33 ms·

Freelancing: How to talk yourself into charging more

395 points by andy_adams 12y ago

raphinou 12y ago
This seems to be for the us and unapplicable to europe (factor 1.25 seems too low), right?
- flashfabrixx 12y ago
  You're right. In Germany you'll need to do the math with 1.40 at least.
- andy_adams 12y ago
  1.25 is too low for the US, too. However, we're just establishing the minimum, so I erred on the low end. 1.5 or 2.0 would probably come closer to reality.
  - zrail 12y ago
    It's highly individual. Mine is about 2.25 because of an infuriating rule about deducting health care premiums. bdunn's course Double Your Freelancing Rate[1] has a really good in-depth discussion on how you can figure this out for yourself. [1]: http://doubleyourfreelancing.com/rate/ http://doubleyourfreelancing.com/rate/
twelfthnight 12y ago
This is great. The simple model to estimate minimum hourly rate is useful and I believe would create a convincing argument in negotiations of rates. (Of course, one wouldn't have to be so conservative in the estimates in that case).
gk1 12y ago
I was nodding my head in agreement… All the way until the “How much would I charge?” part. Here’s something to consider for other freelancers reading this: 1. We all know what a pain it is to bill hourly. The way-off estimates, the tracking, the reporting… Why not bill on a daily/weekly/monthly rate? I know what you’re thinking: “But how will my client know how much work I’m doing?!” In the past year that I’ve been doing this, the ONLY people to ever ask me that were other freelancers, NOT clients/prospects. Clients–the good ones, at least–don’t CARE how many hours you’re spending to do X and Y, as long as you’re doing a damn good job at X and Y and adding significant value to their company. 2. Why tie your rates to your cost of living? (And number of vacation days, and tax rate, and other arbitrary multipliers/divisors…) Your rate should reflect the value you bring to a company. (Yes, figuring the value of your work for a company could be tricky, but that’s another matter…) Using living expenses to calculate your rates makes as much sense as pricing milk by the size of the cow that produced it. Charging based on value will almost always get you more than charging based on your thrifty living expenses. (And if it doesn’t, then either you’re underestimating your work’s value or your clients are way too small.)
- andy_adams 12y ago
  You are 100% correct on both counts. Personally, I bill daily and roughly according to the value I'm providing. This particular article was outlining the steps I had to take before I could charge by value, by the day. Some people are able to charge a ton right off the bat. For me, it was a gradual understanding of pricing that brought me up. Thanks for the comment!
  - gk1 12y ago
    Another good way to "break out" of the low-hourly-rate trap, for those reading this... Just give highest price you can say without laughing. (Wish I could give credit to whomever I heard that from, but I can't remember...) Anecdote: I was once on a call with a prospect, and it seemed we were both in complete agreement about value mattering more than hours spent doing X and Y.... Then when I mentioned my rate, the prospect immediately started doing calculations out loud such as "well I could get 40-50 hours per week out of a full-time employee for $X, yadda yadda yadda..." So they cared more about how many hours they can get out of someone than how much value... That's a company you don't want to work with.
- davidw 12y ago
  Here's my doubt about that: I like having control of my own time. I sometimes arrive later than others and often leave earlier. I get a lot done, though. But I am concerned that asking for 'daily' pay and not putting in the same hours might start to rankle.
  - gk1 12y ago
    If the company continues to get same substantial value from your work, yet they're bugging you about the number of minutes it took you to do it, then they have their priorities backwards. There are cases when timing matters, such as if you're expected to collaborate with internal teams who have set schedules, but that has less to do with how many hours you spent doing X.
    - davidw 12y ago
edw519 12y ago
Nice write-up, but a little too complex for me. I've taken a slightly different approach that I've never had to "talk myself into"... I got the gig by charging something we both felt comfortable with. Then I raised my rates 10% every 90 days. No discussion, no debate, no permission, just, "Starting October 1, my new rate is x." If they said no, I'd walk away. That never happened. I remember the first time I crossed $100 using this method. My client said, "Now we'll have to start treating you like a real consultant." I said, "OK."
- gk1 12y ago
  > "Now we'll have to start treating you like a real consultant." I said, "OK." That's funny... I bet it felt great hearing that. I remember when I had more than 1 concurrent client for the first time ever, I thought to myself: "Wow, now I'm a real consultant, not a wanna-be-consultant!"
- deleted 12y ago
  [deleted]
  - zo1 12y ago
    Don't think he meant that the increase is cumulative across clients. I understood it as he charges more the longer he stays with a single client. Then resets back to a normal/usual rate for new/previous clients.
- reledi 12y ago
  Did it come as a surprise to your clients that your rates would increase every 90 days, or did they know before hiring you?
jtbigwoo 12y ago
I really wish everybody who was a freelancer had a chance to work for six months in a big-time consulting firm (e.g. Computer Science Corp, Accenture, Sapient, or IBM Global Services). Get an up-close look at how much companies will pay for developers, project managers, and designers. Medium-sized or larger companies have no problem paying $175+ per hour for average developers who have the right experience. If you're any good, you'll soon see that a big company will pay $200+/hour for you. Sure, there's extra overhead involved in those big firms, but there's no way you'll come out of that experience thinking you're only worth $50/hour.
- connie_lingus 12y ago
  right, but remember what the companies are mostly paying for is the all the resources and reassurances of an IBM, not for the particular developer they are using to get the work done.
  - mattmanser 12y ago
    No, they're really not. Small companies also charge this rate.
    - spdustin 12y ago
      This. I own a small consulting and training shop focusing on a particular "enterprise" product that's used by more companies than I can count, big or little. We charge a premium rate per hour for consulting, and a premium per-day rate for training. Been doing it for over a decade now. Companies that would hire out to Accenture or Avenade or name-your-consulting-firm-here would, in our experience, much prefer to pay someone they can speak to about their skills and work without a technical sales rep getting in the way. It's not even that tough to get into a client's "preferred vendor" list, if they have one. The combination of humble confidence and actually knowing your shit is a potent one. Edit: typo
    - mtbcoder 12y ago
      Not disagreeing with you, but I would add, "Small established companies" can charge these rates. No one is going to pay some unknown person/company $200/hr without an established track record.
throwaway90446 12y ago
Little bit of reality for you, HN. All due respect to patio11, who has made an excellent career for himself, but outside of the usual suspects (NYC, SF, Chicago), the kind of rates he talks about will get you laughed out of almost all client negotiations.
- gk1 12y ago
  I don't think anyone here is talking about the kind of rates he talks about ($30k/week is what he's mentioned in the past)... There is a huge gap between that and the undervalued rates many freelancers charge.
- andy_adams 12y ago
  I definitely don't charge what he does. But if you ever want to get closer, you've gotta take the steps. Setting a baseline that was logical was the first step for me.
- tptacek 12y ago
  It's true. Patrick is able to charge those rates because he was bit by a radioactive spider, and because he famously invented the idea of hooking "Hello World" up to a random number generator and people want a little slice of that sweet sweet bingo card expertise.
  - chc 12y ago
    I think you're being a little bit flip. As a matter of fact, he is famous for hooking up "Hello World" to a random-number generator. You're right that it's not really an extraordinary feat on its face, but he garnered a lot of recognition for it nonetheless. Most of us here don't have well-funded companies approaching us to consult for them, so I'm not sure why you're downplaying how special the results of that were for Patrick.
    - jameshush 12y ago
      He's not famous. At all. We think he's great on hacker news (I've read the vast majority of his blog and listened to every episode of his podcast), but in the _real world_ nobody actually knows who he is. According to him, most of his consulting gigs have been word of mouth. If he can do it, so can we :)
morganvachon 12y ago
For someone like me who is a "jack of all trades master of none" type of freelancer, this formula works fairly well. I have the advantage of having a full time job and freelancing on the side for extra spending/saving money. But if I ever do make the great leap to a full time freelancer, this formula tells me that I can make it for only a little more than I charge now. Granted, I'm in a suburban/semi-rural area, so I may actually have to raise my rates to make a livable wage on my own, since the client pool is smaller, and this is part of why I haven't already made the leap. Admittedly, the "imposter syndrome" the author spoke of is probably a factor as well; deep down I know I'm good at what I do, but every time I have to research something I end up feeling like a know-nothing. That's something I'll have to overcome not only if I want to set forth on my own as a full time freelancer, but even if I want to advance as an employee.
- gk1 12y ago
  If it's of any help, the impostor syndrome isn't unique to new freelancers. I've been consulting steadily for over a year, and I still feel it frequently. Acknowledge the feeling but don't let it be a barrier. (Maybe someone more experienced can chime in if I'm wrong about this.)
  - pc86 12y ago
    I contracted full-time for about 2.5 years before going back to being an FTE for the stability. Even as I steadily raised my rates upwards of $150/hr+ I still thought back to when I was charging $70 and that I was doing the exact same work and providing the exact same value. Even when you're in the thick of it, it's sometimes hard to contextualize that no, I'm not charging too much now, I was just charging too little then. You will lose clients as your rates go up, it's only natural (I had one complain very loudly when I went from $70 to $80 an hour, even though he only needed 2-3 hours of work a month at most; he left when I went to $95 about 6 months later). With few exceptions, most of them will be the painful ones.
  - morganvachon 12y ago
    I've done IT based side work for nearly 20 years now, so I know it's not unique to those just starting out. My main problem really is that I'm just too helpful; I have a natural inclination to help people, and that leads to being taken advantage of at times. There is one particular client I could have charged twice my regular rate and they could have afforded it, but they saw how "nice" I was being by charging them (a sole proprietorship business) the same rate as the old lady down the street, and figured they had a sucker. When I tried to raise my rates they dropped me and hired someone who charged twice what I did but ultimately wasn't willing to put up with their attitude like I was. Of course, I considered it a good thing as I lost a headache, but I also lost a good referral. In short, I need to stop trying to help my clients financially by offering rock bottom rates (and devaluing myself - imposter syndrome again), and focus on doing the job they are willing to pay me a good rate for. I can still undercut the competition, what little there is here, and make a decent living doing it.
blendergasket 12y ago
This is great. Thank you so much! I was curious if you had any advise on figuring out per project rates? I'm pretty new at making Wordpress sites but I make nice, handsome, responsive and very usable sites. People I have made sites for so far have wanted a single fee for the whole project. I'm not so good at estimating the number of hours that go into a project yet. Do you have a rule of thumb aside from estimated hours * rate?
- jamon51 12y ago
  I wouldn't do a project rate as a freelancer. I own a design/development studio and encourage my employees to do side work if they want to, in order to get some experience in areas they don't normally dabble in. Examples are estimating, invoicing, figuring out tough problems all on their own (and being on the hook for the solutions), etc. I think it's awesome. But I always tell them to bill hourly. I do NOT want them to make the same mistakes that I did when I got started. Working late into the night for free is never a fun feeling.
  - blendergasket 12y ago
    Well put. That makes perfect sense. Thank you for your input.
luckyisgood 12y ago
Charging more is only half the work on escaping feast and famine cycles when you're a freelancer or an agency. A while ago, I wrote a post to my inner circle of email suscribers about one sure way I've found that works when it comes to charging more (here's the email article: http://logit.createsend.com/t/ViewEmailArchive/r/3991C04F56F89D262540EF23F30FEDED/C67FD2F38AC4859C/ http://logit.createsend.com/t/ViewEmailArchive/r/3991C04F56F... - hint: saying "just double your prices" does not work for everybody, like andy_adams discovered himself; I've got a better way - increase prices gradually and with every project.) The second half of being satisfied with your (freelancing or agency) career is having abundant recurring revenue. I recently analyzed revenues, market size and the number of employees per company for ten or so related industries: graphic design, web design, domain industry, hosting industry, digital advertising agencies, advertising agencies, website creation software industry... The numbers told me that graphic design and web design companies cannot even afford to hire a second employee - on average. All the other industries, who are known for relying heavily on recurring revenue, had much healthier business indicators. For example, the market in the U.S. for web design / web development is seven times bigger than i.e. the domain name business, but domain name companies are in much better shape, financially. I've described my experience with implementing recurring revenue services in my webdev agency in the book I wrote: https://www.simpfinity.com/books/recurring-revenue-web-agencies/ https://www.simpfinity.com/books/recurring-revenue-web-agenc... - I now firmly believe that charging more + having recurring revenue is the answer to most freelancers' troubles. As soon you upgrade your attitude to charge more for your work, you're ready to start thinking about earning money from existing clients, every month. We've managed to pay for up to 90% of our monthly expenses solely with recurring revenue.
trjordan 12y ago
Here's another way to look at it. When you're selling yourself as a freelancer, the last step in the sale is to make the business case. At that point, you've probably already proved that you could do something for the company, and the business case answers the question, "Why pay this much for this service, right now?" There is more than one way to build a business case. They include: - ROI. How much money will the business make? What fraction of that will you charge? - Opportunity cost. What timeline would it take to get somebody else to do this? How much is that worth? - Productivity / knowledge. Will your work transfer knowledge to people internally? What is the alternative to not hiring you? - Flexibility. If they didn't hire a contractor, what is their equivalent of "freedom cost"? Reminding employers that they can fire you at any time is a positive for you. You may even be able to find others. It's not a trivial task, and it'll take some digging, but keep your ears open. You can always find ways that different companies rationalize spending money, and using one company's framework to help another justify the spend can make things go much more smoothly.
treve 12y ago
I have on occasion simply raised the number of hours in the equation, instead of my rate. Strictly for fixed-price projects though. They get the same bang for their buck, but lower hourly rates is for some customers easier to swallow.
- dpark 12y ago
  They get the "same bang for their buck" while you "simply raised the number of hours"? That sounds a lot like intentional misrepresentation of hours worked. Or more bluntly, this seems like fraud.
  - ashark 12y ago
    It's what basically every company that delivers project bids that include an estimate of work hours does, AFAIK. Higher hour counts make the managers choosing which bid to accept feel more comfortable, I think. Doesn't necessarily make it right, but it's very common, maybe even expected and off-putting when not committed, in the way that a lot of business-related lies are.
bdunn 12y ago
Justifying your costs by basing what you charge against the costs of a similar employee is a good start, and in my experience it's how most of us start (the old "divide by 2000" trick). I like that Andy makes note that you need to include overhead (prospecting, writing proposals, ...), which a lot of new freelancers tend to miss. However, I think the big takeaway is realizing that the formula presented establishes a minimum threshold. It shouldn't be used to figure out what you charge. My rates are way north of what the a developer/marketer would command on the open market, but I don't contextualize my costs against the equivalent costs of an employee; instead, I anchor my costs against the upside that a successful delivery of a project would yield for my client. The single best way to substantially make more money consulting is to stop selling commodity services (web design, Ruby programming, whatever), and to truly consult. Provide your clients with a way to bridge the problem they face with the solution they desire, and charge accordingly.
- andy_adams 12y ago
  Bingo. Thanks, Brennan. Part of the epiphany I had was "wow, I did a lot more than programming on that project". I managed it, taught other developers, and "consulted" quite a bit. I also read your book right before I had this moment. I hadn't quite bought into it yet, but this was the first step.
- dragos2 12y ago
  Can you give an actual example of some problem that one of your clients had and how did you consult him/her?
  - bdunn 12y ago
    Sure. So I had a client who wanted us to rewrite their 10 year old MS Access app as a web app. The engineer in me would have immediately jumped into "OK, how do I migrate this database into Rails and recreate the functionality and UI of this app?" I would have priced the going rate for web development, and tried to gauge how long it would take to complete. The business owner in me realized that this app is critical to their business. It's the tool they use to manage and close sales, and about 20ish people use it all day, every day. I also knew that the CEO was currently the maintainer of the app, as it was started when the company was a home business and the owner picked up a "Learn MS Access in 21 Days" book. Knowing this, I went to work learning how I could not only modernize the product by making it web based, but I wanted to leverage my experience in usability to optimize how their team uses the app. How can we not just rewrite the app, but also optimize it? Is there a clear path to adding an hour or so a day of additional productivity per employee, and what would 100 hours of combined additional productivity a week mean (financially) for the business? And how much better would it be if the CEO of this small company wasn't needing to maintain the app himself, but could focus on what he does best — growing his company? What I sold wasn't software or a rewrite. I ended up selling a better tomorrow for his business, and a more profitable tomorrow. This "decommoditized" what I was doing, and while he paid me a premium, he received a much better product at the end of the day.
lucaspiller 12y ago
> If I told you about freelancers charging $20,000/week or $350/hour, what would you say? I know what I said: “Sure, they can get away with that, but I couldn’t because…”. How do you raise your rates from $88/hour to $350/hour? That's 4x the rate, it seems like a whole different ball game to me. I have a few regular clients, and there is no way they would be able to afford that, so is it time to ditch them?
- chime 12y ago
  My method goes counter to the article but still ends up with the same result - higher rates with the added advantage that I KNOW it is the highest possible rate I can charge and not worry if I should charge more or less. Here's my simple method: Decide how many hours you want to work each week. Then find double or even triple work than that. Then raise your rates till clients start to drop off until you have your desired weekly hours of work. If you feel your rate for a client is too high, you can always give free or discount hours every once in a while, especially when they are in crisis mode. If you want to drop a client, let them you know you are raising your rates in near future. If they agree to it, great, now you get a bonus for working with bad-client. If they can't afford your new rate, great, you just fired a client without burning down a bridge or having awkward conversation. Your hourly rate is literally the only thing you are getting from the entire contract. They have projects, deadlines, specs, SDLC, deliverables, development methodologies, use cases, and a hundred other things they want. You have an hourly rate. No year-end bonus, no promotion, no office space, no profit sharing, no health plan, no 401k contributions, no office cooler gossip, and certainly no annual raises. Of course, having been on the client side of this equation too, I know how wonderful it is to pay someone a single fixed hourly rate and not have to worry about a hundred minor things because I can trust them to be on top of it without my involvement.
  - nhayden 12y ago
    Your second to last paragraph is a great way to word a conversation I'm about to have. Thanks!
amadeusw 12y ago
I've never freelanced and I'm just about to start (in an SDE-equivalent role), but getting the first job is definitely the hardest. I really need your advice! The back story: My startup is experiencing a quiet period and won't be making money for a few months. I need to make my rent and pay for food, yet have the flexibility to continue working on my startup. I considered asking for a low rate just because of my dire need to make money. This brilliant article makes me reconsider my worth (I've turned down 100k offers to pursue my startup), though. What's the best thing to do in my sitauation? I've built a portfolio and I've considered four approaches that I will take. Which ones should I focus on? Is #2 too much of a long shot? 1. Reach to my network (mostly recent grads, though) 2. Apply to freelancing agencies 3. Reach out to companies that are hiring, have a great cover letter which explains my situation and propose working on a contract basis (is that too much of a long shot?) 4. Reach out to companies that seek freelancers (but how do I find these?) Thanks for advice!
- zrail 12y ago
  5. All of the above. Hang a shingle and start contacting people (and follow up!) Those people who have sent you offers? Contact them and ask what problems they're having and offer to help them solve them.
- andy_adams 12y ago
  I started with #1 and #4. In particular, http://www.authenticjobs.com/ http://www.authenticjobs.com/ is a great place to find quality first-time leads. To get jobs there, I use this formula: 1. Make sure you're only applying to jobs you're really interested in. 2. Write an introduction email that explains your interest in a personal tone. Nothing stodgy, nothing cookie-cutter. 3. Try to be one of the first ones to apply - postings get flooded with applications (most of them crappy), so it doesn't hurt to be in first. This means you may need to check the job board multiple times per day. Beyond job boards: Nothing beats word-of-mouth referrals. Become to "go to" person for your clients and watch the leads roll in. (edit: formatting)
- news_to_me 12y ago
  I just started freelancing after doing a few regular SDE "regular" jobs, and just got my first contract through a freelancing agency. It's been pretty nice in my experience, since they helped explain a lot of things about freelancing that I didn't know, and they handle all the taxes for me (so it's a bit like a consulting firm, and I get a W-4). Ideally I'd like to develop a network so I won't need them for leads, but starting out they've been really helpful.
kaolinite 12y ago
Fantastic article. The company I work for is trying to solve this exact problem with the tool that we're building (http://getbilly.co/ http://getbilly.co/ - not ready yet but launching soon) - trying to get freelancers and businesses to value their time more and charge what they're worth.
reubenswartz 12y ago
The most you can charge is the perceived differential value you provide. So, if the client perceives that you will make them an extra $1M compared to the alternatives, you can charge, say $300K. If you have to do 100 hours of work to do that, don't say that your rate is $3,000/hr. Just say that the $1M costs $300K. You don't always get a clearcut case like that, but the key, as @bdunn mentioned, is that you need to help the customer in a way that other commodity providers can't. Writing Ruby code or working with Photoshop is a commodity. The market sets the rate for those services. But if you can use those skills to reduce costs, increase web conversions, etc, you can provide increased differential value. I've helped a lot of small business owners work through these scenarios, and then come up with numbers that "don't feel right." They don't want to charge what they're worth. Then we have a conversation like this: "I agree with you that it's worth it, but I just don't feel like I can charge that much." "Why not?" "It just doesn't feel right?" "You believe in helping your clients, right?" "Of course." "Would charging the higher rate help you provide more resources and increase the customer's return?" "Probably." "So why are you so hung up on your own feelings that you're hurting your clients by not charging them properly?" OK, it's a bit silly, but it's a real conversation I've had many times. When they are convinced in their head but not in their gut, I ask them to literally practice talking about price in front of a mirror. Do it so that it sound confident, comfortable, and unapologetic. Your customer is getting a great deal! Of course they should want to do this. Steve Jobs never apologized for the fact that a Mac had a higher price than many PCs-- it was just a great deal if you wanted to do certain things. Feedback is that practicing in front of a mirror really helps. ;-)
- dropit_sphere 12y ago
  >"You believe in helping your clients, right?" "Of course." I think this might be the snag. The people who will pay what the SBO is worth will likely not be the same people as the current clients.
  - reubenswartz 12y ago
    This is true in some cases, especially if they don't perceive the value, or they are so cash-strapped that they can't execute on the plans that would really help them. However, this is often an excuse to avoid having the pricing conversation. I've worked with people who have raised rates on existing clients by 30% without losing any of them. Usually, though, you'll lose some clients who don't perceive the value and are a giant pain, anyway. You'll get to do better, more interesting work for most of your clients, who will magically start treating you better, and you'll get to do work for a new set of clients who treat you better than the ones you lost. (Of course, value is not something you assign to a project. It's what the buyer perceives. You can help frame the perception, but it's got to be credible.)
eof 12y ago
I did not read this article and am only commenting on freelancing in general. It requires a good understanding, and importantly, articulation of the problem; but flatrate for projects is the way to go. You can charge more and make the client happier. So many software projects fail; that many clients are happy to pay 50-200%+ premiums for the insurance that if you fail to deliver they won't need to pay. It is hard/impossible to do this when you first start out; but generally speaking if you realize you are selling "peace of mind" rather than whatever it is you are doing; you will make a lot more money and have happier clients.
- chrisbennet 12y ago
  When you charge a flat rate you are assuming the risk of a project. For this, you need to charge a risk premium. My last fixed price contract (what was I thinking?) was estimated to take 120 hours and instead it took 400. I didn't do too bad because I priced that risk into my "rate". If you would normally charge $100 hr, you should charge an effective rate of $175 or $200 hour for a fixed price project. Risk/insurance/peace of mind is something you need to charge for. Don't give it away.
  - eof 12y ago
    Absolutely! You charge a super fat risk premium. My whole point is that clients will pay significant insurance (easily 100% premium) on a flat rate project. I don't talk about hours with my clients when doing flatrate work. I am able to be like "okay.. this should take me 10 hours.. so really it will take me 40 hours, this is eaily worth 3k to them.. if i make anywhere from 75-300/hr I am pretty happy" Then I simply quote 3k and tell them they owe nothing if I don't complete the project to specification. I am very tight on specification and only would do this on projects I fully understand. Even when I have been explicit about risk premiums being 150% of the estimate; clients nearly always choose the flat rate over the hourly with estimate. If I truly believe my estimates; this is an obvious win for me. This is also why I said you can't do it right away; estimates are notoriously hard to get right, you really have to be a veteran to make more money doing flat rate than hourly; but I stand by my conviction that if you are decent at estimating (within .2 - 3x of the estimated hours); clients are generally happy to pay you the risk premium at a rate that is much higher than the actual risk.
tptacek 12y ago
Be very careful basing your rate on your expected salary. It's a trap that will hurt your returns. The most important lesson I think you can learn in consulting is that businesses are paying for more than just lines of code; that a lot of things that you don't intuitively think have any value actually have enormous value. The best way I've managed to describe it is in this comment: https://news.ycombinator.com/item?id=2190379 https://news.ycombinator.com/item?id=2190379 Each of those bullets is something that potentially adds dollar value to a project. Some freelance projects can be valued against the cost of a full-time employee. But ask yourself: "Does the client I'm working for have the capability to hire someone full-time for the service I'm providing? Would they know how? Would they be able to attract the right talent? And: would it make any business sense for them to do that?" If the answer is "no", then please, think of it this way: no more than 50% of the value you're providing comes from actual code; the remainder is business value you create by being available to solve a problem for your client in the precise scheduling and format they need. When you grok this, you see why your rate has nothing at all to do with full-time salary for a comparable tech position. No full-timer can do what you're doing. By definition. Because they're only available full-time. Also: please, for the love of all that's holy, don't bill hourly. You don't have an hourly rate. You have a day rate, for projects so small that you don't charge by the week.
- mbesto 12y ago
  Thomas, thanks for that discussion (almost 4 years ago)! I'm a converted "day rate" person and highly recommend for everyone else. > Be very careful basing your rate on your expected salary. As I mentioned in the linked thread, the problem isn't normally consultants being convinced of these concepts, but rather it's the clients that don't understand this. I often find that going into engagements I have to spend a lot of time explaining these things to clients before moving forward. My suggestions - if they are unwilling to accept/understand that up front you're probably destined to have a shitty client (that will ultimately have financial impact on your business).
- andy_adams 12y ago
  I actually agree with you completely. I bill daily, but this was the first step for me to get there. By the way, thank you for your contributions. Reading your HN profile was a big motivation to move to daily rates - the little bullet point was all it took!
deleted 12y ago
[deleted]
GhotiFish 12y ago
A technique a friend taught me to make good prices. "What number would you not say no to? Assuming you wouldn't enjoy the work." It's helped me make reasonable, and sometimes unreasonable offers, which are good starting points for negotiation.
scrozier 12y ago
I don't see anyone pointing out that the impetus for this blog post was a fixed-price contract that went bad. OP's solution was to raise his rates. This is an apples and oranges discussion. Charging higher rates is not the solution to the pain of fixed-price contracts. And for all but the simplest of projects, fixed price is ill-advised.
smileysteve 12y ago
I confused "Freedom Tax" with self employment tax at first. 25% is definitely a low estimate if it includes 7.5%.
sarciszewski 12y ago
After reading this (and other threads where 'tptacek has written in great detail about the merits of billing by the day, raising your rates, etc.) the only question I have left is: how do freelance consultants typically find clients? Assuming a clean slate and no testimonials or referrals to springboard off of. Is it as simple as calling random businesses? Or is there a nice set of useful tips for starting out? (Has this already been answered in another thread?)
- patio11 12y ago
  Very few people start consulting when immediately out of the womb. One's first client or few clients is often sourced by one's personal network: an old day job, a college buddy who went on to work somewhere, someone you met at the local meetup for Pythonistas, etc. After one is actually working as a consultant, one can fix the "I have no testimonials or referrals" problem fairly quickly. Do great work. Explicitly ask clients, as part of your aftercare (or before), to give you testimonials and/or referrals. e.g. "I'm really happy that this engagement seems to have worked well for everyone. Over the next couple weeks, I'll make myself available to the team if they have any questions about $PROJECT. Naturally, I'm also going to be doing the consulting rainmaking dance. I've really enjoyed working with you -- do you know anyone else who would enjoy working with me?" There are a few other methods which work in a repeatable fashion: a) Go to events populated by people who can say yes to consulting engagements. If you cannot be invited to these for whatever reason or if they don't exist in your area, throw the event yourself. Do presentations which relate in any way to the sort of work that you do and then ask people at the end of the presentation to continue the conversation offline if they found it interesting. You will get 5+ coffee dates per 50 people you present to. Work on converting 1~2 to clients. b) Figure out who should be buying your services. Cold call or cold email them. This strikes engineers as Black Magick Most Foul, but it is actually pretty routine in business, and clearly works in a reproducible fashion. Business owners mostly will not be offended if you send them a considered, personalized, one paragraph pitch to explore business together. Selling and being sold to is what we do all day. c) I hesitate to mention it, since it is a long-ball sort of strategy and typically will not help you pack Q1 with engagements when starting from a standing start in December 2014, but putting a few writeups of what you do for a living on the Internet (you can use WordPress for this but, crucially, you're not shipping blog posts) plus an email capture opportunity can get you a lot of leads over the long run. Virtually anyone on HN who has ever shipped software with a business impact could spend four hours writing about that experience and get a handful of leads every month from now to forever for that investment. Assuming one's consultancy is known to work given people to sell services to, this strikes me as a good use of one's time between engagements.
olddrexperience 12y ago
over age 53 - thought experiment. How much would you charge yourself to WORK on your own brain as a Brain Surgeon? Or comedian star Chris Rock is just another black high school dropout or CHARGES what talent is worth? YOUR CUSTOMER is monitoring your Facebook for signs of depression indicated by drinking too much. Of course your customer is 'paranoid' as your hobby and what you would really do if you were RICH is to RUN A VINEYARD and bottle champaign. Most including perhaps ME are clueless as to what the CUSTOMER IS WILLING TO PAY. Think of it this way. THE CEO signs on with 'golden parachutes' and stock options. GE is still paying plenty for 'club frees' for former CE 'Neutron Jack Welch.' the average tenure of a CEO is less than 3 years, yet some consultants LONGEVITY is 14 years and OLDER THAN the Unix systems of 'the BIG CORP.' It's a simple question of CASH FLOW - most WAGES SLAVES are bound to the paycheck going to the rent. THE VALUATION IS YOUR GENIUS and the MAJOR PROBLEM CHALLENGE is that 'the boss', even BIG CORP, even HQ and even 'the system' does not value your genius. the CONTROVERSIAL SOLUTION used to great effects are the buliding contractors. They have even 'destroyed' the professional engineering consultant industry. This is called design-build-all stops in one shopping. So, BIG CORP. you do NOT pay me for my 'time.' because your employees are too afraid to tell you the truth, you need to hire FREE AGENTS. always offer more for BIGGER PAY. Controversial point number two. Even Contractors and the big water tunnel by Chicago - can go 'bankrupt' and WALK AWAY FROM THE PROJECT. Everyone except the FREE AGENT knows that SO SUE THE SMALL GUY, but too bad your company burns. This is NOT to say that you are an Oracle like Big corp that cannot easily be replaced. oh... have a good lawyer. It has nothing to do with lousy reputation customers; bad environment; DEPRESSED and unhappy customer base and employees, etc. Heeeck. i was happy working for big corp UNTIL I WAS FORCED TO LOOK for FREE AGENT FREEDOM as I was learning little. No, stuuupad! the company paid for your MBA degree but that will not get you a contract. companies that are PROFITABLE are stingy. companies that are LOSING MONEY are desperate not to go bankrupt. At least for me it is NOT the amount or the monies but THE TERMS. how EASY is it to extend the contract flexibly. YES, I expect to do work for your competitors. SURE I LOVE TEACHING, demonsrating, but I am not going to raise the GENIUS LEVEL at your company. Too bad you are stuck with the dumbbbb geniuses there. THE TRENDS - see economics are VERY CLEAR. Labor rates are DECREASING. U get early cataracts from being on the beach sun at AGE 47 and too bad your CONSULTING CONTRACTS with plenty of plane time are GONE. The rent is cheap at the run down apartments - walk up in New York City, but AS SOON AS MARKET DEMAND - area gentrifies, PRICES SKYROCKET. leases are less than a year and can be brocken by the LANDLORD or the 'BIG POWER.' The reason you charge more is for the 'rainy days'

395 points by andy_adams 12y ago

raphinou 12y ago

This seems to be for the us and unapplicable to europe (factor 1.25 seems too low), right?

flashfabrixx 12y ago
You're right. In Germany you'll need to do the math with 1.40 at least.
andy_adams 12y ago
1.25 is too low for the US, too. However, we're just establishing the minimum, so I erred on the low end. 1.5 or 2.0 would probably come closer to reality.
- zrail 12y ago
  It's highly individual. Mine is about 2.25 because of an infuriating rule about deducting health care premiums. bdunn's course Double Your Freelancing Rate[1] has a really good in-depth discussion on how you can figure this out for yourself. [1]: http://doubleyourfreelancing.com/rate/ http://doubleyourfreelancing.com/rate/

twelfthnight 12y ago

This is great. The simple model to estimate minimum hourly rate is useful and I believe would create a convincing argument in negotiations of rates. (Of course, one wouldn't have to be so conservative in the estimates in that case).

gk1 12y ago

I was nodding my head in agreement… All the way until the “How much would I charge?” part. Here’s something to consider for other freelancers reading this: 1. We all know what a pain it is to bill hourly. The way-off estimates, the tracking, the reporting… Why not bill on a daily/weekly/monthly rate? I know what you’re thinking: “But how will my client know how much work I’m doing?!” In the past year that I’ve been doing this, the ONLY people to ever ask me that were other freelancers, NOT clients/prospects. Clients–the good ones, at least–don’t CARE how many hours you’re spending to do X and Y, as long as you’re doing a damn good job at X and Y and adding significant value to their company. 2. Why tie your rates to your cost of living? (And number of vacation days, and tax rate, and other arbitrary multipliers/divisors…) Your rate should reflect the value you bring to a company. (Yes, figuring the value of your work for a company could be tricky, but that’s another matter…) Using living expenses to calculate your rates makes as much sense as pricing milk by the size of the cow that produced it. Charging based on value will almost always get you more than charging based on your thrifty living expenses. (And if it doesn’t, then either you’re underestimating your work’s value or your clients are way too small.)

andy_adams 12y ago
You are 100% correct on both counts. Personally, I bill daily and roughly according to the value I'm providing. This particular article was outlining the steps I had to take before I could charge by value, by the day. Some people are able to charge a ton right off the bat. For me, it was a gradual understanding of pricing that brought me up. Thanks for the comment!
- gk1 12y ago
  Another good way to "break out" of the low-hourly-rate trap, for those reading this... Just give highest price you can say without laughing. (Wish I could give credit to whomever I heard that from, but I can't remember...) Anecdote: I was once on a call with a prospect, and it seemed we were both in complete agreement about value mattering more than hours spent doing X and Y.... Then when I mentioned my rate, the prospect immediately started doing calculations out loud such as "well I could get 40-50 hours per week out of a full-time employee for $X, yadda yadda yadda..." So they cared more about how many hours they can get out of someone than how much value... That's a company you don't want to work with.
davidw 12y ago
Here's my doubt about that: I like having control of my own time. I sometimes arrive later than others and often leave earlier. I get a lot done, though. But I am concerned that asking for 'daily' pay and not putting in the same hours might start to rankle.
- gk1 12y ago
  If the company continues to get same substantial value from your work, yet they're bugging you about the number of minutes it took you to do it, then they have their priorities backwards. There are cases when timing matters, such as if you're expected to collaborate with internal teams who have set schedules, but that has less to do with how many hours you spent doing X.
  - davidw 12y ago

edw519 12y ago

Nice write-up, but a little too complex for me. I've taken a slightly different approach that I've never had to "talk myself into"... I got the gig by charging something we both felt comfortable with. Then I raised my rates 10% every 90 days. No discussion, no debate, no permission, just, "Starting October 1, my new rate is x." If they said no, I'd walk away. That never happened. I remember the first time I crossed $100 using this method. My client said, "Now we'll have to start treating you like a real consultant." I said, "OK."

gk1 12y ago
> "Now we'll have to start treating you like a real consultant." I said, "OK." That's funny... I bet it felt great hearing that. I remember when I had more than 1 concurrent client for the first time ever, I thought to myself: "Wow, now I'm a real consultant, not a wanna-be-consultant!"
deleted 12y ago
[deleted]
- zo1 12y ago
  Don't think he meant that the increase is cumulative across clients. I understood it as he charges more the longer he stays with a single client. Then resets back to a normal/usual rate for new/previous clients.
reledi 12y ago
Did it come as a surprise to your clients that your rates would increase every 90 days, or did they know before hiring you?

jtbigwoo 12y ago

I really wish everybody who was a freelancer had a chance to work for six months in a big-time consulting firm (e.g. Computer Science Corp, Accenture, Sapient, or IBM Global Services). Get an up-close look at how much companies will pay for developers, project managers, and designers. Medium-sized or larger companies have no problem paying $175+ per hour for average developers who have the right experience. If you're any good, you'll soon see that a big company will pay $200+/hour for you. Sure, there's extra overhead involved in those big firms, but there's no way you'll come out of that experience thinking you're only worth $50/hour.

connie_lingus 12y ago
right, but remember what the companies are mostly paying for is the all the resources and reassurances of an IBM, not for the particular developer they are using to get the work done.
- mattmanser 12y ago
  No, they're really not. Small companies also charge this rate.
  - spdustin 12y ago
    This. I own a small consulting and training shop focusing on a particular "enterprise" product that's used by more companies than I can count, big or little. We charge a premium rate per hour for consulting, and a premium per-day rate for training. Been doing it for over a decade now. Companies that would hire out to Accenture or Avenade or name-your-consulting-firm-here would, in our experience, much prefer to pay someone they can speak to about their skills and work without a technical sales rep getting in the way. It's not even that tough to get into a client's "preferred vendor" list, if they have one. The combination of humble confidence and actually knowing your shit is a potent one. Edit: typo
  - mtbcoder 12y ago
    Not disagreeing with you, but I would add, "Small established companies" can charge these rates. No one is going to pay some unknown person/company $200/hr without an established track record.

throwaway90446 12y ago

Little bit of reality for you, HN. All due respect to patio11, who has made an excellent career for himself, but outside of the usual suspects (NYC, SF, Chicago), the kind of rates he talks about will get you laughed out of almost all client negotiations.

gk1 12y ago
I don't think anyone here is talking about the kind of rates he talks about ($30k/week is what he's mentioned in the past)... There is a huge gap between that and the undervalued rates many freelancers charge.
andy_adams 12y ago
I definitely don't charge what he does. But if you ever want to get closer, you've gotta take the steps. Setting a baseline that was logical was the first step for me.
tptacek 12y ago
It's true. Patrick is able to charge those rates because he was bit by a radioactive spider, and because he famously invented the idea of hooking "Hello World" up to a random number generator and people want a little slice of that sweet sweet bingo card expertise.
- chc 12y ago
  I think you're being a little bit flip. As a matter of fact, he is famous for hooking up "Hello World" to a random-number generator. You're right that it's not really an extraordinary feat on its face, but he garnered a lot of recognition for it nonetheless. Most of us here don't have well-funded companies approaching us to consult for them, so I'm not sure why you're downplaying how special the results of that were for Patrick.
  - jameshush 12y ago
    He's not famous. At all. We think he's great on hacker news (I've read the vast majority of his blog and listened to every episode of his podcast), but in the _real world_ nobody actually knows who he is. According to him, most of his consulting gigs have been word of mouth. If he can do it, so can we :)

morganvachon 12y ago

For someone like me who is a "jack of all trades master of none" type of freelancer, this formula works fairly well. I have the advantage of having a full time job and freelancing on the side for extra spending/saving money. But if I ever do make the great leap to a full time freelancer, this formula tells me that I can make it for only a little more than I charge now. Granted, I'm in a suburban/semi-rural area, so I may actually have to raise my rates to make a livable wage on my own, since the client pool is smaller, and this is part of why I haven't already made the leap. Admittedly, the "imposter syndrome" the author spoke of is probably a factor as well; deep down I know I'm good at what I do, but every time I have to research something I end up feeling like a know-nothing. That's something I'll have to overcome not only if I want to set forth on my own as a full time freelancer, but even if I want to advance as an employee.

gk1 12y ago
If it's of any help, the impostor syndrome isn't unique to new freelancers. I've been consulting steadily for over a year, and I still feel it frequently. Acknowledge the feeling but don't let it be a barrier. (Maybe someone more experienced can chime in if I'm wrong about this.)
- pc86 12y ago
  I contracted full-time for about 2.5 years before going back to being an FTE for the stability. Even as I steadily raised my rates upwards of $150/hr+ I still thought back to when I was charging $70 and that I was doing the exact same work and providing the exact same value. Even when you're in the thick of it, it's sometimes hard to contextualize that no, I'm not charging too much now, I was just charging too little then. You will lose clients as your rates go up, it's only natural (I had one complain very loudly when I went from $70 to $80 an hour, even though he only needed 2-3 hours of work a month at most; he left when I went to $95 about 6 months later). With few exceptions, most of them will be the painful ones.
- morganvachon 12y ago
  I've done IT based side work for nearly 20 years now, so I know it's not unique to those just starting out. My main problem really is that I'm just too helpful; I have a natural inclination to help people, and that leads to being taken advantage of at times. There is one particular client I could have charged twice my regular rate and they could have afforded it, but they saw how "nice" I was being by charging them (a sole proprietorship business) the same rate as the old lady down the street, and figured they had a sucker. When I tried to raise my rates they dropped me and hired someone who charged twice what I did but ultimately wasn't willing to put up with their attitude like I was. Of course, I considered it a good thing as I lost a headache, but I also lost a good referral. In short, I need to stop trying to help my clients financially by offering rock bottom rates (and devaluing myself - imposter syndrome again), and focus on doing the job they are willing to pay me a good rate for. I can still undercut the competition, what little there is here, and make a decent living doing it.

blendergasket 12y ago

This is great. Thank you so much! I was curious if you had any advise on figuring out per project rates? I'm pretty new at making Wordpress sites but I make nice, handsome, responsive and very usable sites. People I have made sites for so far have wanted a single fee for the whole project. I'm not so good at estimating the number of hours that go into a project yet. Do you have a rule of thumb aside from estimated hours * rate?

jamon51 12y ago
I wouldn't do a project rate as a freelancer. I own a design/development studio and encourage my employees to do side work if they want to, in order to get some experience in areas they don't normally dabble in. Examples are estimating, invoicing, figuring out tough problems all on their own (and being on the hook for the solutions), etc. I think it's awesome. But I always tell them to bill hourly. I do NOT want them to make the same mistakes that I did when I got started. Working late into the night for free is never a fun feeling.
- blendergasket 12y ago
  Well put. That makes perfect sense. Thank you for your input.

luckyisgood 12y ago

Charging more is only half the work on escaping feast and famine cycles when you're a freelancer or an agency. A while ago, I wrote a post to my inner circle of email suscribers about one sure way I've found that works when it comes to charging more (here's the email article: http://logit.createsend.com/t/ViewEmailArchive/r/3991C04F56F89D262540EF23F30FEDED/C67FD2F38AC4859C/ http://logit.createsend.com/t/ViewEmailArchive/r/3991C04F56F... - hint: saying "just double your prices" does not work for everybody, like andy_adams discovered himself; I've got a better way - increase prices gradually and with every project.) The second half of being satisfied with your (freelancing or agency) career is having abundant recurring revenue. I recently analyzed revenues, market size and the number of employees per company for ten or so related industries: graphic design, web design, domain industry, hosting industry, digital advertising agencies, advertising agencies, website creation software industry... The numbers told me that graphic design and web design companies cannot even afford to hire a second employee - on average. All the other industries, who are known for relying heavily on recurring revenue, had much healthier business indicators. For example, the market in the U.S. for web design / web development is seven times bigger than i.e. the domain name business, but domain name companies are in much better shape, financially. I've described my experience with implementing recurring revenue services in my webdev agency in the book I wrote: https://www.simpfinity.com/books/recurring-revenue-web-agencies/ https://www.simpfinity.com/books/recurring-revenue-web-agenc... - I now firmly believe that charging more + having recurring revenue is the answer to most freelancers' troubles. As soon you upgrade your attitude to charge more for your work, you're ready to start thinking about earning money from existing clients, every month. We've managed to pay for up to 90% of our monthly expenses solely with recurring revenue.

trjordan 12y ago

Here's another way to look at it. When you're selling yourself as a freelancer, the last step in the sale is to make the business case. At that point, you've probably already proved that you could do something for the company, and the business case answers the question, "Why pay this much for this service, right now?" There is more than one way to build a business case. They include: - ROI. How much money will the business make? What fraction of that will you charge? - Opportunity cost. What timeline would it take to get somebody else to do this? How much is that worth? - Productivity / knowledge. Will your work transfer knowledge to people internally? What is the alternative to not hiring you? - Flexibility. If they didn't hire a contractor, what is their equivalent of "freedom cost"? Reminding employers that they can fire you at any time is a positive for you. You may even be able to find others. It's not a trivial task, and it'll take some digging, but keep your ears open. You can always find ways that different companies rationalize spending money, and using one company's framework to help another justify the spend can make things go much more smoothly.

treve 12y ago

I have on occasion simply raised the number of hours in the equation, instead of my rate. Strictly for fixed-price projects though. They get the same bang for their buck, but lower hourly rates is for some customers easier to swallow.

dpark 12y ago
They get the "same bang for their buck" while you "simply raised the number of hours"? That sounds a lot like intentional misrepresentation of hours worked. Or more bluntly, this seems like fraud.
- ashark 12y ago
  It's what basically every company that delivers project bids that include an estimate of work hours does, AFAIK. Higher hour counts make the managers choosing which bid to accept feel more comfortable, I think. Doesn't necessarily make it right, but it's very common, maybe even expected and off-putting when not committed, in the way that a lot of business-related lies are.

bdunn 12y ago

Justifying your costs by basing what you charge against the costs of a similar employee is a good start, and in my experience it's how most of us start (the old "divide by 2000" trick). I like that Andy makes note that you need to include overhead (prospecting, writing proposals, ...), which a lot of new freelancers tend to miss. However, I think the big takeaway is realizing that the formula presented establishes a minimum threshold. It shouldn't be used to figure out what you charge. My rates are way north of what the a developer/marketer would command on the open market, but I don't contextualize my costs against the equivalent costs of an employee; instead, I anchor my costs against the upside that a successful delivery of a project would yield for my client. The single best way to substantially make more money consulting is to stop selling commodity services (web design, Ruby programming, whatever), and to truly consult. Provide your clients with a way to bridge the problem they face with the solution they desire, and charge accordingly.

andy_adams 12y ago
Bingo. Thanks, Brennan. Part of the epiphany I had was "wow, I did a lot more than programming on that project". I managed it, taught other developers, and "consulted" quite a bit. I also read your book right before I had this moment. I hadn't quite bought into it yet, but this was the first step.
dragos2 12y ago
Can you give an actual example of some problem that one of your clients had and how did you consult him/her?
- bdunn 12y ago
  Sure. So I had a client who wanted us to rewrite their 10 year old MS Access app as a web app. The engineer in me would have immediately jumped into "OK, how do I migrate this database into Rails and recreate the functionality and UI of this app?" I would have priced the going rate for web development, and tried to gauge how long it would take to complete. The business owner in me realized that this app is critical to their business. It's the tool they use to manage and close sales, and about 20ish people use it all day, every day. I also knew that the CEO was currently the maintainer of the app, as it was started when the company was a home business and the owner picked up a "Learn MS Access in 21 Days" book. Knowing this, I went to work learning how I could not only modernize the product by making it web based, but I wanted to leverage my experience in usability to optimize how their team uses the app. How can we not just rewrite the app, but also optimize it? Is there a clear path to adding an hour or so a day of additional productivity per employee, and what would 100 hours of combined additional productivity a week mean (financially) for the business? And how much better would it be if the CEO of this small company wasn't needing to maintain the app himself, but could focus on what he does best — growing his company? What I sold wasn't software or a rewrite. I ended up selling a better tomorrow for his business, and a more profitable tomorrow. This "decommoditized" what I was doing, and while he paid me a premium, he received a much better product at the end of the day.

lucaspiller 12y ago

> If I told you about freelancers charging $20,000/week or $350/hour, what would you say? I know what I said: “Sure, they can get away with that, but I couldn’t because…”. How do you raise your rates from $88/hour to $350/hour? That's 4x the rate, it seems like a whole different ball game to me. I have a few regular clients, and there is no way they would be able to afford that, so is it time to ditch them?

chime 12y ago
My method goes counter to the article but still ends up with the same result - higher rates with the added advantage that I KNOW it is the highest possible rate I can charge and not worry if I should charge more or less. Here's my simple method: Decide how many hours you want to work each week. Then find double or even triple work than that. Then raise your rates till clients start to drop off until you have your desired weekly hours of work. If you feel your rate for a client is too high, you can always give free or discount hours every once in a while, especially when they are in crisis mode. If you want to drop a client, let them you know you are raising your rates in near future. If they agree to it, great, now you get a bonus for working with bad-client. If they can't afford your new rate, great, you just fired a client without burning down a bridge or having awkward conversation. Your hourly rate is literally the only thing you are getting from the entire contract. They have projects, deadlines, specs, SDLC, deliverables, development methodologies, use cases, and a hundred other things they want. You have an hourly rate. No year-end bonus, no promotion, no office space, no profit sharing, no health plan, no 401k contributions, no office cooler gossip, and certainly no annual raises. Of course, having been on the client side of this equation too, I know how wonderful it is to pay someone a single fixed hourly rate and not have to worry about a hundred minor things because I can trust them to be on top of it without my involvement.
- nhayden 12y ago
  Your second to last paragraph is a great way to word a conversation I'm about to have. Thanks!

amadeusw 12y ago

I've never freelanced and I'm just about to start (in an SDE-equivalent role), but getting the first job is definitely the hardest. I really need your advice! The back story: My startup is experiencing a quiet period and won't be making money for a few months. I need to make my rent and pay for food, yet have the flexibility to continue working on my startup. I considered asking for a low rate just because of my dire need to make money. This brilliant article makes me reconsider my worth (I've turned down 100k offers to pursue my startup), though. What's the best thing to do in my sitauation? I've built a portfolio and I've considered four approaches that I will take. Which ones should I focus on? Is #2 too much of a long shot? 1. Reach to my network (mostly recent grads, though) 2. Apply to freelancing agencies 3. Reach out to companies that are hiring, have a great cover letter which explains my situation and propose working on a contract basis (is that too much of a long shot?) 4. Reach out to companies that seek freelancers (but how do I find these?) Thanks for advice!

zrail 12y ago
5. All of the above. Hang a shingle and start contacting people (and follow up!) Those people who have sent you offers? Contact them and ask what problems they're having and offer to help them solve them.
andy_adams 12y ago
I started with #1 and #4. In particular, http://www.authenticjobs.com/ http://www.authenticjobs.com/ is a great place to find quality first-time leads. To get jobs there, I use this formula: 1. Make sure you're only applying to jobs you're really interested in. 2. Write an introduction email that explains your interest in a personal tone. Nothing stodgy, nothing cookie-cutter. 3. Try to be one of the first ones to apply - postings get flooded with applications (most of them crappy), so it doesn't hurt to be in first. This means you may need to check the job board multiple times per day. Beyond job boards: Nothing beats word-of-mouth referrals. Become to "go to" person for your clients and watch the leads roll in. (edit: formatting)
news_to_me 12y ago
I just started freelancing after doing a few regular SDE "regular" jobs, and just got my first contract through a freelancing agency. It's been pretty nice in my experience, since they helped explain a lot of things about freelancing that I didn't know, and they handle all the taxes for me (so it's a bit like a consulting firm, and I get a W-4). Ideally I'd like to develop a network so I won't need them for leads, but starting out they've been really helpful.

kaolinite 12y ago

Fantastic article. The company I work for is trying to solve this exact problem with the tool that we're building (http://getbilly.co/ http://getbilly.co/ - not ready yet but launching soon) - trying to get freelancers and businesses to value their time more and charge what they're worth.

reubenswartz 12y ago

The most you can charge is the perceived differential value you provide. So, if the client perceives that you will make them an extra $1M compared to the alternatives, you can charge, say $300K. If you have to do 100 hours of work to do that, don't say that your rate is $3,000/hr. Just say that the $1M costs $300K. You don't always get a clearcut case like that, but the key, as @bdunn mentioned, is that you need to help the customer in a way that other commodity providers can't. Writing Ruby code or working with Photoshop is a commodity. The market sets the rate for those services. But if you can use those skills to reduce costs, increase web conversions, etc, you can provide increased differential value. I've helped a lot of small business owners work through these scenarios, and then come up with numbers that "don't feel right." They don't want to charge what they're worth. Then we have a conversation like this: "I agree with you that it's worth it, but I just don't feel like I can charge that much." "Why not?" "It just doesn't feel right?" "You believe in helping your clients, right?" "Of course." "Would charging the higher rate help you provide more resources and increase the customer's return?" "Probably." "So why are you so hung up on your own feelings that you're hurting your clients by not charging them properly?" OK, it's a bit silly, but it's a real conversation I've had many times. When they are convinced in their head but not in their gut, I ask them to literally practice talking about price in front of a mirror. Do it so that it sound confident, comfortable, and unapologetic. Your customer is getting a great deal! Of course they should want to do this. Steve Jobs never apologized for the fact that a Mac had a higher price than many PCs-- it was just a great deal if you wanted to do certain things. Feedback is that practicing in front of a mirror really helps. ;-)

dropit_sphere 12y ago
>"You believe in helping your clients, right?" "Of course." I think this might be the snag. The people who will pay what the SBO is worth will likely not be the same people as the current clients.
- reubenswartz 12y ago
  This is true in some cases, especially if they don't perceive the value, or they are so cash-strapped that they can't execute on the plans that would really help them. However, this is often an excuse to avoid having the pricing conversation. I've worked with people who have raised rates on existing clients by 30% without losing any of them. Usually, though, you'll lose some clients who don't perceive the value and are a giant pain, anyway. You'll get to do better, more interesting work for most of your clients, who will magically start treating you better, and you'll get to do work for a new set of clients who treat you better than the ones you lost. (Of course, value is not something you assign to a project. It's what the buyer perceives. You can help frame the perception, but it's got to be credible.)

eof 12y ago

I did not read this article and am only commenting on freelancing in general. It requires a good understanding, and importantly, articulation of the problem; but flatrate for projects is the way to go. You can charge more and make the client happier. So many software projects fail; that many clients are happy to pay 50-200%+ premiums for the insurance that if you fail to deliver they won't need to pay. It is hard/impossible to do this when you first start out; but generally speaking if you realize you are selling "peace of mind" rather than whatever it is you are doing; you will make a lot more money and have happier clients.

chrisbennet 12y ago
When you charge a flat rate you are assuming the risk of a project. For this, you need to charge a risk premium. My last fixed price contract (what was I thinking?) was estimated to take 120 hours and instead it took 400. I didn't do too bad because I priced that risk into my "rate". If you would normally charge $100 hr, you should charge an effective rate of $175 or $200 hour for a fixed price project. Risk/insurance/peace of mind is something you need to charge for. Don't give it away.
- eof 12y ago
  Absolutely! You charge a super fat risk premium. My whole point is that clients will pay significant insurance (easily 100% premium) on a flat rate project. I don't talk about hours with my clients when doing flatrate work. I am able to be like "okay.. this should take me 10 hours.. so really it will take me 40 hours, this is eaily worth 3k to them.. if i make anywhere from 75-300/hr I am pretty happy" Then I simply quote 3k and tell them they owe nothing if I don't complete the project to specification. I am very tight on specification and only would do this on projects I fully understand. Even when I have been explicit about risk premiums being 150% of the estimate; clients nearly always choose the flat rate over the hourly with estimate. If I truly believe my estimates; this is an obvious win for me. This is also why I said you can't do it right away; estimates are notoriously hard to get right, you really have to be a veteran to make more money doing flat rate than hourly; but I stand by my conviction that if you are decent at estimating (within .2 - 3x of the estimated hours); clients are generally happy to pay you the risk premium at a rate that is much higher than the actual risk.

tptacek 12y ago

Be very careful basing your rate on your expected salary. It's a trap that will hurt your returns. The most important lesson I think you can learn in consulting is that businesses are paying for more than just lines of code; that a lot of things that you don't intuitively think have any value actually have enormous value. The best way I've managed to describe it is in this comment: https://news.ycombinator.com/item?id=2190379 https://news.ycombinator.com/item?id=2190379 Each of those bullets is something that potentially adds dollar value to a project. Some freelance projects can be valued against the cost of a full-time employee. But ask yourself: "Does the client I'm working for have the capability to hire someone full-time for the service I'm providing? Would they know how? Would they be able to attract the right talent? And: would it make any business sense for them to do that?" If the answer is "no", then please, think of it this way: no more than 50% of the value you're providing comes from actual code; the remainder is business value you create by being available to solve a problem for your client in the precise scheduling and format they need. When you grok this, you see why your rate has nothing at all to do with full-time salary for a comparable tech position. No full-timer can do what you're doing. By definition. Because they're only available full-time. Also: please, for the love of all that's holy, don't bill hourly. You don't have an hourly rate. You have a day rate, for projects so small that you don't charge by the week.

mbesto 12y ago
Thomas, thanks for that discussion (almost 4 years ago)! I'm a converted "day rate" person and highly recommend for everyone else. > Be very careful basing your rate on your expected salary. As I mentioned in the linked thread, the problem isn't normally consultants being convinced of these concepts, but rather it's the clients that don't understand this. I often find that going into engagements I have to spend a lot of time explaining these things to clients before moving forward. My suggestions - if they are unwilling to accept/understand that up front you're probably destined to have a shitty client (that will ultimately have financial impact on your business).
andy_adams 12y ago
I actually agree with you completely. I bill daily, but this was the first step for me to get there. By the way, thank you for your contributions. Reading your HN profile was a big motivation to move to daily rates - the little bullet point was all it took!

deleted 12y ago

[deleted]

GhotiFish 12y ago

A technique a friend taught me to make good prices. "What number would you not say no to? Assuming you wouldn't enjoy the work." It's helped me make reasonable, and sometimes unreasonable offers, which are good starting points for negotiation.

scrozier 12y ago

I don't see anyone pointing out that the impetus for this blog post was a fixed-price contract that went bad. OP's solution was to raise his rates. This is an apples and oranges discussion. Charging higher rates is not the solution to the pain of fixed-price contracts. And for all but the simplest of projects, fixed price is ill-advised.

smileysteve 12y ago

I confused "Freedom Tax" with self employment tax at first. 25% is definitely a low estimate if it includes 7.5%.

sarciszewski 12y ago

After reading this (and other threads where 'tptacek has written in great detail about the merits of billing by the day, raising your rates, etc.) the only question I have left is: how do freelance consultants typically find clients? Assuming a clean slate and no testimonials or referrals to springboard off of. Is it as simple as calling random businesses? Or is there a nice set of useful tips for starting out? (Has this already been answered in another thread?)

patio11 12y ago
Very few people start consulting when immediately out of the womb. One's first client or few clients is often sourced by one's personal network: an old day job, a college buddy who went on to work somewhere, someone you met at the local meetup for Pythonistas, etc. After one is actually working as a consultant, one can fix the "I have no testimonials or referrals" problem fairly quickly. Do great work. Explicitly ask clients, as part of your aftercare (or before), to give you testimonials and/or referrals. e.g. "I'm really happy that this engagement seems to have worked well for everyone. Over the next couple weeks, I'll make myself available to the team if they have any questions about $PROJECT. Naturally, I'm also going to be doing the consulting rainmaking dance. I've really enjoyed working with you -- do you know anyone else who would enjoy working with me?" There are a few other methods which work in a repeatable fashion: a) Go to events populated by people who can say yes to consulting engagements. If you cannot be invited to these for whatever reason or if they don't exist in your area, throw the event yourself. Do presentations which relate in any way to the sort of work that you do and then ask people at the end of the presentation to continue the conversation offline if they found it interesting. You will get 5+ coffee dates per 50 people you present to. Work on converting 1~2 to clients. b) Figure out who should be buying your services. Cold call or cold email them. This strikes engineers as Black Magick Most Foul, but it is actually pretty routine in business, and clearly works in a reproducible fashion. Business owners mostly will not be offended if you send them a considered, personalized, one paragraph pitch to explore business together. Selling and being sold to is what we do all day. c) I hesitate to mention it, since it is a long-ball sort of strategy and typically will not help you pack Q1 with engagements when starting from a standing start in December 2014, but putting a few writeups of what you do for a living on the Internet (you can use WordPress for this but, crucially, you're not shipping blog posts) plus an email capture opportunity can get you a lot of leads over the long run. Virtually anyone on HN who has ever shipped software with a business impact could spend four hours writing about that experience and get a handful of leads every month from now to forever for that investment. Assuming one's consultancy is known to work given people to sell services to, this strikes me as a good use of one's time between engagements.

olddrexperience 12y ago

over age 53 - thought experiment. How much would you charge yourself to WORK on your own brain as a Brain Surgeon? Or comedian star Chris Rock is just another black high school dropout or CHARGES what talent is worth? YOUR CUSTOMER is monitoring your Facebook for signs of depression indicated by drinking too much. Of course your customer is 'paranoid' as your hobby and what you would really do if you were RICH is to RUN A VINEYARD and bottle champaign. Most including perhaps ME are clueless as to what the CUSTOMER IS WILLING TO PAY. Think of it this way. THE CEO signs on with 'golden parachutes' and stock options. GE is still paying plenty for 'club frees' for former CE 'Neutron Jack Welch.' the average tenure of a CEO is less than 3 years, yet some consultants LONGEVITY is 14 years and OLDER THAN the Unix systems of 'the BIG CORP.' It's a simple question of CASH FLOW - most WAGES SLAVES are bound to the paycheck going to the rent. THE VALUATION IS YOUR GENIUS and the MAJOR PROBLEM CHALLENGE is that 'the boss', even BIG CORP, even HQ and even 'the system' does not value your genius. the CONTROVERSIAL SOLUTION used to great effects are the buliding contractors. They have even 'destroyed' the professional engineering consultant industry. This is called design-build-all stops in one shopping. So, BIG CORP. you do NOT pay me for my 'time.' because your employees are too afraid to tell you the truth, you need to hire FREE AGENTS. always offer more for BIGGER PAY. Controversial point number two. Even Contractors and the big water tunnel by Chicago - can go 'bankrupt' and WALK AWAY FROM THE PROJECT. Everyone except the FREE AGENT knows that SO SUE THE SMALL GUY, but too bad your company burns. This is NOT to say that you are an Oracle like Big corp that cannot easily be replaced. oh... have a good lawyer. It has nothing to do with lousy reputation customers; bad environment; DEPRESSED and unhappy customer base and employees, etc. Heeeck. i was happy working for big corp UNTIL I WAS FORCED TO LOOK for FREE AGENT FREEDOM as I was learning little. No, stuuupad! the company paid for your MBA degree but that will not get you a contract. companies that are PROFITABLE are stingy. companies that are LOSING MONEY are desperate not to go bankrupt. At least for me it is NOT the amount or the monies but THE TERMS. how EASY is it to extend the contract flexibly. YES, I expect to do work for your competitors. SURE I LOVE TEACHING, demonsrating, but I am not going to raise the GENIUS LEVEL at your company. Too bad you are stuck with the dumbbbb geniuses there. THE TRENDS - see economics are VERY CLEAR. Labor rates are DECREASING. U get early cataracts from being on the beach sun at AGE 47 and too bad your CONSULTING CONTRACTS with plenty of plane time are GONE. The rent is cheap at the run down apartments - walk up in New York City, but AS SOON AS MARKET DEMAND - area gentrifies, PRICES SKYROCKET. leases are less than a year and can be brocken by the LANDLORD or the 'BIG POWER.' The reason you charge more is for the 'rainy days'