Volume Number: 27
Issue Number: 02
Column Tag: Business

Show Me the Money

Suggested billing practices for consultants

by Ronald Gehrmann

The title of this month's column, lifted from an exchange between Tom Cruise and Cuba Gooding, Jr. in the film "Jerry Maguire," nails the bottom line for a self-employed consultant — you've done your good work and you need to be compensated. And let's not forget how crucial cash flow is when you're a sole proprietor.

As an Apple Consultant, I've seldom worked for corporate clients, and never in the long term, so I have no experience with arrangements such as retainers, pre-payment for blocks of time, purchase orders, or setting payment terms.

Dealing with home and small-business users occurs at a much smaller scale. As opposed to a consultant working with a handful of large business clients, your income base is comprised of many more "small fry clients," and dealing with the sheer number and variety of client situations can be challenging. But on the flip side, if you like people, it can be a delight to mingle with so many different personalities and systems. While there are many different ways of billing home users, in this piece I'd like to share with you thoughts about what works well for me, in the hope you might find it useful.

The foundation for a successful client relationship, and for getting paid, is when the client feels that they are getting enough "bang for their buck." Nobody wants to pay for something that doesn't seem "worth it" to them.

When I receive an initial inquiry by voicemail or email, I explain in my first email response that I can address the prospective client's needs and what my rates are. This way, if there's any question later on, especially regarding my rate, I can always refer back to this written information, rather than relying solely on verbal arrangements. I also briefly describe my areas of expertise, opening the door for providing services that go beyond their immediate need.

If a prospective client replies that my rate is too high, it doesn't bode well for a good relationship. If at that point "my spider sense is tingling," I'll try to recommend a consultant with a lower rate (if I know of one), or direct them to Craigslist or other possible alternatives, and wish them the best of luck. If it seems that this prospect could become a long-term client, I may offer them a slightly discounted introductory rate in the hope that they'll be so satisfied with my work that they'll subsequently be willing (perhaps even happy!) to pay my regular rate. Knowing which clients to let go of and which to keep is an important intuition to hone. There are always surprises, however! Some of my favorite long-term clients are ones that initially fell into the category of "you couldn't pay me enough to work with this person."

Depending on the geography, transportation options and other aspects of your market, you may want to charge for travel time. While building my consulting business when I lived in coastal New Hampshire, serving clients within a radius of about an hour's drive, I charged travel time at half my hourly rate.

Working on-site with clients in Manhattan and parts of Brooklyn and Queens, where public transportation is quick & easy, I don't charge for travel time, however I do have a two-hour minimum for on-site sessions. If people balk, I explain that they'd be surprised how quickly two hours can fly by (and how much they can benefit from two hours of troubleshooting and/or tutoring), and that if they don't use up the full two hours, any remaining time is credited towards support by phone and remote screen sharing.

If, during initial contact via phone and email, a prospective client seems legitimate, I will tell them that payment by check is acceptable. If I have any doubts, I'll request cash payment for the initial session, with the understanding that payment by check will be fine for subsequent sessions.

I also accept payment via credit card (by way of PayPal), but generally prefer to avoid the hassle of adding the PayPal fee on top of my invoice amount, then transferring the incoming funds from my "sandboxed" PayPal bank account to my regular business bank account.

In any case, I make out an invoice at the conclusion of the session and payment is due at that time. I write the invoice in longhand on a pre-printed form, and when I'm back at my office I enter the details into QuickBooks. This avoids all the administrative overhead of later generating an invoice, emailing or snail-mailing it, keeping track of receivables, and possibly needing to send out statements and reminders.

For those home users whom I see multiple times during a month, and if I know they'll pay on time, I'll extend the courtesy of sending them an invoice at the end of the month, with payment due on receipt. Because I take great care to establish a trusting relationship with my clients, I've not had any problems with non-payment.

In keeping with my effort to educate the client about the value of what they're paying for, the invoice I present at the conclusion of a session includes a brief overview of what was accomplished, e.g. "iMac and network setup, data migration, application updates, tutoring." If I'm billing a client at the end of the month for several on-site and/or remote sessions, I try to be even more specific, indicating the date of each session and what was accomplished.

At the end of an on-site session, I always remind the client that I'm available to help them over the phone, either with or without remote screen sharing software (I use TeamViewer; LogMeIn is another popular tool). I explain that phone/remote sessions are billed at my regular hourly rate, pro-rated, with no minimum duration.

When a client calls for phone/remote support (either at a pre-arranged time, or spontaneously), I remind them at the start that they're on the clock, and I let them know at the end of the session how long we worked (I use a timer that's always visible on my screen), and that I'll be adding that amount to my invoice at the end of the month, or at our next on-site session, whichever comes first.

Occasionally, I'll come across someone who chafes at being charged for time on the phone. Yes, sometimes you actually have to "paint them a picture." I explain that they have called with an issue or question that needs to be resolved, and that they have called me because of my expertise, and that after I provide the solution to their problem, why would they possibly assume this would be a freebie.

My time is my service. I do not sell hardware, and cannot "throw in" free phone support. Offering my expertise is how I earn a living. If I am giving away my time for free, I'm not putting food on my table. Furthermore, if one client expects me to working with them for free, I'm not able to use that time to work with a paying client.

Occasionally I've gotten a semi-snarky comment that with by billing phone time "you're just like a lawyer," and if that analogy helps them understand the concept, that's just fine.

To be sure, if I'm working with clients on a long-term basis, I'm flexible and will at my discretion throw in some on-site or remote support time at no charge. It all depends on the relationship I've developed with a specific client.

Who among us consultants hasn't run into a situation where you've banged your head against a problem for an hour or more, and despite all your expertise and resources, you can't fix it. This is not your fault — due to circumstances beyond your control, the hardware or software problem cannot be resolved. How do you deal with billing a client when at the end of the session, they are still at square one?

The best way to avoid a situation like this is through early prevention and detection, i.e. based on your expertise and comfort level in stretching your envelope, only take on clients and jobs where you don't see major red flags.

That said, the unexpected can and will occur. Some consultants have a written contract/waiver to cover situations like this, but I've never used such a document. Instead, when going into a situation that may not turn out 100% successful, I try to manage the client's expectations beforehand, verbally and by email. For example, "We don't know why your Mac isn't booting, but I can try specific diagnostics and troubleshooting techniques that within a short time will either fix your Mac or let us know that deeper expertise and/or hardware repair is required. But even if we're unsuccessful, I'll need to bill you for my time diagnostics."

Another key strategy is to not proceed too far down the rabbit hole of troubleshooting without apprising the client of the situation. Instead, for example, spend half an hour on a first round of efforts and explain what'd need to be done next, and how much time it might take. A client who has approved work beforehand is more likely to pay for that work, than one who is asked after the fact to pay for several hours of work they didn't even know was necessary.

By the end of the month, the bulk of my billing is already complete, because most clients were invoiced, and payment was received, at the end of each session. What remains at the end of the month is for me to tally up my timesheets for clients with whom I've worked remotely, or those I've agreed to bill at the end of the month. Based on the timesheets, I create invoices (with semi-detailed, line-item descriptions of services rendered) in QuickBooks and email them to my clients, noting in the subject line: "Metro MacSupport - December invoice - due on receipt - PDF attached."

A couple of weeks later, I re-send the invoice to any stragglers, making a note on the invoice so that I can document when I followed up.

For consultants working with individual users at home and in small businesses, I cannot overstate the importance of forging relationships based on trust and mutual respect. It can be rewarding to build that direct connection with a home user, without third parties that might be involved when working in a corporate setting.

Open lines of communication are key to maintaining good client relationships. If you're clear about the value of your work, and can achieve success most of the time, the home user will be happy to pay you for your services, as they'll want to ensure your willingness to work with them when they need you in the future.

Ronald Gehrmann (help@metromacsupport.com) has been a devoted Mac geek since 1988, using the platform as a desktop publisher, web designer, translator, and photographer. He joined the Apple Consultants Network in 2002; as an Apple Certified Support Professional he provides on-site and remote support and tutoring to Mac and iDevice users in New York City and beyond.