How Much to Charge to Build an Excel Model

LNewbie2017 on 13/02/2017 - 09:05

I have a lot of experience building Excel based financial models to evaluate business cases in my role as financial analyst over the years.
I have been approached to do some freelance work through an ex-colleague. They are looking at a custom built Excel model to assist with their production planning.
Just wondering if anyone out there has had any experience with consulting work, and know what I should be charging?

From past experience I know that requirements often change as things progress through the build, so it will be difficult to give a fixed price quote.
I am thinking an hourly rate will be a fairer approach, but unsure how much to charge per hour.

Any advice would be appreciated.

Computing

Comments

  • RandomNinja on 13/02/2017 - 09:23
    -1

    Go get a quote from a professional mob then charge 10% less? ;)

    Edit: Side note, if you intend on pursuing the freelance angle, it may be worth doing it on the cheap or even free in return for permission to use this job as an example for future clients

    • mskeggs on 13/02/2017 - 10:31
      +6

      Don't work for free. The clients won't respect your work and will not appreciate its value.
      If you charge fairly and do a good job, a client will be happy to act a s a reference.

  • railspider on 13/02/2017 - 09:53
    +4

    Give them a quote with the range of hours you think the job might take.

    Make your hourly freelance rate 2.5-3 times your normal working rate.

    If you're good and they're big, they probably won't even blink.

    • mskeggs on 13/02/2017 - 10:33
      +2

      This is sensible.
      The only concern the client might have is if costs are a bit open ended.
      So maybe a fixed quote to produce the agreed specification (based on your worst case estimate) plus an hourly rate for revisions after the delivery of the initial model.

      • poboy on 13/02/2017 - 12:54
        +4

        OP must also be careful of scope creep. In the quote detail that the quote is for development of the model, plus complimentary minor changes up to 2 hours.

  • bob smith on 13/02/2017 - 10:06

    I believe you'll need an abn.

    You should charge market rate, or what you think is fair e.g your current pay plus X% to cover for oncost.

  • [Deactivated] on 13/02/2017 - 10:12
    +1

    Not sure what your level or expertise is or where you have worked, but I have a friend that recently finished up from a specialised financial modelling firm and is now doing exactly what you are doing. Some of the numbers he has quoted has been upwards of $1500 for a days work.

    • Newbie2017 on 14/02/2017 - 08:42

      I have advanced financial modelling skills and have worked for blue chip corporates, I remember in one project I worked on the company was paying the firm we engaged in $2000 per day for the guys who built an excel model for us. The quality of it was average and riddled with formula errors, I ended up having to fix it.
      Thank you this has been helpful

      • [Deactivated] on 14/02/2017 - 10:15

        private msg me if you need more help

  • AlienC on 13/02/2017 - 10:41
    +1

    5 pork rolls and a dominos pizza is my hourly going rate.

    • itajac on 13/02/2017 - 11:16

      For doing what exactly…?

      • AlienC on 13/02/2017 - 11:30
        -3

        I give good farts farts.

  • adante on 13/02/2017 - 16:34

    Out of curiousity what's the industry? (Just wondering as you used the phrase 'production planning' - although this can be quite generic)

    This is probably a good point at which both you and the client need to discuss about who will retain the IP to this. Better to be up-front about it now instead of facing a potential debacle later.

  • affable on 14/02/2017 - 07:45
    +1

    I hope you really know the ex-colleague well? I've read of a scenario like you describe where the ex-colleague had no authority to authorise the work and the freelance worker ended up with nothing.
    Also if the ex-colleague trusts you, they should be happy that you will deliver in reasonable hours. Fixed price is for when there is no trust.

  • Newbie2017 on 14/02/2017 - 08:36

    Thank you everyone for your comments, it has been really helpful.

    I have set myself up as a sole trader and have an ABN.
    IP will obviously pass to the client, as the model is quite specific to their business and products, it will be no use to anyone else.

    I have done some research and it seems the market rate range from $1200 - $2000 per day.
    I guess if the business is large and profitable it wouldn't seem expensive, this business is large in scale but not very profitable so I didn't want to scare them off.
    I also don't want to underquote and for them to perceive the cheaper rate as a reflection of the quality of my work.

    • affable on 14/02/2017 - 09:40

      Just make sure you have met face to face with, and received the undertaking from, your ex-colleague's new boss.

      • Newbie2017 on 14/02/2017 - 10:09

        I will definitely do that, thank you

    • grizzle on 14/02/2017 - 11:18
      +1

      A couple of things to bear in mind if you think you'll be doing more of this:
      * As a sole trader, your competitive advantage is that you can charge less that companies due to lower overheads, though obviously you'd have greater uncertainty in workload to account for.
      * Consider whether you'll need professional indemnity insurance
      * There are some standard contracts that may be of use as a basis for your work:
      - Consult Australia Short Form Contract
      - Australian Standard AS4122: GENERAL CONDITIONS FOR ENGAGEMENT OF CONSULTANTS
      These cost money, but you may be able to request conracts in one of these forms to make life easier for yourself.

      • Noblejoker on 15/02/2017 - 11:17

        +1 for the insurance
        You really do need PI which can be expsensive for a standalone operator
        usually cheaper if you can access through a 'buying group' like an industry association etc
        If you decide not to buy the insurance at least have a good contract drawn up with a disclaimer saying all work belongs to the client and any resultant losses are on them
        Google around for a standard contract and then copy and amend it and ideally then get it checked by legal
        The alternative to all this is to work on wages
        If you are an internal employee of the firm rather than an external contractor - on whatever basis, doesn't have to be PAYG - then they have very limited rights of recovery against you

  • robertbruce on 14/02/2017 - 08:40

    hit 'em hard, hit 'em high, there is a reason why they are asking you to do this and it ain't a warm 'n fuzzy one….

    • Newbie2017 on 14/02/2017 - 08:44

      True… they are asking me because they do not have in house skills to do this, but i don't want to come across greedy either as i was recommended by my ex-colleague and I don't want to reflect badly on him

      • dasher86 on 14/02/2017 - 10:42
        +2

        Easy.
        on invoice charge full price.
        Then have a discount line - one off referral discount.
        Therefore they think they are getting a discount because of your excolleague and it doesn't devalue your work as they can see it is priced more.
        If they want more work from you they need to pay full price as the discount was one off.

  • natacon on 14/02/2017 - 13:10

    Estimate how long it will take you to do the job, then multiply by 2.5 to allow for some scope creep. Use whatever day rate you think appropriate. This becomes your base quote for cost/time. Allow for it on your contract with stipulation that time over and above the allotted hours will be charged at X rate/hour at your discretion. Provide timesheets with your invoice.

    Also, make sure you get 50% up front and/or staged payments 30% deposit/30% draft/40% on completion. Also think about licencing and exclusivity. Are you going to want to reuse core assets for other clients? You should factor this in to your contract and pricing.

    The other way to approach pricing is to estimate the value of the work to the company and base your price on that. Are they likely to save tens of thousands as a result of your work? If so and you can substantiate, you could negotiate a higher price for the work.

    Lastly, don't think in terms of being greedy. It's just business. Most people start out undervaluing their work and the only one that suffers is you.

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