Ask HN: Negotiating My Hourly Rate?
Hi, I am a freelancer from a South Asian country and I have been working for a client through my friend for a year. The friend is getting $15 from the client and he pays me $9 hourly (i.e he takes 40% cut). I mostly work on the frontend side and handle multiple projects of the same client. Other than that, I communicate with the client directly and manage the work without my friend's involvement.
I deliver the work on time and in good quality, however, I am not employed by him nor do I work full time on the projects (because of some personal reasons and the fact that I have my own client). Rather, I give enough time each day to complete the assignments on due time. Despite this, I think, I am getting a low rate on the basis of the value which I provide.
This has been in my mind for a couple of months and I wanted to let it out and pitch a new rate of $18 (double the previous rate) to my friend. But I am afraid this may not be acceptable, as he is getting $15 from the client and the client is already on a tight budget. And, I am afraid if I stick with this offer he will try to arrange some other resource, resulting in me losing this opportunity. Moreover, I do have my own client and work for him for $10.
I will really appreciate some help or guidance here. How should I best approach this scenario so there is a WIN/WIN situation for all of us? Am I pitching too high?
PS. He is already looking for an extra resource to share my work. And I am willing to go as low as $15
72 comments
[ 2.6 ms ] story [ 139 ms ] thread> And I am willing to go as low as $15
So if they offered you $14 an hour, you would drop the project? Despite working for $9 so far and having another client at $10? You'd better be able to walk away from this or your leverage is non-existent.
Of course you can still try to cut your friend out of the loop. If he's not providing any value, then working directly for the client will already be a nice boost for you.
If your friend has zero involvement and no relation with the client, I don't see how they are getting paid in your place to begin with.
Do you have a contract with your friend? If not, just notify the client to update your bank account details and they will start paying you directly.
He is rarely involved. I send him invoice monthly, and if I get stuck on some technical things he guides me a little (this have happened around 3-4 times in the whole year, so to give you an idea). He doesn't even have the domain knowledge of projects I am working on for his client.
"just notify the client to update your bank account details and they will start paying you directly" I don't think this is ethical, especially with your friend. This would result in a bad relationship between us or the end of it. We've been friends since childhood.
If your work is good quality, it's almost certainly worth much more than $9 an hour. I would seriously consider:
- negotiating with your friend to reduce his share - as long as it's still profitable to him, he should be willing to move a little.
- trying to find some other freelancing work opportunities so that you don't feel pressured to accept your friend's terms.
But since last year, I have started to take my profession seriously. I quit a good paying job last year and started freelancing because the job was fulfilling for me.
Shortly after quitting the job I started working for my friend's client and that $9 rate was decided back then.
The multi billion dollar staffing agency business in the United States is built on these layers of comp for labor and finding labor.
Also, read whatever patio11 wrote about this.
https://www.kalzumeus.com/2012/09/17/ramit-sethi-and-patrick...
https://www.kalzumeus.com/2012/09/21/ramit-sethi-and-patrick...
Neither too high nor too low. A fee that you think is reasonable.
When someone asks your fee, you say.... “this is my fee. I think it is fair. I do good work. I don’t overcharge. I know there are cheaper people out there but that’s not where I am positioned. You are welcome to work with the cheapest.
If you want good work at a fair price then I am happy to work with you but I cannot discount my rate because it’s not commercially practical for me to do that.”
If you lose the potential client then that is fine . Do not chase them with lower prices. Wait for the clients who agree with you.
When clients insist on some concession, some discount, then give it only in return for something else, like up front payment. Don’t concede discounts for nothing.
In my opinion, when you are negotiating, you should only keep in mind your "win", not of the others.
The other thing is that I would work on improving the "demand" side for my work: if I have 10 potential clients, increasing my hourly rate becomes very easy, something I can do with confidence. On the other hand, if I only have 2 clients, I have to negotiate carefully, because I don't want to lose 50% of my work and income.
I've found it helps if you create a grid with you and your partner as the columns and "Goal", "Walk-Away" and "BATNA" in the rows.
Your goal would be "$18/hr", your walk-away would be $1 less than your current rate (it sounds like) and your BATNA is to find another job that pays more, but accept the risk that you find another job.
For your friend, his goal is to keep you at $9, his limit seemingly would be his own pay or $15/hr and his BATNA is to find someone else but accept the risk that he may not find someone.
Ultimately, most negotiations end between people's limits, so it sounds like if you negotiate you could increase your rate to $12-$13 an hour.
That makes it 80-85% of the original pay. I will keep this in mind but try to pitch my least acceptable offer be 13.5 (i.e 90%)
To make the best initial offer and anchor it in your favor, you should aim for their limit/walk away price. This would be probably around $17/hr for him since asking him for $18/hr I would believe would be beyond his limit price.
In general you should always make the first offer and make it at the limit of your opposition. How do you know their limit? You have to do your research ahead of time and know your opposition and their needs. This even further proves the OP I replied to was wrong.
$15 is his limit. How do i know that?
First this is the amount he is getting from the client, second he won't accept that I get the entire cake while he gets nothing while the fact is that the client is his not mine.
I know him from my school days, he is very careful when i comes to money and I find him tight-fisted. Just to share an experience with him, when I first started working with him he offered me $6, trying to take 60% cut, I told him that this was very low and $9 would be acceptable. At this demand he got irritated and said I worked nights to build this stuff. So I explained him how I would provide value to him and his client and he won't have to worry about my work because I would handle the client directly. After that he came to some sense and accepted that $9 demand.
My advice would be to look for exit path and walk away from this situation when it becomes possible. You can easily make more than $9/hr. on freelancing marketplaces once you establish yourself a bit.
In return for their cut, the agent handles the payments and provides the guarantee that the candidate gets paid on time even if the client pays late.
There's usually a clause in both contracts that prevents them from cutting out the middle-man.
If the candidate is leaving they may provide a different one.
And the client can negotiate several candidates at a fixed rate and the agency can provide different insurances and help with taxes an so on (for both parties).
A good agency would also help with the negotiation towards the client. And find you a new client if the client drops you.
But 30% is not unreasonable. There isn’t any place that I have worked that hasn’t had a much larger gap between my pay and my billable rate even when I was working full time and we were doing custom work for clients.
LOL, what? "The only reason we used staffing firms was cuz them reps be dummy thicc".
I worked for a small/medium ISP for a while and did a lot of hiring for entry-level and mid-level roles. If we threw an ad up on Craigslist for DC, NYC, or Baltimore we would get back, easily, 500+ responses.
The signal-to-noise ration was insane. A huge chunk of the responses would be spam or automated-resume-slinging-bots, and like 30-40% would be immediately disqualified for being in different states/countries or being wildly unqualified. Even after adding a few homemade filters and a basic online tech quiz, we'd still end up with like 40 candidates to screen further. The viability of these candidates was... not great... and a lot of them tended to split after a couple years, and several didn't last 6 months.
Then we started using a headhunting firm and they did all of the sorting, vetting, and gave us a great 3-to-6-month hiring window. We could ask them for 3 decent clients -- "decent" was relative sometimes -- and have them in a couple weeks, get them hired comparatively quick, and turn them to full-timers in 6 months if they were good; usually we did.
Some of the hires were for very specialized roles (frame relay/fiber optic types) that often took a while to source or had to be lured out of other places, and they were generally good at doing that too.
I'd never want to be one of the contract-to-hire candidates again (once was enough) but I'd be hard pressed dissuade others from using them.
This might be the case in large agencies that have their processes right, but it's likely that smaller agencies won't have the cashflow to guarantee that their downstreams get paid on time — even moreso if they have to account for their own staff as well.
Working at an outsourcing firm or sweat shop, these can take a 30-40% cut but they do other things besides just referring a person. Often they take care of a full project from start to finish or they provide a complete development team.
Usually that has a fixed expiration date, e.g. placement-to-hire is a 6-month contract. Otherwise you're just a professional services company with contractors, and that usually carries a 3-6 month non-compete or something along those lines.
It’s ok to negotiate win-win. And in the long run you win from that, because what you want is great relationships with people who feel they can rely on you and respect your work.
If you can do that without being taken advantage of, you will get tons of work for years and make money you are happy with.
Why double your rate right away? Are you happy working for $10?
Can you find new work? Can you increase the rate gradually? Can you say ‘this month it will go up to $12, but in 3 months it will go up to $15’ ...
It’s great if everyone makes money. Are you annoyed your friend is making money? Why are you willing to make $10 from one person but you want $18 from another?
You don’t want to work too cheaply, but you also want to maintain relationships. This is how you get more work for years and years and build a career.
Also it’s good practice.
Not at all, the problem is as others have mentioned is a very big cut he is taking. While I am the one delivering a lot of value to the client. Even upwork takes lesser cut (max 20%) than his.
Can you deal directly with the client and cut out the middleman? Early in my career, I did this with an employment agency who were perpetuating the same scam on me.
They weren't pleased about it, but fuck 'em. These capitalist bastards will grind you down and steal your labour any way they can - and you deserve better!
Anyway good luck with it, whichever approach you take.
You could try getting in touch directly with new clients (costs time and effort) and negotiate a better deal.
You could negotiate with your friend to pay you the full amount but pay your friend a fixed fee instead (applicable if the worktime is not constant). For example if you work 50h/month the client pays 700 - 450 for you. Offer your friend a constant 200$. But try to increase your worktime so you get a better quote and your friend has a fixed income.
Theory: in a negotiation both parties are trying to get a deal that is better than the Best Alternative To A Negotiated Agreement (BATNA). So what you’re trying to do is say if this negotiation fails what am I going to do instead. Theoretically this is where your leverage always comes from because a good BATNA enables you to threaten to walk away.
Practical: in your post I understand what you want, but I don’t understand your BATNA. If your friend refuses, or worse let’s say he fires you right now, what would you do/make instead?
The easiest way to get a win-win is the following: 1) go find other gig offers - compare the price others are willing to pay you (recognizing there’s some risk the next client is not as friendly/easy to work with) 2) Let’s say you get 3 offers at $15,$16,$17. Show these offers openly to your friend and say “look I like working with you and want to continue but the market rate for my work is much higher than what I make right now”. This is actually a win-win because if you’ve done your research right, these are the same offers your friend would have to make to replace you. Now the conversation isn’t about what you want vs what he wants, but what each of you would do if you can’t get to an agreement.
3) Make your offer (say $18) and explain why it is higher/lower than the market avg (you can trust me, you know I do good work, etc).
4) Truly be willing to walk away if it doesn’t work. Not everyone is rational, not everyone will believe your alternative, not everyone wants a quick resolution. Unfortunately this is the hard part with friends, but if it doesn’t work you just must be willing to walk away (try to keep it isolated to your business partnership and not your personal friendship).
Notice, throughout, the premise is: here’s what my alternative is. Without this, you’re just hoping for him to take action out of kindness. It’s certainly possible, but it sounds like you are confident in your skills and value and ready to move past charity to career.
Good luck. Ask questions here if you have them. Let us know what happens.
> > Hi, I am a freelancer from a South Asian country
If they pay you that, all is good. If not, you go on working with them until you find something else.
This is possible to do. I've negotiated big increases in the past. But you need to understand what your skills are worth in the market.
You will also find that if you spend time finding new clients yourself, that activity takes times to do. So if your friend has a lot of connections, you may want to consider preserving that relationship if you don't want to worry about the business side.