

How I can charge so much - mhartl
http://eikonoklastes.org/articles/2007/09/26/how-i-can-charge-so-much

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staunch
I've known more than a few 20-somethings who charge over $100/hour and a
couple that are around the $200/hr mark. There's no correlation between
expertise and hourly rate in my experience. Some of them are ripping people
off and some are undercharging.

The reason this works is that person writing the check is usually not spending
their own money, or if they are it's a drop in the bucket for them and $5k or
$15k isn't much of a difference. They've probably already wasted $100k+ in
salary over time having their employees try to handle the same task before
deciding to bring in someone new. The other factor is the (mistaken) thinking
that if you charge a lot you must be worth a lot.

At most companies the idea of giving one of their own programmers a $20k cash
bonus to do a 10 week project in 1 week is out of the question, but paying a
consultant to do the same thing is no big deal.

The Expensive Consultant idea is what IBM basically lives off of these days.
In their case I think it's pretty unethical, but for individuals who are truly
qualified it's a win-win situation and I highly recommend it as well.

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nostrademons
There's math behind the "If half the people don't say 'fuck you', you're
charging too little" principle. If you double your prices, you're taking in
twice as much revenue. You can afford to lose half your customers, and you'll
still be making the same amount. However, you'll spend half as much energy
doing so.

It's more striking if you have overhead. Say you charge $5000 for some job,
but have expenses of $4000 for it. If you double your prices, you now make
$10K, but your expenses remain constant at $4K. Your profit has gone from $1K
to $6K. You could afford to lose 5/6 of your customers and still break even.

My mom charges $80/hour for elementary-school tutoring, up about $10-15/hr
from when she started tutoring. None of her clients have ever blinked at a
price increase. I know 20-somethings who tutor high-school math and make over
$100/hr.

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kingnothing
Constantly increasing your prices is a pretty fun game.

I did some basic Windows consulting a few years ago; you know, spyware
removal, installing hard drives, etc. My initial rate was $50 / hour, and I
was charging $90 by the end of the summer. No one so much as batted an eye at
whatever number I gave them. Not a single person tried to negotiate.

~~~
SwellJoe
Yeah, I did the same with my web app scalability contracting work...started at
$95/hr, and kept that rate for years, but then when I started getting sick of
the business, I started cranking it up. By the end I was charging $150/hr for
local work and $3k/day minimum for "have to fly to get there" jobs, and hadn't
lost any customers--I was still saying, "No, I can't get out to see you until
the week after next, but I'll fix the particular problem you've mentioned
remotely tonight when I get back into the office."

~~~
soundsop
Why did you stop at $150/hr if it didn't drop any customers?

~~~
SwellJoe
I instead just stopped. That's when I went full-time working on Virtualmin.

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edw519
Nice post. I especially like the "F*ck you" part. I never quite heard it said
like that, but I agree.

Lessons learned from mistakes I made (and you shouldn't):

1\. If they say they won't engage you because of your price, it's not because
of your price. Find out the real reason.

2\. If they're shopping on price, let them. You don't want them.

3\. If you won't compromise your quality, then you shouldn't compromise your
price.

4\. If they legitimately can't afford it, then reduce scope, not price.

5\. If you charge top dollar, you better deliver top quality. Otherwise, don't
be surprised when word gets around and the well dries up.

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DanielBMarkham
Welcome to the crack cocaine of geekdom.

Once you figure out you can bill whatever you can negotiate, it makes it
really hard to do startup work. The most dangerous part about it is that you
always know you can pick up a bag of cash if you need it. When you've always
got an attractive and easy "out", it's always out there calling to you. Yet
another reason to do your startup when you are as young as possible.

~~~
SwellJoe
Agreed. My girlfriend thought I was crazy when I started turning down
$1000/day local contracts and $3000/day "get on a plane" contracts to instead
work on Virtualmin (for no money for the first several months, and until
recently very little money).

~~~
DanielBMarkham
We should talk. I'm in need of some kind of 12-step group.

Seriously. I'd like to hear more about how you managed to quit.

~~~
SwellJoe
The addiction wasn't so much mine as my clients. I had to wean them...and with
enough time for them to hire someone to take my place. In the case of my
biggest customer, they hired a full-time employee for the role.

I think the impetus I needed was the right business. I'd been working on
Virtualmin for fun for two years...somehow it never occurred to me to make it
a business for most of that time. When it finally did, it all seemed
inevitable: it really felt like, from day one, that as long as I worked hard,
it could not possibly fail (and that initial gut feeling is turning out to be
right a couple of years later).

Some things I did to make it clear to myself that I was done with that old
business:

1\. Gave up my downtown Austin office. (Corner of 6th and Congress, Bank of
America building...best location in the whole city.)

2\. Took down the old business website. I left up all of the support materials
and such (and it still gets thousands of hits per day), but I removed all
contact information.

3\. Gave myself deadlines for launching the new business. "The website will be
launched on X, and we'll be selling products by Y."

4\. Did Y Combinator. Not everybody gets to do that, but it triggered a number
of changes that made the break between the old life and the new one very
dramatic and difficult to go back on: I sold my 350Z and had a huge garage
sale to get rid of a lot of my stuff, moved to the Valley (the getting rid of
stuff is enforced when moving to the Valley--I couldn't afford as much space
out here as in Austin), and didn't keep my old phone numbers.

The last one has probably been the most effective. I was still occasionally
taking jobs when friends asked when I still lived in Austin. The thought
process is, "Hey, what can a couple of days hurt? It'll give the new company
more runway." But it slows you down, and gives you a safety net. Once I didn't
have the safety net, I started thinking a lot faster and lot harder about how
to increase revenues to a livable amount (I've never had a lot of big
expenses, even the Z, so I had enough savings to last quite a while, but
moving to the Valley dips into that pretty quickly).

NOTE: I don't have a family to feed and house. My co-founder kept his full-
time job throughout all of this, because he has a family. I'm not saying the
dramatic "drop everything and get serious" is the right path for everyone.

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jamiequint
My experience is that your billing rate is more based on your domain
experience than your education/work experience. We bill around this much and
have only once had anybody complain, and I'm far from an "oldster".

~~~
mhartl
Yeah, we talked a bit about this at RailsConf. Experience still helps, but far
more 20-somethings (especially on this forum) have the chops to justify much
higher rates. I'm hoping to encourage more of them to be like you, and screw
up the courage to charge more.

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dfranke
> The server is temporarily unable to service your request due to maintenance
> downtime or capacity problems. Please try again later.

Holy cow, did they get slashdotted by news.yc?

~~~
mhartl
No, I took this high-profile opportunity to geek out and fix the HTML
validation down to the character encoding level, in case anyone checked. Then
I accidentally committed a slightly broken version, and it took the entire
site down. Then, in my panic, my darcs-fu failed me, and I couldn't get the
patches to unpull properly.

Moral: even someone who looks great on paper can do something unbelievably
stupid. (At least I wasn't charging anyone $100/hr. for it!)

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aswanson
Thanks. I'll probably double my per-unit commission cost for my startup
product, per your inspiration.

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QuestionBoy
Thank you. That was very informative. :)

~~~
mhartl
You're welcome, aptly named QuestionBoy. Thanks for asking the question in the
first place. :-)

