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When we link freelancing rates with salaries, we can easily get led astray by: "OMG $200 an hour — that's like $400k a year full-time! That's insane!" If you'r

by bdunn 13y ago

When we link freelancing rates with salaries, we can easily get led astray by: "OMG $200 an hour — that's like $400k a year full-time! That's insane!" If you're looking to augment staff as a contractor, whoever hires you is going to want to compare your hourly rate with what they're paying their team — so it's going to be tricky to break through that ceiling. But if you're working with clients who have problems to solve, and you're hired to solve one or more of their problems, what you charged should be tied to the financial upside that business will experience when all those problems go away. (e.g. pricing for them, not you and your former salary.) I gave a talk last night on value-based pricing for my local Ruby meetup, and covered some of this: https://speakerdeck.com/brennandunn/value-based-pricing-for-freelancers https://speakerdeck.com/brennandunn/value-based-pricing-for-...

nhance 13y ago
When you have a risk, you call an insurance company. When you have an opportunity, you call me. It's only after you stop selling time and start to understand what it is that drive your customers to call you that you'll ever break free from the hourly rate comparisons.
danielweber 13y ago
"OMG $200 an hour — that's like $400k a year full-time! That's insane!" I had a recruiter try this with me. The rates were much lower (I'm not in a top 5 market), but he still tried to convert it into an annual rate. I think I was being negged so I would lower my rates and they could more easily make the sale.
flyinRyan 13y ago
>"OMG $200 an hour — that's like $400k a year full-time! That's insane!" But it's not full time and that's precisely why it costs roughly 3x contract rates. A portion of your year is "down time" searching for projects and no one is paying for that. So you put that into your project costs. If the companies you're pitching don't realize this you're probably pitching to the wrong companies because it's pretty well known. EDIT: Also, if they want a compare then have them compare you coming in doing this project to the cost of hiring and training a permi and then letting them go. Most likely the turn-around for a permanent employee is going to be 6mo at an absolute minimum (unless it's Zynga or some serious scumbags) where as your project could be hours or weeks.
- bdunn 13y ago
  Exactly. I like using the faucet analogy: when you're paying a consultant, you're getting value for the time they're "on the clock". Employees have onboarding overhead, aren't fully utilized, might require paying a recruiter, have PTO, etc.
zdw 13y ago
My reply to this line of reasoning is: "Yeah, think of the break you're getting - where else could you buy a 400k/year caliber employee for the handful of hours you need them? It's a great bargain!"

by bdunn 13y ago

nhance 13y ago

When you have a risk, you call an insurance company. When you have an opportunity, you call me. It's only after you stop selling time and start to understand what it is that drive your customers to call you that you'll ever break free from the hourly rate comparisons.

danielweber 13y ago

"OMG $200 an hour — that's like $400k a year full-time! That's insane!" I had a recruiter try this with me. The rates were much lower (I'm not in a top 5 market), but he still tried to convert it into an annual rate. I think I was being negged so I would lower my rates and they could more easily make the sale.

flyinRyan 13y ago

>"OMG $200 an hour — that's like $400k a year full-time! That's insane!" But it's not full time and that's precisely why it costs roughly 3x contract rates. A portion of your year is "down time" searching for projects and no one is paying for that. So you put that into your project costs. If the companies you're pitching don't realize this you're probably pitching to the wrong companies because it's pretty well known. EDIT: Also, if they want a compare then have them compare you coming in doing this project to the cost of hiring and training a permi and then letting them go. Most likely the turn-around for a permanent employee is going to be 6mo at an absolute minimum (unless it's Zynga or some serious scumbags) where as your project could be hours or weeks.

bdunn 13y ago
Exactly. I like using the faucet analogy: when you're paying a consultant, you're getting value for the time they're "on the clock". Employees have onboarding overhead, aren't fully utilized, might require paying a recruiter, have PTO, etc.

zdw 13y ago

My reply to this line of reasoning is: "Yeah, think of the break you're getting - where else could you buy a 400k/year caliber employee for the handful of hours you need them? It's a great bargain!"