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Sanity check for FEA rates

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nmuoio

nmuoio

Mechanical
Mar 15, 2004
3
I know the topic of rates comes up fairly often, but I feel I need a sanity check. I’m in the planning stages in starting up a one person engineering business in Seattle. Services will include FEA, structural dynamics, heat exchanger and thermal analysis, and custom numerical modeling. Research brought me four strategies to establishing my rates:

1) 2x-3x regular employee salary
2) Break even
3) Industry standard rates
4) Set rates high enough to weed out the cheapskates

Using the first two strategies I’ve got a range of around $60-$130/hr, and I believe $125/hr is pretty typical. Obviously I need to narrow down my range a bit. Any thoughts on FEA rates for Seattle based consulting businesses?
 
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5) What someone is prepared to pay.

Imagine you are trying to sell your house rather than your services, how much would you ask for that?
 
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nmuoio,
I have a practice in Lynnwood, residential mostly, starving right now... When we bill, we bill at roughly $100/hr. It seems you have some specialized skills within our industry, I should think you would be higher than me... When we were starting out, we were always afraid of starving so wee had a few prices too low, we've raised them since. In doing so, we lost a few clients, not as many as I would have expected, but a few... I like to believe the remainders stayed for the service. We're still making it up as we go along.
 
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I attended a forensic engineering seminar this winter where rates were dicussesed. A few attendees noted that they were told that there rates should be higher by people who reviewed the firms. Reluctantly they raised rates and very quickly found that their volume increased as did the quality of the clients. Juast passing this on with out recomendation.
 
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RVSWA

It sounds familiar we started two years ago, we bought the business from a retiring engineer. We have completely transformed the business. The lessons now currently learning are similar to yours. Lift the rates to a decent level, write out your pricing policies, consulting agreements (fee proposals)to reflect the exact scope allowing for hourly rates for variations!

Neilly Davies Consulting Engineers
 
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Just a note - when at meetings= or other events and talking to competitors or possible competitiors be VERY careful when discussing rates.

This could be construed as "price fixing" and you can go to jail for that.!!

I have seen it happen...
 
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I know I am not going to discuss the actual rates but the process. I am more into developing partnerships with companies that bring regular work. As long as we are reasonable they are fine!

Neilly Davies Consulting Engineers
 
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It is an evaolving task. The rule of 2x or 2.5x is fine but depends on the skill and efficiency of the employee. I personally, when took over replaced contract staff to more permanent staff for quality and commitment. The clients always look at the overall cost for lump sum for variations ofcourse they will look at the rates. It does not always have to be lower than your competetors if you maintain quality and service.

Neilly Davies Consulting Engineers
 
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