7 ms·

Setting my rates too low. Here's what I figured out those many years ago. Clients who are cheap are also really into wasting your time and trying to micromanag

Setting my rates too low. Here's what I figured out those many years ago. Clients who are cheap are also really into wasting your time and trying to micromanage the project. Clients who will pay a lot more also give you latitude to do your job (after all they're paying you to be the expert). Keep jacking up your rates with each new client until you hit a ceiling. Whatever you're charging now, without even knowing what it is, I'm certain it's too low. When I got started I billed $35/he. When I ended 5-6 years later I billed $300/her. Now in what very limited ad-hoc consulting I do, I bill significantly more than that.

chirau 7y ago
Is it better to charge per project or per hour?
- iandinwoodie 7y ago
  I believe that from several times I've read through freelance-related discussion on this site that the recommendation is explicitly not to charge per project. The reason being that it can be very hard to estimate the total time required for the project. Additionally, once a customer has payed they might say "oh, we though you knew that this (previously unmentioned) feature was required when we paid you." Scope creep, tweaks, rewrites, and any change in customer expectation hits your pocket, not theirs, when you charge per project. When you charge per hour you make sure you are getting payed for all the work you are performing. However, I often see it recommended that you charge per week (best) or per day (next best). I believe the rationale behind the per week (or per day) pricing model is that it weeds out the customers that are just looking for the cheapest labor they can find, leaving only those that are serious about a project and can commit to paying reasonably for the work.
  - ubertoop 7y ago
    But they use the same argument to justify project based pay. You could just take longer, there's no way to know what the cost will be, etc.
    - LoSboccacc 7y ago
      then you split the project in two: first part is just analysis, paid per hour, with one deliverable: the scope and exclusion document. the second part can be fixed price based on your estimate from the first part. all the risk for both parties are minimized, and if it doesn't make them happy, they're the kind of client that wants an ambiguous fixed price project precisely to milk you the most work possible, so no loss in losing them.
- mkbkn 7y ago
  Don't know the ideal scenario in the tech industry but in the advertising/marketing industry, it's useful to charge by a project. One may try to calculate (in their mind) how much time they will take to complete the project and then quote a fixed amount based on the no. of hours that came up.
  - monkeycantype 7y ago
    I've made movies and software. I'm extrapolating from movie experience to imagine I know something about marketing and advertising. I'd feel more comfortable presenting a fixed project quote for a creative project than a software project, because in the case of a creative project I can choose to dedicate a fixed amount of time, and have the result - to be judged subjectively - that I was able to produce in that time. In the case of software, I would need to keep working until it objectively meets requirements. The quality of software I deliver doesn't degrade smoothly under time pressure, it falls off a cliff.
    - LoSboccacc 7y ago
      an essential aspect of fixed hour contracts is that requirements need to be sorted from the most critical to the nice to have and the client needs to be prepared to drop the nice to have if the budget doesn't stretch to them which is the whole point of the agile manifesto which is why agile fails under most circumstances, as having fixed time, requirement and budget but under scrum and sprints is anything but agile.
  - ElFitz 7y ago
    One difference that comes to mind is that while in advertising / marketing you'd need to get what your clients offer, what they'd like to be offering, and how to work with them, in tech you'd also need to understand how it is currently done. The fact is, it's often a mess, with lost, fragmented and conflicting knowledge. And while both need to deal with unclear goals, figuring out what it is the client and truly needs, in one case you're selling what they have, or what they are, in the other you have to make something they want and will be able to use, support and sell. That's very often a tremendous amount of uncertainty to work through. Edit: also what this comment says https://news.ycombinator.com/item?id=21729677 https://news.ycombinator.com/item?id=21729677 Edit 2: And this one, featured some time ago on HN https://erikbern.com/2019/04/15/why-software-projects-take-longer-than-you-think-a-statistical-model.html https://erikbern.com/2019/04/15/why-software-projects-take-l...
- nier 7y ago
  As far as I understand it depends on the kind of projects and how repeatable they are. If you automate large parts of the labor that go into them you could have an advantage by keeping the same price tag.
- chrsstrm 7y ago
  Per project is dangerous. Consulting clients will change their minds frequently and you'll want to give them the latitude to do so, which means you simply can't estimate the time needed to complete a project without adding X00% on top to compensate. No one wants to have the "this is out of scope, I'm happy to do it but we need to talk about an amendment..." conversation. Per hour is not adequate for this type of work; you're delivering a product or service that will increase your client's bottom line, you're not a seat-filler who punches a clock. I charge in the smallest increment of time that I believe I can provide a meaningful impact or deliver a complete solution. When asked for a quote I translate my billing into weeks, as in $X000 per week. Accounting for admin tasks and paperwork, back and forth emails and phone calls, plus showing off the work completed and waiting for approval/notes, a week often seems like not enough time (I can't count the number of times a client asking for a simple font change took literally a week to order and get approval on). There are very rare instances where I know I can accomplish a task in days instead of weeks and if the client asks, I will bill in days instead. "My rate is $X000 per week and my initial estimate is that this will take XX weeks to complete. I require an up-front retainer of X weeks to get started and I bill every two weeks after. Who should I address the initial invoice to?" I would typically never reveal this tip, but here it goes: "I bill weekly and my normal rate is $X000. For you I would be happy to reduce that to $X000-20%." The client is told up front that they are getting a discount without having to ask for it and the Discount line item on the invoice(s) very much help in getting that invoice paid faster. The secret is that the rate quoted is always 20% higher than what my ideal number is. I make it rain discounts on everyone. No one wants to have the rate conversation but I've noticed that clients who don't shy away from that talk or flinch at your rate will not be a problem. Clients who complain that you cost too much will be a problem. Politely suggest you are not a good fit for their project and end the call, you're better off. If you get to the point that your non-flinching clients say yes a little too fast to your rate, increase it. You want a little resistance, but not much. Saying yes too fast means you need to charge more. And lastly, this is not about what work "costs" or "market rates", this is about what your completed solution is worth to your client and how much it will increase their bottom line. You're playing a different game so stop charging like you're mowing lawns or digging ditches. Charge more.
  - gk1 7y ago
- zerr 7y ago
  Per day, week (better), month (even better) - and it should NOT be assumed that you work "full-time" (i.e. 8h per day). With this setup - you untie your work from exact hours spent, and retain the flexibility of adding more days/weeks/months to the bill if there is more work than expected.
  - jrs235 7y ago
    How do you prefer the client from thinking your going to work 8 hours a day, 40 a week, etc? Or even worse, expect they get you for more time in the day or week? "I'm paying you x got today, here's 12 hours of work..." Or think they are v trading dollars for your labor and if you finish early on a day, go take out the trash and clean the bathroom. Obviously you define what work will be performed. Just wondering and looking for what language people use to address these issues. Thanks.
- onreact 7y ago
  None of those two. Charge by value you deliver. You can build a 100K car in an hour? Excellent. Don't punish yourself by charging only $100 for the hour you worked on it. Know your value - which in capitalism depends on market demand - and charge accordingly. When you are a distinguished expert you can charge more of course as well. Make a name for yourself and ensure that everybody knows upfront that you are not a "cheap outsourcing" drone.
  - dominotw 7y ago
    > You can build a 100K car in an hour? Excellent. Why wouldn't ur hourly rate be 100k then (vs $100) ?
    - gk1 7y ago
      - what if you found an even faster way and did it in 30 minutes, do you charge half that? - what if it takes you a bit longer, 2 hours, is it fair to charge the client 2x? The point is, the client wants a car, not an hour of car-making. Also, the moment you provide an hourly rate you get compared to other hourly workers, whether it’s fair or not. “What?! $100k an hour? Even our lawyers cost less!”
      - dominotw 7y ago
        > The point is, the client wants a car Except most clients don't know what they want in such clearcut way before the project begins.
        onreact 7y ago
        The client usually wants a solution. What exactly it is you decide as the expert.
    - deleted 7y ago
      [deleted]
calabin 7y ago
I can second this piece of advice. When I first started our small consulting firm we didn't know how to scope explicitly enough and didn't charge enough even if the projects did stay within the scope of work. Don't be embarrassed of your rates. If they're flirting with but not plainly past what potential clients are willing to pay, you're in/around the right territory. Additionally, explicitly the definition of successful deliverables in your SOWs - make sure that you get enthusiastic client sign-off on these criteria. This can only serve to make everyone better off when work is marked as complete. Last, "Due on Receipt" with some understanding and grace is a lot better than having to send "Hey just wanted to check in about invoice #1113" emails 10 days after your 30-day receivables haven't come in.
- ghaff 7y ago
  >When I first started our small consulting firm we didn't know how to scope explicitly enough and didn't charge enough even if the projects did stay within the scope of work. I used to have one client who was otherwise both a good customer and a nice person but he was terrible for constantly trying to incrementally increase scope. It was always an effort during the SOW process to really nail down exactly what the deliverables were.
  - oAlbe 7y ago
    What does "SOW" stand for in this context?
    - detaro 7y ago
      Statement of Work. Document that (ideally...) answers any question about "is doing this part of the contract, and who is responsible for it"
mirimir 7y ago
Same here. I started at a little more than that, and maxed out at less before I retired. I increased rates for new clients, and did my best to encourage more work from ones that paid more, and more promptly. What was mind-blowing was eventually discovering what one of my first clients had been charging its clients for my work. It was over five times what they had paid me!
bitcoinmoney 7y ago
Just curious what do you consult on for 350/hr? Is this basic CRUD stuff? Wordpress template etc?
- im_down_w_otp 7y ago
  $35/hr was writing post-processors for CNC machines. Went up to $75/hr for interactive media work (Flash/Flex). Went up to $150/hr for business systems integration (Netsuite, Salesforce, etc.) Eventually got that up to $300/hr. The astute observer will notice that the rate was inversely proportional to the actual difficulty of the work. This was mostly 10-15 years ago. $350/hr+ was distributed database related consulting, and then started going North from there for increasingly niche and specialized consulting services. Though only on very rare occasion these days. The highest rate I've ever been able to negotiate was $1,000/hr. But, it was also for a very short engagement (~10 hours) for some especially weird knowledge I have about replacing critical mainframe infrastructure with commodity systems. Point being, you might be surprised how much you can charge for the right services to the right customers who have a clear sense of need and appropriately value a solution.
  - WildGreenLeave 7y ago
    If you don't mind me asking, how did you find those clients? I assume it was all mouth to mouth advertisement? How did you switch between those types of work? Reason I'm asking is because I recently started freelancing in software/web development (about 6 months ago) and I think I'm doing okay. I love to design and think out all of the odd, interesting or difficult back-end problems and so far all of my clients love my work, and with that I'm slowly increasing my rate, started at 50eu/h ($55/hr) and am currently at 75eu/h ($82). This is all in Europe (The Netherlands) However I feel like I'm a bit stuck, the clients I'm able to find don't want to pay more then $80 and with that the work isn't as challenging as I'd like it to be. At the same time it feels like the clients that do want to pay more aren't looking for me.
    - robinduckett 7y ago
      This is just under what I charge per day for fully remote full-stack JS development and whilst I do need to charge more in future I am happy with my current client and the work is challenging and engaging. As the OP says, if you don't find the work engaging then move on.
hef19898 7y ago
That is really valid advice! I am currently just starting consulting. A friend of mine told me to put my daily rate around 1,500 Euro. Thie first contacts I had so far didn't object. No project came to fruition, so. But then I just started a couple of weeks ago. Just one question. How do you approach future clients?
onreact 7y ago
When you charge low rates people will assign low value to your work and assume that you are entry-level. Even when they know your work is of good quality they will think that by being unaware of its worth you are probably not very experienced. Last but not least you of course get exploitative clients that way. The worst thing you can do is offering free work for "friends". Often they will not even say "thank you" or use the actual work you delivered.

chirau 7y ago

Is it better to charge per project or per hour?

iandinwoodie 7y ago
I believe that from several times I've read through freelance-related discussion on this site that the recommendation is explicitly not to charge per project. The reason being that it can be very hard to estimate the total time required for the project. Additionally, once a customer has payed they might say "oh, we though you knew that this (previously unmentioned) feature was required when we paid you." Scope creep, tweaks, rewrites, and any change in customer expectation hits your pocket, not theirs, when you charge per project. When you charge per hour you make sure you are getting payed for all the work you are performing. However, I often see it recommended that you charge per week (best) or per day (next best). I believe the rationale behind the per week (or per day) pricing model is that it weeds out the customers that are just looking for the cheapest labor they can find, leaving only those that are serious about a project and can commit to paying reasonably for the work.
- ubertoop 7y ago
  But they use the same argument to justify project based pay. You could just take longer, there's no way to know what the cost will be, etc.
  - LoSboccacc 7y ago
    then you split the project in two: first part is just analysis, paid per hour, with one deliverable: the scope and exclusion document. the second part can be fixed price based on your estimate from the first part. all the risk for both parties are minimized, and if it doesn't make them happy, they're the kind of client that wants an ambiguous fixed price project precisely to milk you the most work possible, so no loss in losing them.
mkbkn 7y ago
Don't know the ideal scenario in the tech industry but in the advertising/marketing industry, it's useful to charge by a project. One may try to calculate (in their mind) how much time they will take to complete the project and then quote a fixed amount based on the no. of hours that came up.
- monkeycantype 7y ago
  I've made movies and software. I'm extrapolating from movie experience to imagine I know something about marketing and advertising. I'd feel more comfortable presenting a fixed project quote for a creative project than a software project, because in the case of a creative project I can choose to dedicate a fixed amount of time, and have the result - to be judged subjectively - that I was able to produce in that time. In the case of software, I would need to keep working until it objectively meets requirements. The quality of software I deliver doesn't degrade smoothly under time pressure, it falls off a cliff.
  - LoSboccacc 7y ago
    an essential aspect of fixed hour contracts is that requirements need to be sorted from the most critical to the nice to have and the client needs to be prepared to drop the nice to have if the budget doesn't stretch to them which is the whole point of the agile manifesto which is why agile fails under most circumstances, as having fixed time, requirement and budget but under scrum and sprints is anything but agile.
- ElFitz 7y ago
  One difference that comes to mind is that while in advertising / marketing you'd need to get what your clients offer, what they'd like to be offering, and how to work with them, in tech you'd also need to understand how it is currently done. The fact is, it's often a mess, with lost, fragmented and conflicting knowledge. And while both need to deal with unclear goals, figuring out what it is the client and truly needs, in one case you're selling what they have, or what they are, in the other you have to make something they want and will be able to use, support and sell. That's very often a tremendous amount of uncertainty to work through. Edit: also what this comment says https://news.ycombinator.com/item?id=21729677 https://news.ycombinator.com/item?id=21729677 Edit 2: And this one, featured some time ago on HN https://erikbern.com/2019/04/15/why-software-projects-take-longer-than-you-think-a-statistical-model.html https://erikbern.com/2019/04/15/why-software-projects-take-l...
nier 7y ago
As far as I understand it depends on the kind of projects and how repeatable they are. If you automate large parts of the labor that go into them you could have an advantage by keeping the same price tag.
chrsstrm 7y ago
Per project is dangerous. Consulting clients will change their minds frequently and you'll want to give them the latitude to do so, which means you simply can't estimate the time needed to complete a project without adding X00% on top to compensate. No one wants to have the "this is out of scope, I'm happy to do it but we need to talk about an amendment..." conversation. Per hour is not adequate for this type of work; you're delivering a product or service that will increase your client's bottom line, you're not a seat-filler who punches a clock. I charge in the smallest increment of time that I believe I can provide a meaningful impact or deliver a complete solution. When asked for a quote I translate my billing into weeks, as in $X000 per week. Accounting for admin tasks and paperwork, back and forth emails and phone calls, plus showing off the work completed and waiting for approval/notes, a week often seems like not enough time (I can't count the number of times a client asking for a simple font change took literally a week to order and get approval on). There are very rare instances where I know I can accomplish a task in days instead of weeks and if the client asks, I will bill in days instead. "My rate is $X000 per week and my initial estimate is that this will take XX weeks to complete. I require an up-front retainer of X weeks to get started and I bill every two weeks after. Who should I address the initial invoice to?" I would typically never reveal this tip, but here it goes: "I bill weekly and my normal rate is $X000. For you I would be happy to reduce that to $X000-20%." The client is told up front that they are getting a discount without having to ask for it and the Discount line item on the invoice(s) very much help in getting that invoice paid faster. The secret is that the rate quoted is always 20% higher than what my ideal number is. I make it rain discounts on everyone. No one wants to have the rate conversation but I've noticed that clients who don't shy away from that talk or flinch at your rate will not be a problem. Clients who complain that you cost too much will be a problem. Politely suggest you are not a good fit for their project and end the call, you're better off. If you get to the point that your non-flinching clients say yes a little too fast to your rate, increase it. You want a little resistance, but not much. Saying yes too fast means you need to charge more. And lastly, this is not about what work "costs" or "market rates", this is about what your completed solution is worth to your client and how much it will increase their bottom line. You're playing a different game so stop charging like you're mowing lawns or digging ditches. Charge more.
- gk1 7y ago
zerr 7y ago
Per day, week (better), month (even better) - and it should NOT be assumed that you work "full-time" (i.e. 8h per day). With this setup - you untie your work from exact hours spent, and retain the flexibility of adding more days/weeks/months to the bill if there is more work than expected.
- jrs235 7y ago
  How do you prefer the client from thinking your going to work 8 hours a day, 40 a week, etc? Or even worse, expect they get you for more time in the day or week? "I'm paying you x got today, here's 12 hours of work..." Or think they are v trading dollars for your labor and if you finish early on a day, go take out the trash and clean the bathroom. Obviously you define what work will be performed. Just wondering and looking for what language people use to address these issues. Thanks.
onreact 7y ago
None of those two. Charge by value you deliver. You can build a 100K car in an hour? Excellent. Don't punish yourself by charging only $100 for the hour you worked on it. Know your value - which in capitalism depends on market demand - and charge accordingly. When you are a distinguished expert you can charge more of course as well. Make a name for yourself and ensure that everybody knows upfront that you are not a "cheap outsourcing" drone.
- dominotw 7y ago
  > You can build a 100K car in an hour? Excellent. Why wouldn't ur hourly rate be 100k then (vs $100) ?
  - gk1 7y ago
    - what if you found an even faster way and did it in 30 minutes, do you charge half that? - what if it takes you a bit longer, 2 hours, is it fair to charge the client 2x? The point is, the client wants a car, not an hour of car-making. Also, the moment you provide an hourly rate you get compared to other hourly workers, whether it’s fair or not. “What?! $100k an hour? Even our lawyers cost less!”
    - dominotw 7y ago
      > The point is, the client wants a car Except most clients don't know what they want in such clearcut way before the project begins.
      - onreact 7y ago
        The client usually wants a solution. What exactly it is you decide as the expert.
  - deleted 7y ago
    [deleted]

calabin 7y ago

I can second this piece of advice. When I first started our small consulting firm we didn't know how to scope explicitly enough and didn't charge enough even if the projects did stay within the scope of work. Don't be embarrassed of your rates. If they're flirting with but not plainly past what potential clients are willing to pay, you're in/around the right territory. Additionally, explicitly the definition of successful deliverables in your SOWs - make sure that you get enthusiastic client sign-off on these criteria. This can only serve to make everyone better off when work is marked as complete. Last, "Due on Receipt" with some understanding and grace is a lot better than having to send "Hey just wanted to check in about invoice #1113" emails 10 days after your 30-day receivables haven't come in.

ghaff 7y ago
>When I first started our small consulting firm we didn't know how to scope explicitly enough and didn't charge enough even if the projects did stay within the scope of work. I used to have one client who was otherwise both a good customer and a nice person but he was terrible for constantly trying to incrementally increase scope. It was always an effort during the SOW process to really nail down exactly what the deliverables were.
- oAlbe 7y ago
  What does "SOW" stand for in this context?
  - detaro 7y ago
    Statement of Work. Document that (ideally...) answers any question about "is doing this part of the contract, and who is responsible for it"

mirimir 7y ago

Same here. I started at a little more than that, and maxed out at less before I retired. I increased rates for new clients, and did my best to encourage more work from ones that paid more, and more promptly. What was mind-blowing was eventually discovering what one of my first clients had been charging its clients for my work. It was over five times what they had paid me!

bitcoinmoney 7y ago

Just curious what do you consult on for 350/hr? Is this basic CRUD stuff? Wordpress template etc?

im_down_w_otp 7y ago
$35/hr was writing post-processors for CNC machines. Went up to $75/hr for interactive media work (Flash/Flex). Went up to $150/hr for business systems integration (Netsuite, Salesforce, etc.) Eventually got that up to $300/hr. The astute observer will notice that the rate was inversely proportional to the actual difficulty of the work. This was mostly 10-15 years ago. $350/hr+ was distributed database related consulting, and then started going North from there for increasingly niche and specialized consulting services. Though only on very rare occasion these days. The highest rate I've ever been able to negotiate was $1,000/hr. But, it was also for a very short engagement (~10 hours) for some especially weird knowledge I have about replacing critical mainframe infrastructure with commodity systems. Point being, you might be surprised how much you can charge for the right services to the right customers who have a clear sense of need and appropriately value a solution.
- WildGreenLeave 7y ago
  If you don't mind me asking, how did you find those clients? I assume it was all mouth to mouth advertisement? How did you switch between those types of work? Reason I'm asking is because I recently started freelancing in software/web development (about 6 months ago) and I think I'm doing okay. I love to design and think out all of the odd, interesting or difficult back-end problems and so far all of my clients love my work, and with that I'm slowly increasing my rate, started at 50eu/h ($55/hr) and am currently at 75eu/h ($82). This is all in Europe (The Netherlands) However I feel like I'm a bit stuck, the clients I'm able to find don't want to pay more then $80 and with that the work isn't as challenging as I'd like it to be. At the same time it feels like the clients that do want to pay more aren't looking for me.
  - robinduckett 7y ago
    This is just under what I charge per day for fully remote full-stack JS development and whilst I do need to charge more in future I am happy with my current client and the work is challenging and engaging. As the OP says, if you don't find the work engaging then move on.

hef19898 7y ago

That is really valid advice! I am currently just starting consulting. A friend of mine told me to put my daily rate around 1,500 Euro. Thie first contacts I had so far didn't object. No project came to fruition, so. But then I just started a couple of weeks ago. Just one question. How do you approach future clients?

onreact 7y ago

When you charge low rates people will assign low value to your work and assume that you are entry-level. Even when they know your work is of good quality they will think that by being unaware of its worth you are probably not very experienced. Last but not least you of course get exploitative clients that way. The worst thing you can do is offering free work for "friends". Often they will not even say "thank you" or use the actual work you delivered.