How To Determine When It May Make Sense To Take a Lower Rate

Dec 8, 2015 12:00:00 AM · by David Kushan

I want to share a conversation I had with a consultant, who, for the sake of this post, we’ll call Bob. Bob asked me for my advice regarding a contract he found on his own.

So, Bob and I were discussing the contract. He told me that he was accustomed to working for $85-90 an hour. This contract offered him $80 an hour. Of course, there’s more to consider when evaluating a contract then merely the hourly rate. But for the purposes of this example, let’s assume that everything about the contract was ideal — if the offered rate were $90 an hour.

Bob asked what type of technique he should use to move the rate higher, being that he really wanted to work on the project. He was struggling, because the rate difference was going to cause him to turn down the contract. Which surprised me, because in my opinion, that’s the last thing he should have been thinking. You see, sometimes ego gets in the way of business. If Bob had another position lined up, this would be a different story. But he didn’t. He was not new to contracting, so I was surprised that I was going to have to walk him through this exercise. (This post is not about how to negotiate, but rather about making a good business decision.)

I told Bob that if he felt the contract was good, and the only thing getting in the way of his accepting it was the rate, he should run the numbers. If he were to accept the contract at $80 an hour, he would make $76,800 ($80 x 160 hours for six months). If he were to accept this six-month contract right now at $90 an hour, he would make $86,400 ($90 x 160 hours for six months).

Over a six-month period, the difference between the two rates would be $9,600. If he took the position at $80, it would take 120 hours (or three weeks) to make up the difference. So, if he felt that he could find another, equally appealing contract at $90 an hour within the next three weeks, then he should pass. But if he were to consider the overall money he would make over the next six months (as well as the probability of finding something more appealing at a higher rate in such a short time frame), he would be better off taking this contract at $80.

Again, there are many things to consider when evaluating a contract. But when it comes down to the rate of pay, this is how you should consider and evaluate the dollars to make the best income decision possible.

General, Consulting, Career Planning, David Kushan


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