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Yes, I've noticed this too... Many people have a visceral reaction to high hourly rates and never actually compare it to the value delivered. I think it's for a

Yes, I've noticed this too... Many people have a visceral reaction to high hourly rates and never actually compare it to the value delivered. I think it's for a couple of reasons: 1) The average person gets paid $27/hour. Even the average software dev gets only ~$50/hour. Since many people interact with people getting paid around this amount, they see high rates as greedy/outrageous. Less likely to get this reaction from clients that are used to interacting with other high pay/skilled work. If you give them a flat rate, they get imagine you’re putting in more hours. 2) If they don't have extensive experience working in the space, I think there's a belief that someone cheaper will deliver the same value.. because they don't understand the variation in skill among those in the same field. Especially in a field like software development, and the client comes from a field that's more structured and slower changing (which is most fields). There's also a delivery risk that could increase the bill substantially.. but it seems to me that there's more to the reaction than just analyzing the risk and value.

chadash 6y ago
Agree. And on top of this, there's a value to predictability. If I go to my boss and ask permission to spend $10,000 to save $20,000, they can OK that pretty easily since it's simple math... they spend money and save more, so the purchase makes sense. When I go to them and say I want to hire a consultant for $200/hour in order to do a project that'll save $20k, suddenly the math is more complicated... how many hours is this person going to work? What if they go over? People pay more for assurance and predictability.
- bavell 6y ago
  Yep, there's a lot of value in risk reduction. People and businesses will pay for peace of mind and to remove unknowns from the equation.
narwally 6y ago
I had this argument with the CTO of a startup I worked for a while back. We had previous experience with a contractor that did great work, but charged the going rate for great work. We had a new job that required the same skill set, and the CTO wanted to shop around for a 'better value'. It blew my mind that he didn't see the previous guy as a good value. Instead he wanted to risk going with someone unknown, not the guy we knew did quality work. Luckily all of the development team was in agreement, and we convinced him that the guy actually was worth what he charged.
bhandziuk 6y ago
I think charging a $27/hour is quite low. That might be what an employee gets but they're going to get billed out at 3x that. A client sees like 75/hr for that 27/hr employee and doesn't have any idea of what their take home pay is. 200/hr for an independent consultant is someone making ~130k annually. It's a lot but not insane.

chadash 6y ago

Agree. And on top of this, there's a value to predictability. If I go to my boss and ask permission to spend $10,000 to save $20,000, they can OK that pretty easily since it's simple math... they spend money and save more, so the purchase makes sense. When I go to them and say I want to hire a consultant for $200/hour in order to do a project that'll save $20k, suddenly the math is more complicated... how many hours is this person going to work? What if they go over? People pay more for assurance and predictability.

bavell 6y ago
Yep, there's a lot of value in risk reduction. People and businesses will pay for peace of mind and to remove unknowns from the equation.

narwally 6y ago

I had this argument with the CTO of a startup I worked for a while back. We had previous experience with a contractor that did great work, but charged the going rate for great work. We had a new job that required the same skill set, and the CTO wanted to shop around for a 'better value'. It blew my mind that he didn't see the previous guy as a good value. Instead he wanted to risk going with someone unknown, not the guy we knew did quality work. Luckily all of the development team was in agreement, and we convinced him that the guy actually was worth what he charged.

bhandziuk 6y ago

I think charging a $27/hour is quite low. That might be what an employee gets but they're going to get billed out at 3x that. A client sees like 75/hr for that 27/hr employee and doesn't have any idea of what their take home pay is. 200/hr for an independent consultant is someone making ~130k annually. It's a lot but not insane.