Comment by malux85
4 years ago
Did you read the title?
When I was at a consulting firm in London that I wont name, I was charging them 700GBP a day, and they were charging the end client 1500GBP a day (I saw this on an internal presentation slide I was not supposed to see)
The difference between employee salary and effective hourly rate, and billable rate, is not usually particularly secret, and usually doesn't make any sense first time, or even 20th time one sees it. The billable rate is some outer space number with no meaningful connection to real world. If you stick long enough you'll realize that billable rate is not what consulting company charges for you. It's what they charge for you and the non billable boss, senior partner, salesperson, delivery excellence review people, Admin and hr support, half a dozen people who did the bids and proposal, legal, the first phase of the project company did as loss leader, and then for all those things multiplied by contracts not won. this too is not a particular secret either internally or to the client.
If you go as a independent contractor, you can bill close to that rate yourself, but may find that you can't bill quite that rate as the mandatory middle vendors will take their obligatory cut, you need health insurance and your own expenses and any moment you're not working whether between contracts or vacation is lost money. Still makes sense for some people, less for others. Depends on your expertise, preferences, sales and networking skills, and how good is your accountant. Always better to build reputation and then become small consulting company yourself, billing billable rates and paying salary rates to others.
(This is in the world of consulting. Math may be different in world of independent freelance technical developers)
Your firm was charging just over 2x, but in the US it's not uncommon to see the client billed 3x what the consultant makes. This is especially true if there are subcontractors.
Pretty sure i was billed at 10x when I started at Andersen Consulting in 1990. My starting salary was 21.5k.
I don't doubt it, for one of the Big Names. I know 3x is common even in smaller shops. I don't doubt that places like Wipro, Infosys and the other big names that work the US H-1B market have much larger markups.
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There is also rack rate and discount rate. The rack rate can be insanely high. The discount will take into account several things. 1. How much does the consulting company wants to work with a client? If it is seen as a high profile client or has long term potential then the discount rate will be better. 2. How long will the assignment be? The longer the assignment, the more billable hours for a person and the lesser the company is still paying a full time person when they are not billable. 3. How much is the sales person trying to make a sale? It's the delivery teams' issue to deal with not enough margin to deliver under budget =or just change order the heck out of the client after the sale.
When I was doing consulting in the UK, there were often layers of white label.
Client hires company A, who bill 2.5kGBP.
Company A outsources to Company B at ~1.5kGBP.
Company B outsources to Company C for 700GBP.
Consultant at Company C makes buggery fuck all, and has to unravel the mess of Chinese whispers/obfuscation to work out what the job actually is and who they are meant to be pretending to be that day, whose report template was being used, etc.