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Charge a lot more that you think you’re worth. Nobody does this at first, and they end up with a bunch of cheap clients because they simply wanted to fill thei
by sharkweek 7y ago
Charge a lot more that you think you’re worth.
Nobody does this at first, and they end up with a bunch of cheap clients because they simply wanted to fill their pipeline, myself included.
The number I use and have seen others argue as well is take whatever your hourly rate was at a full time job and triple it for consulting (e.g, ~$70 hr salary = ~$200 hr consulting rate).
- amolo 7y agoHahaha.. Triple? Really?
- exdsq 7y agoYeah this is what I've read/heard too. I went 2.5x but I probably could have gone higher when I personally did this. If you sell yourself based on the problem you're solving and not hours worked you can charge a lot more than you'd assume.
- gk1 7y agoThis is the kind of mentality you must shake off if you want to succeed in consulting. $200 is not even a rounding error to most companies, and you expect to get paid less than that for solving their biggest problems?
- davimack 7y agoDouble your rate for each new client until you can't go higher and get work. Then back off in reasonable increments until you have just enough work to be happy. I work in biotech. Companies don't blink at anything. $3,000 / day? Yup. No problem. Money doesn't mean anything to a company where the entry price is 15 years of infrastructure build and raw materials that run in the millions if not billions. If it does, you have a braindead manager, so move on.
- gk1 7y agoA helpful thing to remember is that large companies spend thousands of dollars a day just on printer paper.
- bufferoverflow 7y agoHow do you find such clients? I don't mean your particular channels, just the general idea.
- weka 7y agoIsn't there a story about how a certain wine nobody bought but once they jacked up the price, its perceived value was higher and people thought it tasted better and it sold more?
- jammygit 7y agoI am a recent grad, talented I like to imagine, with an opportunity to do some consulting. If I know I can make X/hr elsewhere fulltime, is the 2.5-3x consulting/contracting rate still applicable, or does that apply to senior developers?
- alexhutcheson 7y agoRegardless of level, you have to charge 2.5-3x to make up for the additional taxes you're paying, the benefits (health insurance, etc) you now have to pay full price for, and the inevitable gaps between contracts where you won't be making any money. Whether that bill rate is attainable varies depending on your skills, market, etc., but if you can't get that rate, then you're probably financially better off at the hypothetical fulltime job.
- chasd00 7y agokeep in mind, healthcare, taxes, and retirement costs are going to skyrocket. Uncle Sam hates it when you're not under the thumb of an employer. Only about a third of your hourly rate may actually make it to your checking account.
- eropple 7y agoFWIW, my experience is closer to 55%, in a fairly high-tax state to boot. It can be difficult, but it's not that bad.
- sneak 7y agoDepends on what else you need to service your clients. Some types of consulting require flights, hotels, dinners, equipment, et c.
- eropple 7y agoI never had travel or meals I didn't bill to a client, no. Negotiate better. ;)
- sneak 7y agoI work with small companies. Some clients prefer a simple bill and clear mental model of the costs. I make (slightly) more money on the bills in which I don’t break out my expenses than the ones that I do.
- phonebanshee 7y agoHealth insurance is a problem. Solve it before you move to contracting. Taxes, on the other hand, are completely skewed in favor of consulting. Look at 401k contributions, for example. The limit for your contribution is the same, but your company can contribute a lot more on top of that. And talk to your accountant about how you decide on your salary; that's an important number and it's not straightforward to decide what it is. (It's certainly not your entire income)
- HillRat 7y agoIt’s actually a reasonable estimate of salary + benefits + operating costs, adjusted to cover non-billable hours, with a small profit on top. I’d want a more formal cost accounting model, but as a rule of thumb it’s pretty solid. People cost a lot more than their salary.
- gk1 7y agoBetter yet, don’t charge hourly. The number of hours has nothing to do with how much value you’re providing to a company.
- noufalibrahim 7y agoVery good advice. I recently had a friend with a strong background in sales and business development join me. He recommended higher amounts by estimating the value we were delivering rather than just the hours we were spending and things got so much better.
- ykevinator 7y agoI disagree with this, the client will always try to maximize value, your costs are hourly, I like the other poster who said never do a fixed bid. Clients benevolently keep asking for more and you benevolently keep saying yes and then that niceness on your part becomes a liability after a few days or weeks because now it all blurs into being "in scope". I would also always put the concept of scope discussion process into every contract.
- gk1 7y agoSo don’t say “yes” to things that are out of scope. The recurring thing here seems to be that consultants keep putting limits on themselves and then justify it. “I have to charge hourly because...” “I have to agree to go out of scope because...”
- maratd 7y ago> So don’t say “yes” to things that are out of scope. To expand on this, at the end of every contract is an SOW (statement of work). This explicitly and very clearly outlines what work is to be performed, how it will be performed, when it will be performed, and how long it will take. At the end, I like to put a small sentence. The client can always request to change the scope or add things to the scope, the consultant will provide a cost and timeline for the change and once paid for, the consultant will perform the work. I always say "yes" when a client asks for additional work. Then I tell them how much it's going to cost in addition to what we already agreed. The number 1, cardinal rule, always is ... never work for free. If you don't value your work, nobody else will either.
- bryanrasmussen 7y agoThe number I use is that before tax money per month as a consultant must be at least double what my before tax money is as an employee.
- balfirevic 7y agoDoes $70 here mean take-home salary, pre-tax salary but without health-care, salary including health-hare benefits or something else entirely? What about retirement contributions? I'm sure many people will know what "salary" in this context usually means, but clarification would be appreciated for the rest of us :)
- sharkweek 7y agoGood point - yes, in general I’m tripling the number when I take my last pre-tax salary and divide it by ~2000 hours (40 hour work week across an entire year)
- sufiyan 7y agoWow. Now it makes sense. When I told my first client I wanted to increase rate after finishing a basic prototype (which was the full scope of the project), he ghosted and left me a bad review on Upwork. Well, all in the game..