“I’ve Just Landed My First HR Consulting Gig On The Side. What’s Your Advice?”

Hi Alan,

For the first time, I’m going to be doing some HR consulting on the side. 

What I should charge to create a company handbook, revise new hire paperwork, including an online employee application…and be available for phone consultation?

I want to be reasonable but also don’t want to cut myself short.  Any advice on what to charge and on agreements you have that you would be willing to share would be appreciated?

_____________________________________________


First of all, congratulations on your landing your first HR consulting project. Doing an occasional HR consulting side project is a great way of testing this as a possible career option. Just make sure you don’t jeopardize your day job, unless you’re ready to jump ship.

That said…

Let me start with an HR
consulting horror story….

Four years ago, I signed a detailed consulting agreement with the owner of a small business. I finished the work and the client raved about the results.

He promised to pay me but didn’t.

He said business was slow and that he had cash flow problems.  Yet all evidence indicated to me that his business was thriving.

After following up regularly and failing to get any money after two years, I finally lost patience with this jerk and his excuses.  I wound up suing him and his company and won a court judgment for the $30,000 he owed me plus court costs.

I’ve been using a collection agency and hounding the crap out of him for the past six months.

To date, I haven’t received a dime.  Again, it’s been four years.

I’ve wasted countless hours and paid an attorney in an attempt to recover my HR consulting fees.  By the way, we had a detailed, letter of agreement which is I why I easily won the court judgment.

I’d never met this client before.

But I was star stuck with his sincere personality, impressed with with his small business, blown away by his website, his plush offices and his fantastic vision for the consulting project.

But this guy wound up being a sleaze, a liar and a thief.

It’s been an absolutely horrible experience.

My lessons:

Yes, I know these are all rookie mistakes.

But I made ALL of them in this one particular case.  

If I had done a better, more thorough check through my sources, I would NOT have signed the contract.  The firm’s reputation with the BBB (Better Business Bureau) was questionable from day one.

My bad.  Never again.  Lesson learned.  ‘Nuff said.

With that in mind, here’s my take on your other questions.

On pricing your HR consulting…

Resist the urge to lowball your price or enter price wars.  Since you have a full-time day job, you can afford to be selective about the projects you tackle and picky about clients you take on.

When you demonstrate confidence in your fees, your clients will trust you and value you’re giving your product or service more highly. Your time and HR expertise is valuable.

In my case, I’ve successfully priced my HR consulting based on a rate equivalent to roughly 2.5 times my current (or last) daily base salary.

With former colleagues, bosses or people I’m very tight with, I’ve cut this fee by as much as 20-25%. With everyone else, I stand firm.  I highly recommend this formula.

On the “products” you’ll be producing (e.g. the handbook, new hire paperwork, online application) I’d come up with “one flat price” based on the above formula.

Estimate how how many “days” it’ll take you to develop the products and then put a price tag on each one (see the example in the letter below).

On the phone consultation you’ll be doing, I’d bill that out on an hourly basis based on your daily consulting fee using the formula above.

Keep in mind that once you quote a price, you won’t be able to easily raise it.

And, if you drop prices just to get clients, don’t expect to be able to suddenly raise them back up and still keep those clients.

On contracts and agreements…

If the client doesn’t ask for a formal proposal, don’t write one.

Providing requests for proposals (RFPs) upfront, before you’ve officially landed the assignment is time consuming.

Since I now work primarily with clients that I know well and have long-standing relationships with, I don’t submit proposals at all.

Frankly, my time is too valuable and I’m too busy to compete for business by submitting detailed RFPs.

However, I recognize that my personal choice in not doing RFPs  may not work for everyone — especially those starting out.

Earlier in my consulting career, I submitted lengthy RFP documents that didn’t get acted on or got hung up “in committee.”

Sometimes, I wish the client had just told me “NO” upfront rather than hide behind: “just send us a proposal.”  Today, I have no regrets in keeping with my NO RFP-policy…thankfully!

Instead, my approach is to talk through the proposed project upfront with the client over coffee or lunch, providing as much detail as possible regarding how we’d work together.  And I’ll quote my price verbally or in a brief follow-up email.  If they like it, great.  If not, great.

Once we’ve decided to work together, I WILL ALWAYS then use a letter of agreement to summarize and confirm the project, details and what we’ve discussed. 

This letter of agreement reads like a memo and includes the scope of the HR work I’ll be doing and a cost estimate.

Here’s how one would look like for the project you described…

Sample HR Consulting Letter of Agreement…

Letter of Agreement

Rick Holiday, SVP Human Resources
Chicago Chocolate Company, Inc.
P.O. Box 1108
Chicago, IL 60016

Dear Rick:

This letter will confirm our agreement in regards to my consulting work for you and Chicago Chocolate Company, Inc. As we discussed, these are the terms:

1.  I, Jane Smart, will be deliver to you and Chicago Chocolate Company, Inc. the following work products: (a) a company handbook, (b) revised new hire paperwork ( including an online employee application). The price for these products will be $18,000, with 30% payable upfront.

2.  This includes up to three cycles of revisions of the materials once the original drafts have been submitted for your approval. Any further revisions will be billed at the rate of $400/hour.

3.  I will also be available for phone consultation after 7 p.m Monday through Friday, to provide human resources expertise and consulting services for all aspects of the project described above project at my consulting fee of $400/hour.

4-etc….

5-etc…

6-etc..

I’m excited about our work together and look forward to working with your direct reports on these projects. If you are in agreement with everything as set forth in items 1 though 6, please sign below where indicated. If there are any changes you wish to discuss, please call me right away.

Sincerely

Smart HR Consulting, LLC

_______________________________________
(Signature of Jim Smart, President)

Agreed to and Accepted this 15 day of October, 20xx

Chicago Chocolate Company, Inc.

_______________________________________
(Signature of Rick Holiday, SVP Human Resources)

###

Again, these are just a few of the basics.

Your fees and terms will, of course, vary from those in the example above.

Be as specific as you can and spell out everything.

Be prepared for the client to negotiate terms and add additional conditions before the agreement is finalized.

I’d highly advise having an attorney to look over all your agreements as well.  My sister is a lawyer so I typically run things by her.

I hope all this helps.

Good luck and I wish you much success in your first venture.

Do your diligence and avoid the horror stories, please.

Onward!

CLICK HERE to add your comments or additional insights on this article.

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YOU DON’T HAVE TO CONSULT ON THE SIDE to profit even MORE from your valuable knowledge and experience in HR.   There are other less time-consuming ways.  Curious?  Then check out: YOUR HR GOLDMINE:  How To Turn Your Human Resources Know-How Into A Lucrative Second Income…Without Leaving Your HR Job!  (pictured left).  The book itself will provide you with tons of ideas and a step-by-step plan for putting them into action...without becoming a part-time consultant, if you don’t want to!

About the author: Alan Collins was Vice President – Human Resources at PepsiCo where he led HR initiatives for their Quaker Oats, Gatorade and Tropicana businesses. He is founder of Success in HR, Inc. and the uathor of a variety of best selling books for HR professionals including YOUR HR GOLDMINE.

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31 Responses to ““I’ve Just Landed My First HR Consulting Gig On The Side. What’s Your Advice?””

  1. Jann Says:

    GREAT advice! No RFPS, huh? Interesting…

  2. Alan Says:

    No RFPs. Yes, it’s a personal policy of mine now. I can’t tell you how much time I’ve wasted earlier in my consulting career submitting lengthy documents that didn’t get acted on or get hung up “in committee.” Sometimes, I wish they had just told me no rather than hide behind: “just send us a proposal.” I’m thankful to now work only with people who I know and trust and so I’m not beating the bushes for jobs. However, I’m a realist — this may not work for everyone.
    –Alan

  3. Lana El Moustrah Says:

    Thank you Alan, every time you share the lesson and give advice practically useful to every HR practitioner.

  4. Michelle Says:

    Hello Alan,
    I love your approach. What do you do if you run accross the company wanting you to sign there company consulting agreement?
    Michelle

  5. Alan Says:

    Michelle,
    Thanks for the question. I’m fine with signing their agreement. That means I’m only one signature away landing the HR project officially and I’ve saved my own time in creating one myself. Before signing it, however, I will have my sister (the attorney) look it over first. I don’t hesitate to suggest modifications if needed, but generally at this stage, there are only tweaks. The client is generally anxious to get started.
    –Alan

  6. Angela Says:

    What are your thoughts on having brand new clients making payment up-front for the first contract? Possibly scaling off of that for established, repeat clients.
    Thank you!
    Angela

  7. Alan Says:

    Angela
    Absolutely! With smaller clients who are referrals I’ve asked for 25-30% as an upfront retainer in the agreement. However, most of my work has been with large corporations and former colleagues and I feel no need to request an upfront fee from them.
    –Alan

  8. Andrea Says:

    I was wondering if you carry E & O insurance, and/or if there are typically liability clauses in the agreements you sign. Thanks!

  9. samarjit Says:

    Dear Alan,

    Your thoughts are very informative and genuine . I appreciate your concern for HR Professionals .Thanks

  10. Alan Says:

    Andrea,
    Typically there aren’t. However, I’ve set my consulting business up as a LLC, which minimizes my personal liability in my consulting endeavors. An LLC is not expensive to do and I highly recommend it. Google it to get more details.
    –Alan

  11. Diana Says:

    Thank you Alan, This is precious advise, as always. You have the dimensions of an International HR Adviser to the whole army of HR practitioners all over the world. You land your expertise so generously, comprehensively and true to the actual realities. Thank you again and again from Albania.

  12. Jayne Kangwa Says:

    Great article. In my part of the world, the majority of companies prefer for one to submit a RFP which I think is becoming an obsolete practice and as you say time consuming as one is not assured to get the contract. I wonder how companies could be convinced to do otherwise?

  13. Alan Says:

    Hi Jayne,
    My experience is that change comes s-l-o-w-l-y in companies. I wouldn’t waste your precious time trying to change them. Don’t sweat the RFP thing…you may need to do a few RFPs to get your foot in the door. That’s ok. But as soon as possible move away from that practice forever by finding a few companies (you don’t need a lot) who are absolutely sold on you as their “HR trusted adviser.”
    –Alan

  14. Timi Tope Says:

    Hi Alan,

    Great and authentic advice. I once experienced a similar fate with a former colleague who set up a new business and couldn’nt pay my fees for over a year now. You are very practical and sincere in your help to professionals!

  15. Jayne Kangwa Says:

    Thanks Alan. Will do.

  16. Baptista Says:

    hello Alan,
    This is great and on point. Many thanks

  17. Karen Says:

    Hi Alan — Love your article and advice. I was previously an HR consultant/recruiter and am contemplating restarting my business again since I recently left a corporate position. In the past I provided clients with a “letter of intent”, briefly outlining the assignment they contracted me to perform and required regular payments as I hit certain milestones. That seemed to help with the concept of not getting paid. I would suspend the project if a payment was late. When you speak of the 2.5 X formula — can you clarify what you mean by current daily base salary? How exactly are you calculating that? I want to be sure I’m “current” as I consider jumping back in. Many thanks, Karen

  18. Alan Says:

    Karen,
    Your letter of intent sounds like a happy medium between no RFP and full-blown RFP. Thanks for sharing. On the 2.5X formula, here’s a simple example. Let’s say your last (or current) salary is $100K. Using a base line of of 250 work days a year, that works out to $400/day. Applying the 2.5X formula calculates to $1000/day as a consultant. But consider that ONLY A STARTING POINT for setting your fees — it can be adjusted up or down depending on your experience, the demand for your service and how hungry you are. This also didn’t include your annual value of your bonus, if you’re eligible for one (which I’d certainly add to your base salary calculation). Hope this helps.
    –Alan

  19. vinodh Says:

    This is helpful for any professional.not just hr.
    regards
    vinodh

  20. vinodh Says:

    thank you for sample agreement as above

  21. Stephanie B Says:

    Alan, Great and solid article! Thank You for always sharing relevant advice for those of us getting started.

    Best,
    Stephanie

  22. Suzanne L(aFlair) Says:

    Dear Alan,

    Your message is very timely!!! It’s been suggested that I just declare myself to be a sole proprietor for my fledgling consulting business. Do you have any thoughts on the pros and cons of this approach vs. the LLC?

    Thank you SO much for your advice, newsletters and books. All the best, Suzanne

  23. Ahmed Says:

    Nice one Allan,
    will definitely avoid the horror story..

  24. Diana Says:

    Thank you Alan for re-sending this precious article. I have saved it in a separate file, since when you sent it previously. I have often referred to it whenever in need of your advice for consultancy project work. Specifically, the formula of fee calculation works very logically and fairly. Thank you Alan for sharing. Looking forward to reading your weekend articles :).

  25. Ije Says:

    Noted, wise words to be followed. Thank you Alan

  26. Josephine Winfrey Says:

    Great information Alan:

    I’ve been dabbling in consulting for a number of years. I fell into it mostly because I sit on a non-profit board and was routinely asked to monitor or “help solve” HR issues. I set up an LLC and started “helping” with the understanding that my expertise would be compensated.

    Now I must admit that even though I was compensated, I did low ball for my friends who were starting their own businesses and for Churches. Plus, I looked at it as a hobby, something on the side, testing the waters.

    When I make this my “bread and butter” then my rates will be more substantial. Thanks for the insight on pricing. And to Suzanne L(aFlair), really do some research on sole propietorship vs. LLC. and how it will affect you personally.
    Good Luck!

  27. Anthony Anaba Says:

    It’s sounds good to do PP’s – private practice- while on full time employment but when your employer finds out then be ready to face the music. In my country it can lead to prosecution because you are using official time of your employer to do private business even when the time is fully paid for as agreed. Moreover, what would you do as a HR professional if you find out that another employee is engaged in this kind of activity? Your potential clients may be aware of this ‘double agent’ role and decides to owe you your consulting fees.Play your cards well and try to be discreet about it is my advise.

  28. Gail Sanderson Says:

    This is why we love and respect you, Alan. Good, solid, practical and realistic advice. Thank you!

  29. Alan Says:

    Anthony,

    Great points! Here are my suggestions on being discreet and playing things close to the vest with your employer…
    http://successinhr.com/hr-consulting-on-the-side-2

  30. Muhammad Tahir Says:

    Thank you Alan. This a good contract letter more especially as you include the upfront payment before discharge.

  31. Angie Says:

    Very informative article. Thank you

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