IT Consulting Rates Must Cover Your Overhead

When setting your IT consulting rates, are you charging too little? If you work too cheap, you’re simply setting yourself up for failure. 

Below are three tips to get you thinking about not only covering your overhead but making sure your company stays profitable.

1. Keep in Mind the Overhead That Most Small Businesses Face

New IT consulting companies need to think about what it takes to run a small business.

Even as a one-person company, your rates will most likely need to be over $100 per hour to cover your most basic expenses and provide a reasonable salary for yourself.

The list of possible overhead expenses can be quite extensive, depending on your situation. But just for the basics, make sure you consider

• taxes

• business licenses

• business insurance

• medical insurance

• professional legal and accounting fees

• administration

• billing

• rent

• utilities

• office equipment

• training

And don’t forget about a decent marketing budget to attract new prospects.

2. Not Every Hour You Work is Billable

Think about the hours you’ll actually be able to bill. Not all of the work you do in a week is billable.

Initially, you may only be able to bill about 50% of your time. The balance of your time will be spent running your own business, doing such things as billing, marketing, sales, and training.

3. Avoid the Home-User Market

There are two reasons to avoid the home-user market.

First, they don’t have the urgency that a small business does when it comes to uptime. A home user may be fine waiting a week or two to call you when their computer goes down. A small business will need your help immediately. In most situations, they will also be willing to pay an emergency rate to get you there today.

Second, you simply won’t make much money doing work for a home user. You’ll end up competing against the $29 computer repair companies that advertise in the coupon mailers.

Small businesses have a much larger budget to pay your IT consulting rates in order to keep their business up and running.

The Bottom Line

When deciding what your IT consulting rates should be, take into account your overhead. A surefire way to go out of business quickly is to charge too little for your services. Get this wrong, and your business fails. Get it right, and you can create a business that perseveres for years to come.

Do your IT consulting rates cover your overhead? Or is your company at risk because you’ve set your rates too low? Please share your thoughts in the comments section below.

And to follow through on the tips to help keep your company profitable,  especially if you also consult on SaaS and IaaS, be sure to enroll now in our free 7-day eCourse: Go-to-Market Strategy 101 for B2B SaaS Startups and Scaleups.