Moving Into Consulting 101 - Part 3 - The Hours of a Consultant (2024)

This is part three in a five part series this week,Moving into Consulting 101.

Today's topics talk about why you were hired. How is your work likely to be quantified, weighed, and forecasted? You'll soon become intimately familiar with the daily process of time entry. The hourly rate your company bills to your clients, based on your time entries, funds the whole operation. Or perhaps, your services are provided in exchange for monthly flat-rate contract, or fixed-fee projects. You should be aware of your project's setup for the client.

In tomorrow's topic, we'll dive further into projects, what else you should know and what roles you should be prepared to play.

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The Hoursof a Consultant

Utilization is not a badge of honor

Utilization =The king of all consultancy buzzwords. The number of hours you billed for divided by number of hours out of the week (generally 40).

Most consultancies will expect you to bill 70-95% of your 40 hours per week, depending upon the industry and your level of seniority. You should probably know what this goal is so that you can balance out non-billable tasks you stillneed to accomplish. Most consultants won't bill 40 hours a week every week, especially as you advance. Non-billable time will include supporting sales efforts, team management, time entry, training, internal meetings, project estimation, and creating project proposals.

You will be judged, evaluated, perhaps even compensated based on your utilization goals.While utilization is the factor you'll be reminded of the most, it should not define your success as a consultant or your career progress. If you sense that a consultancy only awards/advances people who work the most hours, perhaps this isn't the place for you. While profitable, squeezing maximum billable hours with no regard to work-life balance is not ethical or empathetic. Maximizing utilization has a negative impact on diversity. Jokes about slacking off if you only billed 40 hours should be a red flag.

A consultancy will be happy to see you bill 55 hours a week, but everyone should know this is not sustainable or empathetic. It's sometimes a requirement, but should not be a pattern. A responsible consultant manager, with empathy for work-life balance, should trade excess billable hours in a week for time off the next week. This is not guaranteed or common. Consultancies employing FTEs like to play fast and loose with the legal definition of "full time employee" and overtime compensation regulations.

Billing 3000 hours in a calendar year is not a badge of honor, it means your consultancy mangled its staffing plan, you helped cover that mistake, and you almost certainly were not compensated fairly in return. There will be pressure and gamification of your utilization, so be prepared for the internal push to bill all the hours you (honestly) can.

One uncomfortable question you'll want to ask right away: "That mandatory half-hour departmental meeting... should I still be expected to bill 40?" I've seen a range of answers to this question: "just work 40" to "bill it to your next client today" to "work late and bill your forty" to "hey man, look, just be cool about it". If the answer isn't presented obviously, ask the question, judge your manager's ethics/empathy and prepare accordingly. If I had to guess, the answer from most consultancies is going to be that you should bill 40 and record 40.5 hours that week's time sheet. Just be prepared for that.

A mature consultancy will be familiar with burn-out and will value their employees' time and work-life balance. While long work weeks may come in bursts, and that's expected, look for signs that your consultancy is paying attention and rewarding overwork.

Track time like a consultant

Every consultancy is going to ask you to track your time, likely in a way and level of detail that is more inquisitive than your in-house job.

Time entry comments may be exposed to clients on invoices. Different time entry systems allow for public vs private comments, for example. Be sure to understand that:

1) Time entry is required for Time and Materials (T&M) type work, so it's just a part of the business. Having it entered timely and accurately is also important for billing purposes. You don't want to be "that employee" who consistently draws negative attention upstream for entering your time late.

2) Know what time sheet detail/comments the clients will see. You don't want to be that consultant whose rude complaints about a client showed up on the client's desk in an invoice.

3) Know what project/task/bucket you should be billing time to for every project. If you need a bucket, ask a project manager or your boss promptly - don't wait. Before I was in a position to create my own buckets, I had probably sent "I need a bucket for..." emails a thousand times.

Don't be surprised if your manager asks you to account for every 15 minutes of your day, even though you're a full-time employee (FTE). You get used to it. It's really not that bad. Oftentimes, I was able to fill in most of my time sheet by virtue of reviewing my calendar, sent items, chat history, and ticketing system history.

How consultancies should bucketize non-billable hours

Time entry systems usually have a bucket for "admin time" or "non-billable" time. In many consulting companies, this single bucket exists but is discouraged and scrutinized, as if it is a trap. I've worked in many different time entry systems and regimes, and I'll strongly suggest to anyone that listens that this type of bucket is a bad idea.

Instead, there should be a wide, customized array of time buckets for things like "training", "sales support", "mandatory internal", "internal systems", "internal reporting", or maybe even one for "time entry". These more specific buckets are self-evident, and over a year's look more understandable.

Consider also "sales support" buckets inside existing projects, for time spent scopingthe nextproject, as you land-and-expand in the client. This way, all that non-billable time doesn't add up so inexplicably on a monthly time report. This makes everyone happy - those who enter the time don't feel so needled, and those who review the time don't get frustrated by big blocks of non-billable hours.

Also, don't be surprised to see your weekly time sheet change dramatically from week to week, project to project, client to client. Your time sheet may be 8x5 for a single client one week and then 12 clients in a week. Especially if you enter a more senior consulting role where you are engaging with technical sales support and scoping, your timesheet will probably look more like a chess board.

As you engage on more and more sales support or pre-sales work, your utilization target should drop accordingly. Early in my consulting career my utilization goal was 85-90%. By the end of my last consulting position as a principal consultant and team lead, I averaged around 50-60% utilization per week, including time spent on T&M and flat rate projects.

Vocabulary

Common consulting sales concepts

Time and Materials (T&M)= A project billed hourly as needed, likely with a cap. If we finish early, we stop billing early. If we run over, we'll need a change order.

Fixed fee= A single price for a single set of deliverables. If we finish early, we get more profit. If we finish late, we can't charge extra.

Change order= Okay, let's get the customer to agree to be charged extra.

Flat rate fee= Often a single price, agreed monthly. Many Managed Service Providers (MSPs) use flat rate pricing in multi-year contracts to lock-in agreements for ongoing support of clients. It's mailbox money for the consultancy, and it's predictable billing and guaranteed services for the client. Flat rate fee contracts almost certainly include a detailed SLA.

Service Level Agreement (SLA)= This details the level of service — the response time, for example — a client should expect from a consultancy in a flat rate fee or "Managed" agreement. T&M and Fixed Fee projects rarely include any SLAs, but a flat rate fee project for access to consultant services must include an SLA. The SLA determines, for example, how long it should take the consultants working on a Managed Service contract to respond to a client request. If a production server is down, the SLA may be 15 minutes. If a non-critical process has stopped working, the SLA may be 3 business days. Other types of requests may have SLAs as well, and different levels of severity need different SLAs.

Sales Support= In short, sales people without expertise need non-sales people with expertise to seal the deal.Senior resources with relevant expertise join pre-sales conversations on a non-billable basis to talk about architecture options, possibilities, approaches to solve problems. As you progress inside a consultancy, you'll be part of more Sales Support conversations, and trusted to talk about the latest trends and technology. You'll also be tasked with estimation and drafting proposal language.

Common internal consulting concepts

Pipeline =As sales opportunities move from status to status inside a company'scustomer relationship management platform (CRM), a percentage of their estimated value at signing is increased. For example, an opportunity after one conversation with a client might only have 20% of its contract value allocated to a sales person's pipeline. A deal expected to close tomorrow would have 80% of its contract value reflected in the pipeline. Similar systems are in place around the industry help with capacity planning, justify hiring decisions, and prioritize pre-sales assets.

Burden Rate =While consulting fees might be relatively flat between different consultants in your company, their burden rates will vary. Burden is the calculated cost/hour of each consultant accounting or salary and benefits. Burden is subtracted from project revenues to determine profit margin. Burden is part of thecost of goods sold, an accounting concept, which is what it sounds like.

Your Plate= Your current and anticipated workload. If your plate is full, you have enough billable work to keep you busy for the next week or two. If your plate is full, you will struggle to take on more work. I had a recurring reminder for my consulting DBA team to send me their "plate," a weekly status report of what they were working on and what was coming.This aided us with forecasting and project assignment, and making the justification for hires.

Bench = Consultants are "on the bench" when they don't have any billable work to do. Bench work makes everyone nervous. Larger consultancies can absorb more bench time than smaller consultancies. The typical conversation that happens with management is that consultants on the bench should pursue training and certifications, work on internal projects, or (more or less involuntarily) burn their personal time off hours. You can't convince an experienced consultant that bench time isn't something to worry about, but sometimes it is inevitable. If you experience bench time, make the most of it by using the time on personal improvement, like technical blogging, developing a presentation for a conference, or developing labs for training.

"Lab it out" = My employees knew this expression well: if you have a question about how something works, try it out yourself. If they came to me with a question about how abc works, we'd test abc out in code, right then and there. I mastered many SQL Server features not by reading about them, but by creating them in my personal SQL Server environment, bending and breaking them. Your technical "lab" might be on personal hardware, your work laptop, or in the cloud. Your best learning will come as you get hands-on with technologies, and clients don't always give you a perfect environment to learn by trial and error.

This is part three of a five-part series onMoving into Consulting 101.

Utilization - The King of Consultancy Buzzwords

Utilization is a critical metric in consultancy, representing the number of billable hours divided by the total working hours in a week (typically 40 hours). Most consultancies expect a utilization rate ranging from 70-95%, depending on industry and seniority. While high utilization is often emphasized, the article stresses that it should not be the sole measure of success, advocating for a balanced approach and consideration of non-billable tasks.

Time Tracking and Entry

Consultants are required to meticulously track their time, with detailed entries essential for billing and project management. The article highlights the importance of timely and accurate time entry, cautioning against negative attention for consistently late submissions. It also advises consultants to be mindful of the visibility of time entry comments to clients on invoices.

Non-Billable Hours

The article emphasizes the need for a nuanced approach to non-billable hours, suggesting a customized array of time buckets for activities such as training, sales support, internal meetings, and project estimation. It discourages the use of a generic "non-billable" bucket and encourages a more granular breakdown for better understanding and transparency.

Common Consulting Sales Concepts

The article introduces key consulting sales concepts, such as Time and Materials (T&M), Fixed Fee, Change Order, Flat Rate Fee, and Service Level Agreement (SLA). Each concept is explained, providing a foundation for understanding the diverse ways in which consulting services are structured and billed.

Common Internal Consulting Concepts

Internal consulting concepts like Pipeline, Burden Rate, Your Plate, and Bench are explained. These concepts offer insights into the internal dynamics of a consultancy, including sales forecasting, cost calculations, workload management, and the challenges associated with bench time.

Expert Insights and Advice

The article concludes with advice for consultants, urging them to be aware of burnout, ethical considerations, and the importance of maintaining a healthy work-life balance. It also touches on the unpredictability of weekly time sheets and the evolving nature of utilization goals as consultants progress in their careers.

In summary, this article provides a comprehensive overview of crucial concepts for individuals entering or navigating the consulting industry, offering valuable insights from someone well-versed in the field.