5 ms·

Those responses are so funny to me, as there seems to be a complete difference in recommendations, every time this topic comes up. I'm also very happy with hou

Those responses are so funny to me, as there seems to be a complete difference in recommendations, every time this topic comes up. I'm also very happy with hourly billing, but the last time I saw a similar topic, the whole comment section was insisting that per-project billing is the only viable way to make money in consulting. Oh well..

hanniabu 7y ago
It's a different strategy. Per project you take on more risk, but you can also typically charge a lot more (less of a barrier for the client to overcome than hourly).
Enginerrrd 7y ago
The real answer is you do both depending on the situation. My best hourly has been doing per-project billing, but you need to be smart about it or you can end up working some hours for free. Hourly T&M is a nice situation to be in since it takes a lot of the risk out and lets you just focus on the work that needs to be done.
deleted 7y ago
[deleted]
pmjordan 7y ago
the whole comment section was insisting that per-project billing is the only viable way to make money in consulting. Generally, when someone gives you advice that's supposed to be 100% right in all cases, they either stand to gain from it personally or have no idea what they're talking about. In this case, the difference between the two approaches is mostly a question of who ends up with what risks. My wife and I run a two-person development contracting business, and we've done projects with both approaches. Both have worked well for us, but for the type of work we tend to do, most projects would not be suitable for fixed price billing. The reason is that most of our work consists of "deep dives" for figuring out if something is possible at all. (Or more precisely, possible within a reasonable amount of effort.) So what usually ends up happening is we'll agree on a capped research budget, and dig into the problem up to that number of days. If we find a solution before that time, great; if we find a fatal blocker before that time, well, not great but it's a result. Otherwise, we'll hopefully have found some leads to pursue in that time and can give a better estimate for how much more effort it'll take. Maybe it's possible to do this sort of project on a value-based basis, but I certainly haven't found one that seems fair, or that a client is likely to accept. The author of the original article likes to claim that with value based pricing, interests are aligned. Well, for this sort of project, one of the parties is likely to lose out massively if you agree a fixed price up front. And as for the author's assertion that your income is capped: you have one variable you can tweak: your rate. Charge more! We charge more than his "optimistic estimate". Sure, we're still not rolling in it, but we also don't work anywhere near 40 hours a week. And the implication that our incentive is to drag out projects to get more billable hours - well, I have a stronger incentive to make all my clients super happy so that they keep coming back for repeat business. This way, we have more requests coming in than we can feasibly accept. Of course, only touch open ended projects for savvy clients. The nature of our particular specialty means we work with tech companies who understand the nature of big unknowns in projects.
- marfusios 7y ago
  You don’t understand. $240K is not cool, $2M is cool. Good luck with hourly billing to get that kind of money. The only way to still doing what we love - software engineering (not some kind of managerial, leading, business role) is fixed price and re-selling already implemented stuff (same approach as lawyers).
  - zenpaul 7y ago
    Good luck making $2M as a solo consultant. In order to take on projects that big and maintain your customer pipeline you almost certainly have to build a team which is what I call creating an agency.
    - godzillabrennus 7y ago
      Which is often called starting an adult daycare.
  - pmjordan 7y ago
    Only reselling already implemented stuff is neither software engineering nor what I love. $240k would be a highly respectable income pretty much anywhere in almost any field. In most of the world, doctors are paid less than that while routinely working night shifts and constantly making life and death decisions about their patients, and you’re seriously complaining about being paid $2k/day for fiddling about with stuff on a computer?
    - somatic 7y ago
      Dude, nobody cares. What ridiculous moralizing. "Fiddling with stuff on a computer?" Crabs-in-a-bucket comparisons to doctors? Whatevah. Get outta town. No one pays you because they like your face. They pay you because you make them money. No one works when they have rivers of cash flowing in their direction. You trade your time for their money: a slice of your life, in the most literal sense. What is the value of your life? Know your worth. Take every dollar. You will get precisely what you can negotiate, nothing more, nothing less.
flyinglizard 7y ago
If you're in familiar territory, the product is well defined and the customer is reasonable - go for project billing. An example would be implementing some low level function for an embedded device. Anything you know is going to only take a few hours, bill per project (unless of course it's an extension of an existing hourly contract with a customer). Anywhere there's upside or difficult circumstances (such as unreasonable timeline due to external requirements, such as an upcoming event or demo), charge per project. But to be in that position you first need to build a stable revenue stream and that happens more easily with hourly consulting.
- zenpaul 7y ago
  Good point. From this thread it is clear that people have made a go of it with project billing in some domains. I develop enterprise business systems that are generally too large and complex to reliably estimate or manage to a fixed budget. In any case, all it takes is one project with one unreasonable customer who demands extra work and then doesn't pay, to wipe out the gains from lucrative projects. Also, in the long term you accumulate responsibilities like mortgages and families that makes that low-risk monthly revenue stream so important.
- iudqnolq 7y ago
  > But to be in that position you first need to build a stable revenue stream and that happens more easily with hourly consulting. I'm trying to get started with freelance work as a college student, and I've experienced the opposite. People want project-based billing because they don't trust me, or my ability to work "as quick as an experienced programmer". (For context, when I say starting I mean starting. I'm currently working on my second contract ever. I have no non-internship work history. My first was for $50 for what ended up being 4hrs, my current was $300 for what I expect will take at most 20hrs. Then Upwork takes 20% for making the match and providing insurance against my not delivering.)
  - flyinglizard 7y ago
    I'd say that for 20 hours project, it's generally not worth the hassle to bill hourly. For small tasks people want to know what they're on the hook for, but once you go into the larger scopes with more variables and properly price your risks, you'd notice their reaction is much less welcoming. I don't know the exact nature of your work - is this just doing generalized programming work, or do you specialize in something (e.g. setting up a Wordpress site)? If what you do is repeatable enough, at some point you'd make good money working per project because you'll become much more effective. Of course it's more difficult to pull off when you do generalized work. This however has one very significant exception, and that's when dealing with a corporate client which would lead to more work. You see, any company that's larger than 20 employees separates the financial management from the technical staff. That means that if you've made it through negotiations and contract work setting an hourly framework with the financial side of the company, you're now another tool at the disposal of the technical people which could utilize you almost on a whim. With a project based setting you need to go almost to square one and renegotiate all the way down every time you want more work. It's not just a hassle for you - it's a hassle for the engineers who'd love to use your help. This, eventually, is what builds you a recurring revenue stream; making yourself available to the technical people at minimal friction. I've been responsible for a pretty significant corporate operation where my team was responsible for procurement of products and services the size of a respectable startup A round, and dealing with vendor onboarding, scope of work, legal approvals and financial signing at the VP/CFO level were a huge time waste. Contractors who billed hourly were much simpler to work with - waste time once and be on your merry way for months at a time. I try remembering that now when I crossed sides, back to consulting. Try make the life of the people who need your services as easy as possible - usually you'll have mutual interests.

hanniabu 7y ago

It's a different strategy. Per project you take on more risk, but you can also typically charge a lot more (less of a barrier for the client to overcome than hourly).

Enginerrrd 7y ago

The real answer is you do both depending on the situation. My best hourly has been doing per-project billing, but you need to be smart about it or you can end up working some hours for free. Hourly T&M is a nice situation to be in since it takes a lot of the risk out and lets you just focus on the work that needs to be done.

deleted 7y ago

[deleted]

pmjordan 7y ago

the whole comment section was insisting that per-project billing is the only viable way to make money in consulting. Generally, when someone gives you advice that's supposed to be 100% right in all cases, they either stand to gain from it personally or have no idea what they're talking about. In this case, the difference between the two approaches is mostly a question of who ends up with what risks. My wife and I run a two-person development contracting business, and we've done projects with both approaches. Both have worked well for us, but for the type of work we tend to do, most projects would not be suitable for fixed price billing. The reason is that most of our work consists of "deep dives" for figuring out if something is possible at all. (Or more precisely, possible within a reasonable amount of effort.) So what usually ends up happening is we'll agree on a capped research budget, and dig into the problem up to that number of days. If we find a solution before that time, great; if we find a fatal blocker before that time, well, not great but it's a result. Otherwise, we'll hopefully have found some leads to pursue in that time and can give a better estimate for how much more effort it'll take. Maybe it's possible to do this sort of project on a value-based basis, but I certainly haven't found one that seems fair, or that a client is likely to accept. The author of the original article likes to claim that with value based pricing, interests are aligned. Well, for this sort of project, one of the parties is likely to lose out massively if you agree a fixed price up front. And as for the author's assertion that your income is capped: you have one variable you can tweak: your rate. Charge more! We charge more than his "optimistic estimate". Sure, we're still not rolling in it, but we also don't work anywhere near 40 hours a week. And the implication that our incentive is to drag out projects to get more billable hours - well, I have a stronger incentive to make all my clients super happy so that they keep coming back for repeat business. This way, we have more requests coming in than we can feasibly accept. Of course, only touch open ended projects for savvy clients. The nature of our particular specialty means we work with tech companies who understand the nature of big unknowns in projects.

marfusios 7y ago
You don’t understand. $240K is not cool, $2M is cool. Good luck with hourly billing to get that kind of money. The only way to still doing what we love - software engineering (not some kind of managerial, leading, business role) is fixed price and re-selling already implemented stuff (same approach as lawyers).
- zenpaul 7y ago
  Good luck making $2M as a solo consultant. In order to take on projects that big and maintain your customer pipeline you almost certainly have to build a team which is what I call creating an agency.
  - godzillabrennus 7y ago
    Which is often called starting an adult daycare.
- pmjordan 7y ago
  Only reselling already implemented stuff is neither software engineering nor what I love. $240k would be a highly respectable income pretty much anywhere in almost any field. In most of the world, doctors are paid less than that while routinely working night shifts and constantly making life and death decisions about their patients, and you’re seriously complaining about being paid $2k/day for fiddling about with stuff on a computer?
  - somatic 7y ago
    Dude, nobody cares. What ridiculous moralizing. "Fiddling with stuff on a computer?" Crabs-in-a-bucket comparisons to doctors? Whatevah. Get outta town. No one pays you because they like your face. They pay you because you make them money. No one works when they have rivers of cash flowing in their direction. You trade your time for their money: a slice of your life, in the most literal sense. What is the value of your life? Know your worth. Take every dollar. You will get precisely what you can negotiate, nothing more, nothing less.

flyinglizard 7y ago

If you're in familiar territory, the product is well defined and the customer is reasonable - go for project billing. An example would be implementing some low level function for an embedded device. Anything you know is going to only take a few hours, bill per project (unless of course it's an extension of an existing hourly contract with a customer). Anywhere there's upside or difficult circumstances (such as unreasonable timeline due to external requirements, such as an upcoming event or demo), charge per project. But to be in that position you first need to build a stable revenue stream and that happens more easily with hourly consulting.

zenpaul 7y ago
Good point. From this thread it is clear that people have made a go of it with project billing in some domains. I develop enterprise business systems that are generally too large and complex to reliably estimate or manage to a fixed budget. In any case, all it takes is one project with one unreasonable customer who demands extra work and then doesn't pay, to wipe out the gains from lucrative projects. Also, in the long term you accumulate responsibilities like mortgages and families that makes that low-risk monthly revenue stream so important.
iudqnolq 7y ago
> But to be in that position you first need to build a stable revenue stream and that happens more easily with hourly consulting. I'm trying to get started with freelance work as a college student, and I've experienced the opposite. People want project-based billing because they don't trust me, or my ability to work "as quick as an experienced programmer". (For context, when I say starting I mean starting. I'm currently working on my second contract ever. I have no non-internship work history. My first was for $50 for what ended up being 4hrs, my current was $300 for what I expect will take at most 20hrs. Then Upwork takes 20% for making the match and providing insurance against my not delivering.)
- flyinglizard 7y ago
  I'd say that for 20 hours project, it's generally not worth the hassle to bill hourly. For small tasks people want to know what they're on the hook for, but once you go into the larger scopes with more variables and properly price your risks, you'd notice their reaction is much less welcoming. I don't know the exact nature of your work - is this just doing generalized programming work, or do you specialize in something (e.g. setting up a Wordpress site)? If what you do is repeatable enough, at some point you'd make good money working per project because you'll become much more effective. Of course it's more difficult to pull off when you do generalized work. This however has one very significant exception, and that's when dealing with a corporate client which would lead to more work. You see, any company that's larger than 20 employees separates the financial management from the technical staff. That means that if you've made it through negotiations and contract work setting an hourly framework with the financial side of the company, you're now another tool at the disposal of the technical people which could utilize you almost on a whim. With a project based setting you need to go almost to square one and renegotiate all the way down every time you want more work. It's not just a hassle for you - it's a hassle for the engineers who'd love to use your help. This, eventually, is what builds you a recurring revenue stream; making yourself available to the technical people at minimal friction. I've been responsible for a pretty significant corporate operation where my team was responsible for procurement of products and services the size of a respectable startup A round, and dealing with vendor onboarding, scope of work, legal approvals and financial signing at the VP/CFO level were a huge time waste. Contractors who billed hourly were much simpler to work with - waste time once and be on your merry way for months at a time. I try remembering that now when I crossed sides, back to consulting. Try make the life of the people who need your services as easy as possible - usually you'll have mutual interests.