24 ms·
How I went from $100-an-hour programming to $X0,000-a-week consulting
- chatmasta 14y agoThis is the best article I've read on HN in a long time.
- chanux 14y agoPardon my ignorance. What does a consultant do?
- pdog 14y agoFull-time programmers can be had for $50 to $100 per hour, but they can create millions of dollars of value, far in excess of what they're paid. Consultants are one of several groups of people who take a share of the difference.
- loceng 14y agoThis is why I work for myself, am building my own company(ies). I knew I would never get paid the value I can bring to the table, and I would never be motivated to do my best in that scenario.
- loboman 14y agoIf you do it right, you are never getting paid the value you provide. The model is always: generate value, get a slice of that, repeat. Think of a very rich person; if this person is so rich, it is because s/he provided much more value to others than the value it captured for him or herself. (Except for conmen)
- pebb 14y agoOr banks
- tptacek 14y agoYou think you could never get paid the value you bring to the table because you are imagining delivering services to the kinds of companies who would think to look at freelance markets to find the going rate for building code in the platforms you work in. But the world is full of businesses with absolutely no technical competence at all, and so much operational competence in their own field (health services, benefits consulting, reinsurance, whole animal butchering, whatever) that they could take over the world if someone anywhere would just notice the opportunity to scale their processes (lead gen, customer retention, supply chain, market expansion, franchising, customer service) with basic technology. To many, maybe most of those businesses, just being able to throw together a Bootstrap/Rails app makes you some kind of terrifying Wizard. If you can get over the urge to talk like a Wizard, and apply the customer service aptitude taught to every new employee at Nordstroms, you would probably find it's nowhere nearly as hard to capture the value of your work as you think it is. I'd also note: if you're incapable of convincing a tech-impaired local business to consider a value-priced engagement that will make or save them millions of dollars, you may have a hard time building your own company(ies). Maybe not, though! Totally possible to skip that step.
- loceng 14y agoI agree with all that you say. Not sure about something though. I'm not sure you'd have access to the information that would allow you to discover/see the possibility of changes that could allow millions of dollars in positive changes. Also, I'm thinking in ranges of $10-$100 million+ per year ranges; Larger ecosystems, etc.. and to have such an influence in an existing company, where they'd be willing to pay you out anything other than bonus or work you're way up to a million-dollar salary, would require many many years working at said time, with lots of risk that you wouldn't be rewarded adequately.
- patio11 14y agoIn broad strokes, make businesses money. In a little more detail, I (personally) work mostly for B2B SaaS businesses and know a few things which tend to work for generating incremental growth in revenue. If you've followed my blog or HN posts they won't sound all that impressively new: write drip email campaigns, do A/B yet, redo pricing tiers, optimize conversion funnels, etc etc. There are many other consulting specialties out there, obviously, but that seems to be a mutually happy place for my abilities and clients' businesses.
- enjo 14y agoJust to be clear: This is different than "freelancing" or "contract development". This is more traditional business consulting. You're going in and changing processes and structures more than anything else. It might be around a specific goal like "make our signups more effective", but you're not just writing some code. You are going in an helping them to change their mindset by incorporating feedback (A/B testing) and new methodologies to run their business better. You get paid so much because the results don't just result in better signups, but in a transformed company at the end. To do this type of consulting you need extreme credibility. Either a big business win, an ivy league education, or something equally as impressive.
- tptacek 14y agoThis meme about there being "contractors/freelancers" and then "consultants" is toxic. In the markets that Patrick and Jason Cohen and Brennan Dunn are talking about, almost the entire difference between "freelancer" and "consultant" is "how you price engagements". It is true that consultants value-price engagements, so that they collect a percentage of the revenue or cost-savings derived from their code instead of a scaled hourly rate. And it's true that to do this, consultants have to think about the actual business context of their code, and be able to confidently propose the value of that code to a real business. But that's where the differences end! Patrick is writing code on his engagements. He's using the same problem-solving methods you're using. On a day-to-day basis actually delivering for clients, he's writing code to generic metrics and then optimize them. The only thing he does differently from you is that he chooses to work on metrics where he knows he can make a case for revenue directly attributable to the metric. It does not take a "big business win" or an Ivy education (WAT?) to "consult" for clients as opposed to "contracting" for them. You don't even have to be particularly attentive to your clients businesses, because so many people have built and written up methodologies for using code to make money for businesses; you can literally start by reading up on those, and offering them to clients who don't already do them. How many of your freelance gigs were for clients with sophisticated email marketing systems? How hard do you think it is to send triggered email updates to clients? Start there.
- SonicSoul 14y agoha, when i saw the headline and read the first paragraph i assumed this was a sales pitch for something.. but after scrolling down to the bottom and not finding anything i shortly realized this is the author of kalzumeus.com which is the source of some of the best advice I (as a programmer) have read on the internets. One gotcha here is that not every programmer can be as successful doing such business consulting. I think it is a different skill (muscle?) that must be developed in order to talk with suits and create the aura of instant value. I wish i knew how to train that muscle more :)
- kruipen 14y agoha, when I read it I still think it was a sales pitch ... not that there is anything wrong with that.
- codewright 14y agoAm I the only one that checks the domain after reading the title?
- StavrosK 14y agoThe sales pitch comes later. The good thing about it is that, if you're interested in these posts, you'll probably be interested in what's on sale.
- brc 14y ago1st lesson : stop using language like 'suits'. They are just people with budget to spend on problems they need fixed. The key here is that talking to people is a skill which can be learned. The way to learn is to start, and make some mistakes and learn quickly.
- debacle 14y agoWhat if you're already a consultant, but are tired of Internet marketing (and its related accoutrements)? Is there a pivot for that?
- bmelton 14y agoSAAS? PAAS? I think it's fairly well known that Patrick consults to help fund his other projects, with the ultimate goal of becoming independent of consulting in favor of passive income. (Apologies if I'm mischaracterizing Patio's intent -- that's at least how it always seemed to me.) Alternately, you could raise your rates a bunch, save the difference and try to retire early.
- debacle 14y agoIt might just be me, but I don't see a market for consulting based on writing RESTful APIs. I could be very wrong about that, though.
- bmelton 14y agoGenerally speaking, there's always a market for expertise. If that's your area of expertise and are markedly better at it than the next guy, there's a market for it. The key is in figuring out the niche "I can train your people to build better APIs than you have now, and hence enable much better engagement from the customers of your API" -- that's a value proposition, and people are willing to pay for it. "I can build your company's RESTful APIs to better engage your developer community" -- that's a totally different one in both feel and purpose, but one that you'd likely find customers for. The only thing you need to do is be able to back up those claims, be personable, and ideally, be able to demonstrate how much value you can add to your customers, in dollar terms, how they would benefit from your services. If you don't believe there to be value, then you just need to think about what your company is paying you for now (assuming employment), and how they're able to justify said employment and still make a profit.
- debacle 14y ago
- flurpitude 14y agoSigh... I'd settle for someone giving me $100 per hour.
- debacle 14y agoIt's not that hard. What do you know how to do? How do you currently market yourself? Who do you market yourself to? What are you really good at? 100 an hour seems like a lot to most of the contractors I talk to, but it's actually probably less than the average for a contract programmer.
- cdavid 14y agoIf you mean in general, a consistent job at 100 $ /hour is completely different from being paid 100 $ / hour for consulting. The former is rather hard, the latter is indeed rather low. The end of Patrick's article gives one of the main reason why (scaling consulting is hard). I consistently meet people who earn > 200 $ / hour, without much programming experience (but know an open source project of interest very well).
- elmuchoprez 14y agoI consistently meet people who earn > 200 $ / hour, without much programming experience (but know an open source project of interest very well). I see this quite a bit as well. People can "luck into" something that gets hot and ride that wave into decent money in the short term. But a decent programming background is what keeps that ship floating because you always have to stay on top of the next thing if you want to keep that up, and it's hard to keep up with everything and even evaluate new stuff without some fundamentals.
- Jach 14y agoOn the other hand, if you can pull in $200/hr consistently (i.e. your yearly income isn't far from $400k before taxes) for at least half a decade, you can save up enough to retire early with a modest standard of living. But as has been said, consistency is harder for these things. What open source projects have you seen people make good chunks of change from just knowing how to work them? http://www.pentaho.com/ http://www.pentaho.com/ is one I've seen. Also people who know the AWS stack can make a good chunk of change migrating someone's software to the Cloud.
- sown 14y agoSo what do I do if I don't have a blog or any real friends to refer me? I don't know anyone at all here in SV and no one seems to want me anyways. On the flip side, I suppose that there are people that could use me but they don't know how to find consultants. The only time this has happened was when a potential employer and I didn't quite work so they let me name a price for the time I worked and they paid (rare in consultancy, I bet).
- girasquid 14y ago- Start a blog - Start going to meetups and make friends (no meetups? Organize one!)
- Jach 14y ago"So what if I hate people and don't want to make friends?" (You tolerate it and with civility it's easy to make acquaintances!)
- girasquid 14y agoTook the words right out of my mouth. :)
- thirdtruck 14y agoAnd no small part of that negative sentiment, at least for some of the population, seems to stem from the same "growing pains" that accompany the early steps of any skill set. Socializing can turn into an enjoyable activity over time, just like how a multiplayer game turns fun once you get past the newbie mistakes.
- bmelton 14y ago"So what do I do if I don't have a blog or any real friends to refer me? I don't know anyone at all here in SV and no one seems to want me anyways." Change that. Go to conferences. Go to meetups. Leverage whatever professional network you currently have to expand it. Start a blog. Post to it. Establish yourself as an authority on something. If you can't do the above yet (because you aren't an authority on something), become an authority. Contribute to a related open source project. Get involved in meetups that focus on the topic. Find conferences that relate to it and attend... later, speak at said conferences.
- lhnz 14y agoHow early can I start doing this? I'm young but confident and I do feel like I have something to offer people already. I guess it's getting the first client which will be tricky...
- sidupadhyay 14y agoIt's totally doable. You'll probably start off with a lower hourly at first, but you can quickly establish a higher rate and then eventually a consistent weekly as patio11 described. Early in college, I found the best way to find my true hourly rate was through project-based pricing with well defined scopes. The scope needs to be clear and you have to prevent any scope creep, as that will negatively affect your rate. Once you've gone through a project or two this way, you will have established a pretty good reputation with your clients, which would let you bill out at the real rate. After that you would be free to continue billing at an hourly or make the jump into weekly rates.
- Alex3917 14y ago"How early can I start doing this?" Read the book Million Dollar Consulting. It pretty much gives a step-by-step guide, from lead gen to writing proposals to how to bill by value: http://www.amazon.com/s/ref=nb_sb_ss_c_0_19?url=search-alias%3Dstripbooks&field-keywords=million%20dollar%20consulting http://www.amazon.com/s/ref=nb_sb_ss_c_0_19?url=search-alias... It repeats itself a lot and is generally poorly written, but there's still a reason why it's been the top consulting book for decades.
- SageRaven 14y agoDamn, that sounds nice. I wonder if system admin/architecture can be modeled that way. I'd love to bill even a modest $2k/week, rather than trawl craigslist, responding to posts for "unix/linux ninjas" then having shops balk at anything over $20 an hour. I don't know how many messes I've cleaned up (likely left by people charging a hell of a lot more than me) for really low rates. I know, I know. Craiglist and other online boards are the dregs of the job market. But I have no network (few friends, few contacts), and I only do remote work. I take what I can get, but it sucks to see half-assed admins getting the gravy.
- debacle 14y agoCraigslist can be useful for finding some jewels, but you have to be completely willing to say "Fuck no." We had a form letter we would send to these companies basically saying "We know you don't think you can afford to work with us, but we know you can't afford not to. Let us know when you're ready." It only worked a few times, but for those few times it was worth it.
- mtrimpe 14y agoI don't know about sysadmin work, but I'm pretty sure DevOps could be. I worked at a company that ended up spending probably several man-years worth of effort over a period of three years on puppetizing their environment and still doesn't have a one-click-deploy of their infrastructure and feels the pain of that acutely every few months when a new environment needs to be brought up by hand. If someone'd been around offering 30, 50 or even 100k no-cure-no-pay work to get their environment into a one-click-deployable state in under a month or so I'm pretty sure I could've sold that internally at several occasions.
- semanticist 14y agoI think this is the key - selling yourself as a 'sysadmin' is like calling yourself a 'programmer' - it's a commodity. Instead you're a site scaling engineer, or a cloud automation specialist, whatever sounds like it'll solve the client's problems - which these days are frequently that a bunch of developers set up the production environment on the fly and it just about works but isn't reliable or convenient. I think the future for sysadmin work is definitely 'DevOps' - and it's not really that much different from old school sysadmin. Yeah a pure Chef/Puppet-managed system is more like writing code than hacking away, but behind it all it's the same kind of work. It is definitely possible to bill US$2k per week or more as a contract sysadmin, but trolling through Craig's List isn't the way to manage it!
- whileonebegin 14y agoThe title is also a little confusing. It's not about making $XX,XXX per week programming. Rather, it's about marketing. I'm not sure the same rates would apply to developers becoming "consultants". I think it's something like this (two different tracks): Web Site Developer => Marketing/SEO => Consultant => $XX,XXX OR Programmer => ISV => Product => $XX,XXX
- danso 14y agoExcellent article. 1. I would be interested in learning more about what a programmer brings to the table in the consulting field. I mean, besides raw programming knowledge. The OP mentions Fog Creek as one of his first clients, a place that obviously is not short on programming insights. What does a consultant with programming chops bring that a non-programmer doesn't? Better ideas? Better tailored ideas? 2) Pedantic alert: "peek" is spelled as "peak" in the introduction.
- patio11 14y agoWhat does a consultant with programming chops bring that a non-programmer doesn't? The ability to write functional computer code, for one, which is a superpower. Besides that, I speak the language, engineering folks generally like working with me over working with "icky marketing types", I have a good understanding of what is easy and what isn't in terms of implementation, I can spec projects or deliver prototypes without needing my hands held too much, etc etc. (And virtually my entire shtick is "Marketing objectives which are worth serious money to you can be achieved by writing carefully considered code.")
- danso 14y agoThe ability to work with (and have the respect) of the engineers is definitely an asset that cannot be overvalued. But in terms of writing functional computer code...how much are you actually writing? Is this code merely to wireframe/prototype something? Or is it an actually deliverable that the company will build atop? I guess what I'm getting at is the usual cynical trope by engineers against consulting: that consultants are hired to tell you what you already know/should've known. So given a hypothetical company of such stature as Fog Creek, what is your strategy for convincing them that you can tell them something they don't know? I'm not saying that engineers are above needing consultants, it just seems like a culture that, as you point out, can be extra-resistant to being told by a third-party what to do, in lieu of a concrete deliverable.
- patio11 14y agoBut in terms of writing functional computer code...how much are you actually writing? Is this code merely to wireframe/prototype something? Or is it an actually deliverable that the company will build atop? Depends on the engagement. There is code I wrote running in production at some clients. (Might want to keep an eye on the FC blog, as I expect there will be something interesting on there eventually, but until then that isn't my story to tell.) So given a hypothetical company... what is your strategy for convincing them that you can tell them something they don't know? I tell them something they don't know, and continue doing so until I win the engagement. With specific reference to Fog Creek, I was active on their forums for a few years and folks there read my blog, so I wasn't exactly starting from a position of We Totally Don't Know Anything About You on the credibility ladder.
- Jach 14y agoApart from "be awesome", "know your abilities well", and "manage project scope carefully", do you have any advice on not choking? Have you ever had to scale back on delivering what was initially agreed upon?
- ronyeh 14y agoTwo important points I learned was: 1) charge by the week, and 2) charge by the value you will be providing, rather than how much your time is worth. Charging by the week allows you to not have to keep track of what's billable and what's not (e.g., you chatted with the customer on the phone for 34 minutes). Charging by the value you provide avoids the conversation of "Hey, you're charging $200 per hour... that's more than I make. And that's like almost $400K per year! Can we get your rate down to like, $90?" Instead, the conversation becomes, "We want to get at least $40K of value out of talking to you, but have only budgeted $10K for this exercise. How much value can you provide us over how many weeks?" That was definitely an interesting writeup!
- nhangen 14y agoI ended up here on accident, but I can vouch for this system's value. I WAS freelancing at between $75-$100/hour, but having to work very hard for every contract. On the side my partner and I were building software, selling a nice amount but nothing that was going to allow us to retire in a year. However, suddenly people starting emailing us after purchase, asking if we could build custom versions for them. Most turned out to be duds, at first, and then something changed. Suddenly we're charging weekly retainers and working on near six-figure projects, all on business that sought us out because of our software. Will this work for everyone? I'm not sure, but it did for us, and we didn't even see it coming.
- pc86 14y agoWas this a particularly "niche-y" software that you had (perhaps unknowingly?) positioned yourselves as the leaders? Presumably it wasn't The Next Big To-Do App but something that gave quite a bit of value.
- nhangen 14y agoIt was our crowdfunding plugin for WordPress - http://ignitiondeck.com http://ignitiondeck.com
- monkey_slap 14y agoI'm working a lot on my open source projects, building a good portfolio. I'm hoping I can get to a point where I find something worth charging for, but for now I'm building tools on weekends and using a large and well-received portfolio to garnish some attention. Great idea you've got there. I wish you only success!
- nhangen 14y agoThanks! Oddly enough, we started building this to raise money for a personal project and only later did we decide to sell it. Turns out that was a smart move. I can sympathize with your weekend pace. We worked on this for a year before it started getting any attention, and it's still not nearly as polished as we'd like it to be.
- s04p 14y agoTo be very honest, this reads like the typical Shoemoney "how to earn $100k within x weeks" article. It's not a big secret that SEO and conversion optimisation can generate a lot of value, and I guess you consult a lot about these topics?
- whileonebegin 14y agoI was thinking the same thing, even down to the sign-up form for the newsletter. Not that there's anything wrong with that, shoemoney has done quite well and his posts are usually quite good.
- s04p 14y agoTo be very honest, this reads like the typical Shoemoney "how to earn $100k within x weeks" article. It's not a big secret that SEO and conversion optimisation can generate a lot of value, and I guess you consult a lot about these topics?
- chatmasta 14y agoWhen I hear "consulting," I think about escaping the grunt work that is actual programming. How much of your time as a "consultant" do you spend actually programming? What other tasks do you do on a day-to-day basis?
- patio11 14y agoTalking to clients, getting buy-in for things I want to make, looking at metrics, thinking, learning about the product / space / company / etc, assorted engineering stuff that isn't programming (wireframes / specs / tests / demos / docs / etc), writing copy, etc etc. Time allocation varies greatly depending on the client and what we're working on. I've had engagements where I spent 100% of my time talking and I've had engagements where I spent as-close-to-100%-of-time-as-practical in heads-down going-to-ship-this-project mode. Most engagements fall somewhere between the two extremes, clustered away from heads-down-programming.
- chatmasta 14y agoDo you have engineers on payroll to whom you can outsource the bulk of the actual programming, or do you have a network of independent contractors that you keep going back to?
- patio11 14y agoI know people who do both, but I do neither. If a code is written for an engagement I'm brought in for, either I write it or a client gets it written by the engineering team. (I work for software companies.)
- dschiptsov 14y ago"Finding a bigger fool" method because I'm, air quotes, "Internet famous."? Oh I get it, it's very clever. Placing narcissistic postings on HN in an a proper time (Monday, morning) with a catchy headline and provocative wording, including digits is a nice work, of absolutely nothing special.)
- sabat 14y agoNo idea why this would be downvoted except for the fact that Patrick Can Do No Wrong. He's wildly opinionated, questionably successful before his sudden consultancy (he wrote a mildly successful Bingo card program in Java), and self-satisfied beyond measure.
- emmett 14y agoBecause it's mean spirited and adds nothing of value to the conversation. Your comment is similar; your dislike of Patrick is based entirely on who he is and doesn't bother to engage with the content of the essay at all.
- nvarsj 14y agoI'm not sure I agree that the post above has no relevance. Every time I encounter (an extremely highly voted) patio11 post, my used salesman alert starts blinking. The guy is obviously a master at garnering karma and links, SEO, what have you, while seemingly providing some value. And he makes his money from this combination. So it is useful to realize where the OP is coming from (self-promotion) when considering the validity of his posts, since they are largely anecdotal.
- polyfractal 14y agoI feel like every post by Patrick should be printed out and taped to the wall. So many great lessons in his writing. Thanks patio! Question of my own: if you are breaking into consultancy, how do you go about cold-calling potential clients? Say you've identified a few clients that you think you could help. What kind of email do you send them? Go the honest route and say "Hey, I'm new but I want to help your business make more money...I'll take a cut of whatever increased revenue I derive, otherwise you dont have to pay me" ? Or go with the "I know what I'm doing route" and just pitch that you are a professional doing this all the time?
- JagMicker 14y agoI am not the author, but my advice would be: -Focus on the "Sales Process". You won't go anywhere without first identifying the need(s) of the prospect and making sure they know that you understand their need(s). Then determine who the decision-maker is, so you don't waste your time selling to the wrong person. -Approach prospects via email AND phone, until you've figured out which method they prefer. -Don't give up until you've received a clear rejection. Offer rebuttals to their objections. Stick with those rules, and work to refine your pitch. Persistence is key!
- smiler 14y agoI've been freelancing / consulting for just over a year myself and am discovering more of the process myself. Here's what I've done so far.. - Reach out to your existing network - if you have friends who have done freelancing / consulting, find out what companies they did freelancing / consulting for - chances are those companies still need it. - Offer to meet for coffee / lunch / dinner. I'm based in the UK and was trying via e-mail to speak to a potential client. It just wasn't happening. They are based in the US. So I called them up and offered to meet for dinner there at a time convenient for them - they accepted and I had the dinner last week. It is very easy for someone to decline a phone call / conference call. It's much harder for someone to do that when they know you have made an effort to turn up in person - they also have to eat so meal times work good. - I find being honest is the best route to go. They expect you to know what you're doing! I think it's fine to say - I've just stepped out of employment and now I'm looking to build a business myself in what I've been doing - people respect you for trying to start a business! - Don't offer to do something for free too early on. The person you're pitching to is not working for free and they won't be expecting you to work for frre either? Yes, you may need to offer something for free to land a client initially - but do not do it with open-ended development!! Instead suggest you do an analysis of their system etc and write up a report and how you'd improve things - at least that has a fixed scope. Or ask for a dataset and show simply how you can use that data to give them some new numbers they don't yet have.
- zrail 14y agoThis is a great article, but one thing it doesn't really address: how does one get started doing this while still keeping a day job? I would love to start charging for value by the week, but if I can only spend 10 hours a week on a particular contract, how do I sell that?
- ronyeh 14y agoCharge per 0.25-week increments? As long as you hold up your end of the bargain by providing enough value, they'll be happy to recommend you to a friend, or request your services again. Later on, you can charge for larger increments while retaining your billing rate.
- reubensutton 14y agoI think the point isn't really that he's charging by the week, it's that he's selling the value he provides to the company, rather than strictly selling his time.
- count 14y agoYour value will be 1/4 of what the full week of work would be, so price accordingly?
- Swizec 14y agoReading this ... man, I'm not even at $100/hour programming yet.
- bsimpson 14y agoI started freelancing out of college. Took a job, raised my prices, took a job, raised prices, etc. until I felt friction in the market. Then, I got hired by one of my clients and asked to find someone to fill my former shoes as a freelancer. I was charging $90 an hour. They were relying on firms like the Creative Group who have the ability to charge 100% markup on the people they hire out. As a result, I realized the people I was competing with at that rate could barely tie their own shoes. I decided in that moment that I was pricing myself into the wrong league and need to raise my prices considerably if I ever get back into freelancing. Thanks to this post, I'll be billing by the week. =) On a related note, there's room for massive disruption in the contract labor space. It's not hard to come up with a service that provides a lot more value within the current economics of that market. I'm not sure contract labor is a business I'm passionate enough about to start, but if anyone wants that have a chat about it, let me know.
- Swizec 14y agoWell I'm out of college since 2 months ago. Going from there :) I'm at the point where I'm feeling the first friction in the market; still figuring out what type of lube it needs. (big part of the problem might be the market itself, I'm focusing on working with startups)
- pc86 14y agoIt really is just a matter of charging more. Don't take more work for less than $n an hour. Grandfather older clients in if you want, or don't if they're not the type of client you'd want to work with long term. As Patrick said in the article, there's no secret to charging more, except charging more. I have a full time job and have intentionally priced myself so that I only have one or two side jobs at any one time ($125/hr for PHP). I am also not actively seeking any work, the last couple jobs have been from existing clients or new ones that have former clients working there now. Given my experience with intentionally raising prices 30%+ across the board and taking 50 hours/week off the table, I have little doubt there's practically a line out Patrick's door with CEOs holding $10-50k checks in their hands.
- laurentoget 14y agoA more appropriate title could be 'Get rich and famous quick by posting articles about quickly becoming rich and famous on Hacker News'.
- F_J_H 14y agoThere seem to be a lot of comments centered on “wow, this sounds great – I wish I could charge more” or “how do I find these high paying contracts”? Here’s one way. It may seem obvious to many, but I think it bears stating. If you are looking for consulting contracts that pay really well, focus on providing a service that helps companies make money rather than save money. In other words, help grow revenues rather than reduce expenses – people pay much more for that. Here’s the reasoning: When business managers, executives, etc. are given targets, they typically relate to increasing revenues much more often than reducing expenses. Not surprisingly, increasing revenues is therefore “front of mind” for those with budgets to make it happen, and they see tremendous value in someone who can help them do that. The fact that a little automation in the accounting system will save a data entry clerk a few hours a month – hmmm...maybe next month. Case in point - I remember reading a comment somewhere from a Google employee who was complaining that at Google, those working on the revenue generation side of the business (i.e. advertising, adwords, etc.) got all the “love and attention” in terms of getting the resources required to get their job done, while others working on more obscure projects had to put up with leftovers. Now I’m not sure if that is actually true at Google, but I wouldn't be surprised as I've seen it at many other companies – the “rain makers” are the darlings with dollars to spend, and the back office ops folks are left to struggle with fewer resources. All injustices aside, find a way to provide something to the rain makers. The type of work that Patrick does directly improves revenues. If you are a DBA selling tuning services to help companies re-write gnarly queries for example, well, unless a slow performing query/process is directly impacting revenues in some way, it likely is a secondary priority in devops/support where budgets are tight and “learn to live with it” is becoming a way of life.
- daemon13 14y agoIt depends... Although focusing on growing revenue is psychologically more comforting, economically saving on expenses is more beneficial. When you save 1 dollar, your profit increases by 1 dollar. When you sell 1 more dollar, your profit increases by 0.1-0.9 dollars (depending on your margins). To put it differently, if a client is a mature company that is growing 3% annually and which gross margin is 10%, probably saving expenses is a better value proposition. If a client is growing 100% annually and has gross margin of 90%, then, obviously, increasing revenue would be perceived a better value by the client.
- jwingy 14y agoOn a related note, does anyone have some informed opinions on the best type of business entity (e.g. LLC vs S-Corp vs C-Corp, etc.) to set up for a consulting business such as this?
- logn 14y agoYou mean LLC vs Corp? I'd go with an LLC. Corps have more formalities like required meetings, minutes, etc. And they're set up to be invested in. LLC should protect your assets without having to jump through too many hoops. The taxes differ, consult a tax pro. You can always convert an LLC to a corp down the road. That being said, I consult on the side and am trying to grow my business and haven't set up any company yet. It's a little risky but then again I'm not doing the kind of work where I'm likely to get sued, and I don't have many assets.
- jacques_chester 14y agoTalk to your accountant. You do have a business accountant, right?
- sxcurry 14y agoImportant take-away - don't ever start compromising on your hourly or weekly rate. Patio is correct - it's very difficult to recover from that. Plus, in my experience, clients who want to bargain on your compensation are already devaluing what you do. I had a client who complained about my rate, and wanted to cut it substantially, because "there were lots of kids around who would work for less." I responded by telling him that he should hire one of those kids, and I would gladly hand his project over to them. I guess he reconsidered, because that was the last I ever heard about lowering my rate. I still work for that client, and have actually raised my rate by 50% over the last few years. Don't undersell yourself!
- Dramatize 14y agoHas anyone had success with ecommerce consulting?
- ana_hilinsky 14y agoYes, do you have any specific questions? We do a lot of Magento builds for medium sized retailers.
- atsaloli 14y agoWhat does medium sized mean? My friend has an online store that grossed 5 million USD in the last year, he is looking for help him next-gen'ing his Magento store as well as SEO. Is that something you'd be good at? He wants one solution provider for both re-doing his store and SEO.
- ana_hilinsky 14y agoCan you send me a quick email so we can take this off the board? I'd be happy to either help or point you in the right direction. ana@buildrx.com We do work for retailers such as True Religion Brand Jeans, Joie Clothing, Tart Collections.. (all Magento based).
- SonicSoul 14y agoPatrick, while being such a web marketing guru, how come you named your page title (and article path) "consulting" instead of using the title? I realized this after bookmarking you in pinboard and later realizing there is a mystery "Consulting" entry in my links feed.
- joseph 14y agoWhat are some good resources for learning how to handle corp to corp paperwork (contracts, billing, insurance, etc)? It's very easy to land contracts through agencies, who handle all of that stuff for you, but billing these kind of rates through them is not possible, since they are going to take a large cut for themselves.
- jacques_chester 14y agoForm a working relationship with an accountant. This is exactly the sort of advice they are good at.
- koevet 14y agoI have freelanced for almost 15 years in Europe and a bit of Middle East. I have done pretty well, charging easily 1K Euro a day, less in the last couple of years. Last year, with a colleague and friend, we started our consulting company. The main reason for that being "let's scale!". We contacted a bunch of freelance colleagues we trusted and respected and asked them to join us as hired guns, whenever we needed more workforce. Another reason for starting a company was that the developer profession is not rewarded as the experience increases. At least in Europe, a 3-4 years experience Java developer can make almost as much as a 10 years experience Java expert. And there are rate roofs which are hardly crossable, so even if you are really really good and have plenty of war stories, still the 1K/day roof is pretty hard to cross. So far, it didn't go exactly as expected. We are doing ok, we have some clients (we are in the Java space, so mostly enterprise stuff) but nothing spectacular. We are having an hard time acquiring new clients and the long running European crisis doesn't help. I'm working considerably more than in the past (weekends are a rare commodity, very long days, in short my work/life balance is critically crappy), so sometime I wonder if it's worth the hassle. The scalability part is very tough: we hired one guy (who was a disappointment) and we use our trusted hired guns, who are often busy with their own consulting gig. Therefore, we are crazy busy. Another problem is that the clients are really interested in our specific experience: that means they want to work with me or my partner, not with the company. This bit is hard to crack. In short we are still figuring out how to go from here. We will invest more in the web site and technical blog (we are also co-authoring a book) and we will hire one or two permanent devs (did I mention that hiring someone in Europe is bloody expensive, so that the 70% billable time mentioned in the article is too low?). Working solo is easy, scaling is not. As a developer, you are faced with plenty of new challenges (finance, marketing, pr, negotiations, contracts, cashflow) - which is fascinating but damn consuming.
- luke_s 14y ago"Another problem is that the clients are really interested in our specific experience: that means they want to work with me or my partner, not with the company. This bit is hard to crack." You certainly have a lot more business experience than I do - however I've been working recently on preparing a lots of tender responses. I work at a software consulting firm, with about 10 devs and 20 GIS analysts. In our tender responses we include the resumes of the people who will be working on the project as an appendix right at the back. At the front we have a section with our 'relevant experience'. In the 'relevant experience section' we NEVER mention which person worked on a specific project. Its always termed as "XYZ corp developed an app to ... " or "XYZ corp worked with ABC inc to ..." I guess it comes down to a metal shift in always describing things your company has achieved, instead of things you as an individual have done.
- paulsutter 14y agoA friend of mine is a marketing consultant and a real genius. He got paid $x0,000 to come up with the title and general theme for the book "Rich Dad, Poor Dad". But the author has made $x0,000,000 from it, despite the mediocre (at best) quality of the book. Really it was the positioning that made it catch on. My friend's career is full of stories like that, so it's not a one off. If you do work as a consultant, definitely, charge what you can. But no matter how much you charge for consulting, it's never as much as its worth. Im sure that pg could charge what sounds like a really high rate for his time. But it would be nothing compared to what he can make from equity. And I promise, it would be a lot less fun.
- mdonahoe 14y agoThat author is bankrupt now, for what its worth. http://finance.yahoo.com/news/rich-dad-poor-dad-bankrupt-163736677.html http://finance.yahoo.com/news/rich-dad-poor-dad-bankrupt-163...
- alexfarran 14y agoOne of his many companies is bankrupt, as a ruse to avoid paying money he owes.
- deleted 14y ago[deleted]
- acconrad 14y agoThis is all well and good, but the biggest reservation I have about all of these consulting blog posts is who should do this and who shouldn't? I feel like consulting is easier to consider when you're a seasoned programmer (10+ years) because you have the accumulated knowledge to really provide value to a company when you're not an employee. I'm almost 27, is my lack of years of experience going to prohibit me from attaining consulting gigs? If I can optimize your front-end code, get you higher performance and SEO rankings, are you going to hesitate / ignore me because of my lack of years in the field?
- borplk 14y agoYou mention a good point. I think consulting requires a character. If you are 20-something I really doubt it's going to work very well. Unless you have a history of extra-ordinary achievements which sets you apart, in which case you probably wouldn't have or want to do consulting.
- trapexit 14y ago"If I can optimize your front-end code, get you higher performance and SEO rankings, are you going to hesitate / ignore me because of my lack of years in the field?" This is a testable hypothesis. Test it. Seriously. Most people who fail are defeated not by external forces, but by forces from within. Stop worrying and start testing.
- robbyishere 14y agoThe choice of varying fonts makes me suspect he is trying to sell something? It looks like a get rich quick spam page, what do yall think?
- flyinglizard 14y agoHere are my lessons after 6 years running a consulting firm in a pretty specialized business (high end ARM/embedded stuff), from the top of my head: 1. Avoid billing by hours, exactly for the reasons listed here. You can only lose like this; it carries more administration overhead, more friction with the customer and at the end there's a max budget allocated on the customer's end anyway - it's not like you can bill indefinitely if things don't go as planned. 2. Always charge fixed price for projects. Remember the budget allocation from #1? Use it. Bill twice as much in the beginning but avoid charging the customer even a penny more for delivering the work you're committed to, even if that means 'losing' money (you don't really lose when consulting, only earn less). 3. Work alone. Hiring people may seems like a good idea but then you've got a financial burden in the slower periods (and these always come when you least expect them). You can make good money alone, and you can make good (and great) money when you have 8+ people working for you but between 2 and 8 employees, you're busy full time getting enough work for the team and your margin on these employees simply isn't big enough (just think of the office costs). Besides, I don't like the whole pimping thing where you sell someone else's skills; YMMV. 4. You are a business problems solver. Don't tell a customer "no", just jack up the price if needed. If you intend to have a large project with them, don't charge them for general consultancy around the project. Happily give them your time for free; make your money on the project itself, not the meetings around it. Edited to add something quite important, IMO: Whenever first meeting a customer, I try to get a high level picture of the business they are in, the product they are looking to develop, who will use it and so on - even if they are just looking for me to develop a specific component. It's very easy to fall into "XY Problems", and understanding the project environment would make it easier to assess the work and rates. 5. Remember there are people in a corporate environment on the other side. Make them look good in their company; give them whatever help needed and be their go-to guy. It's really important for the long term (and as fellow human beings). Don't ask for money for small modifications or changes, think of the administrative process they need for each line item - it makes them look incompetent or just annoys them with bureaucracy. You'll more than make up for that in the following work. 6. Long term, your entrepreneur skills are better spent at build your own business. Consulting is good for the free spirited folks that don't want a corporate environment, or for making a quick buck on some lucrative projects, but it's hardly a way to get rich and it's quite wearing in the long run. Nevertheless, I think that professionally, consulting has been the greatest thing I could have done. The variety of projects, technologies and corporate environment (30+ customers here, most repeating) is great for your own development.
- ana_hilinsky 14y agoThank you for writing this. It's too often that I feel alone in the world of dev consultancy! I've been running my company for 3 1/2 years, I started it straight out of college in 2008 when I realized job opportunities were slim to none and I'd have to figure out how to pay my rent regardless. The most important lesson I learned all these years: find a reputable client, do good by them and watch word of mouth spread. Our biggest asset is the great referrals we get from our clients. It's all too often that we end up taking over a project that was done by some previous consultant/freelancer where they obviously didn't care about the client relationship and let the work get sloppy. It's a shame! (Also, I'm not talking about tiny projects for no name brands, I'm talking about major retailers, musicians and sometimes fortune 500's).
- mlemming 14y agoAfter reading the article and the comments, I'm having a bit of a "a-ha!" moment with the billing question (by week, why didn't I think of that). I have been an independent technology consultant for 12 years now, with a variety clients (big and small) and I'd say "successful" over all. I generally follow all of the good advice principals mentioned in these comments (mostly think long term with a client, don't charge for the small stuff, make the client feel important, etc). The one item that keeps coming up over and over is that I'm "independent". It's just me. I get hit by a bus and my clients are out of luck. Now I agree that generally speaking they don't want anyone else working on their projects, but at the same time they would really like some backup. This seems like a nearly impossible problem. I'm not interested in hiring anyone for the reasons mentioned here. Plus, acting alone doesn't appear to give me the ability to get the really big projects ($1M+). Clients aren't going to give "just me" a project of this scale, it wouldn't be good business sense. So, I've been stuck with letting "IT consultancy firms" find me work on several occasions. They get to mark up my rate, often mix me with other techies, and basically get to sit back and collect money for something that I'm delivering. I'm the one at the client, building the relationship, looking for more work, etc. It's always bothered me that because I'm not a "firm", I don't appear to bill higher rates or win bigger projects. Honestly, it's just me delivering the work anyway. Hopefully this makes sense. The only way I've come up with to reverse this course is to create a firm where I partner with follow IT consultants and we own the firm. Ownership, I think, is the key. If I work for an existing IT firm, I make a nice hourly rate but I have nothing to show for it at the end. Meanwhile, the firm's ownership, who often are not techies and do not have technology skills, gain everything at the end of the day. If the technology staff owns the firm, then that builds in all sorts of interesting incentives. Now the owners actually have a reason to refer other technology people to the firm, builds firm value. Clients see the combined value of the firm, thus hopefully opening the doors to bigger projects and better value. Plus, the "backup" problem is solved since clients understand that there is a team. I haven't quite figured out how to get this off the ground (really just started thinking about it over the last couple of months), but it's interesting to me that other independent IT consultants haven't done this already. Or, maybe they have and there's some obvious reason why it doesn't work.
- tieTYT 14y agoAt the end of your article you said to hit reply if you want to hear more, but I didn't see a reply button so maybe you meant post it here? I'd like an article about the transition from being an employee of a company to being a consultant. I've never been a consultant before and it's extremely intimidating to think about quitting my job. Did you/do others usually do this all at once, or is there a way to do it gradually? As gradual as possible, ideally. Does it make sense to have a weekly rate if you only work 2 hours a day after your day job?
- freework 14y agoI imagine you must know a lot about programming to make this work? Ho often do you tun down jobs because the work is too over your head? Or you don't know the language the work is required to be written in?
- davemel37 14y agoGreat Point about asking what they can cut to get to their budget... This is the reason why when negotiating media buys with commissioned salesmen, you should always give them a budget first and stick to it, and than negotiate for more exposure...This way, the salesmen's commission remains in tact, and he fights to get you what you want, because he wants the sale... Instead of being in a situation where every penny you try to cut in your media spend, he views as a cut to his commission. Great Post.
- pknerd 14y agoNot sure but kind of relevant post in Inc: http://www.inc.com/marla-tabaka/charge-customers-more.html http://www.inc.com/marla-tabaka/charge-customers-more.html
- pknerd 14y agoA question comes across my mind; being a developer how one can make a difference between working as a freelance or given consultancy? At the end of the day you're going to write code, No? Answers by you guys may help many freelancers who might prefer to follow Patrick.
- d0n1 14y agoI couldn't help but post, I run a very similar business model to the one that is described in the article and i can confirm that it is a very successful model. We are slowly at the stage of try to scale out. The "terrifying cashflow" problems are very real, we take the model of taking a modest wage as to not cripple it the cash flow. We also have put on our first staff member which we are pretty excited about. Its interesting to hear that others are using the residual cashflow to create a product. We have tried to generate a couple of differente products but it hasn't out performed the consulting arm.
- tiramisucode 14y agoI'm just a beginning Ruby on Rails programmer right now, and I would love to start consulting on the side. Not just for the money, but just to gain business savvy. Negotiating and delivering goods is an essential skill I believe a business owner should have.
- komlon 14y agoYou just go and be a contractor. There are tons of contracting positions open in London that will pay £500 - £600 per day. It's easy to make over £100k (pounds) if you're a good contractor. http://www.cwjobs.co.uk/JobSearch/Results.aspx?Keywords=core+java&JobType1=20<xt=london&Radius=5 http://www.cwjobs.co.uk/JobSearch/Results.aspx?Keywords=core...
- flyinRyan 14y agoA contractor (contract based, usually 3-6 month intervals, low paid) is a totally different thing to a freelancer (higher bill rate, hourly ad hoc projects usually) and a consultant (much higher bill rate, but project based instead fixed interval based).
- jeremysmyth 14y agoTo be a consultant, rather than an hourly-rate freelancer, you need two things: - insight - reputation The reputation (from prior work) gets you in the door, and the insight (from your wealth of experience in the field, which you have, right?) is what gives you the right to call it a "practice", and the right to get you the 5- and 6-figure paychecks for each engagement. Insight is more than just experience; you'll have to offer something unique and valuable for each customer that they can't just get from their local recruitment agency for commodity rates. You have to be able to communicate at senior management level, in big picture terms, but also operate at the ground floor and all the way up. You must be able to advise at each level of the organisation, while understanding the nuts and bolts of the guy doing the programming (and quite probably doing it yourself).
- dreamdu5t 14y agoEveryone is talking about something different when they say "consulting." I get the feeling some people are talking about freelance marketing with revenue-sharing, freelance development work, freelance sys admin work, and then business advice.
- deleted 14y ago[deleted]
- eldavido 14y agoThis post is great advice if you want to work doing consulting for large companies run by MBAs/business people that view technology as "IT": a tool for solving business problems. I'd guess 90% of programmers earn their living this way, so I agree with it, to a first approximation. What Patrick doesn't acknowledge is the huge role of culture/norms in business, and how these differ based on geographic region, and the backgrounds of the founders. Revenue and profit attribution are human processes that involve a lot of bias. If a salesperson sells twice as much product, should he earn twice as much compensation? How does marketing's work on improving the company's positioning/messaging, engineering's product work, and/or the overall state of the economy factor into this calculation? Who really "created business value" here? The other problem is bigness: as companies get bigger, it's way harder to measure whose contribution is helping the company succeed, whereas it's a lot more obvious when only a handful of people are involved. I'm an engineer, but I work at a product company. If the product is better, it sells more, and we get compensated more, along with sales, marketing, and the whole team. People in Chicago (where I grew up) still bring this dumb 19th century management model to their companies, and it's exactly why (1) all the best innovators and engineers head to the west coat, and (2) why I personally got the hell out of there. I wanted to be a professional programmer, someone who made peoples' lives better by shipping a superior product, and get compensated accordingly, not some IT lackey selling some nebulous concept of 'business value' to some feet-on-the-desk small-business-owning ex-investment banker who wouldn't know the difference between Objective-C and HTML.