First let’s take an example of a project with a physical product. When I build a financial model there’s brainstorming also; thinking of how to construct such that it is useful internally, and persuasive externally. However the long hours actually building it, which are easily quantifiable, make up the fees. The brainstorming is valuable, but it’s just included in the package.
But what do you do when there is no physical time-consuming product? For example I’m getting think-tank type jobs, where where there is a bunch of philosophizing and pontificating and such (and I’m NOT on-site). The output might be something like with FB, how someone came up with the idea that “clicks” are linked to valuation, and this was sold to investors. Now that has proven valuable, hell that nonsense is perhaps more valuable than the actual valuation model which few of us have seen, but maybe some dude thought it up in the shower in 10 minutes.
So again, how do you nail that down to hourly fees?
Try and squeeze in a second program for the points, and I had to get a 30 year conventional term @ 4% if anyone was in consulting without a business background but this topic is very welcome.
LOL, I knew you guys would be of this much help. Suspicious, many here work at McD!?
Nope, it’s up to me.
They’ve never shown any interest in money, I just invoice them, and they pay. Since I’ve been on their side doing budget cuts, I know how they do it. They just pay up, then next year if total spend was too high and investors are screaming, they export toExcel, and sort. “Hmmm so we paid $50K to PA Consulting, and $30K to XYZ Consulting, just eyeballing does this seem reasonable for what we received?” As long as you pass this reasonability test, you are safe. Obviously they never get the money back if it is unreasonable, but they might not renew.
But still, this really doesn’t get me anywhere! Hell, for a month I could bill for 10hrs or 40hrs, both could be defensible.
I think what I will do is develop a physical product. Take the Damore memo, in a think tank situation you still need a physical report to communicate the idea to everyone. A PDF of that size, with charts, and references takes time. Maybe I’ll take [quantifiable report construction time x 2 for the brainstorming time]. That way if they ever ask (probably won’t), I have my billing methodology, as opposed to just totally making sh!t up.
Alpha, this internally developed goodwill can be valued only if someone is willing to pay for it. Otherwise, you’re just an expense to your employer. lol.
I’m not sure that billing hourly is the best model for what you are proposing unless these are open ended projects with undefinable end dates. If these are projects where you think about a problem, discuss it with them and a clear solution/outcome is reached then you should charge per project based on complexity or charge a retainer for the work that cannot be defined in terms of hours and charge hourly for the rest.
Just a note, the person that thought of linking clicks to valuation likely did not know the value of the idea ex ante and thus likely way undercharged. However, he probably overcharged for a ton of ideas that came to nothing and were effectively worth zero.
