Former employer is my first client 1

[jay156]

Hi, so I was laid off, and figured it was a good time to start my own business. Now my former employer has a little bit of work, and I told him what I was doing and he said I couldn't come back as an employee and still pursue work on the side, but he would hire me on as a subcontractor. I'm sure some of you guys who have started your own business have had the same thing happen.

So my question is, how much do I charge him for my services? I would expect my fee would now be higher as I have to pay for E&O insurance and I'm not assured of a continuous salary. He used to charge our clients $70/hr for my time, and then my salary was $34/hr. So what is a reasonable fee? $60? $50? I'm really new to the business part of this thing, so any advice on other things I may be overlooking would be appreciated too.

Thanks

Jay

 

[jay156]

Well, I opted at this time to go back to my old job full time. We're about to buy a house and have another baby, and the steady income is too important. Thanks to everyone who gave their advice. I still hope to come back to this in the future.

 

[karmoh]

ajack1, I agree they're tight, but the lifestyle I have far out ways any deficit or perceived deficit. Going solo was not an effort to get rich, but to enrich.

 

[bvanhiel]

A 3X multiplier is the number I would expect for an established firms, not someone working out of their basement. It's the number I would expect your former boss's company to be charging their clients.

If he's selling you're services for $70/hr you will obviously not get him to pay you more. He should also expect more than $34/hr. I would start with the $34/hr, add the value of any benefits (including paying the hidden half of your taxes), add the overhead costs of software/hardware tools and insurance, and that should give you an idea of what you were costing him. He should be willing to pay a premium over that. How big a premium depends on the length of the job. $50-$60 doesn't sound unreasonable.

In the end he'll only want to pay what he wants to pay, and you'll be left with two choices: take it or leave it. Your goal as a new business owner should be to find more costomers so that you have more choices.

 

[Mililani]

I have one client that has bought over a thousand hours a year for 10 years. His rate is $80/hr, others pay 120/hr, but I seldom get more then 100 hours a year from them.

Once you get below $40 you might as well become a math tutor, $25/hr. I can work as an electrician for $40 or 50.

The lower rate opens up a lot of jobs, when I first started contract engineering I took alot of wiring work for #28/hour.

If you can bill a variety of customers a variety of rates. If you only make half the money your family requires doing lower paying jobs you can last twice as long between good jobs.

 

[kalens99]

If this is purely an ethical issue I can only say a couple of things:

Are you feeling guilty for overcharging because even though he laid you off (perhaps for reasons outside his control) that he was good to you before and you owe him now? Admirable but this is BUSINESS. Unless you owe him money or there is something in a severance contract I am not aware of, I would treat him like any other client. You could give him a break you would give any other client (i.e. you are just starting out). Of course, if you are undercharging in the beginning, you could always say it is because of your relationship. This kind of white lie can be used in any business relationship (don't take that the wrong way, I don't justify deception only basic marketing rules that every company needs to get used to).

Remember, he laid you off. I don't know the full circumstances, but if there was nothing else going on and you never got much more from him than you put in and deserved, I wouldn't say you owe him.

Kalen Smith
Engineer-a-Business

http://www.engineer-a-business.com