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I've brought up daily billing to a few potential clients and am always met with resistance to the idea. I've instead tried structuring my fees to promote long-

I've brought up daily billing to a few potential clients and am always met with resistance to the idea. I've instead tried structuring my fees to promote long-term engagements. So I have an hourly rate (highest), day rate (little lower), week rate (little lower), and month rate (lowest). This is working out okay so far, but it sure requires a lot of explaining up front and I'm probably losing out on potential income for longer engagements. The key is to have your lowest rate still be something that you're willing to work at, or the whole system falls apart. Has anybody else tried a similar rate strategy? How'd it go for you?

tptacek 14y ago
There are two common consulting arrangements in which a customer gets a discount for a commitment. The first is a retainer. Retainer hours come at a significant discount because they might not get used, but are billed regardless. The second is long-term forward-looking commitment. A monthly rate is at the short side of long-term commitment; a multi-month project feels like a more typical discounted commitment. You should not discount for daily or weekly commitments. Daily and weekly rates are industry standard. When you offer a discount on a daily rate, you are effectively communicating a willingness to negotiate your underlying rate. If there's a second strategic decision I want to urge everyone to make, it is "NEVER NEGOTIATE YOUR RATE". With a savvy customer, you will never get any concession on your rate back; once you establish a new floor, that floor is likely to remain there forever. This is the case at big companies and small ones, but be aware that this is such a common dynamic that Fortune 500 companies have people whose performance is evaluated by how effectively they hold the line on bill rates. If you have to negotiate, negotiate over the total price of the engagement. I know your nerd brain can't separate the total for a project from what the hourly for that project works out to, but they are very much not the same thing. I am generally of the mind that your rate structure is your rate structure. Clients want to push back on all sorts of stuff. They also want you to sign their master agreements unmolested. Learn to say "no" professionally: to quickly find ways to accomodate your customer's underlying concerns without budging on your price structure.
- sant0sk1 14y ago
  Well said. Thanks for the advice, Thomas. I probably just need to be more assertive, which I'm slowly getting better at. With regard to retainers, what is a typical retainer discount (percent is fine) for (mostly web) software development consulting?
  - sneak 14y ago
    > I probably just need to be more assertive, which I'm slowly getting better at. To be fair, it took me (a generally obnoxious, opinionated loudmouth) the better part of ten years to get to the point where I feel I should be w/r/t my level of client assertiveness. It's tough!
- dylanhassinger 14y ago
  great stuff, thank you
- hu_me 14y ago
  How do you professionally say no? This is one of the harder things for me when starting on a contract. I dont want to appear pushy and turn them away nor interested in going back to negotiating. Ps. I am from south asia so I also think there is a expectation of a need for haggling.
  - Alan01252 14y ago
    My response is something like this. " I feel that my standard rate is justified due to my knowledge, the quality of the code I produce, my flexibility and my ability to learn and pick up new skills and technologies quickly. I have other clients who are paying my full daily rate and they very satisfied with the work I produce. I completely understand if this is non negotiable. And I realise asking for an increase on the rate you offered may mean I may miss this opportunity to work with some exciting new projects, technologies and people which would be a great shame. " Any feedback on the above would be greatly appreciated.
    - 14y ago

tptacek 14y ago

There are two common consulting arrangements in which a customer gets a discount for a commitment. The first is a retainer. Retainer hours come at a significant discount because they might not get used, but are billed regardless. The second is long-term forward-looking commitment. A monthly rate is at the short side of long-term commitment; a multi-month project feels like a more typical discounted commitment. You should not discount for daily or weekly commitments. Daily and weekly rates are industry standard. When you offer a discount on a daily rate, you are effectively communicating a willingness to negotiate your underlying rate. If there's a second strategic decision I want to urge everyone to make, it is "NEVER NEGOTIATE YOUR RATE". With a savvy customer, you will never get any concession on your rate back; once you establish a new floor, that floor is likely to remain there forever. This is the case at big companies and small ones, but be aware that this is such a common dynamic that Fortune 500 companies have people whose performance is evaluated by how effectively they hold the line on bill rates. If you have to negotiate, negotiate over the total price of the engagement. I know your nerd brain can't separate the total for a project from what the hourly for that project works out to, but they are very much not the same thing. I am generally of the mind that your rate structure is your rate structure. Clients want to push back on all sorts of stuff. They also want you to sign their master agreements unmolested. Learn to say "no" professionally: to quickly find ways to accomodate your customer's underlying concerns without budging on your price structure.

sant0sk1 14y ago
Well said. Thanks for the advice, Thomas. I probably just need to be more assertive, which I'm slowly getting better at. With regard to retainers, what is a typical retainer discount (percent is fine) for (mostly web) software development consulting?
- sneak 14y ago
  > I probably just need to be more assertive, which I'm slowly getting better at. To be fair, it took me (a generally obnoxious, opinionated loudmouth) the better part of ten years to get to the point where I feel I should be w/r/t my level of client assertiveness. It's tough!
dylanhassinger 14y ago
great stuff, thank you
hu_me 14y ago
How do you professionally say no? This is one of the harder things for me when starting on a contract. I dont want to appear pushy and turn them away nor interested in going back to negotiating. Ps. I am from south asia so I also think there is a expectation of a need for haggling.
- Alan01252 14y ago
  My response is something like this. " I feel that my standard rate is justified due to my knowledge, the quality of the code I produce, my flexibility and my ability to learn and pick up new skills and technologies quickly. I have other clients who are paying my full daily rate and they very satisfied with the work I produce. I completely understand if this is non negotiable. And I realise asking for an increase on the rate you offered may mean I may miss this opportunity to work with some exciting new projects, technologies and people which would be a great shame. " Any feedback on the above would be greatly appreciated.
  - 14y ago