HR Consulting on the Side: “I’ve Just Landed My First Gig. What’s Your Advice?”
Hi Alan,
For the first time, I’m going to be doing some HR consulting on the side for a small business.
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 starstuck 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:
- Beware of doing business with someone you don’t know.
- Beware of doing business with someone who doesn’t come highly recommended by someone you trust.
- Beware of working with small businesses, inexperienced entrepreneurs and tiny start-ups.
- Beware of doing business with someone you don’t check out thoroughly in advance.
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.
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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 any 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, lunch or by phone, 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…
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Sample HR Consulting Letter of Agreement…
Letter of Agreement
Rick Holiday, SVP Human Resources
Chicago Chocolate Company, Inc.
621 N. Michigan Avenue, Suite 2000
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)
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Again, these are just a few of the basics about HR consulting on the side.
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!
Would love your feedback? CLICK HERE to add your comments or additional insights on this article.
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Additional Related Resources:
b
YOU DO NOT 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 without consulting. 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!
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!
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Another way to profit from your knowledge is by starting your own blog.
If you’ve ever wanted to start writing about your own HR expertise, can write e-mail length messages and like sharing your ideas with others…then you’re in a great position to capitalize on your very own HR blog.
For more details, check out. START YOUR OWN AWESOME HR BLOG: “The Absolute Beginner’s Guide To Launching Your Own Outrageously Successful Human Resources Blog …Easily, Quickly and Simply!”
You can get all the specifics HERE.
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Finally, you can write your own HR book.
Candidly, writing a book isn’t for everyone. And, there are plenty of HR folks who can leverage their HR expertise just fine without one. However, if you’d think you would like to do a book either now or sometime in the future, then you should check out…
WRITE YOUR OWN HR BOOK FAST! Take Your Career in Human Resources To The Next Level By Authoring Your Own Book — Faster Than You Ever Thought Possible & On The Side!
It’s a quick-read, no fluff step-by-step guide (plus a 20-minute downloadable step-by-step video and other bonuses). And it’s geared for anyone in HR that would absolutely love to write their own book, fast — and on the side. Check it out HERE.
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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 author of a variety of best selling books for HR professionals.
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GREAT advice! No RFPS, huh? Interesting…
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
Thank you Alan, every time you share the lesson and give advice practically useful to every HR practitioner.
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
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
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
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
I was wondering if you carry E & O insurance, and/or if there are typically liability clauses in the agreements you sign. Thanks!
Dear Alan,
Your thoughts are very informative and genuine . I appreciate your concern for HR Professionals .Thanks
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
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.
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?
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
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!
Thanks Alan. Will do.
hello Alan,
This is great and on point. Many thanks
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
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
This is helpful for any professional.not just hr.
regards
vinodh
thank you for sample agreement as above
Alan, Great and solid article! Thank You for always sharing relevant advice for those of us getting started.
Best,
Stephanie
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
Nice one Allan,
will definitely avoid the horror story..
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 :).
Noted, wise words to be followed. Thank you Alan
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!
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.
This is why we love and respect you, Alan. Good, solid, practical and realistic advice. Thank you!
Anthony,
Great points! Here are my suggestions on being discreet and playing things close to the vest with your employer…
https://successinhr.com/hr-consulting-on-the-side-2
Thank you Alan. This a good contract letter more especially as you include the upfront payment before discharge.
Very informative article. Thank you
All great information Alan. As you know we launched our firm 7 years ago full time. We now serve clients nationally. One piece of advice I would give your readers, Go Big! It takes about the same amount of time to come to agreement on a $1,000 project as it does on a $100,000 project. And your comments on RFP’s ~ We agree! We do not get involved with them whatsoever unless we already have agreement that we will be selected. Great article thanks!
Mark, as always appreciate benefiting from your terrific experience and insight. Love your “Go Big!” advice. That’s sage wisdom that I support 1000%. Hope all is well on your end.
Hi, though you said no RFP’s. I have a company asking for a proposal to be sent. Will be great if you can share a template if available for an individual HR consultant.
Thanks.
Sorry Silky. Since I don’t use RFPs. And don’t recommend using them. See no value in creating one. Might want to search elsewhere. Be well.
-Alan
Great advice as always and so timely!
Needed and helpful article, Alan. With so many HR folks out of work, we recommend that they dip their toes into consulting work. I agree with everything you wrote – including NO RFPs. Generally, government entities require 3 proposals. They usually already know who they want and get proposals easily from eager consultants. It’s a lot of work with no return. My advice – same as yours – stick to WHO you know and personal referrals. Thanks for putting your thoughts out there, Alan!
Thanks Gail for your comment. Much appreciated. The RFP thing can be a sticking point and an easy hole to fall into. Appreciate your insights and sharing your experience with government work. Be well.
This article is so great! Unfortunately I have a horror story of my own. I was working a small HR job on the side as a freelance project and it cost me my job. I wish I handled things differently but I will take this time to make my side hustle my main business!
Thanks for your advice. I have provided consulting services, as an independent contractor, for over 20 years and I still struggle whenever I am asked to provide a written proposal. In this instance, I have been asked to detail how I will provide ongoing HR support to a small business – about 40 employees but operating in five states. UGH! I really can’t provide a detailed proposal, too many unknowns. But I do want to provide enough information for them to recognize that I would be a great partner. Wish me luck! And thanks again for the “down to earth” approach.
Martha, thanks for weighing in on your situation. Your experience is impressive. By clearly describing the unknowns, hopefully, they’ll understand why a detailed proposal might be difficult…and they’ll settle for a less detailed one. Wish you much success! -Alan
Hi, Alan. I have followed your blog for years, and I always find it very helpful. I bought “Your HR Goldmine” several years ago, and after reading this blog, I need to go back and read it again. I find the marketing or the finding of clients to be the most difficult aspect of trying to start my own consulting business. I also appreciate having a sample letter and a formula for fees to work with. While I have confidence in my abilities and have wanted to go out on my own for a while now, I am nervous to get started.
Hi Mary, thanks for weighing in. Appreciate the support over the years. The best suggestion for starting is to begin with your current contacts –people you know well, former bosses, former colleagues, and clients. Let them know what you’re doing and ask them to pass the word along. You might surprise yourself.
Totally agree. One other thing I take into account is the length of project. I.e. if it’s a year long project I may charge slightly less then if it is a 2 month one. And include a termination clause should project/consulting end early outlining notice period and payout terms.