At work I have been transitioning into a consulting/sales role. I am a non-PE Mechanical Engineer in the AEC space. My focus has primarily been production work, so I'm straight salary. Now I'm interacting more with clients and trying to win work. At the first of December I have an annual review and we will negotiate a new compensation plan. Any tips on what to ask for? My main focus is commissions off of consulting services and product sales. Thanks!

Questions to prepare you - Every company is different, but most of the points below are standard in consulting.

• What is your current general structure (Salary, Bonus, Profit Sharing, 401K match, insurance)?
• What have they shared with you in the past or have you heard?
• How large is the firm and how much are you "winning yourself"?
• What is your billing rate?
• What is your billing percentage?
• Do your peers have a PE?
• Do you ever plan on running your own business?

When I was with a larger firm, those were the factors we used to look at promotions, bonus, etc. and when we were hiring mid and senior level people.

At the fiscal year, your comp plan should 100% transition from base to base+variable. That alone should increase your pay by a large amount.

If base currently = 100K and the new plan is 60/40, you should get a 40K increase. Your base pay should not go down. That's not acceptable.

Good luck!

tamc93 said:

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Questions to prepare you - Every company is different, but most of the points below are standard in consulting.

• What is your current general structure (Salary, Bonus, Profit Sharing, 401K match, insurance)?
• What have they shared with you in the past or have you heard?
• How large is the firm and how much are you "winning yourself"?
• What is your billing rate?
• What is your billing percentage?
• Do your peers have a PE?
• Do you ever plan on running your own business?

When I was with a larger firm, those were the factors we used to look at promotions, bonus, etc. and when we were hiring mid and senior level people.

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Here are my answers:

• Salary, insurance, and sometimes bonus
• We've discussed commissions from consulting services and from my involvement in product sales
• We are small. Less than 20 people. At the beginning of the year our consulting services were $0. I've won one big job so far this year and have a couple possibilities before the end of the year.
• $150-$175/hour depending on the type of job
• It's different based on the job. Anywhere from 25-75%.
• No one at my company and not many in the industry.
• Yes, I would like to eventually.

To expand on my original question, I'm unsure what percentages are reasonable on consulting services and sales and if there is anything else I should expect/ask for. For example, with consulting, I'm looking at jobs ranging from $20k to $250k that will take us 1-9 months to complete. What's a reasonable commission? 5%? 10%?

On the sales side, our main product offering is in the form of a subscription. These can range from 20 users to thousands. What's a reasonable commission from sales? 2-5% Renewals? Bonus structure for meeting certain goals?

Thanks for the help!

Do you know what your profit margin is on the consulting services? That number will likely drive the %.

Without know more details, I'd be really surprised if you got anywhere near 10% of the sale. I'd expect you'd be looking at a certain % of the net income off said sale.

If you're selling the work you can likely calculate project profitability. That's the most important factor, but firm profitability makes a difference too. How much at risk comp are you willing to shift to? If you have high confidence and you can sell the work relatively easily - You will likely have more luck if you offer to manage the A/R process as well and propose your payment upon collection of the fee. In consulting a 5-10% sales commission would be vey high unless you drop your base comp.

Sorry for the long response, but a fairly complex question that needed Consulting Business 101 (I used to recruit and teach something similar to younger employees for the business side):

I have not seen a % commission in consulting a true AE firm (you appear to be doing something slightly different), but have thought of using it to entice people to create a syndicate or other hub/spoke firms. Your employer has the risk of all of the costs, etc - my initial reaction when I looked at it was probably 5% of the gross sales and possibly higher depending on the profitability.

General thoughts below:

• We are small. Less than 20 people. At the beginning of the year our consulting services were $0. I've won one big job so far this year and have a couple possibilities before the end of the year.

A repeat track record is the key to transitioning into larger "commissions" and having leverage or the ability to start your own firm.

• $150-$175/hour depending on the type of job
This and the utilization rate are fairly critical to determining the "potential" profit that is available on a job. An example is provided below.

• It's different based on the job. Anywhere from 25-75%.
In a normal AE firm, these are generally low to maintain profitability of the firm. My personal one currently is probably over 80% (we are very busy and I am in doing more project management vs winning work right now - we are blessed).

General Example of Profit in Billings (You can work the variables as you see fit)

Billing Rate: $150/hr
Salary: $104,000 ($50/hr)
Company Fringe Multiplier (cost of running the business and paying basic overhead and benefits): 2.0

50% Utilization Example

Annual revenue from employee: $150*2080*50% = $156,000
Annual basic cost of the employee: $50*2080*2.0 = $208,000
Company is basically "losing money" due to the lack of billable hours (there are many variables, but you get the idea)

70% Utilization Example

Annual revenue from employee: $150*2080*80% = $234,000
Annual basic cost of the employee: $50*2080*2.0 = $208,000

Company is making about an 11% profit on the billable work (and that assumes it is all paid).

You can also try to back door this by determining what your total comp package is worth to see how much "profit" you are leaving to operate the company. Eg. Salary + Company Health Costs + Company Paid SS etc + Bonus

jbone3515 said:

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tamc93 said:

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Questions to prepare you - Every company is different, but most of the points below are standard in consulting.

• What is your current general structure (Salary, Bonus, Profit Sharing, 401K match, insurance)?
• What have they shared with you in the past or have you heard?
• How large is the firm and how much are you "winning yourself"?
• What is your billing rate?
• What is your billing percentage?
• Do your peers have a PE?
• Do you ever plan on running your own business?

When I was with a larger firm, those were the factors we used to look at promotions, bonus, etc. and when we were hiring mid and senior level people.

---

Here are my answers:

• Salary, insurance, and sometimes bonus
• We've discussed commissions from consulting services and from my involvement in product sales
• We are small. Less than 20 people. At the beginning of the year our consulting services were $0. I've won one big job so far this year and have a couple possibilities before the end of the year.
• $150-$175/hour depending on the type of job
• It's different based on the job. Anywhere from 25-75%.
• No one at my company and not many in the industry.
• Yes, I would like to eventually.

To expand on my original question, I'm unsure what percentages are reasonable on consulting services and sales and if there is anything else I should expect/ask for. For example, with consulting, I'm looking at jobs ranging from $20k to $250k that will take us 1-9 months to complete. What's a reasonable commission? 5%? 10%?

On the sales side, our main product offering is in the form of a subscription. These can range from 20 users to thousands. What's a reasonable commission from sales? 2-5% Renewals? Bonus structure for meeting certain goals?

Thanks for the help!

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Thank you for the replies! This gives me some things to think about and try to determine.