Carlton’s Successful Reseller Secret # 10
Billing Rates & Fixed Fee Pricing
By. J. Carlton Collins, CPA

Billing Rates in General

Across the board, most resellers charge fees based on billing rates that range from $60 to $100 per hour for entry-level products, $100 to $125 for mid-range products, and $125 to $150 for SQL based products. In larger cities, you can typically add $25 per hour to these billing rates. 

Calculating Billing Rates

Most attorneys, CPAs, and consultants calculate billing rates as a multiple of the consultant's salary. This multiple usually ranges from 3.0 to 4.0, with 3.5 being a common multiple. For example, let us assume that the consultant is paid an annual salary of $65,000. This equates to $31.25 per hour. Assuming the company uses a multiple of 4.0, in this case the company would bill the employ at $125 per hour ($31.25 times 4.0). Of course the billing rate actually used is tied closely with the number of billable hours generated by the consultant. It has been my experience that an annual budget of 1,100 to 1,200 billable hours are the top end of a reasonable budget range. To expect numbers dramatically higher than this is simply unreasonable, and often leads to consultants missing their numbers, and becoming de-motivated.  

Raising Rates

Are you worried that you will lose clients by raising your rates? Perhaps you shouldn't be. According to a recent newsletter produced by Best software Guru Taylor Macdonald, research shows that it happens infrequently and when it does, it is usually the clients you want to lose.

Fixed Fee Pricing

Does the prospects of extending a fixed fee price to your customer scare you? Actually, fixed fee pricing is a great way to land deals and make more money. Over the years your customers have been trained by their attorney's, consultants, and even their plumbers to be "gun-shy" of hourly rate pricing. They feel much more comfortable accepting a fixed fee price.

Fixed fee pricing is more profitable than hourly rate pricing when you are well trained and your people know precisely what they are doing. If they attack each engagement slowly and methodically, delegating the majority of the tasks to the client's staff, they they can minimize their time on the job - and increase profitability. Measures such as group training, scheduling short 90 minute meetings, assigning the client's staff homework assignments using preprinted homework assignments, asking the client's staff not to take phone calls or interruptions while you are meeting with them, holding training sessions at your location, etc all minimize your time on the job. An efficiently run implementation engagement can shave 30% of the time off the typical budget, but with fixed fee pricing you can bill for these hours anyway.

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