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Making Money Modeling
Making Money Modeling
We can make some money as an Excel expert. We can make more as a modeling or an FP&A (Financial Planning and Analysis) expert. We can make even more as a business expert who knows how to use modeling. We can seek safety in working for someone else for moderate rewards, or we can risk all as a business owner. No matter which path we choose, there is more to a career in modeling than modeling.
Whether focused on financial modeling, or providing a broader portfolio (which TBM is better suited for), This section is for all who use Excel professionally.
Employee vs Business Owner
Employee vs Business Owner
Over 40 years ago I started as a freelancer fresh out of college. At the time, I was one of the very few people with personal computer skills which made selling my services to non-profits, a mortgage broker, construction companies, real estate developers, and others, relatively easy. I had computer skills. I didn't have business skills.
Had I known then, what I know now, I would have bought stock in Apple, but I digress. If I knew business then like I know business now, I probably would have stayed an entrepreneur because I would have found a way to turn the feast and famine cycle of freelancing into a much steadier and much more lucrative income stream. But at the time, everything seemed very uncertain. I got married and, with the responsibility of family, I was attracted to the security of employment. My freelancing experience looked great on my resume and, thus, I had no problem breaking into the world of corporate computing, which, at the time, was a growing field.
The growing field for those with Excel skills in today's market is FP&A (Financial Planning and Analysis). If we search job boards for FP&A we can find many good paying jobs. The technical skills posted in many of these openings include Excel, Power Query, and Power BI (perfect for TBM - Table Based Modeling). As entry level staff, we can work remotely giving us the flexibility of living where we want and working on our schedule so we can care for others (young children/aging parents) if needed. And we have a great career path to CFO or VP of FP&A.
The security of employment can be attractive. So can the potential rewards of self-employment. Self-employed persons can exceed the market value of competitive salaries for several reasons. Contractors:
Work when needed so employers are not burdened with the locked-in hidden costs (office equipment, benefits, paid-time-off, and taxes) of full-time employees, thus, the per hour rate employers are willing to pay is much higher (see Consulting Rates below).
Can be dis-engaged (terminated) relatively easily compared to full-time employees so it is easier for hiring managers to get permission to engage consultants than to add staff.
Can leverage work for other clients to reduce project costs without reducing project pricing. I rarely consult today, but when I do, I charge by deliverable, not by hour, because, by leveraging my past projects, I typically can deliver finished projects in a tenth of the time as an hourly employee.
Can add lower cost staff to their business and, thus add profit margin to services.
Some of the information in this section applies only to freelancers but even if we seek employment, many of the practices presented here can make our work standout and position us for career advancement.
Consulting Rates
Consulting Rates
What we should charge is based on a multitude of factors which include our skill level, our reputation, the services we can provide, the demand for those services, and the return on those services. The high end of consulting rates can be found in prestigious management consulting firms firms like McKinsey, BCG, and Bain who charge several hundreds of dollars per hour. The low end can be found on sites like Upwork who list Excel experts at $7/hour. Why such a discrepancy?
Selling Yourself - "Services we can provide"
Selling Yourself - "Services we can provide"
At the low end we find people selling Excel skills. This means we know Excel. Such services are useful to low level management or small organizations who know exactly what they need but lack the technical skills to bring that vision to life. These are usually Office Automation projects that improve employee efficiency but do not result in significant revenue increases or hard dollar expense reduction. Thus, the return on these project is low which limits the project's budget.
On the high end we find corporations selling management consulting services. Such services are required by corporate executives who have a goal but lack the knowledge (or time) on how to achieve it. This can include projects like starting a new business. For large ventures, this could result in huge returns and so, the investment required to realize those gains can be huge as well.
In my career I have engaged and worked along side consultants from the big three management consulting firms and the big four accounting firms. The projects included implementing an SAP module for a multi-billion dollar corporation, to creating an online market during the dot com era for a joint venture with several multi-billion dollar corporations. While working on those projects, I used Excel to project costs and returns of various approaches recommended by the consultants. These Excel models were used by my employer to determine whether the projects should move forward or not.
Later in my career, I used what I learned working with these consulting firms to launch smaller projects for large corporations. Some added millions in net revenue annually. Some reduced expenses by millions. In every case I used Excel skills to model and manage those projects but I would never sell myself as an Excel expert. Excel expertise has some value but finding millions in revenue has much more.
How will you sell yourself? As an Excel expert? As a management consultant? Something in between? Decide what you can deliver. If you are just starting out, maybe you can only sell your Excel skills. If you have completed one of the Financial Modeling certifications you can sell yourself as a financial modeler. And after running your own business for a few years you can sell yourself as a business consultant because you will have learned (if you survive) what is required to keep your business running - and that can be very valuable to a small startup.
Determining a Rate
Determining a Rate
Once we have decided on the services we can provide we need to determine their market value. Let us assume we have Excel, Power Query, and Power BI skills as well as enough financial and business knowledge to provide FP&A services. To determine FP&A services market value we can start by Googling "FP&A Average salary." Pick a few links for your country, and if possible, region. I Googled that on Oct. 28th, 2022 and Indeed reported an average base salary of $92,162. We can assume this if for 40 hours a week, 52 weeks per year which equates to $44.31/hour. That's base salary.
The fully burdened cost in the US is around 30% more. Fully burdened costs include benefits like paid time off, and the employer's share of payroll taxes which we must bear. That raises our base line consulting rate to $57.60/hour. We also need to add our cost for customer acquisition which includes networking, advertising, cold calling, etc. This can take about 10 hours or more per week, or about 25% of a 40 hour work week. Thus our rate needs to be higher than $72/hour or we are better off being an employee.
Summary
Summary
There are many ways to make money leveraging our Excel skills. Which ever path we choose we must be aware that there is more to our careers than just our Excel skills. Continue in this section to learn more about what lies Beyond Excel.
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