
Ask HN: What was your experience starting a tech consultancy? - amolo
Basically share anything.
Advice.
Warnings.
Stories.
About the time you considered and also actually starting a consultancy.
======
DoubleGlazing
Being able to sell and do the whole business BS thing is vitally important. If
you can't do it, hire someone or get a friend/relative to help.

Under promise, over deliver. (slightly)

Become an authority on your subject matter. Write blog posts, post often on
twitter, write to journals/newspapers - set yourself up as someone who knows
what they are doing.

Charge for spec work.

Don't be afraid to turn down work that may challenge you more than you can
handle. You are taking an unnecessary risk. In those circumstance you can
offer to help the client find the right consultant/solution provider.

ALWAYS get a deposit before work begins. And then insist on regular payments
for longer projects - if payments stop, you stop work.

Don't do fixed fee work, unless you REALLY, REALLY trust the client.

Good relationships are vital. If a client likes you they will market you
through word of mouth and that's the best kind of advertising.

Have a plan in place to deal with non-payments or difficult clients. Be
consistent and don't let bad clients take advantage of you. Offer no credit
terms longer than 28 days. Offer a 5% discount for quick payment.

If you are providing software before full payment is received, don't be afraid
to use a licensing mechanism to shut it down if payment fails to materialise.
A friend lost €20k in a similar situation.

Also, bear in mind you will work long hours. That's why I couldn't keep doing
it. I was making decent money, but the hours, and travel, were killing me.

~~~
reikonomusha
What’s wrong with fixed-fee if a fully specified statement of work is made
with clear, objective test criteria?

~~~
kradroy
As someone who's done over a dozen fixed-fee jobs - DON'T DO IT. There are too
many unknowns, even in "simple" jobs. It won't be worth your time and you'll
regret it. In order to make fixed-fee contracts worth it I had to cut corners.
I hated doing that, but I preferred it to dropping the contract altogether
(sunk costs fallacy).

I've also found the clients who insist on fixed-fee contracts to be very
demanding and petty. They tended to interpret the specs liberally. It's not
worth the hassle. Trust me.

~~~
avinium
As someone who's been on both sides of the table - client and contractor - I
completely agree. I never do or ask for fixed-fee.

When I'm the client, I feel fixed-fee gives the contractor an easy
backstop/fallback position - they figure they can half-ass the job and use the
additional time to scout for more work.

When I'm the contractor, it's the same, but in reverse - fixed-fee makes
clients feel like they can demand the moon beyond spec at no additional cost.

Hourly/daily rates make sure that BOTH parties have something at risk, which
tends to be keep everybody in line. The contractor's at risk of the client
firing them. The client's money is at risk if they keep demanding endless
revisions.

Actually a good lesson for business in general.

------
Stronico
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.

~~~
Stronico
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.

------
lprubin
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.

~~~
cldellow
+1 on charging for specs.

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.

~~~
vijaybritto
Sorry but what is meant by this "specs"? Estimation?

~~~
cldellow
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.

~~~
vijaybritto
Thanks

------
tedshroyer
Here are a few things I would recommend:

\- 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.

~~~
achenatx
fixed bids are the only way to make in excess of $500/hour.

You need to learn how to do fixed bids and then have processes to support it.

~~~
justanother
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.

------
sharkweek
Charge a lot more that you think you’re worth.

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).

~~~
gk1
Better yet, don’t charge hourly. The number of hours has nothing to do with
how much value you’re providing to a company.

~~~
cloudartisans
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.

~~~
gk1
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?

~~~
cloudartisans
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.

------
noufalibrahim
1\. Get a good grip on how to understand and interpret the finances of your
company. Especially the concept of cash flow. A book I can recommend it
[https://www.goodreads.com/book/show/5152210-financial-
intell...](https://www.goodreads.com/book/show/5152210-financial-intelligence-
for-entrepreneurs)

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/](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!

~~~
servercobra
How far out do you normally set your Z?

~~~
noufalibrahim
2 to 3 weeks.

------
natch
The start went like this:

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.

~~~
collyw
I like this approach (having been stuck in full time jobs for longer than I
intended).

------
savrajsingh
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.”

~~~
maxxxxx
I think it’s ok if you get paid a lot of money. Just don’t get sucked into
working for cheap building the castle in the clouds.

~~~
mlevental
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.

~~~
maxxxxx
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?

~~~
peteforde
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.

~~~
maxxxxx
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.

~~~
peteforde
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.

~~~
maxxxxx
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?

~~~
ninefoxgambit
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.

------
dopeboy
Hey, a topic I can comment on in good depth, for a change! Learnings after
five years of running a consultancy [0]:

* You must communicate better than you know how to code. Knowing how to do the former can offset the latter.

* You're always selling. Whether you're at a social event or a meetup or a get together, you must make sure everyone leaves knowing what you do. You must be on people's radar so when they get inbound, they know to pass it on to you.

* Take fixed contract over hourly. The moment work is tied to time rather than outcome, both sides suffer.

* It is excellent if you want to have a work life balance. It is not good if you want to create something that is challenging or something that can scale. It is not good if you want to become a better engineer, either. For these reasons, among others, I won't be continuing mine that longer.

If you're in the bay area, come grab coffee with me. Happy to share more.

[0] - [https://www.thenorthstarlabs.com/](https://www.thenorthstarlabs.com/)

------
martin-adams
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.

------
bberenberg
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.

Sell.

------
gk1
I wrote about my first year of consulting to share what it was like and some
tips I learned along the way: [https://www.gkogan.co/blog/how-i-learned-to-
get-consulting-l...](https://www.gkogan.co/blog/how-i-learned-to-get-
consulting-leads/)

Here is another good one, which applies to tech consulting just as well:
[https://tomcritchlow.com/2019/04/04/the-strategic-
independen...](https://tomcritchlow.com/2019/04/04/the-strategic-independent/)

~~~
msadowski
Thanks a lot for sharing this. Just this month I'm hitting one year
anniversary of my consulting and your advice hit really close to home. Thank
you!

------
jaequery
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.

------
usermac
When you run out of work simply go visit an old client—not to ask for
business, not to ask for anything, just a visit to see them. Within about two
weeks, that client is calling me with a project to do. It is magic. I did this
many times.

~~~
lostdog
What do you do on your visit?

------
maxxxxx
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.

~~~
chasd00
always sell. _always_ sell

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.

~~~
c0nfused
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

------
kowdermeister
It didn't really work for me, tried it twice and quit both times. I really
dislike that I had to be a one man show besides what I enjoy doing:

\- 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.

------
sparker72678
Started a consultancy, ran it for 5 years, closed it down. YMMV.

My experience:

Running a successful tech consultancy has nothing to do with actually building
tech. The only thing that matters is sales. I'll say it again: the ONLY thing
that matters is sales. Every consultancy will be more successful by selling
crap than by failing to sell great work.

(That said, do great work. Referrals are typically your best way to get
clients you actually want to work for, so do good work. But you're here on HN
already, so you probably don't need to be told that.)

Someone in your company will need to be spending just about 100% of their time
attempting to sell your services. If you're running a one-person show, this
will be very hard. You will need to make much more money per job, so you can
float financially between projects.

Did I mention that the only thing that matters is sales?

Why is sales the most important thing? Because in a consultancy you only make
money if you're working on a project. There are no residuals. No one will
signup for your services and automatically start paying you, then keep paying
you indefinitely. You will need to close a sale, start work, then charge for
it.

All of that means that you are ultimately selling time. Your time. And that
time is finite. Take a vacation? You're making less and spending more. Get
sick? Making less and spending more. And if you're close to the line on your
overall finances, this can be devastating. Which leads me to...

Cashflow. Cashflow is your new master. It owns you, controls you. Everything
you do will be to serve your Cashflow. The only way to keep it happy is to
feed it more sales. If you don't feed it constantly, it punishes you,
brutally.

When you aren't feeding Cashflow sufficiently, you will lay awake at night
trying to figure out what sacrifices you will have to offer. And, there will
be sacrifices. When you _are_ feeding Cashflow, you will wonder how much
longer you will be able to feed it. You will know how much Cashflow runway you
have. You will know when you will be out of money.

Consulting is just a game of kicking the run-out-of-money can farther down the
street. When it catches up to you, the game is over.

I'd echo many other things I've seen in this thread:

* Charge for specs * Charge high rates for good work * Pay your taxes * Say No to projects you know will be awful * Don't give discounts for any reason

------
neilv
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.

------
chasd00
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.

~~~
gk1
If there are only so many hours in a day, then why bill hourly? It’s a self-
imposed limit to what you can earn.

~~~
himynameisdom
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.

~~~
gk1
> 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.

~~~
himynameisdom
I'm assuming none of your SOWs have gone to RFP.

~~~
gk1
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.

~~~
himynameisdom
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.

~~~
barry-cotter
> 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.

------
HeyLaughingBoy
1) Upsell. Take what you're asked for and apply your expertise to show the
client what else they're likely to need and how you can provide it.

2) Go for the boring stuff you could do in your sleep. The most profitable
projects are usually the most boring projects.

------
wgx
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%.

------
mooreds
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.)

~~~
odyssey7
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?

~~~
mockingbirdy
How to pull off a 4-man-shop:

\- 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!

~~~
odyssey7
Thanks!

------
unixhero
It worked. Time and material was fine for me.

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.

~~~
odyssey7
Could you elaborate on what a good sales pipeline would mean in this context?

~~~
unixhero
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.

~~~
odyssey7
Thanks!

------
homakov
I've run a security consultancy for 5 years and stopped few years ago. The
goal was lifestyle business, not something operating at scale or doing snake
oil. The focus was on high quality audits (for specific platforms such as
Rails) that others wouldn't be able to perform.

I did many things wrong but still pretty happy with the results. Not a
recommendation: I did zero marketing.

Monthly some cool bugs I did writeups about, which brought new clients, which
brought new ideas, which I wrote up about again.

I quickly realized that (cringe) "rock star" name allows you to bill $500/hr,
which I did. No one ever said "that's too expensive for us".

I think what tptacek and McKenzie are always saying is best advice indeed :
increase your rates. _Believe_ that you are worth that much, don't feel like
an imposter.

The reports I've delivered contained great bugs but were poorly presented (no
design, basic formatting). It could be done much nicer, so invest in your
"receivable items".

------
osrec
Chase payments constantly from the START. Make it the norm that you must get
paid on time. People will often defer payment if you don't push them. If you
can help it, try and get paid in advance - at my firm, clients must pay for
the _next_ 2 weeks of consulting, or their work stops. I know it sounds
brutal, but my people need to get paid, and if clients can't handle that, then
they're not worth having as clients!

Edit: clients who REALLY understand their business are better than those that
don't. You want to work with people who know what they're doing, so that they
can explain their requirements clearly to you. You'll be surprised at how many
people can't do that, often resulting in them expecting one thing and getting
another (and they'll blame you for it).

~~~
theandrewbailey
In other words, don't have a client from hell. I've been reading stories about
those kinds of people for years now.

[http://clientsfromhell.net/](http://clientsfromhell.net/)

------
UI_at_80x24
(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.

~~~
gk1
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?)

~~~
UI_at_80x24
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.

~~~
HeyLaughingBoy
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.

~~~
UI_at_80x24
Just generic sysadmin related stuff.

------
werber
From someone who has failed at it, get comfortable talking about money or get
someone who is. I didn't.

~~~
scardine
It is one of the first skills you should master.

\- it is hard to make good money if you are not good talking about money.

\- talk money first - do not spend days writing a detailed proposal just to
discover later your proposal is way over the client's budget: your first
proposal should be verbal, the detailed proposal should be the contract once
the verbal proposal is accepted (even worst, don't give for free a detailed
proposal your client will use to bargain with your competitors). Many clients
will resist to disclose the budget but you should argue: too often people say
we are too expensive, let's make sure we don't waste each other's time knowing
at least the investment ballpark.

\- run from clients that say they want to invest as little as possible.

\- if the prospect don't know how much they want to invest you probably are
selling to the wrong person - always insist to present the deal to someone
that is able to financially approve the investment. Decline to present your
proposal if the person is late or can't attend to the meeting, say you can
wait for 20 minutes and if the person is unable make it, reschedule. Don't
waste time with minions.

\- in order to frame the business proposition as an investment you must
understand how much the problem costs.

------
tunesmith
Depends on what kind of consultancy. As a one-person remote consultancy who
focuses on long-term (years) engagements, with usually 1-2 concurrent clients,
I've found hourly rates work all right, although I've experimented with daily
rates, too. That kind of work straddles the line between consulting,
contracting, and staff augmentation, but it also tends to lead to secure and
solid long-term relationships. That's the outgrowth of optimizing for high
flexibility, decent pay, and low marketing needs.

As a solo consultant (perl, php, java, scala/akka, with no mysterious
specialties) I associate daily rates with shorter-term (weeks or months)
engagements, which means better pay but more sales/marketing stress.

------
alberth
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.

------
achenatx
I took the "easy" way and started a services company. My plan was to do that
for a few years make a few million and then start a product company. 19 years
later and Im still running a services company, though we finally are at around
9 million and I am working on a product based startup.

During that time Ive had many friends/acquaintances start and sell product
companies for 10+ million. The "easy" service company was about as hard as the
product companies, but with a lot less value in the end.

On the plus side there were many years I only worked 5 hours a week while
making 300k+/year take home with 300K+ left in the company. The downside is
during the 2001 and 2008 recessions we almost lost everything.

Your sales and your services will never be in balance. You will either be
making customers mad because you dont have enough people, or paying for people
that have no work to do. This will cause your delivery managers and sales
managers to regularly be mad at each other.

Your main job will become keeping your managers happy which means mediating
conflicts between them.

I started constant recruiting from day one, we always have people ready in the
pipeline to hire. I also outsourced bookkeeping/payroll as soon as possible.

A friend of mine had his wife embezzle all his money and run off with one of
his customer's. You should be the only person able to touch the money. Even
today I sign every check and approve every wire transfer.

Get the largest line of credit you can before you need it. When you need it,
there is no way you are going to get one. It will take two years of operation
before a bank will give you a line. Your line will be 80% of receivables, with
a max of 25% from any one customer. You can generally get under 100K as an
unsecured personal line with good credit.

There is a really challenging point when you are about 4-8 people. When you
were a single person you made all the money. As you add more people and
continue billing, you are flush with cash. Around 4 people you need to manage
them and then find new business. At that time you start making much less money
but with a lot more headaches. This happens up until about 8 people. Lots of
small consultancies never break past this point

I have always been torn with putting employees first vs putting clients first.
This is a very challenging dilemma.

You might think having broad services would get you the most potential
customers, but the opposite is true. The smaller you are, the smaller your
niche needs to be.

Collect your receivables, if you arent the type of person who can keep at it,
make sure your bookkeeper will do it. We had a customer owe us 500K going into
the 2008 recession and if we hadnt collected most of our money before they
went into bankruptcy we would not have made it. For public companies we look
at the 10K to make sure we understand their cash position.

Never be a 50/50 partner. Every single one I've seen has eventually gone bad.
One person needs to be able to call the shots.

Sales is actually pretty easy for me, marketing is really hard. Once you crack
the marketing, the really hard part will be having enough senior people to
take on completely new clients.

The people who grew their service businesses the fastest aligned with a
technology that took off. The downside was that if their technology provider
lost then their business took a big hit. They also tended not to develop their
marketing muscle because all their leads were generated by their technology
parter.

If you are not a detail oriented executer you must have one as a partner or a
senior employee.

In the entire history of the company we only won maybe one RFP. Enterprise
sales are done with relationships and the RFPs are usually just people jumping
through hoops to satisfy procurement. Generally speaking the buyers already
know who they want and they will craft the RFP so their desired vendor will
win. If you are not that company, then you will lose. Generally we will never
do an RFP.

Some of my favorite actionable books are:

Managing the professional services firm

First break all the rules

Five dysfunctions of a team

Spin selling

Sandler sales technique (there is a book called you cant learn to ride a bike
at a seminar, but it doesnt fully represent the full sandler sales process,
which is an anti sales process)

Getting to yes

Blue ocean strategy

E-myth (revisited?)

~~~
jsperx
Fascinating comment, thanks for sharing. If you had it all to do over again,
knowing all this, would you have started a product business 19 years ago
instead?

------
tptacek
Don't charge money to scope projects. Be selective about the kinds of projects
you'll take, and don't take the kind where paid scoping is material.

Don't charge hourly; daily at minimum, but you can go _much_ higher than this.
We bill monthly and have quarterly commits.

Raise your rates. Raising your rates also raises the quality of your clients.

Fixed vs. T&M isn't an either/or. At Matasano, our standard engagement was
"bid" fixed, with a single price tag, but backstopped with a T&M extension
clause (which we rarely used). Clients want to know what they're paying, and
you can tell them, while also retaining the discretion to start a meter
running if the project goes over.

Don't nickle-and-dime clients. If you're trying to squeeze a small number of
clients, you're doing it wrong. Serious returns from consulting come from
scaling up to larger engagements and to multiple large clients. If you're a
pain to deal with, that's going to take longer to happen; you'll get stuck in
a local maxima that is a real drag to be in long term.

We have two prices: free and expensive. This is liberating; at Latacora, we're
totally unafraid to do work that other firms would charge significantly for
(we've done whole assessments for people gratis), because we are super clear
(and a serious financial commitment) to engage for real. But even at Matasano,
where our engagements were super variable in price, we were still happy to do
lots of stuff for free. I'm pretty sure consulting is karma based; I don't try
to map out exactly where the karma is flowing, I just try to feed it and
assume good things will happen later, and that's always proven out for me.

Look for ways to specialize. A trading firm would rather do business with a
trading development consultancy than a development consultancy, and, if they
couldn't find a trading development consultancy, they'd prefer a development
consultancy over a generic IT consultancy.

Remember the difference between an employee and a principal is that employees
always get paid; when business is light, principals don't eat. To anyone
thinking about consulting for-serious I'd tell them to plan on hiring! But be
very careful about how and when you do it.

Get an accountant. Get an accountant! GET AN ACCOUNTANT.

A lawyer is also helpful. There are two strategies I've seen with respect to
contracts: the "just sign everything" strategy and the "get everything
reviewed" strategy. We've always been on the latter side (Grellas Shah reviews
our contracts and we're very happy with them), but I would be remiss if I
didn't point out that one of Matasano's more-successful competitors was a
"just sign everything" company.

Did I mention don't bill hourly? Don't bill hourly.

~~~
enraged_camel
>> Don't charge money to scope projects. Be selective about the kinds of
projects you'll take, and don't take the kind where paid scoping is material.

I think it's OK to charge a token fee (like $500) depending on your target
audience and industry. It allows you to filter out clients who aren't serious
buyers, and are just "shopping around".

The trick to charging the fee however is that you need to deliver _some_
value. For example, we do business automation consulting, and the value we
deliver when speccing out a project is a business process diagram that neatly
outlines all the inputs, transformations and outputs of a given process. It
tends to be an eye-opener for our clients and helps us demonstrate our worth
up-front. From then on, the actual consulting work begins, followed by the
engineering work (software implementation/customization).

~~~
jsperx
Could you explain a little more about how you define business automation
consulting? I’m an IT generalist (manage an in-house department plus an
outsourced vendor) and the cross-department automation (e.g. let’s remove this
dumb paper process and connect these key systems via APIs) to create
efficiencies is what I find most rewarding. Curious to know how much you
specialize and how you find clients...

~~~
enraged_camel
I think you've got the gist of it: we help clients identify processes that are
running inefficiently (due to a wide variety of possible reasons) and figure
out whether and how we can utilize technology to ease or eliminate pain
points.

Our solutions range from simple, commoditized stuff using enterprise tools
(e.g. accounting department receives paper invoices, then staff keys them in
manually into the accounting software - we convert that to a 95% automated
system where invoices are scanned, values are OCR'ed off them and
automatically pushed to the accounting system) to "fairly advanced" (e.g.
custom APIs, specialized UIs, backend validations/triggers/approvals etc.)
that involve a fair amount of programming.

We find most of our clients through referrals (either from existing clients,
or from our partners), although we also do some cold-calling and
telemarketing.

------
skizm
I'm a generic backend Java programmer (plus a smattering of other languages,
but mostly use Java). I've worked with a wide range of tech: from you're basic
web stacks, to more complicated stacks, consumer facing stuff, all the way
back to programming map-reduce jobs and jupyter notebook stuff. I wouldn't say
I have a specialty, but I can say I can go from 0 to productive with most new
tech in a weekend, and my CS skills are decent (data structures and related
algos).

What sort of consulting would people here recommend for someone like that?
I've considered just picking a company (Oracle, Atlassian, etc.) and product,
getting a bunch of certs, and just doing that as it seems like specializing
gets you the big fish and allows you to charge more. Curious what others
think.

~~~
jlj
Sounds like your tech skills are sharp, focusing on selling skills and finding
an opportunity may be a better return on your time than certs and vendor
specific tech. Unless it's something you want to do for enjoyment or learning.

I went the other way and started with vendor specific tech right out of my
bachelor's degree (Oracle EBS), self-learned some programming languages over
the years (still a long way to go), and got an AWS cert. The cert was good
learning and helped land some full time roles, but no one is calling me for
consulting work.

Making that leap requires networking and selling, and finding the right
problem or opportunity niche to focus on. If you find that, chances are the
tech stack won't matter as much. Or if the tech stack does matter and you can
learn it on a weekend, go for it when the need arises.

Edit: Recruiting firms cold call me a couple times a week for contractor roles
but they aren't close to the hourly rate that I would need compared to my full
time position. They have to take their cut of the rates. The clients are often
looking for task takers or backfilling for positions that are hard to hire
for. It's not really consulting, more about staff augmentation. Although it
could lead to consulting.

------
PopeDotNinja
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.

------
aregs
I charge a weekly retainer regardless of the amount of time I spend during the
week. I practice continuous delivery so the client can see the daily progress
during the week. At the end of the week the client has the option to continue
with the next week by paying the retainer for the previous week. Client has
access to all code and infrastructure automation scripts if they decide to
take over the project at any time

------
mancerayder
What's the trick to self-marketing as a solo DevOps guy if you've never
published anything?

After a few years of contracting and then using recruiters after my latest
contract ended, I found the interview process so grueling and stressful that I
had to opt for a full-time role.

How do I find someone I can pay to partner up with? My marketing skills being
what they were (0), I feel like I was consulting in name only. Any tips
appreciated.

------
majkinetor
Great comments here.

How do you guys promote yourself, those that work alone without agency of some
kind ? Word of mouth or web site or something else ?

~~~
msadowski
I'm only 1 year in but I find most of my contacts on UpWork (I'm lucky being
in the niche field and not having too much competition there).

I'm currently trying out to see if a newsletter can work and I managed to get
one project through it so far.

~~~
sah2ed
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?

Thanks!

~~~
msadowski
I do Robotics!

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.

------
social_quotient
-Manage your cash flow.

-Get good contracts.

-Insurance shouldn’t be overlooked

-Manage your receivables

-Transition from taking any client to just taking the clients that are perfect “fits”

-Define perfect fit clients (will take a while)

-Be good setting meetings, conferences, desktop shares (the small details here make a big difference)

-get a main number with something like “call ruby” so the phone is always answered.

-don’t underestimate branding and visual design

-manage your cash

-set goals and find a way to be accountable to them

Hope this helps

------
eldavido
I'll offer two pieces of advice, having done this.

First, get clear on what you're doing. Are you offering actual "consulting"
services, where you're coming in and solving business problems? Watch Burn
Notice -- you're Michael. That's a "high dollar, low volume" proposition. In
this sort of role you need to work directly with business decision-makers and
sell them on things like revenue increase, cost decrease, etc. Consultants
primarily sell expertise, and "the ability to do very risky/complicated things
well". Surgeons are consultants. This is the world of small, sharp, high-
prestige teams. Think BCG, McKinsey, Bain.

You can also run a contracting company. There is a lot of money in this (a lot
more than consulting actually) but it tends to be less glamorous. Look at the
Bechtels and Fluors of the world. The main thing a company is selling here is
top-notch coordination, project planning, and management services, not
necessarily "expertise" as such. "You know what you want, we are the people
who can get it done". In this world, you'd better know how to manage big teams
(often cross-functionally), hit deliverables, and control costs. Look at how
large-scale construction projects are managed for inspiration.

Contractors take direction from their clients; consultants give it.

In either case, your best bet is to be narrow but very recognized. Pick some
problem, for instance, "converting hotels from booking.com to commission-free
direct booking" or "helping restaurants improve labor utilization" and be the
absolute best at it. Note also that consulting tends to be defined by
"industry problems" more than any sort of technology (e.g. ASP.NET, Java,
etc).

Second piece of advice: realize running a company is too hard to do "on the
side". If you're going to really excel at running a business, you need to be
OK with the idea that your #1 job, at all times, is sales, and that your tech
chops will decay. Deep in their hearts, many technologists aren't OK with
this, so they end up as relatively crappy engineers _and_ businesspeople. You
need to be comfortable with the idea that your professional identity is no
longer, "person who's very good at shipping/building technology". Your ability
to get a high-paying tech job is valuable (do an NPV analysis) and is
absolutely going to suffer if your resume doesn't follow the standard "track".
Running a shitty consulting company is both less fun _and_ less financially
rewarding, than being a mid-level engineer at a SV tech company. If you want
to write code or lead complicated cutting-edge technical projects, you
probably aren't cut out to run a consultancy/contracting company. That's OK.
Just do some real soul-searching about the choice.

Parting word: most contract work is garbage. It is by definition the work a
company doesn't view as sufficiently core or important, to justify doing in-
house. Again, you need to give this a hard think and really be OK with it,
otherwise you're setting yourself up to fail.

------
jpwagner
Ran a consultancy for years

Most important advice I'd give is to liberally turn projects down and there
are two positive outcomes

\- you don't take on projects that don't make sense for you

\- the best projects are the ones where the client is resilient enough to
negotiate through your initial "no"

------
marpstar
Never give a discount on a flat rate project. It's just asking to be taken
advantage of.

~~~
chasd00
i was brought on to work a "red" project 5 or 6 years ago. It was a fixed
price project but the SOW was so poor it basically left the door wide open for
the client to expand the scope as much as they pleased with no increase in
cost. The client was very sophisticated and smelled the blood right away,
gladly signed, and took the firm for a ride. That project cost the firm so
much money it's kind of famous.

------
fastbeef
Throw money at _everything_ that’s not your core competency - ivocing,
bookkeeping, sales, marketing, virtual assistants.

You can sell your invoices to factoring companies and have the money within
48hours for 2-3% of the invoice total.

------
gfiorav
Great resource on the matter: [https://andyadams.org/everything-i-know-about-
freelancing/](https://andyadams.org/everything-i-know-about-freelancing/)

------
julianlam
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.

------
Vanderson
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 more payment/estimate. And any changes
from the documented scope (expectations) will require an estimate.

Just put this stuff in your proposal/estimate and that will solve much of your
communications/billing problems in advance. Also, it will give your client
some confidence that will do what you say you will do.

There's a ton more I could add, but there are some great comments here.

------
DGAP
Triple the estimate.

------
michaelmcmillan
Charge by the value you produce, not hours worked.

------
peteforde
I am a fan of charging for scoping, although I call it discovery and charge
more than $500. It is really the project before the project. Doing this
discovery will make the project better before it starts, and makes it possible
to actually work out what to charge on a fixed rate basis so that you're not
arbitrarily limiting the value you capture to the number of hours you work.
Likewise, a client that doesn't trust you or sees no value in discovery is a
client you want to avoid. I urge you to read the Win Without Pitching
manifesto, which might be the most important business book I've ever read:
[https://www.winwithoutpitching.com/](https://www.winwithoutpitching.com/)

I don't really consider one person to be a consultancy, so I'm going to
presume that there's going to be a team. What does that team look like? The
dynamics, profits, risks, stresses and daily experience is wildly different
for 3, 8, 15, 40, 100 and beyond. Personally, I like 8-15 people for reasons
I'll explain next; but, also, because we can fit around the same big table.
Some people love big companies, but I love big small compies.

Let's say that n is the number of partner founders in your new consultancy.
You should aspire to stay at n for as long as possible, because that is the
halcyon era... trust me. The moment that you decide to hire your first
employee and become n+1, you set in motion an unstoppable chain of stressful
years because suddenly instead of doing the thing that you're best at, your
new job is to keep a sales pipeline full enough to provide security and
stability for your team. You will have many challenges and dark times, and
through it all, you must put the team first. You hire as slowly as possible,
only when you can't not hire to meet the demand for your services.

The clouds will not part until you hit roughly n+6 team size. This often takes
a few years, but you will finally be breaking even and even profitting more
often than you will be desperately begging your clients to settle their
accounts payable. The chasm between n+1 and n+6 will take a few pounds of
flesh, so go into this prepared for battle. Many will fail, having come for
the high rates and perceived lifestyle freedom. A talented developer who
suddenly realizes that she spends 80% of her time talking to people fishing on
the phone and trying to figure out how to make rent all so that her friends
can do the coolest projects and not have to worry is right to wonder if it's
all worth it.

It's been my experience that 9-15 people is the sweet spot you attain after
swimming through the mile-long chasm of liquified shit. You're big enough that
you're able to realize some profit and do a few speaking gigs, maybe even
catch up on what happened in your framework community in the four years you
were hustling on the phone, trying to empathize with frustrating founders.
You're not so big that you have to hire HR and create a management structure.
That's usually when I check out, because management structures are what I was
looking to avoid in the first place.

Finally, I really urge you to hire only people that you actually like and
would want to spend time with, even if you weren't at work. Bonus points if
there's inherent diversity in this crew, for sure. However, you spend more
time with your team and partners than you do your spouse and friends, so I
encourage you to pretend that you're starting a rock band. Ask yourself: would
I enjoy driving around the country with this person in a van for weeks at a
time? If someone seems smart but you wouldn't drive across the country with
them in a van, you probably shouldn't hire them. (Some people don't care about
this and that's fine, because they are people I won't end up working with.)

Good luck! Make sure that you have good support networks and people around you
that will give you honest feedback when your ideas are bad. I urge you to be
financially stable going into any new venture, or else you're just multiplying
the stress you will experience and dramatically shorten your miserable life.

------
mockingbirdy
Some tips I had to learn the hard way:

1\. Understand your client: If you have clients that are non-techy, you need
to understand that they have other priorities than technical people. The most
important things are: a) You care about them and b) They trust you. If they
feel like this is not given (e.g. you didn't send a mail to / call them for 3
weeks), they don't want to work with you. Regardless of your talent.
Communication is key.

2\. You need two types of work: a) the ambient noise and b) the big stuff.
What does that mean? You need to have a stable amount of monthly work that is
reoccurring - e.g. hosting, existing clients that need changes etc. Why do you
need this? Because you have to avoid _at all costs_ to be desperate for work:
You can't sell your work properly and you will overpromise desperately, you
don't say no to bad clients. This can break the neck - especially for young
consultancies. Have savings before you found your consultancy (e.g. for 6-12
months). Only hire people if you have the savings to pay them minimum 4-6
months (if they weren't making any money). Then target the big stuff™.

3\. Learn to work. This may sound obvious, but I've seen many people who
weren't able to deliver. We also had this problem in our agency. Developers
didn't do what they should, people came late, etc. - You need to learn how to
work without outside pressure (because you're your own boss). This is about
behaviour and personality development. I'm making sure that the work was done
and I'm doing quality assurance for the projects of my own web agency: trust
is good, but negligence is stronger sometimes. Learn to control yourself and
the work of others. Avoid micromanagement - try to use the scope that is the
least invasive for your employees but still gives you a good overview.

4\. Never promise something that you can't deliver. Just because the client
doesn't want to hear it (e.g. "I'll need 3 weeks for this") doesn't mean that
you can change reality. This gave me so much stress in the past because my co-
founder overpromised regularly. Lower your expectations and learn to assess
projects realistically. If you then are able to add a nice little surprise,
clients will love you. Classic underpromise, overdeliver (slightly, you don't
need to do too much - otherwise, you risk exploiting yourself).

5\. I charge 1/3 of the project price before working on it. Other comments
already wrote about it. Never lose your cashflow out of sight.

6\. Last thing: Give people massive value. Don't focus on your daily rate
while working, don't focus on unnecessary details. If you're at a customer, be
fully in the moment. The negotiation phase is over - now join their mission
and give them maximum value and the tools they need so _they_ succeed. - If
you're doing your job right, the client will think that you are a good deal
(regardless of your high price). It's all about value.

------
fujohnwang
find a customer and serve it well.

basically, consultancy is a high-level outsourcing biz.

------
obiefernandez
Over the course of my successful career as a software engineer, professional
consultant, author and business owner, I’ve started to master the art of the
power play. I define them as actions and modes of thinking that tip the
balance of power within business relationships in your favor. Note that I
don’t recommend power plays for personal relationships.

Granted, the actions and modes of thinking related to power plays tend to come
naturally to assertive, confident individuals, as they did to me, but it
wasn’t until one particular morning in New York City that the concept of
naming and defining particular power plays crystallized. I must give credit to
my colleague Jon Larkowski for actually coining the term in the way that it is
used throughout this book, and I’ll use its inaugural example to introduce the
basic concept.

It was a crisp springtime morning in Times Square. Jon and I were in town to
meet executives from Reuters, an important new client for our consultancy,
Hashrocket. To be clear, the deal was closed, but this was our first day
consulting on site and kicking off the new project. As we hustled over from
the hotel to the Reuters building, just a few short blocks away, I decided we
should buy some authentic New York bagels for breakfast. Thing was, we didn’t
quite have time (nor space in the cramped bagel shop) to actually eat the
bagels and enjoy our coffees before 9 am, the scheduled time we were to meet
the client people. Instead of waiting to eat breakfast later, or skipping a
meal, we took our bagels to go, in little brown paper bags, and continued on
our way.

At the lobby of the Reuters building, we were held up by the fact that the
person we were meeting was delayed and unavailable to let us up to the
appointed floor. So we stood there, hungrily, debating the timing of our
breakfast.

One the one hand, a warm bagel is much better tasting than a cold bagel. On
the other, it would be easier to sit down for breakfast once we made it
upstairs to an office, rather than awkwardly chowing down in the Reuters
building lobby.

I told Jon, “You know, we could just wait until we got upstairs and then we
could eat our bagels as we met the new clients.”

“That... would be quite a power play,” responded Jon, with his signature wit,
adding “there’s nothing like eating during personal introductions to really
establish who’s in charge.”

He was right. If you think about it, in situations where you’re meeting a new
client or business partner for the first time, polite protocol dictates that
you dress well and be on your best, most attentive behavior. You are paying
attention to the person you’re meeting – they are your main priority, at least
until introductions are over.

How does eating during an introduction alter that equation? Well, it
essentially says to the person that you’re meeting: “See here, I was hungry,
and satisfying my hunger was more important than respecting protocol regarding
introductions, even at the risk of pissing you off.”

The underlying principle is that your behavior will constantly affect the
power dynamics of your business relationship with your clients. From the
moment you first interact with a potential client, you are either helping or
hurting your ultimate chances for success and satisfaction in a client
relationship. I firmly believe that both parties can be happy with the balance
of power resting on the vendor side, your side, as the consultant, the
provider of services.

Conversely, I believe that you will never be happy when the balance tips over
to the client side, because their temptation to screw you over is ever-present
and extremely tempting. Ideally, you want to do a good job, while cultivating
a healthy fear in your client that they might do something to piss you off,
and to cause you to fire them, not the other way around. Normally, clients do
always have the upper hand, because no matter how much they depend on your
services, no matter how afraid they might be of losing you, they are the ones
that pay you, and not the other way around. You depend on your clients to make
your money, your living, and that leaves you at a disadvantage right from the
start.

In fact, given the nature of billing cycles, you’re always one or two mistakes
away from not getting paid – and collecting after a disagreement can be near
impossible in practice. (If any of you reading this have discovered a
foolproof way to always get paid up-front, please let me know.)

“But wait a minute,” you might counter to this line of reasoning, “isn’t
pissing off your client with power plays a mistake?”

That would assume that power plays result in anger, but executed correctly
power plays should not draw the ire of any client. The most important aspect
of a power play is undeniably subtlety! If something is too obviously a power
play, then you’re doing it wrong, and putting your client relationship at
risk. At its most fundamental level, a power play is simply a way to send a
subliminal message about who is in charge.

Let’s go back to the bagel example. If Jon and I had started eating in the
atrium of the Reuters building, not only did we run the risk of being
interrupted by our due-to- arrive client, we would subject ourselves to the
undeniable inconvenience of eating in a public place, standing up, bundled up
in jackets, and carrying backpacks and briefcases.

We can extrapolate the messages that course of action would send to onlookers
and the thoughts it might provoke:

• You didn’t leave enough time for breakfast prior to arriving to your
destination, perhaps indicating lack of preparation or foresight. Are you a
late riser, or did you stay up too late the night before, or maybe you’re just
lazy?

• You’re not necessarily allotting enough time to finish your meal, since you
might get interrupted. And if you got interrupted, you might not be able to
finish until much later, if even at all.

• You don’t mind inconveniencing yourself, which might be an indicator of
lacking confidence or self-esteem.

• Rushing a meal, particularly in a highly visible public place, might betray
a lack of social refinement.

Bagels (particularly a toasted everything bagel with a generous helping of
cream cheese) is a messy meal, and risking a mess before an important meeting
without an easy way to clean up is a potentially foolish course of action and
certainly risky.

On the other hand, what if you waited until reaching your meeting? That’s what
Jon and I did, and I think it made for a successful power play. (Mind you, it
takes some amount of practice and hubris to do this sort of thing.)

“Man, we’re hungry. Mind if we eat our bagels as we talk?” I asked the client
once our bags were on the floor and we were settling into an impromptu meeting
space within the office of a vacationing executive.

It was a reasonable request, and the client granted it without any obvious
displeasure. We’re all friends, right?

The context makes all the difference in the world. Just play it like you meant
to do this all along, and here are some of the signals you will send:

• Sleep (your comfort) was more important than waking up early to be able to
have breakfast before this meeting.

• Satisfying your hunger is more important at this moment than waiting for
introductions and meetings to break or be over

• You’re okay with the risk of talking with your mouth full, or leaving crumbs
on someone else’s desk or meeting table.

Essentially, you want to gently send the message that you’re in control, that
you’ll manage this relationship the way that you want, and that you can break
unwritten rules whenever you want to do so. You’re special, just like your Mom
told you when you were a child.

On the other hand, you don’t want that message to come across in a crass
manner, only matter-of-factly, as if it’s the most natural thing in the world
for you to always get what you want.

\---

Excerpted from my book "How to Eat Nachos and Influence People, a guidebook
for business (and life)" which has a bunch of stories about my life in tech
consulting. [https://leanpub.com/nachos](https://leanpub.com/nachos)

