How to include time off in a consulting proposal

Question

Hi all,

I run a consulting company for early stage startups. We help them build the foundation of their recruiting & HR functions, then guide them through hiring internal specialists and phase out. We typically take on long engagements (up to or over 12 months), so it's necessary to account for time off.

So far we've been squeezing in extra hours before and after time off to make it up, but it's not a sustainable approach. We need to rework it.

How do established firms to do this? Please share specific examples.

Many thanks,
Caitlin

Additional Context:

The most similar business model to ours is RPO (recruitment process outsourcing). We sit on each team and largely act as internal team members.

We work on retainer and bill monthly in advance for a pre-determined number of hours. For example, I'll send an invoice at the end of December for 160 hours to be completed in January. I do this each month for the duration of the contract.

If we get ahead or behind on hours we adjust the following the month's workload. Either way, monthly revenue remains the same.

This provides predictable cashflow, which is important for a small firm. We were okay with it in our startup phase, but it's not healthy for the longterm.

Is it common to say that within a multi-month contract, the total number of hours worked will be (let's say) = 35 hours per week x # of weeks - some predetermined, reasonable # of vacation days?

I'd like to avoid the scenario where someone takes a week off and we lose 10+% of that month's revenue.

Answer 1

Hi Caitlin,

I am happy to provide my perspective on it:

One approach that is commonly used in the consulting industry is to structure engagements as multi-month contracts, with a pre-determined number of hours per month. For example, you could specify that a contract will include a certain number of hours per week, minus a certain number of vacation days. This can provide a clear and predictable framework for both you and your clients, and it can help ensure that you are able to deliver on your commitments while also allowing for time off.
Another approach is to use a blended billing model, where you combine a fixed fee for certain services or deliverables with additional hourly billing for additional work or support. This can provide flexibility and allow you to adjust the scope of your engagement based on your availability and the needs of your clients.
If someone from your consulting firm takes a week off, there are a few different approaches you can consider to ensure that your clients continue to receive the support they need.
- One option is to find a replacement or substitute to cover for the person who is taking time off. This could be another member of your team who is available and has the relevant skills and experience. Alternatively, you could look for an external consultant or contractor who can provide the necessary support on a temporary basis. This can help ensure that your clients continue to receive the support they need without interruptions or delays.
- Another option is to distribute the workload among the rest of your team. This can involve reassigning some of the tasks and responsibilities of the person who is taking time off to other team members. This can be a good option if you have a small team and there is enough capacity and flexibility to accommodate the additional work.
Overall, there are many different approaches that you can consider, and the best approach for your business will depend on your specific goals and needs. It's a good idea to explore different options and consult with other firms and experts in the industry to find the best fit for your business.

In case you want a more detailed discussion on what to do in your specific situation, please feel free to contact me directly.

Best,

Hagen

Answer 2

Hi Caitlin,

Why don't you use the sample of projects you've delivered until now to come up with an average, then factor in the additional time off and then use this number as a day charge. Then you can scale up based on the estimated number of days for the project and correct at the end the sum in the final invoice.

Best,

Cristian

Answer 3

Hello Caitlin,

Fully agree with Hagen's answer here!

All the best!

Rushabh