Consulting Income Report: October 2012

Consulting Income Report: October 2012

As many of you know, I share my consulting income details for a few reasons:

  • To keep me motivated. 🙂
  • To be transparent, and show you both what’s possible as well as mistakes made.
  • To inspire you to take action and start or grow your business.

If you’re just starting out, building a business will take hard work, patience, and persistence. But the rewards can be far beyond what being an employee can provide.

This month’s consulting income numbers

Overall, my consulting income was a little more compared to the prior month (by about $100), but has been consistent over the past few months–which is good, since big swings in revenue (especially low-billing months) make the next month or two pretty stressful when it comes time to pay bills. 🙁

Here are the numbers:

  • Total worked: $15,450.00
  • Average hourly rate: $160.94
  • Number of clients billed: 8
  • Average days to bill (this is the average number of days between when I actually do the work and when I bill the client): 9

Those numbers have been pretty similar over the past 4 months, which is good, since it makes my cash flow more consistent.

In addition, since I began invoicing my clients twice a month (at the beginning of the month and around the middle of the month), my average days to bill has been more than cut in half. This means that I’ll end up collecting cash for the time worked much sooner–which is a great thing.

You might notice that my average hourly rate is less than my old-client rate ($165) and my new-client rate ($175); that’s because I chose to discount some of my time for a new client on a project that went a bit over my initial estimate. Yes, I did an off-the-cuff estimate for what I thought was going to be a small project, but which turned into a more involved one. As soon as I realized that it was going to exceed my original estimate, I told the client, but should have communicated it to the person who’s actually in charge of paying my invoices. In any case, I ended up discounting some of that time–and prominently displaying the discount on the invoice–as a way to earn trust with the client, since I’m confident that the client will have additional work for me in the future. Lesson learned.

What are my expenses?

Some of you have asked what my expenses are, and to include them in the monthly income reports. I’m happy to do that. A couple things to keep in mind:

  • Some of my expenses are only paid annually; I’ll report those as they come up. But in the meantime, you can get a sense of how much I pay in expenses each month.
  • I pay myself a salary as an employee (and take distributions from my s-corp). For now, I’m omitting how much in taxes I pay (federal withholding, state withholding, Social Security, and Medicare), since depending on your situation, where you live, how many exemptions you claim, etc., your taxes are virtually guaranteed to vary wildly from mine. One thing I find helpful is claim 0 exemptions and also withhold extra federal and state income taxes; that way, I don’t have a huge tax bill come April when I file my personal income taxes. So far, I’ve been pretty accurate at estimating how much I’ll need to pay, and then pro-rate how much I need to withhold each month.
  • Likewise, I haven’t included health insurance premiums in the total. I currently pay $1,207 each month in health insurance premiums (which covers myself plus my family). However, depending on your circumstances, what you pay for health insurance may vary wildly from what I pay.

Anywho, here’s the expense total for the prior month: $1,162

That expense total includes things like:

  • rent
  • internet
  • cellphone
  • accountant fees
  • Skype service renewal
  • subcontractor payments (for services which I billed and was paid by clients)
  • business-related books, and
  • business coaching.

Keep in mind though, when I first started my consulting business, my expenses were MUCH lower–probably in the range of under $100 per month.

Where do I get all my billable work?

Frankly, at the start of a month, I typically have maybe 20-30 hours of billable work that’s ready & waiting for me to complete. That means that I still need to get roughly 60 billable hours of work for the month–that’s a lot of hours, roughly 2/3 of what I’d like to work each month. That’s a pretty steep hill to climb every month.

But there’s a funny thing. Since I have a fair number of clients–several dozen for whom I’ve done work since I started my consulting business, and a couple dozen for whom I’ve done work within the past 6-10 months–the work usually trickles in on its own, instead of me having to chase around and do cold calls to drum up business.

Essentially, a lot of my marketing is automated: new clients seek me out and contact me for new projects.

The marketing tasks that I actually do are typically follow-up calls to clients and prospects who’ve contacted me to discuss a specific project, but weren’t ready to start work on it just yet. So, I’ll call and check in with them, ask where the potential project stands, if they have questions, etc. A lot of times, these check-in calls end up turning into billable work–often for new projects that are unrelated to the original project for which the client contacted me.

So, those check-in calls are a way to bring in new business, without being very sales-y. Just a friendly check-in, essentially tending my orchard.

2 Responses to Consulting Income Report: October 2012

  1. Greg,
    You didn’t say what you pay yourself as weekly or monthly salary. Is that for reason or you just forgot? Also, I am wondering what exactly your expertise is? I mean what you do for the clients that adds value to their organization / life? Can you share that?
    Thanks

    • Good questions!

      I _generally_ pay myself a monthly salary, but the amount depends on my cash flow. My accountant advises that I pay myself about $60,000 in salary over the year, which would be $5,000 salary per month. But like I said, the amount I pay myself in salary each month depends on cash flow. If cash flow is low, then I’ll take more money out as a distribution from the s-corp and less in salary. As a rough example, if I pay myself $5,000 salary in a month, the total of my federal & state income tax, social security, and medicare is roughly $2,200–but keep in mind that of that $2,200 in tax, $825 is because I choose to pay federal + state income tax for each salary paycheck so that I don’t owe anything (hopefully) when I file my personal income tax return each April.

      To get a sense of how much in taxes you’d pay and a net salary amount, I use the following free paycheck calculator: http://www.paycheckcity.com/calculator/netpay/us/new%20mexico/calculator.html

      For your other question, my expertise is SQL and VB programming, and my specialty/niche is working with a specific enterprise software application for law firms. I develop custom functionality & automation for the application, develop automated reports, do data manipulation & integrations, etc. Generally, I automate workflow processes for law firms, which saves them time and creates more accuracy & streamlines their work processes.

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