One More Client
MONEY MEETS TAX · EPISODE 08
Anaheim · Fall 2024
Money & Tax in this episode
Growing consulting demand · Scope and pricing · Marginal tax rates
The email arrived at 9:46 on a Sunday morning.
Evan saw Kevin’s name and almost left it for Monday.
Almost.
A friend of mine is looking for help. Similar issues to the distribution project, but bigger. Told him you might be a fit.
Below that was a forwarded message.
The company had grown quickly.
Margins were uneven.
Nobody seemed to agree on which customers were actually profitable.
They wanted someone to clean up the numbers and give the owners a better way to make decisions.
Evan read it twice.
Daisy was in the kitchen cutting a peach.
“You’re working.”
“I’m reading an email.”
“On Sunday.”
Evan looked at her.
“Technically.”
Daisy smiled.
“I’ll allow the distinction.”
Evan kept reading.
At the bottom was one more line from Kevin.
They have budget.
That helped.
The introductory call was Tuesday.
By Thursday, the owner asked Evan for a proposal.
Six weeks.
Weekly meetings.
Customer profitability analysis.
A pricing review.
Recommendations at the end.
Evan estimated forty-five hours.
He priced the project at $8,500.
The number looked good.
He left the proposal open on his screen.
Daisy came into the room.
“What’s that?”
“New client.”
“You got another one?”
“Maybe.”
She leaned over.
“Eight thousand five hundred?”
“That’s the project fee.”
“For how long?”
“Six weeks.”
Daisy looked at the proposal.
“And when are you fitting it in?”
Evan looked back at the screen.
“Nights. Some weekends.”
“You’ve already been doing a lot of that.”
“Not every night.”
Daisy smiled.
“Most nights lately.”
“That’s temporary.”
“So is six weeks.”
Evan smiled.
“That’s the point.”
Daisy nodded.
“Just make sure six weeks stays six weeks.”
She walked toward the kitchen.
Evan looked at the proposal again.
Forty-five hours worked out to just under $190 an hour before expenses and tax.
He changed the estimate to fifty.
Still good.
Then sixty.
Less good.
He closed the spreadsheet.
The client accepted the proposal the next morning without negotiating.
Evan read the email twice.
$8,500.
Six weeks.
Then he looked at his calendar.
That week, his regular job had two late meetings.
A current consulting client wanted revisions.
The new laptop worked perfectly.
Evan noticed this because he spent a lot of time looking at it.
On Thursday night, Daisy came downstairs at ten.
Evan was still at the dining table.
“You coming up?”
“In a little bit.”
Daisy looked at the clock.
“You said that a while ago.”
“I need to finish this.”
“The new client?”
“The old one.”
She nodded.
“That seems promising.”
Evan looked at the clock.
“I’ll be up in twenty minutes.”
“Okay.”
She went upstairs.
He finished forty-three minutes later.
By the second week of the new project, Evan had stopped trying to predict the hours.
The data was messier than expected.
The client had three versions of the same sales report.
None matched.
One customer appeared under four different names.
A pricing file had a tab labeled:
FINAL
Next to another labeled:
FINAL 2
Evan understood that immediately.
Saturday morning, Daisy came downstairs dressed to leave.
“You forgot.”
Evan looked up.
“What?”
“Lunch.”
He remembered.
Her friends were meeting in Newport Beach.
They had talked about going together.
“What time?”
“Eleven thirty.”
Evan checked the clock.
10:18.
“I can still go.”
Daisy looked at the laptop.
“Do you want to?”
He looked at it too.
There was a client call Monday morning.
The analysis wasn’t finished.
“I probably shouldn’t.”
“Okay.”
She picked up her bag.
Evan looked at her.
“Sorry.”
“I know.”
“I really did mean to go.”
Daisy nodded.
“I know that too.”
She adjusted the strap on her bag.
“Finish what you need to finish.”
Evan looked back at the screen.
“And next time, put lunch on the calendar.”
He smiled.
“That seems fair.”
Daisy smiled back.
Then she left.
Evan worked until two.
The client liked the analysis.
And every time they liked something, they seemed to find one more thing they wanted to see.
One additional customer segment.
Another scenario.
A slightly different pricing view.
On Monday, the owner emailed:
This has been really helpful. Could we also look at the West Coast customers separately before next week?
Evan started typing:
Sure.
He stopped.
He opened the original proposal.
Then his time log.
38.5 hours.
They were halfway through week three.
A year earlier, Evan would have said yes.
The first $4,800 had arrived because someone thought his help was worth paying for.
For a while after that, every new request felt like proof that the consulting work was real.
Now there was enough work.
He just had the same number of evenings.
Evan deleted the reply.
He wrote:
Happy to add that analysis. It’s outside the original scope, so I can either include it as an additional deliverable for $1,500 or we can swap it for the pricing scenario currently scheduled for next week. Let me know which is more useful.
He read the email twice.
It sounded less friendly than Sure.
He sent it anyway.
The client replied twenty minutes later.
Let’s add it. $1,500 works.
Evan stared at the screen.
That had been easier than expected.
That evening, Daisy was unloading the dishwasher.
“I charged them extra.”
“For what?”
“More work.”
She closed the dishwasher.
“Good.”
Evan looked at her.
“That’s it?”
“What were you expecting?”
“I thought they might push back.”
“Did they?”
“No.”
Daisy put a glass in the cabinet.
“Then maybe the price wasn’t the strange part.”
“What was?”
“That you almost said yes without charging them.”
Evan looked at her.
“How do you know that?”
Daisy smiled.
“I know you.”
He opened the refrigerator.
Daisy leaned against the counter.
“How much are you going to make from this project now?”
“Ten thousand.”
“That’s good.”
“Yeah.”
She waited a second.
“And how are the hours looking?”
“I don’t know yet.”
“That part sounds less good.”
He took out a bottle of water.
“I’ve been thinking about that.”
Daisy smiled.
“That usually means there’s another spreadsheet coming.”
“It might.”
Later that night, Evan updated his projection for the year.
Consulting income was going to be higher than he had expected in January.
He looked at the federal tax brackets.
Then California.
Then the hours he had spent on the project.
The tax calculation was familiar now.
The last number wasn’t.
Daisy walked past the table.
“Still at it?”
“Not exactly.”
She glanced at the spreadsheet.
“What are you figuring out?”
“Whether the project was worth it.”
Daisy stopped.
“You already know you can do the work.”
“That’s not the part I’m trying to figure out.”
She waited.
Evan looked at the project fee.
Then the hours.
“I’m trying to figure out what I should charge next time.”
Daisy nodded.
“That makes sense.”
She started upstairs.
Evan went back to the spreadsheet.
Next to Project Fee, he added one more column.
Hours
The Tax Behind the Story
Extra consulting profit does not cause all of Evan and Daisy’s income to be taxed at the highest marginal rate they reach. Federal income tax uses brackets, so only taxable income falling within a particular bracket is taxed at that bracket’s rate.
For 2024, married taxpayers filing jointly entered the 22% federal bracket once taxable income exceeded $94,300, and the 24% bracket began above $201,050. That does not mean all of their income suddenly becomes subject to 22% or 24%.
But the federal income-tax bracket is only part of what Evan may keep from another consulting project. Net earnings from self-employment may also generate self-employment tax, and Evan’s W-2 wages matter when determining how the Social Security portion applies. For 2024, the Social Security wage base for combined wages and net self-employment earnings was $168,600. California income tax may apply as well.
An after-tax estimate can therefore help Evan evaluate another project.
It just does not tell him what an evening is worth.
Want the tax rules behind the story?
Extra Side Income: How Much Do You Actually Keep?
A deeper look at marginal tax brackets, self-employment tax, W-2 wages, California income tax, QBI considerations, estimated taxes, and how to estimate the after-tax value of additional business profit.
Next Episode
Someday
A friend asks Daisy a question she has answered the same way for years.
This time, the answer takes a little longer.