Assorted Tidbits of Advice for Fellow Contractors & Consultants

    I started this after getting an e-mail from a researcher on the verge of starting her own practice, wanting to know what on earth to charge clients.  After rambling for half a page I decided to tidy it up and post it.  Meanwhile, I've gotten other (well, one) e-mail looking for advice & have added that as well.  Please take with a grain of salt -- I work almost strictly in academic medical/health care research from my office in Minnesota, so if you're doing marketing research on the coast your mileage may vary.  The letters are based on my personal experience (standard caveat re: don't take as legal or accounting advice), and are edited sporadically.  C-

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  Dear Carol:

    I'm starting a new practice.  How the devil do I decide what to charge?

Baffled in Hawaii

Dear Baffled:

    Even if you are suggesting ideas, the client will have a budget.  They will either need to write a grant to get the funding, or will have to appropriate internal moneys for the project.  The best thing I ever did (accidentally) was keep detailed hourly records of my billable hours, categorized by task area (i.e. data management, analysis, data cleaning); I use Access for billing, so it's easy to go back and calculate how many hours I spent on Project X doing Analysis.  It's not perfect, but it helps when doing budgets to see if I'm way off on the totals. 

    Hourly rates can run anything from $30 on up, and as an advisor told me when I started out, it's what the market will bear.  Research tends to be lower than what programmer/analysts charge for businesses (I've seen those in the $100+ from one database firm).  A Ph.D. can charge more than a MS ... IF .... what you're doing is statistical consulting and advice on research design, & not just churning out the paper.  Rates I've heard for statisticians locally have been $50 & up.  You're in Hawaii, so I don't know what the market is there.  Market research I suspect is higher than medical/academic research. 

    Give yourself a couple of years or more to get established.  The lag time for research is atrocious.  If you're fortunate, you get called in up front when they're designing the study, especially if you want to be doing research design.  But from that point, they write the grant, send it off, waaaaiiit to hear back, get the money if they're lucky, etc. etc. & schedules always slip 6 months it seems from when they were hoping to get the data collected.  If you're lucky (or lazy in my case), you'll develop some ongoing relationships with a pool of researchers.  Unfortunately, the good ones get better and they end up hiring staff to do what the contractor did (sniff!).  But then I'm in academia, and I don't know what your target market is.

    Then there's the other variety of projects ... HELP! we just fired our 2nd programmer and we have X months left to use up the rest of the $$.  For those projects, I usually don't have to prepare a proposal BUT I do keep religious track of the hours as I frequently need to tell the client they can't do what they want to do because they don't have the money.

Dear Carol:

    I've been asked by my client to prepare a fixed bid for doing an analysis.  What do you think?

Fixated in Phoenix

Dear Fixated:

     I flat out refuse to do fixed bids, and fortunately no one has asked me to do so in 12 years.  (Oops, correction, now a Really Big Funder told my client a bid for a new pair of projects must be fixed.)  The lion's share of my clients are academics doing medical/health care research funded by grants, and I'd be crazy to do a fixed bid.  Rarely do researchers have an exact idea of what they want done up front, and even if they did, once we start poking at the data what they wanted may not be appropriate for the data anyway.  The biggest unknown is data cleaning & refining new variables to account for inconsistent data or missing data -- the upfront data setup work can eat up 2/3rds of the hours easily for longer surveys that are complex (i.e. lots of skips/branches). 

    I prepare a work plan/budget proposal using Excel; any task that's more than about 20 hours I break down into smaller chunks, unless it's a bucket of hours that's hard to predict (i.e. 25 hours for other reports as requested).  But then I do database setup and stats reporting, if you're doing mostly stats consulting and research design, you might not need so much detail.  I've done other plans just as a Word table, which lets you include a lot more verbiage to explain where the hours are going.

    Here's a quick list to consider if you want to tackle a fixed bid.  But realize since I've only hit one project  in academia needing a fixed bid, don't take my experience as the last word:
I've actually turned down work (recently) because a) I didn't want to accept the financial risk and b) could not in clear concience give a good enough estimate given fuzzy specifications.  I'd feel pretty, what, dumb?  greedy?  unethical?  if I overshot in my bid by more than 5 - 10%. In some markets, if fixed bids are the norm, then your business motto may be "sometimes I win, sometimes I'm short, but on average I hit my target rate".  

Dear Carol:

    My client just handed me a multi-page, fine print contract.  Should I just sign it?  What's this about 'errors and omissions insurance'?

Overwhelmed

Dear Overwhelmed:

    Big organizations like universities LOVE boilerplate contracts.  They get used for everyone from the plumber working on the new football stadium to people like us mashing numbers for research.  Consequently, they can be long, include lots of fine print, and include many things that don't even apply.  Here's what I've learned from two big academic institutions:
    And here's my tale of woe.  I made the mistake of crossing out the paragraph that says I have $1M in errors and omissions insurance on a boilerplate contract, since my client said I don't need it.  I had done so for another institution, with no problems.  The contract wended its way through all the people who need to sign it and then landed in the Risk Management department.  Despite what the principal investigators thought, because their department is part of University X, the Risk Management people said I am required to have general liability insurance with "personal and advertising injury" for $Y.  After a few panicked calls to my insurance agent, I got a respectable quote (under $200) for insurance to make Risk Management happy.

    You may need general liability insurance, depending upon your clients.  Figure out how much that's going to cost and factor that into your rate.


Dear Carol:

    It's been weeks since I submitted an invoice, and the client says she signed it for payment.  Now what?

Short-Changed in Sausalito

Dear Short:

   The first invoice or two on any academic contract can take literally months before you see that first check, so budget accordingly.

    Do you have a hard-copy of the executed contract in hand?  The what?  Many organizations will not pay you until a contract has been (ugh, what a term) "executed", meaning everyone who is supposed to sign it has done so.  Furthermore, the copies of the fully signed, stamped, and blessed contract need to have physically been handed to the right person in the right department and entered into accounting systems.  

    If you don't have the magic contract, start there.  Sometimes a client will tell you to call Accounting directly (get the name of the right person), others want to do the sleuthing themselves.  Persevere until you have a copy -- occasionally contracts are buried in inbaskets of people on vacation, leave, or worse, get forwarded to other departments due to "problems" (read the previous letter about contracts).

    Contract in hand?  Great!  Now, did Accounting really GET the invoice?  Clients sometime sign so many bits & pieces they think they sent it on when they're really remembering last month's bill.  If Accounting can't find it, send your client another copy.

    Ok, say it's really, REALLY late.  Unfortunately, I don't have a good answer on how to start adding in "late" charges, especially when the lateness is due to incredible sludgelike pace of academic bureaucracy as opposed to a customer not wanting to pay.  In some cases, the slowness is due to an overwhelmed financial staff.  Whatever the reason, I send polite, to-the-point reminders to the principal investigator and, if appropriate, the financial manager listing the outstanding invoices and dates.  Usually that helps speed things along.

    Usually.

Dear Carol:

       My client is pressuring me to do something a little out of the ordinary (FILL IN ASSORTED ETHICALLY FUZZY SCENERIOS HERE) but I feel pretty funny about this.   Now what?

Bulldozed in Birmingham

Dear Bulldozed:

    Here's an easy acid test for business ethics:
1.    Get it in writing.
2.    Get it in writing.
3.    Get it in writing.
What?  Don't want to put it in writing what they want you to do?  Then it doesn't fly.  End of story.  If you're feeling coerced, pressured, "this isn't such a big deal so don't panic", then maybe it IS a big deal.  This client, remember, is not your only client, nor is this your only project – you have your good name and professional reputation to protect.  A data analyst/programmer/data manager must be honest above all else, IMHO.  (2/14/03)

 
Dear Carol:

    There's all these big companies out there that provide statistical programming services.  How can I compete against the big guys?

Intimidated in Utah


Dear Intimidated:
         
   Bah!  Don't let the "big" companies scare you -- I am a tiny tiny company of one (Albright Consulting is a name just to put on the card & name tag at conferences) and my target market doesn't overlap with theirs anyway.  The big guys are probably going after drug or medical device research, which can require full-time effort & a specialized knowledge base (FDA requirements).  My business is a conglomeration of small medical/health care research projects supported by grants.  They're all very part-time, sporadic effort, lasting from 3 months to a few years per project BUT benefit from having an experienced data manager/stats programmer/researcher-- a combo that's very difficult to find in an employee.  Some grad students are up to it, but I've replaced several students on projects.
I fell into doing contract work 12 years ago during graduate school -- a classmate (MD) asked me what I knew about databases (he had a research project and needed help), a doc I did a project for as a school project referred me to a medical association that needed stats programming help, I met another doctor on their research committee, etc. etc.  All my business development has been via personal relationships, including some developed via the SPSS listserv. 

Dear Carol:

    Working for myself sounds very appealing, but I like knowing there's a paycheck coming every 15 days.  You post a lot to the listserv, so you must be busy.

Steady Eddy in Dubuque

Dear Steady:
   
    Contract work is very unstable, pay-wise.  Research projects come in glumps.  This last fall & onward I've had a BIG pile of projects, but it was DEAD! over the summer, ze-ro work other than a few, small long-term data management projects.  Overall, mind you, I haven't been rolling in the dough, but that's not why I'm a contractor anyway (more on that later).
    Grants & research in general (you know this) have a really, really long lead-time, even when you know you're part of the team.  It always takes PI's longer to get projects launched than expected, data collection drags on, throw in vacation, contract glitches and the gap between when you start work and the first check arrives can literally be months.  So you budget accordingly.  Figure out what the minimum is you need to get by on, cut up the credit cards, buy a cheap, reliable car, etc. etc.  Some expenses drop dramatically -- I work out of my home office & rarely attend meetings -- ipso, no commuting costs.  I live in my beat-up jeans -- no need to buy business duds.  Meanwhile, I shell out (ouch, ouch) a chunk every year for my SPSS upgrades, internet/web space costs, continuing ed & misc. office supplies, AND my half of Social Security taxes.  AND now that my hubby is also self-employed, all our own benefits.

Dear Carol:

    Wow, I'm jealous -- you must be rolling in the dough and driving a Mercedes, jet-setting to exotic places for conferences.  That's what I want, too.
 Rich & Famous in Fairbanks

Dear Misinformed:

WHY I DO CONTRACT WORK:
    Not to get rich, that's for sure.  But as a contractor, I've been able to work with multiple organizations, projects, researchers, etc. which you don't when you're part of a single organization.  I'm nosey, so this is fun for me, but could be unsettling if you like stability.  With the free time I've been able to do volunteer/community work & spend more time with family and friends.  I loathe corporate life (I used to work in a bank in a suit) and even though I've been offered at least one job since escaping, I always have said no.  You can do your work whenever, so long as it gets done pronto, which can mean week-ends and evenings.  It can be incredibly lonely, so you need to be creative about building in social support & contacts other than your family to replace the random blabbing at work.  Dry spells are hard on the ego & are anxiety provoking, so have outside interests like volunteer work & hobbies.

    Figure out for yourself why you think you want to do consulting.  I think of myself more as a contractor in reality -- a hired pair of hands; I provide very little advice other than to younger researchers (& then it's more training/mentoring), and academics don't listen very well to advice anyway!

Dear Carol:

    I already work as a statistical programmer at a university -- how do I make the switch to working for myself?

Jumping the job track in Poughkipskie

    Good question -- you're already in the thick of things.  Do you have a reasonable boss?  Could you switch to part-time while you build up your business?  I have a colleague statistician who moonlights on the side of her almost FT hospital stats job.  I'm not sure what the etiquette is for looking for a project if you're already an employee.  Do you know of any contractors already working on projects at your school?  (There might not be any or very many, I'm an odd duck in town).  Get a copy of Geoff Bellman's 'Consultant's Calling' which is kind of a Zen & the art of working for yourself & might have suggestions.

    My projects have all come through bumping into people -- example:  I met Cindy because she was my sister's Ph.D. advisor.  Then I met Craig because he was on Cindy's project.  They both referred Joanne to me.  Etc. etc.  In your environment, you might meet Dr. X in the lunch room, who is blabbing about her new project and needs some help setting up the database.  Not a big project, but she doesn't have anyone on staff and needs it done soon.  There's your first project.  But again, find out what your institution's policies are about double-dipping, being a contractor and an employee.

Revised 1/8/2003;  email comments to Carol Albright, calbright@visi.com