What to charge when you start consulting on what you know

Take your final salary and divide it by 2,000. That's roughly the hours in a working year, and it gives you the hourly number your employer was implicitly paying you. A $120,000 salary works out around $60 an hour.

Now throw that number away, because as a consulting rate it's badly wrong. Too low, by a factor of three.

You won't bill 2,000 hours. Independents who bill half their working hours are doing well. The rest goes to proposals, invoicing, travel, reading, and the calls that don't turn into anything. Add your own health coverage, no paid vacation, no sick days, no employer match, self-employment tax, software, insurance, and the dead weeks between projects.

The common working multiple is two and a half to three times the salary-equivalent hourly. That $60 becomes $150 to $180 an hour, or somewhere around $1,200 to $1,500 a day.

Say that out loud a few times before you have to say it to a client. Most people who've been on salary their whole lives physically struggle to ask for a day rate that exceeds what they used to earn in a week.

You're not charging for the hours

The reason the arithmetic feels uncomfortable is that you're still thinking in hours. Your client isn't.

A plant manager calls you because a line keeps failing and nobody on staff has seen this particular failure before. You've seen it four times. You know in twenty minutes what it would take his team three weeks to figure out, if they figured it out at all.

He isn't buying twenty minutes. He's buying the three weeks he doesn't lose, and the production he doesn't lose with them.

That's the whole business. You compress time for people who don't have it. Price the compression, not the clock.

Narrow it until it sounds too small

The single most common mistake is describing yourself too broadly. "Operations consultant." "HR consultant." "Thirty-five years in construction."

Nobody hires that. It's too vague to attach to a problem, and it puts you in a pile with everyone else who wrote the same thing.

Go narrower than feels comfortable. Not "manufacturing consultant" but "I help mid-size food plants pass their first audit after a facility expansion." Not "finance" but "I sit with family businesses in the eighteen months before the owner sells."

The narrow version sounds like it eliminates work. It does the opposite. It makes you the obvious call for one specific situation, and that situation happens to hundreds of companies a year. Broad makes you a possibility. Narrow makes you the answer.

You can widen later, once the phone rings on its own.

Check what you signed before you call anybody

Before your first outreach, dig out your employment agreement. Non-compete clauses, non-solicitation clauses, confidentiality terms, and anything attached to a severance or retirement package.

These vary enormously by state and by contract, and some are enforceable while others aren't. Don't guess, and don't take a colleague's word for it. An hour with an employment attorney costs less than one bad phone call to a former client.

Same goes for the business structure. Sole proprietor, LLC, S-corp — the right answer depends on your income, your state, and your other retirement income. Ask a CPA. This is the one place where the cheap option genuinely costs more.

Where the first three clients come from

Almost never from a website.

Your former employer is often the first call, especially if they let people go and then discovered what left with them. Your former suppliers and vendors know exactly what you're good at, and they know who else needs it. The person who took over your job will eventually hit something you handled routinely.

Then there's the tier below where you worked. If you spent your career at a large company, the mid-size firms in the same industry can't afford someone like you full time and have wanted that knowledge for years. They're your best market and they're rarely anyone's first thought.

Trade associations, industry conferences, and the regulator's public lists are all worth an afternoon. So is calling six people you liked working with and saying plainly what you're doing now. Not asking for work. Telling them what you do.

Day rate, project fee, or retainer

Three structures, and each fails differently.

Day rate is simplest and hardest to argue with. It's also the one that punishes you for being fast. The better you get, the less you earn per problem.

Project fee is where the money is. You quote $18,000 for the audit readiness work, and whether it takes you nine days or fourteen is your problem and your upside. The risk is scope: if you haven't written down exactly what's included, you'll do twenty-two days for the price of nine.

Retainer is the one to aim for eventually. A fixed monthly fee for a defined amount of access — say, two days a month and unlimited email. It smooths your income and it's easier for a client to renew than to re-approve. The danger is becoming an employee again without the benefits, so cap the hours in writing.

Start with day rate for your first couple of engagements. Move to project fees once you can estimate your own speed honestly.

The coffee that costs you money

Someone will ask to "pick your brain over coffee." Sometimes that's genuine and it turns into work. Often it's a free consultation with a pastry.

A reasonable policy: one conversation, thirty minutes, no charge. It's how people decide whether they trust you. If the second conversation is also about their problem rather than about hiring you, say so kindly and quote for it. "Happy to dig into that properly — it's a half-day, and I can send you what that looks like."

People who value expertise won't be offended. People who are offended weren't going to pay you anyway.

Put it on one page before you start

Not a forty-page contract. One page, signed, covering:

• What you'll do, in specific deliverables
• What's explicitly not included
• The fee and the structure
• Payment terms — 50% up front for new clients isn't unusual, and net 15 or net 30 after
• Expenses, and who approves them
• How either side ends it

The up-front deposit matters more than anything else on that list. It filters out the clients who were never going to pay, and it does it before you've done the work.

Ask your accountant about quarterly estimated taxes in your first year, and ask an insurance broker about professional liability coverage. If you advise for a living, you need it.

Decide how much you actually want to work

Write down the number of days a month before you take the first project, and tell your spouse the number.

The trap isn't failure. It's succeeding, saying yes to everything because you're flattered to be asked, and finding yourself at sixty-eight working harder than you did at fifty-five, for a client roster you didn't choose. Three good clients at a proper rate beats nine at a discount, and it beats them by a mile on a Tuesday afternoon in July.

The first time someone wires you a four-figure fee for an answer that took you four minutes, you'll feel like a fraud. You're not. They didn't pay for the four minutes. They paid for the thirty years standing behind them.