Adventures in Consulting: On-Site Travel Expenses and Your Hourly Rate

If your a freelancer, chances are you'll have to work on a 'time and materials' basis on occasion.

For me, that is my preferred method, because it gives me some assurance that my client won't take a fix-bid quote and 'scope creep' me into the poor house. Of course, if you can give your client a clear set of requirements and some sort of a 'cap' (not to exceed hours) then everyone has a stake in the game and it's fair for everyone.

Some of the work I do requires me to be on-site. Sometimes that's just because the customer wants to see what they're paying for, but also because co-location can really help communication and project progress.

If the customer is willing to pay my hourly rate + travel, then I just invoice them for actual travel costs, and they reimburse me. (Don't forget to add the per diem cost for 'meals and incidental expenses' from the IRS.)

But a little more tricky issue is what to do when the customer wants to pay an 'all inclusive' hourly rate? That puts more risk on you, the consultant, to absorb the travel costs, etc.

Fortunately, through trial and error, I've found a great formula, and it's pretty straight forward:

Travel cost
+ On-site cost
/ 8 hours/day
= Hourly On-site Travel

1. Travel costs: First, determine whether you want to drive or fly to the location, and how often you'll return home. If driving, use the standard IRS driving rate (currently 58.5 cents/mile), if flying, log onto Travelocity, or Orbitz, or one of those sites and get an estimate of what a ticket will typically cost you. Take the $ per trip and multiply that by the number of times per month you'll return home, then divide by 4.2 to get a weekly number, then divide by 40 to get an hourly equivalent:

Trips per month cost
/ 4.2 weeks in a month
/ 40 hours in a week
= Travel Costs per hour estimate

2. On-site costs: Probably the easiest way to calculate other costs for being on site is the IRS per diem rates. Simply look up the city you'll be staying in, and take the Per Diem rate and divide it by 8 hours/day to get an hourly eqivalent:

IRS Per Diem (daily) Rate
/ 8 hours per day
= On-site hourly estimate

Now you have a good idea of what it will cost you just to be get there and be on-site. Add that to your hourly rate (what you want to make per hour), and you have your billable rate!

Tip: Clients and recruiters don't always consider all of this info when they negotiate a rate with you. I have found most people to be reasonable when I show them this information and it's turned out to be a great tool in successful rate negotiation.

Until next time...