits, like $x per hour for two
weeks only, or a flat fee, or something.
2. Company Y contacts IBM Global Services for a resource, willing to fly
me in every Monday and back every Friday, contacts another partner, who
contacts another partner, who contacts another partner, who contacts me
and offers me $40 per hour and after discussion goes up to $50 per hour.
Everyone making a minimum of $10 per hour for nothing more than a phone
call, plus IBM GS making their hefty profit. I turned it down.
When customers call me and I don't have the time or expertise myself, I
don't sub-contract. I forward the lead on. I wish everyone would do the
same. I don't charge a fee but hope that my "friends" would throw some $
my way if they would like me to give them more leads.
> I would like to hear some opinions regarding compensation for referrals.
> A former IBM Business Partner I used to occasionally work with on a 1099
> basis has contacted me with an immediate opportunity to provide services
> one of his clients. He wants to turn over complete control of the account
> me and in exchange he wants me to pay him a flat rate for each hour I bill
> to the client. This flat rate equates to about 12% of the hourly rate that
> will be billed to the client and stays the same regardless of the number
> hours billed. He's also offered to do this with his other clients when/if
> they have a need for services. I can accept these terms but I have no
> experience with an arrangement of this nature so my first question is does
> this seem fair to both parties? Is this the customary way for handling
> type of referral or are there better alternatives?
> Feel free to contact me off-list.
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