Factors that Determine Hourly Rates
Technology services are commonly billed by the hour. Rates typically range from $60 per hour to $200 per hour depending on the market and the work being done.
Auto insurance companies try to calculate fair premiums that are reflective of anticipated group claims. In other words, when you are bunched together with other people of your age, gender, education, driving record, and credit score, the insurance company can fairly closely estimate the average cost each person needs to pay in order to cover all claims, with a little bit of profit left over for the insurance company.
Similarly, the actual cost of providing technical support and services isn’t the same for each person or situation. Here are other factors that can influence hourly rates:
- Allergen Free Environment. Working in a clean environment that is allergen-free helps prevent allergic reactions, sinus congestion, headaches, and other such reactions including possible cold symptoms that result in a short-term inability to work. It’s also more pleasant. So, those who provide clean workspaces should be rewarded.
- Business or Home. Business rates are usually higher than home consumer rates. This is because typically more training, experience, and competency are required, as well as commercial-grade testing and diagnostic systems for networks and servers. Working for businesses is typically a higher stress situation compared to residential services because businesses need services delivered quickly and problems need to be resolved promptly to avoid downtime and loss of income.
- Cost of Failure. When the cost of failure or downtime is high, and the complexity of a problem is high, the stress involved and cost to solve problems results in higher costs. Sometimes equipment needs to be replaced quickly, at higher costs than if comparison shopping were done or three-day delivery were possible. If a business is looking at $1M in losses for one day of downtime, they will probably be willing to pay more than the typical hourly rate to get back up and running again. The consultant needs to make an ethical decision regarding what is fair, while avoiding what amounts to extortion and exploitation of someone in a difficult situation.
- Experience. Consultants with more experience generally charge more for their services. This is similar to senior lawyers charging more per hour. Even hair stylists will charge higher rates after they have been in business for a long time. Typically when you work with someone who has a lot of experience, they can provide insights, innovations, and efficiencies that make the higher rates more economical.
- Fast Payments. Customers who pay promptly when services are rendered save time later in follow-up requests for payments.
- Food. For projects that extend over a longer period of time, it’s convenient to have food and water available and to be able to eat while working. In work environments where food isn’t available, meals sometimes get skipped, or meals require breaks from work. So, the convenience of food on-site has value and should be rewarded. In some situations, a customer might offer food to a consultant and that’s something that should be appreciated and rewarded with a lower rate.
- Good For Community. It’s nice to reward non-profit organizations and others working in the public interest by extending discounts to them.
- High Volume. Customers who repeatedly request services on a regular basis help streamline the work process. It’s common for customers to receive a discount as a reward as a quantity discount.
- Ideas. Sometimes customers provide ideas and business insights that have value. These should be rewarded.
- Local Economy. Areas with a higher cost of living and higher salaries will have higher service rates.
- Long-Term. Repeat customers provide stability and continuity. There’s value in being able to rely on repeat business.
- National Security. There are many agencies, organizations, and professions that strengthen national security, national infrastructure, natural resources, and the environment. Teachers and librarians help create a stronger country. Those involved in these service roles should be rewarded.
- Overhead and Operating Costs. If a consultant has a lot of operating costs, then their hourly rate must be higher to help cover the cost of running their business.
- Paperwork. Some customers request detailed invoices as a receipt for payment. Other people pay with cash, check, or credit card and need no further paperwork.
- Parking. Some locations have close and convenient free parking available. Other locations do not have parking close by, or free.
- Purchase Approval. Some customers will approve just about any purchase that is recommended. This is very helpful and makes it easier to perform requested work. It’s often easier to spend money on hardware rather than spending money on labor to compensate for broken or outdated systems.
- Referrals. Customers who provide regular referrals that result in new business should be rewarded with lower rates. The cost of marketing and promotions are reduced when new customers are plentiful due to word-of-mouth advertising.
- Required Timeframe. Some customers need to have services provided at a specific time, on time. Other customers don’t really care when a consultant arrives. This reduces stress and pressure considerably. The consultant’s day can be organized to have all stops in the most efficient order possible without worrying about getting to a specific stop at a certain time. If someone demands on-time service, this often results in inefficiencies, skipped stops, backtracking, and rescheduling other appointments in order to make it to one location on time.
- Special Assistance. Those who’ve experienced a tragedy in their life should get a break either through a discount, or perhaps free services. Whether from a natural disaster like flood or tornado, or perhaps a death in the family, it’s nice to reduce their burdens in some way.
- Specialized Training. Services requiring certifications or specialized advanced training, such as network support or certified repairs, can cost more.
- Travel Time. When service providers need to travel for on-site work, their time and mileage need to compensated for. So, on-site services generally cost more than in-shop services or over-the-phone service.
- Value of Solutions. Sometimes a consultant will be compensated based on the value of the services and innovations they provide. If a solution is provided by a consultant that can save a company $300,000 in operating costs annually, or allow that company to generate an extra $500,000 in profits for a year. Should the consultant be paid for how many hours they worked? Perhaps only a few hundred dollars? Or, should the consultant be paid more because of the value of what they offered. For consultants who regularly provide such value, higher hourly rates can be expected.
- Work From Home. If projects can be completed from home, such as working on computers that are dropped off, working on websites, or providing remote support, this eliminates travel time. It also makes it possible to do some multi-taskins while waiting for some processes to complete.
- Workspace. While not directly related to the cost of delivering services, spending time in a nice workplace can have value and should be compensated for.
Given all of the above variables, it makes sense to have a sliding scale for consulting rates that takes these factors into account.
Annual Cost of Delivering Technology Services – $20,000
Even a small one-person shop can have a long list of expenses associated with operating their business. Here are some examples showing the typical cost per year of basic services. The expenses below come to about 20,000. So, a typical consultant will want to bring in about $70,000 per year to earn about $50,000 after they pay their expenses. Then plan on another $14,000 paid out in taxes for an annual income of about $36,000 per year. This assumes the consultant is charging $80 per hour and able to have about 4 billable hours per day.
- Accounting – $720. Most online accounting services have a monthly fee. It’s not uncommon to spend $30 per month for systems that will help create invoices and take payments. In addition to this, most small business have at least a tax accountant who helps with their books annually for a fee that can be $360 per year.
- Advertising and Web Hosting – $360. Website hosting, business cards, and other similar advertising expenses can be several hundred dollars per year if you have multiple websites.
- Asset Tracking and Inventory – $2,400. Software and services are available that help maintain inventory and system status of customer computers. Such services can cost $200 per month or more.
- Automobile – $6,000. Most service businesses rely on having fairly new vehicles that are either purchased or leased to ensure reliability and safety of use year-round. A new clean vehicle helps convey something about a consultant’s care for their own property, attention to detail, and business success. Such vehicles are sometimes stored indoors to ensure that tools and electronics remain in a secure climate-controlled environment. The cost of purchase, operation, maintenance, and care for business vehicles can be $400 to $500 per month for fuel, maintenance, insurance, payments, and upkeep.
- Communications – $1,440. Consultants using cellular data services, smart phones, tablets, and mobile hot spots, may spend over $120 per month. Particularly if there are two or more phones needed.
- Customer Service – $360. Tracking customer requests and providing follow-up is often done using an online support portal such as Zen Desk. Such services can cost $30 or more per month.
- Equipment – $3,600. The cost of replacing computers, tablets, phones, and other equipment on a 4-5 year cycle can be several thousand dollars per year.
- Internet – $840. Those providing technology services will typically pay a higher monthly fee so they can have very high speed internet.
- Office Space – $3,600. Most consultants have an office space of some kind. Either a dedicated space in their home, or a rented commercial office space. This cost could be several hundred dollars per month or more either as a commercial rental cost or as a portion of mortgage or rent.
- Remote Support – $600. With technology consulting, it’s common to use some kind of remote support software. This can cost $30 to $50 per month depending on the service used.
- Software $360. It’s not uncommon for a small business to pay $100 per year for Microsoft Office 365, as well as renewal fees for other software that’s used for providing technology services like data recovery.
- Training – $600. Ongoing training and professional development can cost thousands of dollars per year. Or, with online ongoing self-study, this cost could be eliminated.
Challenges With Billing
One of the greatest challenges with billing is knowing how to charge for shorter service calls.
- Travel Time. On-site support calls can sometimes take less time on-site than the round-trip travel time. From the customer’s perspective, they may have only received 10 minutes of help, so they might feel reluctant to pay for an hour to cover the 20 minutes in transit each way.
- Short Support Sessions. Brief support sessions over the phone are equally challenging to charge for. Should there be a fee for a 5-minute support call? What about a 10-minute support call? What should the threshold be? It’s not uncommon to spend several hours a day on short phone calls, email exchanges, and text messages.
- Competing With Free Services. When shopping in a big box store, we’re used to getting an abundance of free advice when making a purchase, and even afterwards to get help with setup, basic usage questions, and troubleshooting. Such stores typically make enough on the sale of products to cover the cost of offering other services for free.
- Compensation for Brief Follow-up Calls. Some consultants will adjust their hourly rates to cover for brief follow-up questions and support requests. So, instead of charging $60 per hour, they might charge $80 per hour so that a 3-hour session will cost $240 and that can make it possible to not charge for a few simple follow-up questions later.
- Billing Administration Time. The time required to generate an invoice can be significant. If the invoice is to include detailed notes about the work performed, then it takes time to assemble those notes. So, for many short 5-10 minute support calls in a day, one may need to spend an hour or more to write up the bills. Customers may feel it’s time consuming and a nuisance to write a check or go online to pay for such a small invoice.
Challenges With Arriving On-Time
A person may spend hours trying to fix a problem before they call a consultant. So, the support requests a consultant is working on are often not the easy ones to figure out. When arriving on site, there can be other underlying issues. It’s common to run basic diagnostics, updates, and virus scanning before even starting on solving a problem. When on-site, people typically think of other questions they’ve had. In ideal circumstances, it’s nice to answer all questions, solve all problems, and put preventative measures in place before going on to the next service call. For these reasons, it’s difficult to know with precision if a service call will take an hour or several hours. Problems initially thought to be easy to solve, may turn out to be very difficult to solve.
People really don’t like to have a consultant come over, spend several hours, and leave a problem unresolved, or perhaps partially fixed — perhaps with updates half-way completed, and then have the consultant say, “Well, I need to get to my next service call.” People really prefer to have the job done, or at least get to a reasonable stopping point with things put back together again. So, it seem like the best practice is to completely finish a project to the customer’s satisfaction before moving on to the next day. if not, a person could end their day with several job sites and projects left partly completed. As a result, it’s common to be running behind when arriving to the next customer location.
While people really like it when a service technician arrives on-time, they don’t really seem to have the same degree of concern regarding when the consultant leaves. They will keep the consultant longer just so they can have all their questions answered and all their problems solved. So, this balance ultimately helps people understand that a person may arrive late because all jobs need to be finished adequately before continuing to the next.
A consultant’s day is generally scheduled as efficiently as possible. As an example, service calls and stops on the west side of town would be bundled together in the same morning. Stops along the way to the east side of town are done over the noon hour before making several service calls on the east side of town. If one customer on the east side really demands that the consultant arrive on-time, then some service calls and stops must be skipped to get to that client. This results in time consulting backtracking to run necessary errands that weren’t done earlier. Perhaps driving right past drop-off or pick-up locations because there isn’t time to do even quick errands on the way. Perhaps a client calls, and you’re in their neighborhood, and it would be super efficient to just stop by on the way, but the next appointment is a stickler for being on-time. So, the person close by who just called must be skipped and wait until later. In this way, an entire day that could efficiently be taken care of efficiently in 7 hours (with some flexibility regarding arrival times) could end up taking 10-12 hours because of backtracking.
Low Density Appointment Scheduling
In offices where procedures and checkups are performed that have a highly predictable time requirement, one method of increasing income for the office is to push as many customers through as possible. This might be true for a doctor’s office providing annual physicals, a dental office providing cleanings, or an automotive service center scheduling oil changes. These are relatively predictable customer encounters.
The airline industry is known for overbooking flights, knowing that some people will be unable to make the flight. This way all flights can be completely full. This can result in greater efficiency, but also results in miscalculations leaving insufficient seating for all passengers booked on the flight.
Low density appointment scheduling is when appointments are scheduled with plenty of time between appointments so if one project requires more time to complete there’s no stress about leaving to get to the next appointment. Having extra time between appointments also ensures that unplanned support requests that arise can be responded to.
Not overbooking during the day makes it possible to keep up with emails, phone calls, and text messages.
Hourly Rates or Menu of Services and Fees
In recent years, big box stores have begun offering a menu of services with fixed fees, such as virus removal $70, printer setup $50, home theater installation $150. Fixed rates help consumers budget and know ahead of time what the cost will be for a specific service. Yet, estimating the actual time required for work can be difficult. Each situation is different. It’s hard for local consultants to compete with these lower rates. A big box store can deliver home support service for very low rates in hopes of making profits on product sales. The big box store can also hire students trained for specific simple tasks who earn much lower rates than a typical consultant.
Generally speaking, it’s most equitable to have each person pay a rate that’s equal to the time, effort, and value of services they were provided.
Consulting Rate Structure Established 18 Years Ago
Sometime in the late 1990s, I began charging an hourly rate using a sliding scale based on various factors, including those things that cost me less to deliver services. The original rate structure is shown below. I decided I’d let people calculate the rate I would charge them for services. Over the years, I added categories to the list. Ultimately I decided to simplify my billing and charge what seemed like the average that most customers were paying. Yet, this has always been a guide for determining what I charge. These are the original categories from about 18 years ago.
Our rates are some of the best in the industry. You can have a support technician on-site for less money than most companies charge for telephone support. For example, if you have a name brand computer that is out of warranty, you can pay up to $180 per hour just for phone support. Although our standard rate is $140 per hour, most of our clients pay less than $70 per hour for support because of our “Cash Back” investment program. For more information, continue reading below.
With our “Cash Back” investment program, you’ll receive the equivalent of cash back on every invoice as an investment in your company — up to 80% of your invoice balance (does not apply to trip fee). It doesn’t cost a lot to get the best computer support available.
- Standard Rate: $140 per hour. Based on industry standard rates for telephone-only support.
- 10% “Cash-Back” Rate. You pay only $126 per hour and save $14 per hour.
- 20% “Cash-Back” Rate. You pay only $112 per hour and save $28 per hour.
- 30% “Cash-Back” Rate. You pay only $98 per hour and save $42 per hour.
- 40% “Cash-Back” Rate. You pay only $84 per hour and save $56 per hour.
- 50% “Cash-Back” Rate. You pay only $70 per hour and save $70 per hour.
- 60% “Cash-Back” Rate. You pay only $56 per hour and save $84 per hour.
- 70% “Cash-Back” Rate. You pay only $42 per hour and save $98 per hour.
- 80% “Cash-Back” Rate. You pay only $28 per hour and save $112 per hour.
Calculate Your Cash Back Rate Now!
Print out the tables below to calculate your percentage “Cash Back” rate now. If you qualify for the Cash-Back category described, fill in the available percentage cash back in the right column, then add up your cash back percentages to get your total.
We currently have 5 general cash back categories:
|(1) Good For Business / Makes Our Job Easier|
|(2) Flex Scheduling|
|(3) Good For Family & Community|
|(4) National Security|
|(5) Special Assistance|
(1) Good For Business / Makes Our Job Easier
|Referrals. Helping promote PC DOC through client referrals.||5%||_______|
|FastPay1. Payment usually received the same day.||5%||_______|
|FastPay7. Payment usually received within 7 days.||2%||_______|
|HighVolume. Large quantity of work on a regular monthly basis (5 hours or more) OR major project (20 hours or more).||5%||_______|
|LongTerm5. Long-term PC DOC client, over 5 years.||5%||_______|
|LongTerm10. Long-term PC DOC client, over 10 years.||10%||_______|
|Ideas. Client provides business solutions or concepts that save us time, money or make our work more enjoyable.||3%||_______|
|Workspace. Client provides access to phone line and workspace to be used by PC DOC to return phone calls and respond to e-mail.||1%||_______|
|DOC-Okay. Client generally accepts PC DOC recommendations.||1%||_______|
|Parking. Free parking is available.||1%||_______|
|Food. Food is available on-site.||1%||_______|
|Meal. Meal is provided.||1%||_______|
|ClearArea. Computer located in smoke-free and dust-free environment.||1%||_______|
|WorkAtHome. Support or research done from home.||1%||_______|
|FAX. Client can receive FAX documents.||1%||_______|
|E-Mail. Client can receive e-mail.||1%||_______|
|MSN. Client has an MSN or AOL account.||1%||_______|
(2) Flex Scheduling
|Cash Back Qualifier
|AnyTime. “Stop in anytime.”||7%||_______|
|OpenWeek. “Stop in sometime next week.”||5%||_______|
|OpenDay. “Stop in anytime on Wednesday.”||4%||_______|
|4HourWindow. “Could you stop by in the afternoon on Wednesday?”||3%||_______|
|OpenHour. “I need to have you stop by Friday morning between 10:00 AM and 11:00 AM.”||2%||_______|
|OnTime. “I need to have you here at 10:00 AM sharp.”||1%||_______|
|Emergency. “I need you here as soon as possible.”||0%||_______|
(3) Good for Family & Community
|SmallTown. Small town business or resident.||1%||_______|
|FamilyRun. Family owned or operated business.||1%||_______|
|HomeBased. Home based business.||1%||_______|
|HomePC. Home computer.||1%||_______|
|Farming. Farm owner, operator or farming related business.||1%||_______|
|Volunteer. Community volunteer (e.g. fire or ambulance).||1%||_______|
|Contributor. Gives regularly and generously to charitable organizations, supports local chamber of commerce, assists with other community needs.||1%||_______|
(4) National Security
|Church, Synagogue, Mosque, or Ministry||5%||_______|
|Library or School||1%||_______|
|Police, Fire, Ambulance, or other public service worker||1%||_______|
|Army, Air Force, Navy, Marines, National Guard, or reserves||1%||_______|
(5) Special Assistance
|Old PC (valued at around $200) or New PC (purchased within 60 days)||2%||_______|
|Disaster. Natural disaster or catastrophe (flood, fire, hail, tornado, lightning).||1%||_______|
Calculate Your Total Cash Back Percentage
|Total for Category 1 – Good For Business / Makes Our Job Easier||_______|
|Total for Category 2 – Flex Scheduling||_______|
|Total for Category 3 – Good For Family & Community||_______|
|Total for Category 4 – National Security||_______|
|Total for Category 5 – Special Assistant||_______|
|Total Cash Back Percentage||_______|
Calculate Your Cash Back Per Hour
and Adjusted Hourly Rate
|Our Standard Rate||$140.00|
|What You Receive Per Hour In Cash Back
$140.00 x _______ (your total cash back percentage)
|What You Pay Per Hour After Cash Back
$140.00 – _______ (what you receive in cash back per hour)