Pick a mail forwarding service that is high quality that can both scan and forward mail and packages with a very low turnaround time. Moving and having to update address info with N agencies and clients is a huge and unnecessary PITA.
After your first year, hire an accountant to audit your accountant, figure out which one is doing things in a way you agree with, use that one going forward.
Getting paid a lot of money to build something that never gets users is draining and not fun. There are tons and tons of people — super naive entrepreneurs — that are willing to pay a lot of money to build the complex castle in the clouds they imagine, and are then surprised when no one switches over to use it. I’ve literally heard people say “no we can’t build an mvp, it only works if everything is there.”
you're wrong. you can only ignore your conscience for so long if you have a particular set of morals/principles and fighting the urge to push back on decisions is exhausting because it creeps into every other decision you end up making on a project.
You are providing a service in exchange for money. As long as your service is good you have done your part. It’s not your business to decide whether your customers are doing the right thing. It’s up to them to decide what they want do. Maybe they just know what they are doing?
>Getting paid a lot of money to build something that never gets users is draining and not fun. There are tons and tons of people — super naive entrepreneurs — that are willing to pay a lot of money to build the complex castle in the clouds they imagine, and are then surprised when no one switches over to use it. I’ve literally heard people say “no we can’t build an mvp, it only works if everything is there.”
I guess in my years as consultant I have not met a lot of people who could afford my rates and were clueless at the same time. Maybe I didn’t understand what they were after and what their business situation was but I almost always found out that they had spent much more time thinking about their business than I had so I learned to mind my own business and do a good job.
I wonder if you are trolling us, as you are wrong across several important dimensions.
First, your opinions about what you're working on are at least as important as your development contributions. Good clients light up when someone smart shows up and pushes back against their dumber ideas. It's unfortunately true that most leaders have unintentionally created social structures around themselves where, for several reasons, they are rarely disagreed with. Someone offering a compelling and assertive telling you not to do something before you do it will be regarded with the passion of a new lover. People inside of an organization are hamstrung by harsh social, political and personal setbacks if they are perceived as disagreeable and frankly, most employees need to believe their founder has a clear vision. Result: no honest feedback.
Second, even if you're totally fine taking a sociopathic view and accept money for work that you know in advance will fail, the people who work for you that trust you to find them projects where they can contribute to something meaningful will become depressed and resentful. They will do terrible work until they leave to find something more satisfying.
Finally, this is subjective but experience has led me to conclude that even the most confident and successful people never "just know what they are doing". Entrepreneurs are plagued by imposter syndrome and the vast majority of decisions they make are confident wild guesses based on incomplete data under stress.
The smarter the leader, the more energy they will put into surrounding themselves with smart advisors. And if you're good at your job, you're one of these key advisors and that's why they hire you: to have strong opinions and give a shit about them and their company.
We are talking about consultants here. They get hired for a job and are supposed to do it well. I have hired guys to do stuff that would be needed in case another idea didn’t work out. They did a good job and were appreciated for it but their work got thrown out. I still would hire them again because they did a good job.
I don’t really want a consultant who just came in and thinks he understands the whole situation. As consultant you should do the job you were hired for really well. You can make suggestions but in the end you should assume that the people who hired you know what they are doing until clearly proven otherwise.
It seems as though you are a client and not a consultant, which gives us a little bit of charity when trying to understand why you appear to be utterly clueless about how to be a great consultant.
Answer: you're not a sociopathic consultant, just a client who sees the hired help as a commodity chattel. That's you're perogative, but if you woke up today willing to be humbled, what you haven't realized is that by definition, you're working with below-average consultants who only care that you pay them.
The optimism is that an entirely wonderful future is possible if you accept that you just might be doing it all wrong.
This discussion is getting way out of hand and I really don't like your tone (“humbled” “sociopath” “clueless”) but do you really disagree that as consultant you should be doing what you are hired to do first? If you have been hired to give business advice do that. If you have been hired to do coding do that. Why would anyone listen to you if you haven’t demonstrated some ability and also have learned something about the business that has hired you?
Probably a designer. Gets asked to design a banner ad and ends up trying to rebrand the entire company.
On a serious note it took me a long time to understand that some clients do only want you to execute and do not want you to provide a more holistic professional assessment at every stage.
Your moral obligation is to do what's in your contract to the best of your ability, and not to put anything in the contract that you can't be certain you can deliver on.
i'm not talking about morals here. i'm talking about the nitty gritty of building things in a stupid way simply because the customer so demands it because they have an immature notion of their business or product.
If you are good at this job - understanding, caring about, clarifying, refining, building, integrating and maintaining someone's aspirational vision - then you are exactly perfect to make these judgements. Good clients appreciate and expect strong opinions and trust that their expensive advisors genuinely give a shit about their success.
If any of my clients suspected that I was only maximizing my consulting returns, I would have no clients.
I like what you're saying, I got into making software to build new valuable things not to extract money from the next greater fool.
Sure a contract is a contract but a contract represents a minimum legal obligation, and I like to do and receive a little more than the minimum legal obligation.
That’s a consideration. But if you phrase it correctly, your part actually succeeded. You are not responsible for the whole company, only for your own part.
This literally happens all the time. Build it, nobody shows up. Naive entrepreneurs often think people will simply flock to their SaaS app. "All we need to do is build it!" Forgetting about the other parts, like marketing, sales, support, documentation. Building it really isn't even half of the equation. The other parts are just as hard, often harder...
Correct, this is definitely very draining. My solution was to add a marketing wing to my consultancy. That marketing wing is hyper focused on launch and growth strategy. A high percentage of my clients purchase this "upsell" and the projects go much better post launch. Win/Win. More successful projects = better case studies + more tech work on those successful projects + more marketing work, etc etc etc. It becomes a virtuous cycle.
If you don't feel up to adding this offering, partner with another agency who already does it.
I wore out my throat telling entrepreneurs that they needed money, users, or someone who could bring in either. I responded to the pain of selling shovels to people doomed to get stuck underground by going to established, profitable businesses only but I love the idea of having a marketing service.
Maybe you could get affiliated with some investors too? Why not?
Expect to spend about 50% of your time actually “doing work” of consultancy for clients and the other 50% doing things like:
Marketing,
Business development (sales),
Negotiations, kick-off meetings, contracts,
Invoicing and chasing payments.
In fact in the early days, the proportion of your time doing “non-work” work will be significantly higher than 50%.
- Never do a fixed bid. Not even when the job looks small or you are desperate for work. Any time a fixed bid goes wrong, not only do you lose money and time, but it's unbelievably demoralizing.
- Hire people. If you do it all by yourself, you'll end up doing all the jobs. Fun for about 1 month and then exhausting.
- Be honest. This is the one thing I feel like I got right. When I didn't know how hard something was, I would just tell the prospect or customer that while simultaneously telling them how we were going to figure it out. This approach always got me customers that I could work with and who were patient with me when I was consulting.
- Net 30 or better terms. Cashflow on Net 60 or Net 90 is brutal.
A little more nuanced view of this: if you know the client, their business and their systems well, there can be nothing more profitable than fixed bids. I have quadrupled my normal rate this way and ended up with happy clients. If you don't know them well, then, yes, fixed bids can be very, very risky unless you figure out a way to corner the risk.
I got burned by this as well. A very well known silicon valley company found me here, on HN (I solved one of their puzzles for fun). We agreed on a fixed-priced project. The project wasn't specced well, just a bunch of screen designs without describing exactly how they work. I kept asking for the specs, they always replied "yeah, coming soon, nothing to worry about!". I trusted them. Most of the screens were trivial, a few were complex. At first glance it all made sense. Started working, went through about a third of the project, till I got to one screen with some convoluted UI. It wouldn't work they thought it would, would require a massive redesign, lots of extra work affecting other parts of the app. I told them about it. At first they didn't believe. Then they agreed. Then they wanted me to do all the extra work as "in scope". I declined. Lost two weeks of pay.
Again, this was not some cheap and poor startup, a major company that just raised a ton of money with lots of tech media coverage.
In the end, it's my fault for not going through the exact UI logic on each of the designs, but it's easy to miss when there are 100 designs.
I wouldn't say it's your fault for not going through the exact UI logic, but more for not scoping the project properly from the beginning.
If there is a clear scope laid out in the initial contract it's more clear who is on the hook for anything outside the scope, and easier to recoup losses when the client fails to deliver the requirements properly.
I once onboarded as a vendor for a large, inflexible client and had to choose between two possible payment terms.
something like: EITHER Net 90 OR a schedule of discounts for any payment earlier than that (e.g 1.5% for 30 days and 3% for 15 days). and I wondered how many of their vendors simply jacked up their rates or fees to compensate, thus saving the inflexible client nothing. I guess this is very common.
I automatically increase my bids by at least 30% if I learn there's a purchasing department involved.
Invoicing an engineering manager who needs things to happen tends to be the least friction from my side.
Even if it costs more on the purchase, inflexibility does help streamline business operations. Any business who can just mandate "this is how this process is going to work" and make it stick is going to benefit from not needing to make bespoke agreements with every little vendor they co-operate with. I believe WalMart is the classic example for this case.
The advice against fixed bids is a bit more nuanced - there are two problems at play.
1. You do not fully understand the scope of the project, or think you do but actually don’t. In these cases a fixed bid will be catastrophic.
2. The client themselves do not fully understand the scope of the project, or think they do but actually don’t. This is even more of a disaster for a fixed bid, because even if you give them exactly what they asked for it isn’t going to be what they needed, and that’s what they’ll measure success against.
The advice for fixed bids deals more with the question of value capture. If by hard work, study, and practice, you have a way to deliver $1,000,000 of value to a client, it makes sense to charge (at least) $100,000 for it, even it takes only an hour. This is technically a fixed bid, but not in the traditional sense. Here you understand exactly what it is your client needs, how you’re going to do it, and what value they will derive from it, and so charge a percentage of that value instead of an hourly rate.
Fixed price is fine if:
Not only you understand the scope, but the client does too. Make sure you write down exactly what you're going to deliver in your statement of work, and ANY DEVIATION, CHANGE, or ALTERATION is a change in scope and subject to a change request in writing with added cost.
Also write down in your SOW that anything you send to client for review or as a deliverable, is considered accepted by client if they don't say anything about it for 2 days.
Adding to the fixed bid thing, sometimes it’s far easier to hire a consultant at all if you convince your management that the price is fixed with crystal clear acceptance criteria. “Let’s hire a contractor for an indeterminate time at a high rate” is often a tougher swing.
Another thing higher-ups like is having several options presented:
a) I can do this in 4-6 weeks, but we can also hire a consultant who can probably do this in 6-8 weeks and it is going to cost roughly this much (in this particular example I had intimate knowledge of the system and was proficient with the framework/tools).
b) Look, we don't have anyone on the team particularly suited for this project. We can either train ourselves, but the project will take about two months, or we can hire an expert who can probably do that in a month, and this is going to cost roughly this much.
Of course, be very conservative with your estimates and think hard, if someone from outside of the company can do the project faster (green-field project with unknown tech) or slower (upgrading internal system, for which the original developer is still around, but busy earning money for the company)
this is a very good point. It's like handling dynamite but for an individual or very small team fixed bid is the only way to real revenue.
Think of it this way, you have 40 hours * sizeof(yourteam) to sell per week. There's a ceiling on $/hr or you price yourself out of the market and you don't have a time machine to create more hours. You can either add people to the team or detach the price from time with a fixed bid.
If you don't want hundreds, if not thousands, of consultants in your company then fixed bid is your only path forward.
Came here to say this, although in a slightly different way. No matter what your bill rate is, if your commit is for xx hours per week/month, you're always going to feel like you're losing. Especially when you _inevitably_ encounter the customer who gets irate when you could only manage yy hours of brainpower in a week, even if those hours were superhumanly productive (and they probably were, amirite, or you wouldn't have burned out early for the week). In an age where so many people are seeing past the lie of butts in seats for 40 hours a week, don't be the one to subject your own self to the same.
I mean when you're getting started that's pretty much the only option. No one is going to believe that you're going to be able to deliver an entire app or whatever until you have a couple on your resume. But you certainly shouldn't aspire to be billing by hour.
I joined a consultancy startup a couple years ago. Set aside culture aspirations and your office decor for a second, here's the truth.
1. demand 75% utilization from everyone in delivery. That means 75% of a 40 hour week is billed to a client.
2. If your PMs are happy then the client is happy, if the client is happy then the project is fine. Talk to your PMs often.
3. Bridge sales and delivery with a liaison who has a foot in each department. Give them the authority to tell sales to STFU and also to tell delivery get it done or else.
edit
back to #1 a billed hour is your only source of revenue in consulting. Further, there are only so many hours to sell. Do some math and let that guide you in project decisions.
There are two sides to this. Most clients will want some form of cost control on their end. If the final proposal has ambiguity, you best bet the client's procurement team or relationship manager will want to discuss this. They have people they report to as well, and it's in their best interest to get the best price. The forecast has to have some form of predictability/reliability, otherwise prospective clients will simply stop returning your emails.
> procurement team or relationship manager will want to discuss this
The trick is to find clients who have authority to make decisions without approval from HR or Procurement or wherever.
Despite being a one-person consultancy, I did a multi-month project for a global telecom company. As you would expect, this company has a complicated vendor management system, project approval process, budget approval process, and so on. But because my client was a decision-maker (and not a mid-level manager), none of that mattered...
They wanted my help and they needed it fast, so they told me not to worry about the red tape and that they'd deal with it. The only time I heard from procurement/AP was a friendly request for my W-9 form.
Getting pushback from other departments about value-based billing means you're not dealing with the right person. The right person, a decision-maker, will make those problems go away if they really want to work with you.
Not sure what you mean exactly. I never work through RFPs, and that's the point. If you find someone who really needs your help (not just anyone), they will get you through the necessary hoops and deal with bureaucracy on your behalf.
Are you saying those who go to RFP to keep cost control transparent really don't need the help? It's also kind of egotistical to assume a company needs you and you alone to solve their problem. If the problem is big and important enough, rest assure there's more than one shop that has an idea as to how to fix it.
I also think we're talking apples to oranges. A one person shop may approach contracts differently than a shop with 13 across 3 time zones.
> It's also kind of egotistical to assume a company needs you and you alone to solve their problem. If the problem is big and important enough, rest assure there's more than one shop that has an idea as to how to fix it.
How is it egotistical to say that you’re good enough at what you do that people will make their bureaucratic procedures go away to get you to work for them? It’s either true or it isn’t. The number of people who are literally the only person who can solve a given problem will always be minuscule but being one of the top five people in a very expensive niche is an achievable goal. Being the only one of those people with a public profile and a consulting practice is also achievable.
Think of academic expertise. I’m confident people go to Peter Norvig and ask him as an individual with incredibly deep, broad and publicly known Algorithms skills to do work for them and if they make it too bureaucratic he just declines the work. Likewise economists like Alvin Roth with mechanism design or other hairy, expensive and lucrative problems.
This model of being very good and being known to be very good works for individuals. I’d be shocked if there aren’t one man consulting shops that bill $1m a month, very expensive expertise exists, at a minimum in finance. They probably have a secretary but a principle plus minimal support staff consultancy.
Sell, sell and sell. Hire people. It can be really hard to balance projects if you are alone. Either it’s too much work or too little. Don’t be just a coder. Go to meetings with business people and be part of finding the solution. Doing the actual work is the easy part. And sell. All the time.
this being HN many of the readers here are engineers and scientists. The technical side of tech. consulting is only maybe 20% of the overall pie. Most of the work is in forming and nurturing relationships in your industry and clients. It's the relationships that bring you billable work and billable work is all you have to keep the lights on.
When I started consulting, I got given the advice to join the local chamber of commerce. I was skeptical but it was very helpful in terms of meeting the local players. Would recommended it especially outside the traditional tech hub cities
Nobody does this at first, and they end up with a bunch of cheap clients because they simply wanted to fill their pipeline, myself included.
The number I use and have seen others argue as well is take whatever your hourly rate was at a full time job and triple it for consulting (e.g, ~$70 hr salary = ~$200 hr consulting rate).
Yeah this is what I've read/heard too. I went 2.5x but I probably could have gone higher when I personally did this. If you sell yourself based on the problem you're solving and not hours worked you can charge a lot more than you'd assume.
This is the kind of mentality you must shake off if you want to succeed in consulting. $200 is not even a rounding error to most companies, and you expect to get paid less than that for solving their biggest problems?
Double your rate for each new client until you can't go higher and get work. Then back off in reasonable increments until you have just enough work to be happy.
I work in biotech. Companies don't blink at anything. $3,000 / day? Yup. No problem.
Money doesn't mean anything to a company where the entry price is 15 years of infrastructure build and raw materials that run in the millions if not billions. If it does, you have a braindead manager, so move on.
Isn't there a story about how a certain wine nobody bought but once they jacked up the price, its perceived value was higher and people thought it tasted better and it sold more?
I am a recent grad, talented I like to imagine, with an opportunity to do some consulting. If I know I can make X/hr elsewhere fulltime, is the 2.5-3x consulting/contracting rate still applicable, or does that apply to senior developers?
Regardless of level, you have to charge 2.5-3x to make up for the additional taxes you're paying, the benefits (health insurance, etc) you now have to pay full price for, and the inevitable gaps between contracts where you won't be making any money. Whether that bill rate is attainable varies depending on your skills, market, etc., but if you can't get that rate, then you're probably financially better off at the hypothetical fulltime job.
keep in mind, healthcare, taxes, and retirement costs are going to skyrocket. Uncle Sam hates it when you're not under the thumb of an employer. Only about a third of your hourly rate may actually make it to your checking account.
Some clients prefer a simple bill and clear mental model of the costs. I make (slightly) more money on the bills in which I don’t break out my expenses than the ones that I do.
Health insurance is a problem. Solve it before you move to contracting.
Taxes, on the other hand, are completely skewed in favor of consulting. Look at 401k contributions, for example. The limit for your contribution is the same, but your company can contribute a lot more on top of that. And talk to your accountant about how you decide on your salary; that's an important number and it's not straightforward to decide what it is. (It's certainly not your entire income)
Or you can just do without healthcare. While there is some danger in that, it's considerably less dangerous than driving without seatbelts, which everyone used to do. I don't recommend no healthcare coverage, especially if you have a family in the childbearing years, but it's unlikely to be the end of the world, either, unless something really bad happens...
You can claim a lot of business expenses as deductions that you wouldnt be able to as an employee
The IRS now has a 20% deduction for passthrough entities up to 450K or so
You can put approximately 40K or 25% of income (whichever is less) into a solo 401K. Much more than a typical company 401K
There are ways to pay no FICA, by distributing through a limited partnership. You can save 15K up to the cap on those taxes, but then you will hurt your social security which requires 40 quarters of W2 wages to max out.
Healthcare will potentially cost more, but once you have around 6 employees you can join a PEO and get grouped in with other small business and get a typical cost for a business.
There are products (such as insurance ) that can shield a much larger portion of your income. For example, you buy income insurance that pays out any year you take a loss. You "pay" for it with your profit for that year. That counts as a business expense so you pay no tax on it. They keep track of your account balance+growth and you can borrow from your own account with no tax consequences. You can essentially withdraw the money at favorable tax rates if you ever take a loss.
It’s actually a reasonable estimate of salary + benefits + operating costs, adjusted to cover non-billable hours, with a small profit on top. I’d want a more formal cost accounting model, but as a rule of thumb it’s pretty solid. People cost a lot more than their salary.
Very good advice. I recently had a friend with a strong background in sales and business development join me. He recommended higher amounts by estimating the value we were delivering rather than just the hours we were spending and things got so much better.
I disagree with this, the client will always try to maximize value, your costs are hourly, I like the other poster who said never do a fixed bid. Clients benevolently keep asking for more and you benevolently keep saying yes and then that niceness on your part becomes a liability after a few days or weeks because now it all blurs into being "in scope". I would also always put the concept of scope discussion process into every contract.
> So don’t say “yes” to things that are out of scope.
To expand on this, at the end of every contract is an SOW (statement of work). This explicitly and very clearly outlines what work is to be performed, how it will be performed, when it will be performed, and how long it will take.
At the end, I like to put a small sentence. The client can always request to change the scope or add things to the scope, the consultant will provide a cost and timeline for the change and once paid for, the consultant will perform the work.
I always say "yes" when a client asks for additional work. Then I tell them how much it's going to cost in addition to what we already agreed.
The number 1, cardinal rule, always is ... never work for free. If you don't value your work, nobody else will either.
In 10 years of consulting, I've yet to see a client buy this line of thinking. Clients want an accurate forecast for cost and key assumptions being made to formulate that cost. At the end of the day, it's in their best interest to get a good price.
This doesn't mean you can't over-forecast the hours needed in a week to deliver x, it can be an iterative/incremental process. But don't think for a second a client won't want to see how you came up with your pricing model before signing an SOW.
In my six years I’ve never had to switch to hourly billing. The most pushback I encounter to this idea is from other consultants, often before they even try it.
Alternate view that's worked well for me: not only do I not charge by the day, I don't even charge by the hour. I charge by the minute and tell them exactly what I did in the time I worked. Even when something takes me a paltry couple of minutes because I may have recently spent an hour on it for another client and I could easily charge more money for it. This level of transparency earns me an incredible amount of trust with my clients, who, so far, have each become "client for life." And the overhead isn't bad--a simple spreadsheet--complete a task, describe it in several words, enter the number of minutes spent, and everything gets summed up to the total amount due at the bottom.
EDIT: for clarity, I build RESTful API back-ends on AWS and support them with DevOps; I can see how my method may not work for other industries.
I've never actually asked or gotten questions about my invoices. So, either everything is crystal clear, or you're right, they don't look at them. I suspect every client probably looks at the first couple to get to know me and establish trust, and then just skims them thereafter. But it's nice for both of us--we can each review and see exactly what I did and how long it took.
Thank you. Yeah, I try to do the same with my invoices. My experience is about the same as yours. My current clients don't complain and they pay on time. It works well enough, but it takes longer for me to create each invoice.
OTOH, a while back I had a client that told me to stop detailing everything on my invoices. They just wanted a total number of hours. I think maybe it had to do with the review process upstream. Fewer details gave the higher ups less to scrutinize and complain about, I guess. And none of the other contractors were providing such detail.
How do you know you're not leaving money on the table? It sounds as though people get a lot of value from your work, and they trust you, and want to continue working with you... So probably they'd be willing to pay more?
You're right, I don't know. I figure, if they are happy, I will get repeat business and referrals. If I'm charging too little, then they should be extremely happy and are even better champions of my work/name. That seems worth more than higher pay, long-term.
I once worked at a company in London who called an emergency plumber out who charged £5 per minute. It cost ten quid just to get him in through the front door and up the lift.
You always charge hourly, it’s just that you don’t always expose it as such. All of your costs are either driven by time (rent, salry and benefits, SaaS costs, calories per day) or amortizable over expected number of billing hours. You need to know your total loaded cost per billable employee, because you’ll need to charge more than that for an hour of their time. In the end, fixed-price contracts are just really crappy T&M contracts from an estimations perspective.
Does $70 here mean take-home salary, pre-tax salary but without health-care, salary including health-hare benefits or something else entirely? What about retirement contributions?
I'm sure many people will know what "salary" in this context usually means, but clarification would be appreciated for the rest of us :)
Good point - yes, in general I’m tripling the number when I take my last pre-tax salary and divide it by ~2000 hours (40 hour work week across an entire year)
Wow. Now it makes sense. When I told my first client I wanted to increase rate after finishing a basic prototype (which was the full scope of the project), he ghosted and left me a bad review on Upwork. Well, all in the game..
Don't run out of cash. Don't do business with assholes. Ask attorneys how much you should expect to pay for a service before engaging them. Outsource everything that isn't your core business until you are big enough that bringing it in-house makes sense.
If I could give you one piece of advice it would be this: Charge a small but reasonable fee for speccing a project. (My fee is $500 based in NYC).
There is nothing more demoralizing then spending a bunch of time and effort speccing out a complicated tech project and then getting ghosted by the potential client once you deliver the estimate. Once I started charging for speccing, this never happened again.
And, once I started charging for this process, my conversion rate on proposals delivered went up a tremendous amount.
I think a couple things are at play.
1. Many clients leads aren't actually serious but it can be difficult to figure that out, especially when you're new to the game. If somebody is willing to pay for this process, they're clearly serious about the project.
2. People respect you when you charge for your time like this. My agency got taken much more seriously by prospective clients as soon as we mentioned that we charge for this process.
3. By charging for it, it forced me to create a clear process and clear set of deliverables for that fee. Clients LOVE clear processes and clear sets of deliverables. It makes it much easier for them to say yes. They are like a warm security blanket for the decision maker.
4. I believe it was HN's Patio who taught me that as long as your offering is below $1000, it usually falls under the discretionary spending threshold for most departments, meaning it doesn't require boss/committee approval.
If a prospective client was surprised by this fee, I took them through my process of all the things I'd help them figure out along the way that they clearly didn't have figured out yet, and make it clear they were free to go with a different agency after this process was complete. No strings attached.
I believe that clients who understand the business value of that work are much better clients than the ones who do not.
Shoutout to Brennan Dunn for the idea to charge for scoping.
It's all about getting to a point where I can write a proposal that will blow away the competition. I believe a great proposal includes:
1. A deep understanding of why the client is doing this project and how it delivers value to the client. Stating specific estimates of dollars this project can create/save or time/hassle it can save is a great thing to try and figure out and include. But be sure to state these are estimates and use large ranges. The goal isn't to be specific, just to illustrate the scope of the problem/opportunity. Most proposals DON'T have this. This alone will let you stand out from the crowd.
2. Understanding key stakeholders. Who will be involved in the project on the clients end and how will you bring them into the process in a way they'll be comfortable with.
3. Outline processes to get to success. What will the project look like from the day to day. How will you project manage? How will you communicate. What meetings will be needed? Will there be user testing? Who will do what - on your team and theirs?
4. Break up the project into larger chunks/variations. What is the smallest chunk that can deliver value ASAP. How can additional chunks be added in a modular, step by step approach that can bring value? Monolothic Yes/No proposals having a lower conversion rate than a "Menu of Options" the client can mix and match to their liking. Get creative!
5. What support options will you offer after the project ends? Will you disappear on them and leave them to fend for themselves? Will you train their team? Will you help them hire/transition to internal tech teams?
6. Include case studies for clients you've done something similar for before. This de-risks the project from the clients end and a big part of vendor decision making is de-risking.
So my speccing process is asking a bunch of really specific and pointed questions so I can make a great proposal. Sometimes I send them an online survey to fill out before our first speccing meeting. Sometimes it's just a meeting. But I've honed a long set of questions over time that get me the answers I need to write a great proposal. Then really listen to answers to those questions.
Somebody in this thread asked if I make wireframes in my speccing process. I prefer a collaborative whiteboarding session in the speccing meeting if it will help flesh out what the project is. It's much more fun and allows you to demonstrate your ability to work with them and incorporate their feedback on the fly.
But your proposal should be more about the problem you're solving and how you're going to solve it than about the lines of code/screens you're going to create. Don't be a craftsperson. Be a problem solver!
Anywhere from 2 to 20 hours. Average is probably 4-5. But I have a ton of other proposals now that I copy and paste from and just fill in relevant details. Used to take me longer.
We had some landscaping done and interviewed a few contractors. Only one charged for the upfront design work, but theirs was the most detailed proposal. We ended up going with them. I think they rebated most of the design fee, too.
Also, if you feel uncomfortable for charging for specs, you can always agree that the fee will be waived if the client decides to commit to the project.
Specs here means specifications. It could include things like requirements documents, acceptance criteria, wireframes--anything to create a shared understanding of the precise shape of the work product to be delivered.
It should show you know what you're talking about, communicate a path forward, and wet the client's appetite for more. For the project at hand if that means wireframes then so be it. However, for $500 i wouldn't spend more than a couple hours start to finish.
On the other side of point 3, as a person whose role is building analyses and products (often on spec or as part of a pilot project), a clear process for the pilot or spec-work, as well as a clearly defined set of deliverables (the product(s), a report, and a methodology workflow, a demo, whatever), is just as (if not more) important for your success as it is going to increase the likely hood of you getting the contract.
The more structured my pilots have been, the higher the success rate has been in terms of turning them into contracts. This also is a time where you can set and measure client expectations (so that sales/ account managers), don't get out of control with their promises.
Somewhat related - I'll charge for analysis and a briefing doc as well before speccing the actual project. Sometimes in marketing clients don't know what the outcome they want is (other than, "make moar £££s"), so reviewing what they're doing is also another good funnel into a larger gig.
Again, this helps clarify the intent and scope when you launch into a larger engagement.
In my experience being a tech consultant, I would focus on the following if I had a do-over:
1. Really work on systemisation of your workflow so you avoid the trap of just keeping your head above water with all the work.
2. Run it as a profit first business.
3. Hire and delegate the things you're not good at or don't protect the core value that you bring.
4. When delegating, make sure you also delegate the decisions and accountability of the results too.
I really enjoyed 2 books which I would apply, Profit First and Clockwork - both by Mike Michalowicz.
Second to that, I would really fall in love with why I run a consultancy business. For example, if my mission is to provide the best technical solutions that empowers the access of services to everyday people, then it can also align with your client's mission. If the thing you're passionate about solving is the same as what they are passionate about solving, then you work more as a partner than a supplier.
Don't ever underbid. It's never worth the additional overhead and the client demands are inversely proportional to how much they're paying relative to the job's value.
2. Learn to play the sales and marketing game. As engineers, we often underestimate the value of presentation. Showing up for a meeting well dressed and groomed has a really positive effect on a prospective client. I used to send my proposals as plain text files. People started taking me a lot more seriously once I switched to PDFs with proper fonts and colours that reflected my own company branding (website, stationery etc.).
3. Get money from your clients when the time is due. Don't become a line of credit for them. I learnt this the hard way and have a significant amount of money that's due to me which I'm not hopeful of getting.
4. Learn to evaluate a potential lead quickly and then decide on how much time you want to spend on making the proposal. Good leads might be worth a quick prototype of the project even. Bad leads might not be worth the email you send telling them that you're not available. Your time is valuable and it's what you're selling. Spend very little of it for unpaid tasks.
5. Put an expiry date on your proposals. Tell them that you'll do X for Y $ if the project starts by Z. Don't skip the Z.
6. Charge an advance before you start the project and charge in pieces based on value delivered. This also helps your cash flow.
8. Keep growing. In my experience, consultancy (the services business) is a numbers game.
9. Spend some time, money and energy setting up policies for HR etc. up front so that when your employees come about raises and things, you have answers ready.
Can you give a vague hint as to your niche to give us an idea of the kind of services you render? iOS? HFT? Mobile games? Marketing? US taxes? GDPR compliance?
On average I find approximately 2 jobs worth applying a month. Robotics is not really that popular on Upwork so there are not many jobs available but also there is little competitions.
On average I find approximately 2 jobs worth applying a month. Robotics is not really that popular on Upwork so there are not many jobs available but also there is little competition.
There is an inverse correlation between profit margin and utilization (% of year you're billable).
So if you are selling billable time of your employee at a 30% markup over cost, then you need that employee billable 70% of the year JUST TO BREAK EVEN.
Charge more than you think is right, market rates are exorbitant. Invest in your spare time. Invest in professional society time. Invest in your training. Communicate explicitly and often to set and define expectations.
Have a sales pipeline. Don't be a one client consultant. Abundance mentality.
I don't mean anything in particular, only the generic having a good sales pipeline. Thinking ahead, what is planned for sales "in the pipeline" for 1 quarter down the line, 2 quarters down the line and so on? Will it be an extension of existing project? More projects with the same client? Any other small engagements you can juggle on the side? Bring on an extra partner and deliver and work together? It's just normal business speech for planning ahead I'd say.
What kind of consultancy do you want? I'd think long and hard about that.
A one person consultancy where you have one main client at a time is vastly different than a 4 person consultancy where you are doing mostly project management and sales is vastly different than a 15 person consultancy where you are doing hiring and people management.
Pick where you want to go before you start. (You can change goals as you go, of course.)
I'm currently trying to get very skilled at being a one-person consultancy to understand things well, before I shift over into building a ~four-person one. Do you have any thoughts on how to pull this off?
Hah, I am afraid I'm the wrong person to ask. I did the one person consultancy for years and never had the courage to step up and hire someone to get to that next level. (Now I'm at a 15 person consultancy, but got hired in after they go to that level.)
Maybe another commenter can speak to your question.
- Have so much work on your table that you have to hire people. Don't force your growth. If you're doing a good job, you'll get more work to do.
- Make sure that the people you have in your team are committed and are able to organize their lives. Cultivate your company - e.g. have some rituals like weekly breakfasts and table tennis. Small things that increase the bond. Pay the salary on time, be open for personal conversations (personal growth of your employees is important) and remember their birthdays. Appreciation of their work is extremely important.
- Plan to spend some time (sometimes a lot of time) to guide your new employees. Try to build checklists for every reoccurring process.
- Build up savings. You should have 4-6 months of monthly income for every hire on your bank account e.g. if you want to hire someone for $4000, you should have $16k in the bank. Why? Because they may a) need longer to be productive, b) have personal issues or get ill, c) are not good in their jobs but you've noticed it too late (it happens).
-- We started to hire with less savings and I wouldn't repeat it. It's good for your sleep if you know that you'll be able to pay your employees regardless of anything bad that might happen.
1. Your experience will be different than everyone else's because of who you are. I was always told to raise my rates, I charged too little, etc... But I never had a conscience problem with my rates. When I was ready, I raised them without worry. Be patient with this. Some of the pricing recommendations comments on here would never work for me personally, so do what works for you. Just get started and learn from your mistakes.
2. Ask for a portion of money upfront as soon as you get the ok from your client to start work. (1/3 - 1/2) I usually do this after making an estimate and sometimes a full proposal, really depends on the client's needs and the size of the project. Let them know in the estimate (before you ask for up front money) that you will be asking for it when you get the ok to start.
Long term clients that pay well I don't ask for anything up front anymore, as they always pay on time with no hassles. Some clients (that I won't work with anymore) I charged 100% up front, as they had taken advantage of me in the past. (I no longer work with them)
3. You may end up with a client that makes your life so miserable you just want to quit and get a job and fast food place. Find a way to politely end your work with these clients, unless you really need the money... which happens.
4. When making an estimate, break out the costs into a few sections like, minimum requirements, nice to have, extras, and dream features. Put a price on each one. This is really useful because you don't have to worry about your pricing, and you are giving your client control over how much they want to spend with you.
The worst feeling was handing a client one number, and them balking at it and now you don't get the work. Most of the time the client is happy to take on all the work. In reality they almost never do the last two unneeded bits of work because they change their minds so much, or reality with testing shows those features are needed. (depends on the type of work you are doing of course) But they will still pay for you to do it. But will likely change the budget to something more important later.
I did art, design and animation before as well, and these rules applied in the same way.
5. Much of what I do with my clients is education. Be decent, patient and helpful. They have no idea how software development works and are often confused about why some things are necessary and others aren't. After a few years, I get fewer questions and more trust.
The newer the client, the more diligent you need to be with documentation and communicating very, very clear expectations. If the client says "why didn't you do X, Y and Z?" If you expressed expectations clearly, you can show why you didn't do them in a way that is helpful to your client instead of infuriating.
6. Never start work until you get an official ok, I almost always require it in an email/writing of some kind with new clients so there is no misunderstandings. When I was starting out I have started work on a few projects thinking I was going to get paid only to get an angry response later...
7. Change orders. This is a big one... If you were careful to layout expectations, this helps both you and your client. Expectations help your client because they can hold you to what you said you would do. They help you because then if the client asks for something outside the scope of the agreed upon work, you need to get comfortable telling them "this is outside the scope of this project", and that you will need to make a new estimate for this extra work.
This is the biggest issue I've seen with new people starting work. Why? Because every single client changes their mind at some point, and you need to be ready for that.
My solution to easing clients into this change order is to tell them upfront (saying things in advance is always more helpful than in the middle of a problem) that they get say 3 changes for free after the project is finished, and any changes after that will require m...
Me: You need this database stuff done. I can consult for you.
Them: We are looking for a full time employee.
Me: Well I'm keeping an open mind here, let me just go through the interview process and see what we both think.
(interviews)
Them: OK we interviewed you and we want to hire you.
Me: After understanding more about the position, I need to be remote.
Them: We don't want to hire any remote employees. OK we'll hire you as a (remote) consultant.
Me: $$$
... time passes ... largest income year ever ...
At this point I failed to look for more clients, and it became a one-client consultancy and eventually died when they decided they wanted to convert me to a (remote) employee after all.
(1) Charge different rates based on onsite vs remote service.
e.g. $75/h onsite vs $50/h remote.
(2) Charge a retainer for 'instant' contact.
e.g. $200/month to cover cell-phone bill so you can be reached 'anytime' and/or resolve issues immediately.
The other side to this is: I will reply within 15 minutes, but only able to address the issue when I am available.
(3) Charge for travel time as part of onsite-service.
My billings begin when I leave my home.
(4) always give 3 quotes and specs. (minimum, adequate, suggested)
(5) Never charge for things that you learn. "It took me 3hrs to set that up, but i'm only going to charge you for 1hr because I learned X." They think they get a deal, and your worth increase. The key to that is communication. Make sure they KNOW they got a hell of a good deal.
Sounds as though you could be earning a lot more. Why should the client not pay for work just because you learned something along the way? What does the cost of a phone bill have anything to do with the value of having an expert on-call? (Would you set pricing for a SaaS product based on hosting costs?)
The point behind the 'monthly retainer' is that if only 1 client agrees to it, I make small% profit each month by doing nothing, but in reality when I have 10-20 clients all agreeing the same thing, it passive income that goes a long way.
So 10 clients all doing this = $2000/month.
On average I get 1 call every 2-3 months. So that is significant income just to be available. As part of that (especially if it's a 10-15 minute "ssh in, do X and done" job) everybody is happy.
Note: Most of my clients are small'ish Tool & Die shops, these are the kinds of places that still run a multi-million dollar GM contract on a DOS-based MS-BASIC kludge. So my environment and the mentalities of the area are vastly different then a big metropolis like New York, LA, Toronto, etc.
They think they are getting something for free. Because I've upgraded most of their systems from the kludge to some things more robust, I do less work and get paid more.
If I may ask, what kind of work do you do for them?
I like working with manufacturing people: machine shops, motor rewinders, etc. One of my current clients retrofits old machine tools (think 20hp planers using 0-10V controls) with new digital controls. I always enjoy discussing that kind of stuff.
> Charge different rates based on onsite vs remote service. e.g. $75/h onsite vs $50/h remote.
I don't know. I think the rate should be the same but you just add "traveling expenses".
> Charge a retainer for 'instant' contact. e.g. $200/month to cover cell-phone bill so you can be reached 'anytime' and/or resolve issues immediately. The other side to this is: I will reply within 15 minutes, but only able to address the issue when I am available.
Bad idea. Do you want to be available in 2AM Sunday morning while you are at bed with your significant other. (or even alone). If your client requires 24/7, then hire 3 on-site that cover the 24 hours day (8-8-8). You'll probably need more for weekends. Your bank doesn't offer 24/7 services, why should you?
> Never charge for things that you learn.
Unless you should know it and it is general knowledge. Otherwise charge for it. It is part of the job. Also if you don't know it because of inexperience, your rates are probably lower. So a more experienced worker will take less hours but charge more per hour. Same result, same wage.
1. I would read "The Secrets of Consulting" by Gerald Weinberg
The biggest lesson (I think it was in that book) was that you're being hired as an expert on a topic. to be a Successful expert you must A) have an expert level of knowledge about the topic and B) LOOK LIKE you have an expert level of knowledge about the topic. Those are two separate, but essential things.
2. Go for 70-30 split of listening to talking.
3. Read Million Dollar Consulting by Alan Weiss
4. Make sure to read a lot in the early days, but don't expect to get more than two or three insights from any particular book (for example the insight in the Weiss book that has proven most useful was "Clients that are difficult in good times will be nightmares in bad times". That has been true in each and every case in 17 years in business)
5. By the time you're in front of someone (physically) your primary job is not to sell them on anything, but to de-risk your offering to them.
Addendum
6. When you make architectural decisions (creating some function in code instead of sql for example) go ahead and explain your reasoning to the client in some form or fashion. Volunteer this casually at a meeting. It creates a good bond between the two of you, and the client will probably reciprocate by telling you about some more "businessy" trade off or decision they've made. It also allows the two of you to communicate better in the future, and you will both know each other's implicit priorities better. Do this sparingly, but definitely do it. At worst the client will be bored, but at best it's a good force multiplier.
I had a partner who was afraid to charge extra fees to clients, for things like making small updates, adding features and tweaks, etc. he was under the assumption that the more sacrifices you do for the client, the client will be more committed.
but guess what, the client later left to another company who charged twice our cost. i fired my partner after that and not making that same mistake ever again.
I've had a one-person technical consultancy for about a decade (with a year off in the middle, for a university research appointment, and an early stint helping out another niche expert firm). I'm looking forward to moving back to an employment/startup role, in which I can spend most of my time building good technical systems, rather than spending half my time on small business administration overhead for what's essentially only an individual contributor role (sales, compliances, accounting, learning enough about IRA/401(k) to create a plan, etc.).
Like in any line of work, there are way too many little bits of acquired wisdom to rattle off-the-cuff in an HN comment, so just a couple that first come to mind...
I've ended up always billing hourly, tracked in 15-minute increments. The hourly rate sounds high, but when I looked at the value I provided to a client over a year, and compared to a TCO of an employee who could've provided comparable value, it seemed that the client got a really good deal. Maybe too good; when it's remote work, I err on the side of avoiding slippery slopes about hours (e.g., clock doesn't start until I'm fully awake and exercised and typing on the computer on the problem; don't bill anything for a morning walk when I spent most of the time thinking about the problem). On-site, I'd bill all time, except for things like lunch and other significant breaks (e.g., non-work-related watercooler conversation beyond exchanging pleasantries).
One thing that comes to mind at the moment is that, if you initially find a client due to expertise in some niche (e.g., you're known in a language or open source community for a particular piece of stack that client uses), that might turn out to be only a small part of the expertise that you apply. For my favorite client, I was immediately applying other background I didn't expect, and I ended up becoming the go-to person on many topics, including things I learned on-demand. (I already believed in hiring people who could quickly pick up whatever flavor-of-the-month bit of stack was needed at any time, but this experience reinforced my opinion that this could also apply to more limited consulting arrangements. With consulting, you probably need an expertise in something foot in the door, though.)
Most things I think to mention here only apply to a minority of consultants, or are widely applicable to many kind of development roles.
Regarding multi-person consultancies... I'm glad that I didn't start hiring additional consultants or forming a partnership, because I'd foresee spending even more time on business administration, plus have the stress of other people's livelihoods dependent on my relatively neophyte business skills. I'm much more confident in my engineering skills. (Of course there are a few organizational/leadership things I'd like to try, as I think many of us would based on our experience in the engineering trenches, but am willing to give that up if someone else will make all the money and bureaucratic stuff just happen, so that I can focus on engineering things.) But if you want to move to the business side, that can work.
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[ 0.60 ms ] story [ 248 ms ] threadAfter your first year, hire an accountant to audit your accountant, figure out which one is doing things in a way you agree with, use that one going forward.
Sell.
Here is another good one, which applies to tech consulting just as well: https://tomcritchlow.com/2019/04/04/the-strategic-independen...
the GOP is exactly about stupid money
First, your opinions about what you're working on are at least as important as your development contributions. Good clients light up when someone smart shows up and pushes back against their dumber ideas. It's unfortunately true that most leaders have unintentionally created social structures around themselves where, for several reasons, they are rarely disagreed with. Someone offering a compelling and assertive telling you not to do something before you do it will be regarded with the passion of a new lover. People inside of an organization are hamstrung by harsh social, political and personal setbacks if they are perceived as disagreeable and frankly, most employees need to believe their founder has a clear vision. Result: no honest feedback.
Second, even if you're totally fine taking a sociopathic view and accept money for work that you know in advance will fail, the people who work for you that trust you to find them projects where they can contribute to something meaningful will become depressed and resentful. They will do terrible work until they leave to find something more satisfying.
Finally, this is subjective but experience has led me to conclude that even the most confident and successful people never "just know what they are doing". Entrepreneurs are plagued by imposter syndrome and the vast majority of decisions they make are confident wild guesses based on incomplete data under stress.
The smarter the leader, the more energy they will put into surrounding themselves with smart advisors. And if you're good at your job, you're one of these key advisors and that's why they hire you: to have strong opinions and give a shit about them and their company.
I don’t really want a consultant who just came in and thinks he understands the whole situation. As consultant you should do the job you were hired for really well. You can make suggestions but in the end you should assume that the people who hired you know what they are doing until clearly proven otherwise.
Answer: you're not a sociopathic consultant, just a client who sees the hired help as a commodity chattel. That's you're perogative, but if you woke up today willing to be humbled, what you haven't realized is that by definition, you're working with below-average consultants who only care that you pay them.
The optimism is that an entirely wonderful future is possible if you accept that you just might be doing it all wrong.
On a serious note it took me a long time to understand that some clients do only want you to execute and do not want you to provide a more holistic professional assessment at every stage.
If any of my clients suspected that I was only maximizing my consulting returns, I would have no clients.
Sure a contract is a contract but a contract represents a minimum legal obligation, and I like to do and receive a little more than the minimum legal obligation.
It doesn't demonstrate you wrote maintainable clean code and it doesn't demonstrate that you wrote something that scaled more than 1 user.
If you don't feel up to adding this offering, partner with another agency who already does it.
Maybe you could get affiliated with some investors too? Why not?
In fact in the early days, the proportion of your time doing “non-work” work will be significantly higher than 50%.
- Never do a fixed bid. Not even when the job looks small or you are desperate for work. Any time a fixed bid goes wrong, not only do you lose money and time, but it's unbelievably demoralizing.
- Hire people. If you do it all by yourself, you'll end up doing all the jobs. Fun for about 1 month and then exhausting.
- Be honest. This is the one thing I feel like I got right. When I didn't know how hard something was, I would just tell the prospect or customer that while simultaneously telling them how we were going to figure it out. This approach always got me customers that I could work with and who were patient with me when I was consulting.
- Net 30 or better terms. Cashflow on Net 60 or Net 90 is brutal.
Even better... get paid in advance with a retainer, if you can swing it.
A little more nuanced view of this: if you know the client, their business and their systems well, there can be nothing more profitable than fixed bids. I have quadrupled my normal rate this way and ended up with happy clients. If you don't know them well, then, yes, fixed bids can be very, very risky unless you figure out a way to corner the risk.
This. Because you're not charging for your time, but for the value you add to the client's business.
Again, this was not some cheap and poor startup, a major company that just raised a ton of money with lots of tech media coverage.
In the end, it's my fault for not going through the exact UI logic on each of the designs, but it's easy to miss when there are 100 designs.
If there is a clear scope laid out in the initial contract it's more clear who is on the hook for anything outside the scope, and easier to recoup losses when the client fails to deliver the requirements properly.
On top that, offer a 5% discount if they pay within 30 days. Helps with a lot of accounting departments.
Charge another $5/10 an hour if you want to compensate.
I once onboarded as a vendor for a large, inflexible client and had to choose between two possible payment terms.
something like: EITHER Net 90 OR a schedule of discounts for any payment earlier than that (e.g 1.5% for 30 days and 3% for 15 days). and I wondered how many of their vendors simply jacked up their rates or fees to compensate, thus saving the inflexible client nothing. I guess this is very common.
Invoicing an engineering manager who needs things to happen tends to be the least friction from my side.
Even if it costs more on the purchase, inflexibility does help streamline business operations. Any business who can just mandate "this is how this process is going to work" and make it stick is going to benefit from not needing to make bespoke agreements with every little vendor they co-operate with. I believe WalMart is the classic example for this case.
1. You do not fully understand the scope of the project, or think you do but actually don’t. In these cases a fixed bid will be catastrophic.
2. The client themselves do not fully understand the scope of the project, or think they do but actually don’t. This is even more of a disaster for a fixed bid, because even if you give them exactly what they asked for it isn’t going to be what they needed, and that’s what they’ll measure success against.
The advice for fixed bids deals more with the question of value capture. If by hard work, study, and practice, you have a way to deliver $1,000,000 of value to a client, it makes sense to charge (at least) $100,000 for it, even it takes only an hour. This is technically a fixed bid, but not in the traditional sense. Here you understand exactly what it is your client needs, how you’re going to do it, and what value they will derive from it, and so charge a percentage of that value instead of an hourly rate.
Also write down in your SOW that anything you send to client for review or as a deliverable, is considered accepted by client if they don't say anything about it for 2 days.
a) I can do this in 4-6 weeks, but we can also hire a consultant who can probably do this in 6-8 weeks and it is going to cost roughly this much (in this particular example I had intimate knowledge of the system and was proficient with the framework/tools).
b) Look, we don't have anyone on the team particularly suited for this project. We can either train ourselves, but the project will take about two months, or we can hire an expert who can probably do that in a month, and this is going to cost roughly this much.
Of course, be very conservative with your estimates and think hard, if someone from outside of the company can do the project faster (green-field project with unknown tech) or slower (upgrading internal system, for which the original developer is still around, but busy earning money for the company)
You need to learn how to do fixed bids and then have processes to support it.
Think of it this way, you have 40 hours * sizeof(yourteam) to sell per week. There's a ceiling on $/hr or you price yourself out of the market and you don't have a time machine to create more hours. You can either add people to the team or detach the price from time with a fixed bid.
If you don't want hundreds, if not thousands, of consultants in your company then fixed bid is your only path forward.
Isn't the first rule of consulting literally that you should be billing by value, not by hours?
1. demand 75% utilization from everyone in delivery. That means 75% of a 40 hour week is billed to a client.
2. If your PMs are happy then the client is happy, if the client is happy then the project is fine. Talk to your PMs often.
3. Bridge sales and delivery with a liaison who has a foot in each department. Give them the authority to tell sales to STFU and also to tell delivery get it done or else.
edit back to #1 a billed hour is your only source of revenue in consulting. Further, there are only so many hours to sell. Do some math and let that guide you in project decisions.
The trick is to find clients who have authority to make decisions without approval from HR or Procurement or wherever.
Despite being a one-person consultancy, I did a multi-month project for a global telecom company. As you would expect, this company has a complicated vendor management system, project approval process, budget approval process, and so on. But because my client was a decision-maker (and not a mid-level manager), none of that mattered...
They wanted my help and they needed it fast, so they told me not to worry about the red tape and that they'd deal with it. The only time I heard from procurement/AP was a friendly request for my W-9 form.
Getting pushback from other departments about value-based billing means you're not dealing with the right person. The right person, a decision-maker, will make those problems go away if they really want to work with you.
I also think we're talking apples to oranges. A one person shop may approach contracts differently than a shop with 13 across 3 time zones.
How is it egotistical to say that you’re good enough at what you do that people will make their bureaucratic procedures go away to get you to work for them? It’s either true or it isn’t. The number of people who are literally the only person who can solve a given problem will always be minuscule but being one of the top five people in a very expensive niche is an achievable goal. Being the only one of those people with a public profile and a consulting practice is also achievable.
Think of academic expertise. I’m confident people go to Peter Norvig and ask him as an individual with incredibly deep, broad and publicly known Algorithms skills to do work for them and if they make it too bureaucratic he just declines the work. Likewise economists like Alvin Roth with mechanism design or other hairy, expensive and lucrative problems.
This model of being very good and being known to be very good works for individuals. I’d be shocked if there aren’t one man consulting shops that bill $1m a month, very expensive expertise exists, at a minimum in finance. They probably have a secretary but a principle plus minimal support staff consultancy.
this being HN many of the readers here are engineers and scientists. The technical side of tech. consulting is only maybe 20% of the overall pie. Most of the work is in forming and nurturing relationships in your industry and clients. It's the relationships that bring you billable work and billable work is all you have to keep the lights on.
Nobody does this at first, and they end up with a bunch of cheap clients because they simply wanted to fill their pipeline, myself included.
The number I use and have seen others argue as well is take whatever your hourly rate was at a full time job and triple it for consulting (e.g, ~$70 hr salary = ~$200 hr consulting rate).
I work in biotech. Companies don't blink at anything. $3,000 / day? Yup. No problem.
Money doesn't mean anything to a company where the entry price is 15 years of infrastructure build and raw materials that run in the millions if not billions. If it does, you have a braindead manager, so move on.
It can be difficult, but it's not that bad.
Some clients prefer a simple bill and clear mental model of the costs. I make (slightly) more money on the bills in which I don’t break out my expenses than the ones that I do.
Taxes, on the other hand, are completely skewed in favor of consulting. Look at 401k contributions, for example. The limit for your contribution is the same, but your company can contribute a lot more on top of that. And talk to your accountant about how you decide on your salary; that's an important number and it's not straightforward to decide what it is. (It's certainly not your entire income)
The IRS now has a 20% deduction for passthrough entities up to 450K or so
You can put approximately 40K or 25% of income (whichever is less) into a solo 401K. Much more than a typical company 401K
There are ways to pay no FICA, by distributing through a limited partnership. You can save 15K up to the cap on those taxes, but then you will hurt your social security which requires 40 quarters of W2 wages to max out.
Healthcare will potentially cost more, but once you have around 6 employees you can join a PEO and get grouped in with other small business and get a typical cost for a business.
There are products (such as insurance ) that can shield a much larger portion of your income. For example, you buy income insurance that pays out any year you take a loss. You "pay" for it with your profit for that year. That counts as a business expense so you pay no tax on it. They keep track of your account balance+growth and you can borrow from your own account with no tax consequences. You can essentially withdraw the money at favorable tax rates if you ever take a loss.
The recurring thing here seems to be that consultants keep putting limits on themselves and then justify it.
“I have to charge hourly because...”
“I have to agree to go out of scope because...”
To expand on this, at the end of every contract is an SOW (statement of work). This explicitly and very clearly outlines what work is to be performed, how it will be performed, when it will be performed, and how long it will take.
At the end, I like to put a small sentence. The client can always request to change the scope or add things to the scope, the consultant will provide a cost and timeline for the change and once paid for, the consultant will perform the work.
I always say "yes" when a client asks for additional work. Then I tell them how much it's going to cost in addition to what we already agreed.
The number 1, cardinal rule, always is ... never work for free. If you don't value your work, nobody else will either.
Whether I have to work 5 hours or 8 hours on your project, either way my day is largely shot.
This doesn't mean you can't over-forecast the hours needed in a week to deliver x, it can be an iterative/incremental process. But don't think for a second a client won't want to see how you came up with your pricing model before signing an SOW.
In my six years I’ve never had to switch to hourly billing. The most pushback I encounter to this idea is from other consultants, often before they even try it.
EDIT: for clarity, I build RESTful API back-ends on AWS and support them with DevOps; I can see how my method may not work for other industries.
OTOH, a while back I had a client that told me to stop detailing everything on my invoices. They just wanted a total number of hours. I think maybe it had to do with the review process upstream. Fewer details gave the higher ups less to scrutinize and complain about, I guess. And none of the other contractors were providing such detail.
I'm sure many people will know what "salary" in this context usually means, but clarification would be appreciated for the rest of us :)
There is nothing more demoralizing then spending a bunch of time and effort speccing out a complicated tech project and then getting ghosted by the potential client once you deliver the estimate. Once I started charging for speccing, this never happened again.
And, once I started charging for this process, my conversion rate on proposals delivered went up a tremendous amount.
I think a couple things are at play.
1. Many clients leads aren't actually serious but it can be difficult to figure that out, especially when you're new to the game. If somebody is willing to pay for this process, they're clearly serious about the project.
2. People respect you when you charge for your time like this. My agency got taken much more seriously by prospective clients as soon as we mentioned that we charge for this process.
3. By charging for it, it forced me to create a clear process and clear set of deliverables for that fee. Clients LOVE clear processes and clear sets of deliverables. It makes it much easier for them to say yes. They are like a warm security blanket for the decision maker.
4. I believe it was HN's Patio who taught me that as long as your offering is below $1000, it usually falls under the discretionary spending threshold for most departments, meaning it doesn't require boss/committee approval.
If a prospective client was surprised by this fee, I took them through my process of all the things I'd help them figure out along the way that they clearly didn't have figured out yet, and make it clear they were free to go with a different agency after this process was complete. No strings attached.
I believe that clients who understand the business value of that work are much better clients than the ones who do not.
Shoutout to Brennan Dunn for the idea to charge for scoping.
1. A deep understanding of why the client is doing this project and how it delivers value to the client. Stating specific estimates of dollars this project can create/save or time/hassle it can save is a great thing to try and figure out and include. But be sure to state these are estimates and use large ranges. The goal isn't to be specific, just to illustrate the scope of the problem/opportunity. Most proposals DON'T have this. This alone will let you stand out from the crowd.
2. Understanding key stakeholders. Who will be involved in the project on the clients end and how will you bring them into the process in a way they'll be comfortable with.
3. Outline processes to get to success. What will the project look like from the day to day. How will you project manage? How will you communicate. What meetings will be needed? Will there be user testing? Who will do what - on your team and theirs?
4. Break up the project into larger chunks/variations. What is the smallest chunk that can deliver value ASAP. How can additional chunks be added in a modular, step by step approach that can bring value? Monolothic Yes/No proposals having a lower conversion rate than a "Menu of Options" the client can mix and match to their liking. Get creative!
5. What support options will you offer after the project ends? Will you disappear on them and leave them to fend for themselves? Will you train their team? Will you help them hire/transition to internal tech teams?
6. Include case studies for clients you've done something similar for before. This de-risks the project from the clients end and a big part of vendor decision making is de-risking.
So my speccing process is asking a bunch of really specific and pointed questions so I can make a great proposal. Sometimes I send them an online survey to fill out before our first speccing meeting. Sometimes it's just a meeting. But I've honed a long set of questions over time that get me the answers I need to write a great proposal. Then really listen to answers to those questions.
Somebody in this thread asked if I make wireframes in my speccing process. I prefer a collaborative whiteboarding session in the speccing meeting if it will help flesh out what the project is. It's much more fun and allows you to demonstrate your ability to work with them and incorporate their feedback on the fly.
But your proposal should be more about the problem you're solving and how you're going to solve it than about the lines of code/screens you're going to create. Don't be a craftsperson. Be a problem solver!
[0]: https://training.kalzumeus.com/newsletters/archive/consultin...
We had some landscaping done and interviewed a few contractors. Only one charged for the upfront design work, but theirs was the most detailed proposal. We ended up going with them. I think they rebated most of the design fee, too.
I've been chatting with a few other freelancers who's spec process gets all the way to wireframes and is something like 40 hours * their hourly rate.
$500 seems like a perfect middle ground.
The more structured my pilots have been, the higher the success rate has been in terms of turning them into contracts. This also is a time where you can set and measure client expectations (so that sales/ account managers), don't get out of control with their promises.
Again, this helps clarify the intent and scope when you launch into a larger engagement.
1. Really work on systemisation of your workflow so you avoid the trap of just keeping your head above water with all the work.
2. Run it as a profit first business.
3. Hire and delegate the things you're not good at or don't protect the core value that you bring.
4. When delegating, make sure you also delegate the decisions and accountability of the results too.
I really enjoyed 2 books which I would apply, Profit First and Clockwork - both by Mike Michalowicz.
Second to that, I would really fall in love with why I run a consultancy business. For example, if my mission is to provide the best technical solutions that empowers the access of services to everyday people, then it can also align with your client's mission. If the thing you're passionate about solving is the same as what they are passionate about solving, then you work more as a partner than a supplier.
2. Learn to play the sales and marketing game. As engineers, we often underestimate the value of presentation. Showing up for a meeting well dressed and groomed has a really positive effect on a prospective client. I used to send my proposals as plain text files. People started taking me a lot more seriously once I switched to PDFs with proper fonts and colours that reflected my own company branding (website, stationery etc.).
3. Get money from your clients when the time is due. Don't become a line of credit for them. I learnt this the hard way and have a significant amount of money that's due to me which I'm not hopeful of getting.
4. Learn to evaluate a potential lead quickly and then decide on how much time you want to spend on making the proposal. Good leads might be worth a quick prototype of the project even. Bad leads might not be worth the email you send telling them that you're not available. Your time is valuable and it's what you're selling. Spend very little of it for unpaid tasks.
5. Put an expiry date on your proposals. Tell them that you'll do X for Y $ if the project starts by Z. Don't skip the Z.
6. Charge an advance before you start the project and charge in pieces based on value delivered. This also helps your cash flow.
7. Structure your company properly. A good book on that topic (and several others - a must read IMO) is https://davidmaister.com/books/mtpsf/
8. Keep growing. In my experience, consultancy (the services business) is a numbers game.
9. Spend some time, money and energy setting up policies for HR etc. up front so that when your employees come about raises and things, you have answers ready.
Good luck!
How do you guys promote yourself, those that work alone without agency of some kind ? Word of mouth or web site or something else ?
I'm currently trying out to see if a newsletter can work and I managed to get one project through it so far.
Thanks!
On average I find approximately 2 jobs worth applying a month. Robotics is not really that popular on Upwork so there are not many jobs available but also there is little competitions.
On average I find approximately 2 jobs worth applying a month. Robotics is not really that popular on Upwork so there are not many jobs available but also there is little competition.
So if you are selling billable time of your employee at a 30% markup over cost, then you need that employee billable 70% of the year JUST TO BREAK EVEN.
Charge more than you think is right, market rates are exorbitant. Invest in your spare time. Invest in professional society time. Invest in your training. Communicate explicitly and often to set and define expectations.
Have a sales pipeline. Don't be a one client consultant. Abundance mentality.
- sales
- networking
- sales
- accounting
- become your own project manager
- handle client requests, emails, phone calls,
- changes, followups, meetings
- writing contracts
- sales
- play well with client's partners
- marketing your previous work
- did I mention sales?
Kudos to anyone who can manage all these.
A one person consultancy where you have one main client at a time is vastly different than a 4 person consultancy where you are doing mostly project management and sales is vastly different than a 15 person consultancy where you are doing hiring and people management.
Pick where you want to go before you start. (You can change goals as you go, of course.)
Maybe another commenter can speak to your question.
- Have so much work on your table that you have to hire people. Don't force your growth. If you're doing a good job, you'll get more work to do.
- Make sure that the people you have in your team are committed and are able to organize their lives. Cultivate your company - e.g. have some rituals like weekly breakfasts and table tennis. Small things that increase the bond. Pay the salary on time, be open for personal conversations (personal growth of your employees is important) and remember their birthdays. Appreciation of their work is extremely important.
- Plan to spend some time (sometimes a lot of time) to guide your new employees. Try to build checklists for every reoccurring process.
- Build up savings. You should have 4-6 months of monthly income for every hire on your bank account e.g. if you want to hire someone for $4000, you should have $16k in the bank. Why? Because they may a) need longer to be productive, b) have personal issues or get ill, c) are not good in their jobs but you've noticed it too late (it happens).
-- We started to hire with less savings and I wouldn't repeat it. It's good for your sleep if you know that you'll be able to pay your employees regardless of anything bad that might happen.
Good luck!
2. Ask for a portion of money upfront as soon as you get the ok from your client to start work. (1/3 - 1/2) I usually do this after making an estimate and sometimes a full proposal, really depends on the client's needs and the size of the project. Let them know in the estimate (before you ask for up front money) that you will be asking for it when you get the ok to start.
Long term clients that pay well I don't ask for anything up front anymore, as they always pay on time with no hassles. Some clients (that I won't work with anymore) I charged 100% up front, as they had taken advantage of me in the past. (I no longer work with them)
3. You may end up with a client that makes your life so miserable you just want to quit and get a job and fast food place. Find a way to politely end your work with these clients, unless you really need the money... which happens.
4. When making an estimate, break out the costs into a few sections like, minimum requirements, nice to have, extras, and dream features. Put a price on each one. This is really useful because you don't have to worry about your pricing, and you are giving your client control over how much they want to spend with you.
The worst feeling was handing a client one number, and them balking at it and now you don't get the work. Most of the time the client is happy to take on all the work. In reality they almost never do the last two unneeded bits of work because they change their minds so much, or reality with testing shows those features are needed. (depends on the type of work you are doing of course) But they will still pay for you to do it. But will likely change the budget to something more important later.
I did art, design and animation before as well, and these rules applied in the same way.
5. Much of what I do with my clients is education. Be decent, patient and helpful. They have no idea how software development works and are often confused about why some things are necessary and others aren't. After a few years, I get fewer questions and more trust.
The newer the client, the more diligent you need to be with documentation and communicating very, very clear expectations. If the client says "why didn't you do X, Y and Z?" If you expressed expectations clearly, you can show why you didn't do them in a way that is helpful to your client instead of infuriating.
6. Never start work until you get an official ok, I almost always require it in an email/writing of some kind with new clients so there is no misunderstandings. When I was starting out I have started work on a few projects thinking I was going to get paid only to get an angry response later...
7. Change orders. This is a big one... If you were careful to layout expectations, this helps both you and your client. Expectations help your client because they can hold you to what you said you would do. They help you because then if the client asks for something outside the scope of the agreed upon work, you need to get comfortable telling them "this is outside the scope of this project", and that you will need to make a new estimate for this extra work.
This is the biggest issue I've seen with new people starting work. Why? Because every single client changes their mind at some point, and you need to be ready for that.
My solution to easing clients into this change order is to tell them upfront (saying things in advance is always more helpful than in the middle of a problem) that they get say 3 changes for free after the project is finished, and any changes after that will require m...
Me: You need this database stuff done. I can consult for you.
Them: We are looking for a full time employee.
Me: Well I'm keeping an open mind here, let me just go through the interview process and see what we both think.
(interviews)
Them: OK we interviewed you and we want to hire you.
Me: After understanding more about the position, I need to be remote.
Them: We don't want to hire any remote employees. OK we'll hire you as a (remote) consultant.
Me: $$$
... time passes ... largest income year ever ...
At this point I failed to look for more clients, and it became a one-client consultancy and eventually died when they decided they wanted to convert me to a (remote) employee after all.
(2) Charge a retainer for 'instant' contact. e.g. $200/month to cover cell-phone bill so you can be reached 'anytime' and/or resolve issues immediately. The other side to this is: I will reply within 15 minutes, but only able to address the issue when I am available.
(3) Charge for travel time as part of onsite-service. My billings begin when I leave my home.
(4) always give 3 quotes and specs. (minimum, adequate, suggested)
(5) Never charge for things that you learn. "It took me 3hrs to set that up, but i'm only going to charge you for 1hr because I learned X." They think they get a deal, and your worth increase. The key to that is communication. Make sure they KNOW they got a hell of a good deal.
So 10 clients all doing this = $2000/month. On average I get 1 call every 2-3 months. So that is significant income just to be available. As part of that (especially if it's a 10-15 minute "ssh in, do X and done" job) everybody is happy.
Note: Most of my clients are small'ish Tool & Die shops, these are the kinds of places that still run a multi-million dollar GM contract on a DOS-based MS-BASIC kludge. So my environment and the mentalities of the area are vastly different then a big metropolis like New York, LA, Toronto, etc.
They think they are getting something for free. Because I've upgraded most of their systems from the kludge to some things more robust, I do less work and get paid more.
I like working with manufacturing people: machine shops, motor rewinders, etc. One of my current clients retrofits old machine tools (think 20hp planers using 0-10V controls) with new digital controls. I always enjoy discussing that kind of stuff.
I don't know. I think the rate should be the same but you just add "traveling expenses".
> Charge a retainer for 'instant' contact. e.g. $200/month to cover cell-phone bill so you can be reached 'anytime' and/or resolve issues immediately. The other side to this is: I will reply within 15 minutes, but only able to address the issue when I am available.
Bad idea. Do you want to be available in 2AM Sunday morning while you are at bed with your significant other. (or even alone). If your client requires 24/7, then hire 3 on-site that cover the 24 hours day (8-8-8). You'll probably need more for weekends. Your bank doesn't offer 24/7 services, why should you?
> Never charge for things that you learn.
Unless you should know it and it is general knowledge. Otherwise charge for it. It is part of the job. Also if you don't know it because of inexperience, your rates are probably lower. So a more experienced worker will take less hours but charge more per hour. Same result, same wage.
The biggest lesson (I think it was in that book) was that you're being hired as an expert on a topic. to be a Successful expert you must A) have an expert level of knowledge about the topic and B) LOOK LIKE you have an expert level of knowledge about the topic. Those are two separate, but essential things.
2. Go for 70-30 split of listening to talking.
3. Read Million Dollar Consulting by Alan Weiss
4. Make sure to read a lot in the early days, but don't expect to get more than two or three insights from any particular book (for example the insight in the Weiss book that has proven most useful was "Clients that are difficult in good times will be nightmares in bad times". That has been true in each and every case in 17 years in business)
5. By the time you're in front of someone (physically) your primary job is not to sell them on anything, but to de-risk your offering to them.
but guess what, the client later left to another company who charged twice our cost. i fired my partner after that and not making that same mistake ever again.
Like in any line of work, there are way too many little bits of acquired wisdom to rattle off-the-cuff in an HN comment, so just a couple that first come to mind...
I've ended up always billing hourly, tracked in 15-minute increments. The hourly rate sounds high, but when I looked at the value I provided to a client over a year, and compared to a TCO of an employee who could've provided comparable value, it seemed that the client got a really good deal. Maybe too good; when it's remote work, I err on the side of avoiding slippery slopes about hours (e.g., clock doesn't start until I'm fully awake and exercised and typing on the computer on the problem; don't bill anything for a morning walk when I spent most of the time thinking about the problem). On-site, I'd bill all time, except for things like lunch and other significant breaks (e.g., non-work-related watercooler conversation beyond exchanging pleasantries).
One thing that comes to mind at the moment is that, if you initially find a client due to expertise in some niche (e.g., you're known in a language or open source community for a particular piece of stack that client uses), that might turn out to be only a small part of the expertise that you apply. For my favorite client, I was immediately applying other background I didn't expect, and I ended up becoming the go-to person on many topics, including things I learned on-demand. (I already believed in hiring people who could quickly pick up whatever flavor-of-the-month bit of stack was needed at any time, but this experience reinforced my opinion that this could also apply to more limited consulting arrangements. With consulting, you probably need an expertise in something foot in the door, though.)
Most things I think to mention here only apply to a minority of consultants, or are widely applicable to many kind of development roles.
Regarding multi-person consultancies... I'm glad that I didn't start hiring additional consultants or forming a partnership, because I'd foresee spending even more time on business administration, plus have the stress of other people's livelihoods dependent on my relatively neophyte business skills. I'm much more confident in my engineering skills. (Of course there are a few organizational/leadership things I'd like to try, as I think many of us would based on our experience in the engineering trenches, but am willing to give that up if someone else will make all the money and bureaucratic stuff just happen, so that I can focus on engineering things.) But if you want to move to the business side, that can work.