May 01, 1998
Meetings & Conventions: Planner's Portfolio May 1998 Current Issue
May 1998 Independent LifePLANNER'S PORTFOLIO:

The Independent Life


What Are My Services Worth?

Figuring out how much to charge is the first order of business

The day has finally arrived. You've jumped from the corporate world to owning your own business. A potential client has asked you to submit a proposal. You outline the purpose of the meeting, define your activities and create a time line. Now comes the hard part: How much should you charge?

There are three basic options. You can charge by the hour, ask for a project fee or figure your fee as a percentage of the total cost of the meeting. Each has its advantages - and disadvantages.

Charging clients by the hour is the most common method of billing, because you are paid for all of your time. The difficulty here is estimating how much time the project will require. If you bill for more hours than you estimated, the client will probably be upset and will want a full accounting of your time. If you overestimate your hours, your costs may not be comparable to your competition's, and you may price yourself out of the job.

One way to avoid "guesstimates" is by questioning your client up front. Zero in on what is really going to be expected of you. Has this meeting been held before? If so, how much time was involved? If an in-house person used to make all the arrangements, contact him about his experience.

The next step is determining a rate. Start with your last annual salary in the corporate world, say, $40,000 a year. Add the expense of medical insurance, taxes and running your business (telephone, fax, copying, etc). Typically, these costs add an additional 40 percent, making your new gross salary $56,000 ($40,000 multiplied by 1.40).

To arrive at an hourly rate, divide the $56,000 by the number of hours you expect to work in a year. Don't use 52 weeks times 5 days a week times 8 hours a day (2,080 hours). Take into account holidays (say, 10 days) and vacation (10 days). Also figure on spending one day a week to market yourself or to improve your skills. This reduces your available hours to 1,504. Divide the $56,000 by 1,504, and your hourly rate is a reasonable $37.

Billing by the project means receiving a flat fee for the job. The advantage is that you no longer have to track or justify your hours. You can even ask to be paid monthly, guaranteeing a steady income for you and putting a ceiling on costs for the client.

Again, the hard part is estimating the time you will spend working. Once under contract, you will not be able to bill for extra hours unless the scope of your assignment changes. Also, be on guard for "project creep," where your client asks you to do work not covered by your agreement.

To determine the project cost, list every service to be provided, calculate the total hours you'll spend on each task, and multiply those hours by your hourly rate. If you're not sure about your ability to estimate your hours, or think that you won't be able to say no if asked to do extra work, avoid project billing.

However you charge, travel time for site inspections and attendance at the actual meeting must be considered. I have known planners who calculate travel time at their hourly rate, half the hourly rate or not at all. While on site, you also need to define a "day." My recommendation is to bill no more than 8 hours a day, no matter how long you're on call. Point this practice out to your client to illustrate your efforts to hold down costs.

This type of billing most often is used by destination management companies, large meeting houses and travel agencies. The client is charged a percentage of the total cost of the meeting (anywhere from 3 to 20 percent). The advantage here is that you will probably make more money. But I think independents should avoid this type of billing because of the ethical issues involved. In the percentage scenario, if you take as a premise that part of your job is to hold down the cost of the meeting, where is the incentive to negotiate a lower rate? There might even be a tendency not to squeeze the suppliers as hard as you would if your fee didn't depend on their cost.

In the beginning, it's best to bill by the hour. You can switch to project pricing once you have gained some experience, or when you are bidding on multiple meetings. Before proposing any price, do your best to discover what the competition is charging and try to find out the meeting's budget and the client's cost expectations. Finally, know your bottom line. What price is too low for you? When all is said and done, you should feel comfortable that you are being fairly compensated and that your client is getting real value.

Mike Kabo is president of Solutions Inc., a New York City-based consulting firm that specializes in travel and meetings management.

Back to Current Issue index
M&C Home Page
Current Issue | Events Calendar | Newsline | Incentive News | Meetings Market Report
Editorial Libraries | CVB Links | Reader Survey | Hot Dates | Contact M&C