Consultants and Travel Time -- Who pays?

 I am some times asked about pricing and billing for consulting services. One of the sticky points is:

Who pays for travel and travel time?"

Basically the question comes down to what have you negotiated with the client or the consultant. There are two parts to travel, a) the out of pocket expenses incurred by the consultant and b) the consultant's time consumed by traveling.

Out of Pocket Expense

Based on my experience and practice, the out of pocket for travel (transportation, food and lodging), if an over night is required, is billed to the client at some agreed upon standard rate such as federal per diem rates. If necessary these can be backed up with actual receipts justifying actual cost, or at predetermined daily rate or allowance, or some variation of both.. The federal rates are a good reference source since they take into account the cost of living in different cities and countries.

Consultant's Time

Depending upon whether you are a sole proprietor (self employed) consultant or are hiring one, the time engaged in travel is a cost of doing business and should be reflected in the pricing formula used by the consultant to compute his/her a daily or hourly rate. The travel time is overhead, in my view, and therefore is part of cost to be recovered from the hourly rate and hours actually worked for the client. As long as both parties agree to the rate for actual work/service done for the client, it is really no concern to the client how that rate was determined. On the other hand, the consult should be aware of what his/her costs are and how much (how many billable hours) time and at what rate he/she must sell to breakeven per period.

The travel time is a shared expense rather than as a paid vacation. The consultant should not travel unless a.) he is assured that there is paying assignment at the other end; and/or b.) she is willing to consider and accept the risk that the travel is a marketing (overhead) expense to the consulting practice rather a paid junket.


Consulting Firm and Travel

If you are hiring an established consulting firm, or work for one, there should be established policies in place for dealing with these contingencies. These policies should be discussed prior to the sale/purchase of the consulting services and be incorporated into the consulting contract. The responsibilities of each party should be clearly set out in the contract before work begins.


Mission Creep

Beware of mission creep. Mission creep is when the client expects a little more effort without paying for it; or when the consultant wants to extend the billable time because he/she low balled the project.


Over-billing or Underpaying for Travel

A final observation, to charge a client for the travel may seem like a great idea for the consultant. However, it is really only a very short term benefit. If the client is at all dissatisfied with the work and then sees two days of "travel" time padding the invoice -- it may be the last time you hear from the client or any of his/her contacts.

The client who requires the consultant to travel from point A to point B in the client's interest, but refuses to pay for the time that the consultant must take away for "meaningful" work is cheating the consultant of billable hours that might be more productively spend on the project or for another client.

Travel while under contract


One area of mission creep and under/over billing takes place is paying the consultant's travel time, while under contract.

Sometimes the consultant is asked to travel to an event at the request of the client, or if you are the client, you want the consultant to accompany or represent you at an event. If this case, the consultant should be paid for his/her time on route and return from the event. If the travel was unanticipated when the contract was negotiated and signed, the consultant may have under bid the assignment and an amendment to the scope of work and the time should be negotiated.

For example, if a consultant is asked to attend a conference or workshop for the client, and then is expected to prepare a report or conduct a local training session for the client and their staff based on the conference/workshop, the time the consultant spends in transit is part of the cost that client should be expected to pay.

In this case, the consultant's activity is part of a larger mission, research or training the trainer. The client gains because they are paying for only one person (an expert) to attend the event. As a result the client obtains an expert's evaluation of the data/event, or prepared the consultant  to train the staff locally. The client gains by saving registration, travel, and down time expenses that the client would have incur by sending staff to the event.

BASIC PRINCIPLE

1. If the consultant is required to travel before a contract is negotiated and signed with a client, then the consultant's time is his/her responsibility.

2. If the travel is required after the contract has been signed and the travel is required by the client, then the consultant's time in transit should be billable to the client. 


3. As far as reimbursement for out of pocket expenses, pre-contract expenses should be negotiated or assumed by the consultant while out of pocket expenses incurred while under contract should be billable (reimbursed) by the client.


  

What are you doing to Prepare for H1N1?

We are in the beginning days of the H1N1 flu pandemic. This fall and winter, the traditional time for flu, America and the northern hemisphere can expect a massive increase in the number of flu cases, normal and H1N1. This will impact the economies of many nations as workers and consumers become infected; as the hospitals take on a heavier loads; and as those who remain productive attempt to fill in for those who have to stay home from work because of illness, their own or a family member.

For small businesses, especially those dependent on cash flow to survive, this epidemic may be a killer. The normal period of infection is not known but according to the Center for Disease Control

In general, persons with novel influenza A (H1N1) virus infection should be considered potentially infectious from one day before to 7 days following illness onset. Children, especially younger children, might be infectious for up to 10 days.

For further information about H1N1 check out this link to the CDC: Interim Guidance for Clinicians on Identifying and Caring for Patients with Swine-origin Influenza A (H1N1) Virus Infection available at CDC H1N1

As a small business person/owner you need to prepare.

What you do to protect yourself, and employees will not prevent your business from being at risk.

This information may help you deal with the disease and get you, your workers and families immunized, but what about the economic consequences to your business? How did you prepare for Y2K or post 9/11? Are you going to do the same thing?


What did you do for Y2K?

In 1999 I was trained as a Y2K consultant to work with small and midsized business to plan for what was feared to be a potential disaster as the Y2K (millennial) bug hit the nations computer systems. For small business, this could have been real disaster. The purpose of the Y2K consultants was to 1. Help business owner determine if their systems were susceptible to the Y2K problem; 2. If so, to help them prepare a plan for their business if they, their customers, or suppliers would be affected.
It turned out that there was a simple solution for most Small and Med size businesses.

The price of computers and advance in software created an opportunity and reason to buy new software and new equipment. So very few took advantage of the opportunity to do a top to bottom analysis of their business.

What did you about 9/11?

In the Spring of 2003, I went to a training session sponsored by the new Department of Home Land Security. Again the purpose was to train and prepare consultants to help businesses, small, medium and large to prepare for the post 9/11 threat. What Do you know what the threats are to your business? How do you protect against them? What is your plan to survive a repeat 9/11 type event? Again, few small businesses took advantage of the opportunity to plan for the threat. Instead they adopted the herd survival strategy, "don't attract attention to yourself."

What are you doing to prepare for the pandemic?

A pandemic is not a technological problem, nor a security or political problem. H1N1 is an equal opportunity disease. It is a PUBLIC HEALTH PROBLEM and a species wide biological disease problem.

Have you thought about the risks? Have you planned for the risks?

Here are some of the risks:

1. Key employees come down with the flu and are out of work for 2 weeks. Do you have a plan in place to cover their job responsibilities?

2. 20% or more of your work force is out of work with the flu for a month or longer. Can you still run an effective operation? If not, what is your plan to insure vital operations are not interrupted?

3. 20% or more of your suppliers are unable to fulfill their orders to you and your operations are effected because you don't have the inventory to maintain your minimum operations for more than a month. Do you have sufficient inventory? Do you have the ability to shift suppliers to insure no disruption in your operation? Do you have business disruption insurance and are you covered?

4. 20% or more of your customers are unable or unwilling to make purchases or pay their bills for a month or longer because of the impact of the pandemic on their business or jobs. Do you have enough cash or credit available to cover your operations for an extended period of diminished revenue and negative cash flow?


What are you doing to prepare your business for it and for the collateral damage of the epidemic on your suppliers/customers and community?

How do you spot a fake venture capitalist on the Internet?

Recently someone asked me, "How do you spot a fake venture capitalist?

Apparently, she was concerned by the recent financial scandals and what she could do to avoid being taken. Margaret has a business idea which she has turned into a business plan (BP). She explained, "I have been shopping it around to ALL the VCs on the internet."

She had met a number of Venture Capitalists (VC), or persons she thought were VCs on the internet. They were from the USA, Europe AND Latin America.

She told me, "The US VC's seemed real and had money; but the others ... Well, they seemed fake."

I asked her what she meant by that. She said that the Europeans and Latin Americans (she is Hispanic), she had spoken to seem to be just interested in getting her BP and then trying to sell it to a bank or someone else for a fee.

Others were "Consultants who wanted to charge her a fee just to look at the BP. None of them had any real money to invest."

She asked, "How can I tell? I seem to be waste my time and I'm afraid I going to make a mistake. What can I do?"

I told her the following:


"My experience with the start-ups and start-up funding is that the VC often come in much later than the Business Plan (BP) stage. They are looking for a going concern that has proof of concept, intellectual property protection, a basic corporate structure and systems in place, and some key human capital in place. VC will do a deal for a piece of the action and an active role in the future development of the business. VCs will be there for the 'long term (3 to 5 years)'. They will also own 50% - 80% of the business."

"There are deal makers who may claim or allow you to think that they are authentic VCs. But these are middle men who will shop around your business plan to investors (Angels, and others) for a fee. Their fee is based on successfully matching you with an investor.This is what you will be buying from them."

"Deal makers can be useful in opening doors, but you should not expect more from them than they can deliver. Deal makers invest their special knowledge of the small investor network. Deal makers are not there for the long term."

"Yes, there are the Consultants who are there to earn a fee for their advice. Consultants invest their intellectual and experiential capital in your business plan. They can be a valuable resource to help you identify the strengths and weaknesses in your Business Plan and your marketing strategy for the plan. Again don't expect them to get the funding for you. It is your BP, not theirs."

I then asked her:

"Do you want to spend days, months, or years searching for just the right investor? If so, that is your choice. But if you want to take your dream and turn it into reality, you are going to need help."

"That help comes in many forms and to succeed as a business you will have to learn what help you need, where to look for it, and how to use it to your advantage."

"You have been focusing too much on your idea and not on the job of selling your idea. VCs are only one part ofa complex investor market made up of many different parts."

"What you need to learn is management. Management is the most difficult lesson an innovator like you, hoping to become an entrepreneur, can learn."

Lesson:

Once you decide to turn your idea into a business, you must change your orientation from innovator (the creator of the idea) to manager(the one who guides and nurture the idea through the development process).