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How To Bill A Client For A Consultant's Time


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#1 RisaBB

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Posted 15 September 2008 - 04:04 PM

Hello,

What is the best, most fair way, to bill a client for a consultant's time? These are my thoughts:

1. Don't mark it up, submit the consultant's bill, but bill for my time for finding the consultant and coordinating the work.

2. Submit the consultants bill, but at a multiple, like 1.25%.

3. Submit the consultants bill, but at a multiple, like 1.25% + my time.

Just for the background, my client's site has been hacked and data disappears from the database so I am hiring a PHP programmer to clean up the code and beef it up against SQL injections. The original scope of work 3 years ago was a lump sum fee, so consultants I worked with were included in my fee. I already told my client that I will need to find a consultant to help with this problem.

Thanks for any advice.

Risa

#2 DrPete

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Posted 15 September 2008 - 04:15 PM

I've seen it done just about all of those ways - I think what's "fair" is really whatever is relatively transparent. As long as the client knows what work they're getting for how much money, and they're ok with that, it's fair. The exact nature of the relationship between you and the 3rd-party isn't necessarily the client's business. Personally, my instinct would be to go with option (1).

#3 iamlost

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Posted 15 September 2008 - 04:55 PM

There are so many permutations but it all comes back to (1) what the client knows, i.e. that a sub was hired, the subs rates, etc. and (2) your prior billing association with the client.

Personally I detest hourly anything - at least so far as the client knowing a rate - but others like to continually (re)negotiate with their clients.

Remember that the sub is your sub, not the clients. Thus you are perfectly entitled to bill out those services at a higher rate than the bill you receive.

I always billed out subs at their cost to me plus 25% (a margin of 20%) or plus my 4-hr minimum, whichever was greater. Sort of midway between 2 and 3.

Why would you ever ever ever show a subcontractor's bill to a client? Simply bill a total price, without cost breakdown or breakout except for relevant taxes. Naturally a nice list of included actions, services, etc. - but without any attached individual costs.

And I never ever discussed my costs - especially subcontractors costs - with others. Remember that what they charge you may not be what they bill others. Don't box in either them or yourself.

#4 RisaBB

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Posted 15 September 2008 - 05:29 PM

You are right, Iamlost. At first, I was glad to read Dr. Pete's response, because it's what I thought, too. But after reading your response, it is the shrewder business decision.

Risa

#5 A.N.Onym

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Posted 15 September 2008 - 06:50 PM

I'd be transparent and go with (1). No need to send the developers invoice/bill to the client separately, but I'd just let him know how much time the developer cost and how much time I spent on it.

Edited by A.N.Onym, 15 September 2008 - 06:51 PM.


#6 projectphp

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Posted 15 September 2008 - 10:41 PM

I'd mark it up, personally. 20-25% is about right.

If they sub-contract through you, as oppossed to you merely introducing them, then you have both responsibility (which you should be compensated for) as well as time invested. As you'll likely field questions, co-ordinate, run around you need compensation.

Also, and more importantly, there will likely come a time when the client doesn't pay, and you feel obliged to pay the consultant (or they threaten to never work with you again, or cry their kids will starve... you get the picture), so you need to make some money to cover that risk.

The other question is how to explain that to the client, and I'd take the attitude that, as your account, you are responsible for ALL work done, including by sub-contractors, and that it is all part of your service. In other words, they are paying you to cover their risk.

Edited by projectphp, 15 September 2008 - 10:44 PM.


#7 DrPete

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Posted 16 September 2008 - 10:52 AM

Risa, I should clarify that by "transparent", I only meant that the client should know what work they're getting and how much it's costing them. I agree with iamlost that this doesn't oblige you to break down your hours and that your financial relationship with people you contract out to is your business. I only lean towards option (1) because I often just bill clients directly for 3rd-party services and then bill my time separately - that's just a personal preference and a luxury I have due to long-term relationships with a couple of clients.



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