Going off on my own...how much to charge? 3

[mfstructural]

Hey all,
I was recently contacted by someone who is interested in me sealing some drawings for them. The drawings are for 7.5 ton RTU on a warehouse. They do not have calculations so I would have to do my own to validate the drawings. I'm not sure how much to charge or how assess the value of a project when it comes to the value of my time, liability, etc.
Any advice? Thanks

 

[MiketheEngineer]

I start out quoting about $150.00 / hr - Mid-West. Itr is higher on the coasts. And I usally discount that a bit.

 

[rowingengineer]

Where are you in the world, if the USA I don't have any real costs for you.

all I would say is that if you doing this as a on the side job to your normal engineering full time job. Then you should consider the following.

1. have consent of your current employer
2. have all the insurances required in case it goes south
3. decided if you are going to do this as an individual or company, if company set up a company.

http://www.nceng.com.au/

"Programming today is a race between software engineers striving to build bigger and better idiot-proof programs, and the Universe trying to produce bigger and better idiots. So far, the Universe is winning."

 

[Ron]

Charge what the full-size firms charge. Just because you are a one-man show, doesn't mean you don't deserve the same value for your services. Don't discount your hourly rate. If you need to reduce your fee, reduce the amount of work you do....not the rate. If you reduce the rate, you'll be stuck forever!

 

[ajack1]

Just out of interest why has this person contacted you rather than going to an established company? I would guess because they want “mates rates”, obviously I could be wrong.

Are you looking at doing this as a career change or just a bit of pocket money?

If you are looking to set up a company you need to factor in all your overheads, which will be more than you probably think, if it is just a one off the very least you will need to cover insurance costs, so you will probably be about 5x more expensive than anyone else.

If you are looking to do it without insurance and just undercut legitimate companies then I hope you fail and it comes back and bites you.

 

[JedClampett]

As far as liability, it's a lot more than you could charge. That's what insurance is for. And when you see what the insurance costs (about $10,000 a year), you're likely to turn down the job.
Don't forget, even if your design is sound, if the crane drops the RTU and it fails the roof, you're going to get dragged in. It might not be your fault at all. You're insurance company knows how to fight this. You'd have to hire a lawyer and pay for it yourself. And who's going to pay you if you get deposed.
Hanging out your shingle and taking work is a big decision. Don't take it lightly.

 

[DHambley]

MF,
If your career plan is to contract your services there are a few factors which you should use to set your rates which may not be apparent to an employee on W2. Say for example that you believe you are worth $120K a year as an employee. What do you need as an independent contractor to bring in that same amount?
1. Start with this $120k value (or whatever)
2. Figure you are billing 9 months out of 12 average ~1,500 hrs = $120k/1,500 = $80/hr.
3. You pay 7.5% more FICA than a W2 employee. Add that: $80 + 7.5% = $86
4. Liability insurance: This is tax deductible so add $10k/1,500hr = $6.67 ~7 $86+7 = $93
5. Health insurance: W2 employees usually get this for a small monthly rate but this comes out of your pocket after taxes so you have to add the amount before taxes: I don't know your family size so guess $12k per year. $12k*(1/(1-35%))=$18.5k Div by 1,500 hrs - $12/hr $93+12 = $105.
6. Equipment, training, buy your own software, professional conference once a year etc etc. ~$5k, tax deductible. $5k/1,500=$3.33 That brings the hourly rate up to about $108/hr.
7. Business taxes. In my state it's about 2% after deductions. 1.02*$108 ~ $110

So, approximately $110/hr would be what you should charge to bring in the equivalent $120k that a W2 employee makes. Note that item #2 above also figures in your holidays (another W2 freebee), searching for clients, training time and other time an employee gets for free

Once I worked next to an engineer who was salaried at ~ $120k. He made a bitter, jealous remark that I got to keep all that money for myself. Odd - He's using calculus to perform thermal stress calculations but, incapable of simple "addition" like I laid out above. Usually they accept your fee as reasonable though.