Small Company Consulting - Load Factor
For all of those solo/small business consultants . . . what percentage of your time do you consistently find to be billable? Once you take out conferences, blogging, learning, setting up your computer, sales activities, keeping an eye on the accounts, doing year end taxes, being involved with mailing lists, reading about new trends in software engineering, figuring out Ant, re-installing Eclipse, getting MySQL working properly on your laptop and all of the other stuff that comes up, what would you say your steady state billable range is? 50% of your "at work" hours? 40%?
I'd be interested to know what you assume, what you find (if you have any detailed records) and what multiple of your planned hourly salary you charge to cover non-billable time.
But, like I say, I am just starting, so once I get my processes in order, I may manage to reduce my admin time.
On average, I'd guess about 35-50% of my time would be billable (the rest being admin + stuff you mentioned). I'd charge 2 - 2.5 times my desired hourly rate, but I'd probably drop the blog time before doing that. (i.e., I may be "working" 9-12 hours a day, but if 3 of those hours are keeping up with technology and blogging to create an ID, I won't charge the 3).
Not sure how I'd estimate how much of that is admin vs. things you mentioned. Mostly more on the "things you mentioned" side of the equation though.
I'd guess I'm about 40-50%, but this varies from week to week depending on what I've got on. Sometimes I can spend a whole week developing and others seem to slip away in meetings, on the phone, trying to land new work, sorting out existing work, accounting, and keeping up-to-date.
It's quite shocking to think of it in those terms. I have a friend who's a decorator and bills every hour she's on a job. And if she's not on a job she's not at work. She (and others) can't understand how I spend so much time 'working' but that I'm not super-rich.
I think this also comes down to enjoying my job and feeling like I'm being productive even if I can't bill for all the time, however, having fun doesn't pay the bills!
@Adam, it does seem like you're doing pretty well if you can consistently bill over 30 hours a week. Any suggestions? Do you do on-site work using day rates, how many clients do you have at any one time? Do you outsource your book keeping? Do you keep your learning activities time boxed? How do you handle all of the little calls you often get from clients before or after an engagement? How strict are you at billing for time? Any hints/thoughts you'd like to share? Also, what is your typical engagement length in hours or days? I'm wondering if a smaller number of larger projects might allow for a larger load factor.
I generally budget for 60 billable hours a month, which is 37% (est) billable hours. If I do 80 I'm living large this month (but next month might suffer ).
One thing I've noticed (which may or may not be obvious) is that billable hours may have no relation to cash flow, especially on fixed fee projects. On a 3 month project, I may take half up front and half at the end, but that doesn't mean I'm not working during month 2. :-)
I neglected to answer the multiple question. I don't really have one, although I do keep a strict budget so if the client negotiates I do know how low I can go and still be profitable.
My business hours for client work are 9-5 (give or take). Blogging, mailing lists, training, self-education, podcasting, etc... all come after hours.
I try (with fair success) to keep one day a week "computer-less", and lately I've added a second day of "no work".
Good point about cashflow. My goal is to build 6 months cashflow into a working capital account, and you're certainly going to have bumps if you don't have 30-60 days - especially if you have a smaller number of larger projects.
One of the benefits of hourly work is at least you can bill monthly for hours spent!
After doing this for almost 3 years now I'm starting to look at the bigger picture a bit more rather than leaping from one job to the next. My conclusion? The smaller jobs are usually more trouble than they're worth, and that I don't like being a salesman.
With this in mind what I'm trying to do now is have a handful of local clients with larger sites that pay me for a fixed number of days per month for general maintenance and enhancements. Any new development is done on a daily rate. This way I'm not as reliant on the smaller jobs coming along and it should help the cashflow as I have guarenteed income every month no matter what else I get up to. This is all very nice if you can get it.
Of course the flip side of this is that I wouldn't find it as easy to get a short term contract within another organisation - but I'm OK with that for now.