Wages....

I really hate to bring this up but Ill see if anybody starts taking pop shots at me. Im starting to get some offers for contract work. Mainly taking
drawings off paper napkins, autocad, TIF, ect and building SWX models. A few of these offers seem to have some pretty big projects. Now I know for a fact that Im underpaid at work, but thats besides the point. I do get good benefits, bonuses, 401K, ect. But my ultimate goal is to work from home full time within a few years and I am just starting to network. I will be using a legal seat at my current employer after hours to do this extra work. After that, If I leave my job, I will have to purchase a legal seat for my Home Office. I want to make a fair wage, and I dont want it so high that I wont get the work. But on the other hand, I dont want to cut anybody elses livelihood off either because I underpriced them. You know what Im trying to say. Unfortunatly Uncle Sam will want his share off the top :( One firm would like me to give them a bid on the entire project. Thats kinda tough for me to do. This work will be done in Florida...Im sure there are wage differences throughout the country with us hillbillies being about the lowest. Thanks for any help you can provide. Sincerely, Jake Barron
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Jake: I live in Oviedo and would be willing to help if you need.
You need to look at yourself and decide what kind of money makes you happy. If you feel like the king of the world while at home working for 10 bucks an hour then I think you will have a lot of work. If on the otherhand you price yourself at a level that makes you disgruntled, do not accept the work. When you work for yourself, allow yourself to be happy. Do not make excuses for your wage and do not appologize.
Now that my soapbox is kicked out from under me, concider this. employers must match what you pay to social security. They must pay for benefits. there are other costs associated with your employment. with that all said, 35 to 40 /hour is not to pricey.
You should try to get the person to pay you on the project. Just be sure that YOU define what you will do. If there are unknowns, push them back on them. Tell them exactly what you will do for XXX money. More likely than not, you will finish what you said you would and the project is not complete. Now you can ask for more money knowing exactly what needs to be done and make up your price then.
HTH, Colazi
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On Fri, 12 Sep 2003 03:24:33 GMT, the renowned Colazi

Rough rule of thumb for "consulting" type work- take the hourly wage you'd be paid working in an equivalent full-time job in your area and double it and that's an indication of what you should be charging per your. Of course if you have special experience in some area, competition is light or intense, or you have to do a lot of learning you may have to/want to adjust things up or down. Consider what the shop rate is at your local garage, what a service call for your washing machine costs, etc.
Best regards, Spehro Pefhany
--
"it's the network..." "The Journey is the reward"
snipped-for-privacy@interlog.com Info for manufacturers: http://www.trexon.com
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Having done this in the past, I would NEVER do development work on a lump sum basis. The process you describe will most certainly create a great deal of tension between you and the customer. Been there, done that, got the scar tissue.
I know a lot of customers blanch at the idea of a blank check, but there are a world of unknowns waiting to bite you on the backside in development projects. Unless you have done projects almost identical to the one you propose, then you are making a wild guess to the time it will take to complete the work. Some you will win, some you will lose. Unfortunately it doesn't take many losers to bankrupt you. One loser will eat up the profit from 5 winners if you get my drift.
Good luck,
Chris
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I'd be REALLY careful about doing outside work at your current employers--that's a minefield you're walking into. It's not a good idea to try to mix consulting and a job in the same chair; there are just too many conflicts of interest.
You might want to try working from home instead. Under the terms of the SW liscense, you may be authorized to put a legal copy of the program on your home machine....
quoting from the liscense---"If the Software is permanently installed on the hard disk or other storage device of a computer (other than a network server) and one person uses that computer more than 80% of the time it is in use, then that person may also use the Software on a portable or home computer."
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Just for talking purposes, a good rule of thumb for you to be able to take home what you do now as a regular paid employee is to charge twice your hourly wage. IOW if you make $10 an hour, then charge $20 an hour. Don't forget about an Errors and Omissions insurance policy. That will cost you about $15K for $1M worth of coverage with a $10K deductible. A lot of clientle require it and I wouldn't do consulting business without it. It will minimize the chance of losing everything you own if something turns sour. Let's face it things happen that are beyond our control that can severely impact your project. Some insurance companies will allow you to bootstrap this onto your existing homeowners policy. As them about a personal unlimited liability policy. It will cost you about $500 for $1M worth of coverage. Some insurers excluded engineering development, some don't. Unfortunately mine did so this wasn't available to me.
Do yourself a BIG favor and look up your local SCORE office (Service Corp of Retired Executives). They provide free counseling and information for people like yourself to maximize your chances of success. They will be able to give you great insight into all the legalities involved in what you are attempting to do. Do your homework first, BEFORE you walk out on your current employer.
E-mail me off line if you want more information.
Chris
P.S. You WILL need an accountant. Consider it the cost of doing business. You don't necessarily have to incorporate, but I would.
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Not to necessarily disagree with Chris Dubea, but I think a couple caveats are in order to exand on what he wrote:
1) If you are working full time on your own AND you have no trouble at all staying busy ALL the time, then you could add around $8 or $10 per hour to the rate you're earning as an employee and consider that is pretty much an equivalent. Differs by area and also by how much health insurance costs are for you (and your family). A decent health insurance plan for a family now will cost you around $1000 per month -- and you can count on the premiums going up substantially next year (will be 100% deductible next year, however). If you don't have a well established network of businesses which are doing well, and you're having to drum up work for yourself, you can pretty much count on spending half your time (or even more) GETTING work and the other half DOING the work. In that case doubling your hourly rate would be more like an equivalent to your salary. But consider that the higher you charge the less business you'll be likely to get, unless you just happen to be lucky, or extremely good at sales, or have a good network with a good reputation in an area rife with business.
2) E&O insurance is more often necessary with structural work or machine design where you may put others at risk by making mistakes. Although it's true that some companies will require E&O insurance in order to business with them, typically you don't need it and companies won't require it if you're basically just contracting. Unless you're handling entire projects you seldom will be asked about it.
3) If you DO get into handling entire projects don't make the mistake of HIRING people as employees unless you absolutely must. The expenditure in time and red tape and other insurance coverage (workmen's comp and unemployment insurance mandatory, just as a start) will not make it worthwhile. If you have to subcontract work with zero profit from other contractor's efforts (because their rates match your own) in order to get business then consider it well worth the cost.
Best regards, 'Sporky'
Chris Dubea wrote:

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Even more fuel to the fire, and I'll get to the bottom line first:
The economy has been very poor, it's been a buyer's market, but it is getting better (the advantage will shift to the seller soon I hope). I have found that under these conditions it has been difficult to charge more than what contracting houses are charging. In this area (Upstate SC) SolidWorks designers are going for as little as $18/hr up to $28/hr, but not much more for *_designers_*. Design Engineer contract positions are hard to find, but they command more. But the contract house still has to take their cut. Price yourself accordingly until the economy picks up, and that'll get you the jobs.
I've read several "how to be a consultant" books and they all pretty much describe a spreadsheet method of calculating your required hourly rate. Total expenses must be covered by some hourly rate times the number of available hours you can actually bill somebody versus marketing time, downtime, admin time, potty-break time, take your wife out to dinner before she divorces you time. Like Spork said, you'll probably spend a bunch of hours soliciting business. Can you generate enough revenue doing SW design work to cover your expenses? Run the numbers and estimate it to see. When I started this game, my calculated required rate scared everybody off because it was way too high compared to the market. I have since developed a graduated scale based on what it is that I do. I charge different rates for designer work, programming work, and actual "I'm responsible for the numbers" engineering work goes for the outrageous rate...but it's typically only 5%-15% of any project. It helps that I have the BSME+Master's + PE license, so some companies look at that as a legitimacy and value thing. With SW, the grunt work (drawings) is highly automated anyway.
The jewel of this game is getting the long term contracts so the marketing time is minimized and the revenue-generating time is maximized. It all depends on your reputation, your background, and controlling your expenses.
Moe

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Thanks for all the good advice and hints. Ive gotten so many different stories and rates from so many people by word of mouth, Im not sure what to do. It is all side money, but that also means I have to watch taking on the bigger projects since the customer wants their work on time...and lately Ive been doing alot of overtime from my employer.......We will see what happens I guess. Il probably just go to my existing wages plus a percentage to cover expenses. But the hard part is, when Im working for my current employer at home, I am earning 1 1/2 times regular pay. So who wants to sit there and do extra stuff for $25-$28 when I can make alot more with the overtime. But you never know when that will come to an end either. So...thanks for all the help and suggestions :) Jake Barron

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