Posted in MicroBusiness Musings, Starting Out as a Freelance Consultant, General Freelance Info at 7:59 pm by andy

What should I charge for subcontracting to an agency?  Do I need to discount my time?

I’ve had many different roles in my career, from employee to manager to owner.  Here’s what I found about rates:

• As a consultant, your employer wants to bill you for at least 3 times your salary on a per-hour basis.  If you make $100K, they want to bill you at $150/hr and so on.  Some industries actually look for a higher return — e.g., SAP consultants – because they may not be able to book you full time, but 3x is a good rule of thumb.
• If you are being rented out by an agency as a full-time rent-a-body, the agency will mark up your desired hourly rate by between 25% and 35% and require a minimum 90-day contract for your time.  They have low overhead, because they don’t have to hire you if they can’t contract you out.
• If you are a freelancer and someone wants to subcontract work to you, the mark-up on your time will be anywhere from 30% to 100%, depending on the agency and the circumstances.  For my consulting company, when I subcontract work, I will mark up the subcontractor based on the value he/she is bringing to the project in terms of costs and output relative to my rate and output.  I will also pay the subcontractor before I even bill the client, because there’s no reason that the subcontractor should take any risk if I’m marking up their costs.
• If I’m subcontracting a job, I might give a 20% discount to the primary contractor, provided a few conditions are met: (1) I’m not busy and can’t bill full rate for that time anyway; (2) I don’t have to help sell the client on the project; (3) I get paid when I submit my invoices.  Otherwise, I don’t give a discount.
• If a client wants to put me on a retainer for a certain number of hours each month, I might offer a discount for the certainty of the contract, but only if I’m not busy and don’t have enough in the pipeline at full rate.

In other words: expect your rate to get marked up and offer a discount only if you are getting something worthwhile in return.  And never ever screw your primary contractor by trying to work direct for the client without the primary contractor’s permission.  That’s a great way to develop a bad reputation.