My usual business is providing technical hands-on training, and much of it is oriented, these days, to kids. HOWEVER, I’ve been approached by an old client, from another time, to provide them with the skills, knowledge, and TOOLING to accomplish a task that, here-to-for, they had sent out and paid rapacious rates to have done.
It happens that I am one of very few, but not the only party, to have the knowledge to provide both the training and the tooling design. At this point it is not agreed if I will provide the tooling, or merely the consultation to enable them to have the tooling made in house, or with their preferred source. I’ve never been in a position where I was providing tooling services before, and it seems that such services are worth more than my usual $150/hour target. Suggestions and comments are welcome.
Thank you!
Replies
As a Mechanical Engineer I would recommend that you charge what the knowledge is worth. Just because it takes you considerably less time to accomplish a project than another source doesn't mean that you should be paid less. Experience and everything that comes with is has a price.
Be extremely careful in dolling out information. I had a major corporation take some of my designs without giving me the compensation I was due. I was stupid for allowing the drawings and concepts to be revealed without a intellectual property form being signed, my mistake. Once they have the answers they don't need you!.
If your training and tooling design is going to profit this company, you should be compensated. Figure out what the actual savings will be and charge accordingly. I have hired consultants who knew the Who, What, When, Where & Why to solve a problem. The problem was costing a former employer over $6000 an hour so his $50,000 fee was quickly approved with the condition of no pay for no solution. He was flown in and had the solution for the problem in a hour and our chemist educated in two. If you are providing the million dollar solution don't ask for $150
Abe, the $ to be saved question is the real question, and one to which I don't have a really good answer (but it's not $2,000,000!). My best guess is in the thousands/year, but I don't really have a good picture of their systems' MTBF.
The deal is that there are a mere handful of people in the country who have the knowledge to help them (but most of them are located relatively near to them, but they don't know who or where) The party who has been meeting their service needs has been uping prices and reducing both general support and length of warranty as well. In a nutshell, these folks are really PO'd. The downside for them with this is that the parts available on the open market for this product are not to the standard of the manufacturer (who will not sell parts). The downside for me is that their checkbook is just a wee bit thin. Thanks for your thoughts and comments.
Most people pay high rates because the work is not as easy as it appears.
"Most people pay high rates because the work is not as easy as it appears."
But in this case - the work is so simple even a GI could do it, and, once upon a time, they did do it. The required tooling, however, is not available on the open market.
I am in the consulting business although from a corporate operations perspective. We have had a tremendous amount of success utilizing a value based billing approach. We generally take 15-25% of the savings as the client realizes it over a specific time period. You can't generally run you take out to perpituity, but you can get two or three years worth.
The realization approach generally solves the cash flow problem as you get paid when they get paid. The key though is to have a client with integrity and appreciation for what you have provided.
That is a very interesting idea which I had not considered at all, tho I know of situations wherein it was employed. Hmmmmm. Thank you!
Ed,
Good luck! Another thing to consider is what sort of long term relationship do you want? If your not worried about future business charge whatever the most you think you can get from them. If you are, your going to have to play a tight game because if the others hear about they would ALL (lying through their teeth) charge less than you did.
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