
How I went from $100-an-hour programming to $X0,000-a-week consulting - atomical
https://training.kalzumeus.com/newsletters/archive/consulting_1
======
F_J_H
There seem to be a lot of comments centered on “wow, this sounds great – I
wish I could charge more” or “how do I find these high paying contracts”?

Here’s one way. It may seem obvious to many, but I think it bears stating.

If you are looking for consulting contracts that pay really well, focus on
providing a service that helps companies make money rather than save money. In
other words, help grow revenues rather than reduce expenses – people pay much
more for that.

Here’s the reasoning: When business managers, executives, etc. are given
targets, they typically relate to increasing revenues much more often than
reducing expenses. Not surprisingly, increasing revenues is therefore “front
of mind” for those with budgets to make it happen, and they see tremendous
value in someone who can help them do that. The fact that a little automation
in the accounting system will save a data entry clerk a few hours a month –
hmmm...maybe next month.

Case in point - I remember reading a comment somewhere from a Google employee
who was complaining that at Google, those working on the revenue generation
side of the business (i.e. advertising, adwords, etc.) got all the “love and
attention” in terms of getting the resources required to get their job done,
while others working on more obscure projects had to put up with leftovers.
Now I’m not sure if that is actually true at Google, but I wouldn't be
surprised as I've seen it at many other companies – the “rain makers” are the
darlings with dollars to spend, and the back office ops folks are left to
struggle with fewer resources. All injustices aside, find a way to provide
something to the rain makers.

The type of work that Patrick does directly improves revenues. If you are a
DBA selling tuning services to help companies re-write gnarly queries for
example, well, unless a slow performing query/process is directly impacting
revenues in some way, it likely is a secondary priority in devops/support
where budgets are tight and “learn to live with it” is becoming a way of life.

~~~
philwelch
> If you are looking for consulting contracts that pay really well, focus on
> providing a service that helps companies make money rather than save money.
> In other words, help grow revenues rather than reduce expenses – people pay
> much more for that.

But decreasing costs by $1 is mathematically the same as increasing revenue by
$1--it increases profitability by $1. Which means any process or mentality
that prefers one to another is biased in a bad, purely self-destructive way.

~~~
nfm
The problem is that reducing costs doesn't typically scale. If you want to
grow a businesses profit significantly, you need to increase sales. It's
entirely reasonable to double your sales. It's pretty difficult to halve your
costs.

~~~
baruch
In order to double the profits you need to either double the sales or
_eliminate all costs_.

Or do a mix of both. Doubling sales multiple times is more likely than making
profits on your infrastructure... Amazon AWS is probably the exception here.

~~~
ksmiley
How much you need to reduce costs, in order to double your profit, is
dependent upon your current costs and revenue. So you don't necessarily need
to eliminate all costs to double profit.

Suppose you purchase widgets from a manufacturer for 100$ and sell them for
101$. In that case, 101$(revenue per widget) - 100$(cost per widget) =
1$(profit per widget). Suppose you then change manufacturers and reduce your
cost per widget to 99$. You now make 2$ profit per widget. By reducing costs
by 1%, you doubled your profits. Much easier than doubling your sales.

~~~
nfm
In theory, yes, but if you have a profitable business with a 1% margin by
definition it already has to be absolutely giant (e.g. Amazon) to be making
money. And to reduce costs at this scale is harder than increasing sales.

------
SageRaven
Damn, that sounds nice. I wonder if system admin/architecture can be modeled
that way. I'd love to bill even a modest $2k/week, rather than trawl
craigslist, responding to posts for "unix/linux ninjas" then having shops balk
at anything over $20 an hour.

I don't know how many messes I've cleaned up (likely left by people charging a
hell of a lot more than me) for really low rates.

I know, I know. Craiglist and other online boards are the dregs of the job
market. But I have no network (few friends, few contacts), and I only do
remote work. I take what I can get, but it sucks to see half-assed admins
getting the gravy.

~~~
johngalt
In sysadmin work it's _easier_ to make large consulting fees. The problem you
have is that no one spends the money for good sysadmin
architecture/infrastructure. So you can't sell "good practices". Instead just
focus your work in loss aversion, not value creation. People will spend more
for a emergency room doctor/hospital than a gym membership.

The keys are two simple things:

1\. Be able to quickly fix expensive problems.

2\. Make sure people with expensive problems know about you.

I've _routinely_ seen multi-million dollar projects held up for months over
things a skilled sysadmin can solve in a day. You just have to be at the
receiving end of that 911 call, and not afraid to quote a big flat fee for
problem resolution.

~~~
zenocon
I bet Team Romney / Orca would have paid handsomely for this at zero-hour,
despite all the cost-cutting they did up front.

~~~
ams6110
Yeah but some things aren't possible. A poorly architected system can't be
fixed in an hour, or a day, in most cases.

------
nhangen
I ended up here on accident, but I can vouch for this system's value.

I WAS freelancing at between $75-$100/hour, but having to work very hard for
every contract. On the side my partner and I were building software, selling a
nice amount but nothing that was going to allow us to retire in a year.

However, suddenly people starting emailing us after purchase, asking if we
could build custom versions for them. Most turned out to be duds, at first,
and then something changed. Suddenly we're charging weekly retainers and
working on near six-figure projects, all on business that sought us out
because of our software.

Will this work for everyone? I'm not sure, but it did for us, and we didn't
even see it coming.

~~~
pc86
Was this a particularly "niche-y" software that you had (perhaps unknowingly?)
positioned yourselves as the leaders?

Presumably it wasn't The Next Big To-Do App but something that gave quite a
bit of value.

~~~
nhangen
It was our crowdfunding plugin for WordPress - <http://ignitiondeck.com>

~~~
lywald
I like the design but that automatic slideshow changing every 2 seconds is
annoying... That close to the text it disrupts reading, and I don't even have
enough time to watch the image (I can pause with mouse but by the time I learn
that I'm already annoyed).

Reminds me of this thread "Don’t Use Automatic Image Sliders or Carousels":
<http://news.ycombinator.com/item?id=4595026>

~~~
nhangen
Thanks for the honest feedback. We've been wanting to update the page for some
time, but just haven't found the time yet. Will keep that in mind for the next
revision.

------
ronyeh
Two important points I learned was: 1) charge by the week, and 2) charge by
the value you will be providing, rather than how much _your time is worth_.

Charging by the week allows you to not have to keep track of what's billable
and what's not (e.g., you chatted with the customer on the phone for 34
minutes).

Charging by the value you provide avoids the conversation of "Hey, you're
charging $200 per hour... that's more than I make. And that's like almost
$400K per year! Can we get your rate down to like, $90?"

Instead, the conversation becomes, "We want to get at least $40K of value out
of talking to you, but have only budgeted $10K for this exercise. How much
value can you provide us over how many weeks?"

That was definitely an interesting writeup!

------
danso
Excellent article.

1\. I would be interested in learning more about what a programmer brings to
the table in the consulting field. I mean, besides raw programming knowledge.
The OP mentions Fog Creek as one of his first clients, a place that obviously
is not short on programming insights. What does a consultant with programming
chops bring that a non-programmer doesn't? Better ideas? Better tailored
ideas?

2) Pedantic alert: "peek" is spelled as "peak" in the introduction.

~~~
patio11
_What does a consultant with programming chops bring that a non-programmer
doesn't?_

The ability to write functional computer code, for one, which _is a
superpower_.

Besides that, I speak the language, engineering folks generally like working
with me over working with "icky marketing types", I have a good understanding
of what is easy and what isn't in terms of implementation, I can spec projects
or deliver prototypes without needing my hands held too much, etc etc. (And
virtually my entire shtick is "Marketing objectives which are worth serious
money to you can be achieved by writing carefully considered code.")

~~~
danso
The ability to work with (and have the respect) of the engineers is definitely
an asset that cannot be overvalued.

But in terms of writing functional computer code...how much are you actually
writing? Is this code merely to wireframe/prototype something? Or is it an
actually deliverable that the company will build atop?

I guess what I'm getting at is the usual cynical trope by engineers against
consulting: that consultants are hired to tell you what you already
know/should've known. So given a hypothetical company of such stature as Fog
Creek, what is your strategy for convincing them that you can tell them
something they don't know? I'm not saying that engineers are above needing
consultants, it just seems like a culture that, as you point out, can be
extra-resistant to being told by a third-party what to do, in lieu of a
concrete deliverable.

~~~
patio11
_But in terms of writing functional computer code...how much are you actually
writing? Is this code merely to wireframe/prototype something? Or is it an
actually deliverable that the company will build atop?_

Depends on the engagement. There is code I wrote running in production at some
clients. (Might want to keep an eye on the FC blog, as I expect there will be
something interesting on there eventually, but until then that isn't my story
to tell.)

 _So given a hypothetical company... what is your strategy for convincing them
that you can tell them something they don't know?_

I tell them something they don't know, and continue doing so until I win the
engagement.

With specific reference to Fog Creek, I was active on their forums for a few
years and folks there read my blog, so I wasn't exactly starting from a
position of We Totally Don't Know Anything About You on the credibility
ladder.

------
sxcurry
Important take-away - don't ever start compromising on your hourly or weekly
rate. Patio is correct - it's very difficult to recover from that. Plus, in my
experience, clients who want to bargain on your compensation are already
devaluing what you do. I had a client who complained about my rate, and wanted
to cut it substantially, because "there were lots of kids around who would
work for less." I responded by telling him that he should hire one of those
kids, and I would gladly hand his project over to them. I guess he
reconsidered, because that was the last I ever heard about lowering my rate. I
still work for that client, and have actually raised my rate by 50% over the
last few years.

Don't undersell yourself!

------
sown
So what do I do if I don't have a blog or any real friends to refer me? I
don't know anyone at all here in SV and no one seems to want me anyways.

On the flip side, I suppose that there are people that could use me but they
don't know how to find consultants.

The only time this has happened was when a potential employer and I didn't
quite work so they let me name a price for the time I worked and they paid
(rare in consultancy, I bet).

~~~
patio11
Get a blog and start making new business acquaintances. (Being in the Valley
should not exactly have you hurting for options on that score.)

~~~
pknerd
And what about those who not even in US and belong to a "3rd world country"
where one wish to give work only because it's Cheap?

~~~
mootothemax
_And what about those who not even in US and belong to a "3rd world country"
where one wish to give work only because it's Cheap?_

Be good at what you do; your location shouldn't affect your consulting rates.

By way of example, I routinely bill in excess of $100/hour despite being
located in Poland. And trust me, I'm working on increasing the value I
deliver, and charging appropriately.

~~~
Ives
I sort of agree. You can definitely bill over $100/hour in Poland (or Belgium,
where I'm located) if you're an experienced consultant, but patio11 was
billing that much _before_ he changed his pricing approach.

Do you know of anyone that bills 20k$ a week in Poland?

------
paulsutter
A friend of mine is a marketing consultant and a real genius. He got paid
$x0,000 to come up with the title and general theme for the book "Rich Dad,
Poor Dad".

But the author has made $x0,000,000 from it, despite the mediocre (at best)
quality of the book. Really it was the positioning that made it catch on. My
friend's career is full of stories like that, so it's not a one off.

If you do work as a consultant, definitely, charge what you can. But no matter
how much you charge for consulting, it's never as much as its worth.

Im sure that pg could charge what sounds like a really high rate for his time.
But it would be nothing compared to what he can make from equity. And I
promise, it would be a lot less fun.

~~~
mdonahoe
That author is bankrupt now, for what its worth.

[http://finance.yahoo.com/news/rich-dad-poor-dad-
bankrupt-163...](http://finance.yahoo.com/news/rich-dad-poor-dad-
bankrupt-163736677.html)

~~~
alexfarran
One of his many companies is bankrupt, as a ruse to avoid paying money he
owes.

------
koevet
I have freelanced for almost 15 years in Europe and a bit of Middle East. I
have done pretty well, charging easily 1K Euro a day, less in the last couple
of years.

Last year, with a colleague and friend, we started our consulting company. The
main reason for that being "let's scale!". We contacted a bunch of freelance
colleagues we trusted and respected and asked them to join us as hired guns,
whenever we needed more workforce.

Another reason for starting a company was that the developer profession is not
rewarded as the experience increases. At least in Europe, a 3-4 years
experience Java developer can make almost as much as a 10 years experience
Java expert. And there are rate roofs which are hardly crossable, so even if
you are really really good and have plenty of war stories, still the 1K/day
roof is pretty hard to cross.

So far, it didn't go exactly as expected. We are doing ok, we have some
clients (we are in the Java space, so mostly enterprise stuff) but nothing
spectacular. We are having an hard time acquiring new clients and the long
running European crisis doesn't help.

I'm working considerably more than in the past (weekends are a rare commodity,
very long days, in short my work/life balance is critically crappy), so
sometime I wonder if it's worth the hassle.

The scalability part is very tough: we hired one guy (who was a
disappointment) and we use our trusted hired guns, who are often busy with
their own consulting gig. Therefore, we are crazy busy.

Another problem is that the clients are really interested in our specific
experience: that means they want to work with me or my partner, not with the
company. This bit is hard to crack.

In short we are still figuring out how to go from here.

We will invest more in the web site and technical blog (we are also co-
authoring a book) and we will hire one or two permanent devs (did I mention
that hiring someone in Europe is bloody expensive, so that the 70% billable
time mentioned in the article is too low?).

Working solo is easy, scaling is not. As a developer, you are faced with
plenty of new challenges (finance, marketing, pr, negotiations, contracts,
cashflow) - which is fascinating but damn consuming.

~~~
luke_s
"Another problem is that the clients are really interested in our specific
experience: that means they want to work with me or my partner, not with the
company. This bit is hard to crack."

You certainly have a lot more business experience than I do - however I've
been working recently on preparing a lots of tender responses. I work at a
software consulting firm, with about 10 devs and 20 GIS analysts.

In our tender responses we include the resumes of the people who will be
working on the project as an appendix right at the back. At the front we have
a section with our 'relevant experience'. In the 'relevant experience section'
we NEVER mention which person worked on a specific project. Its always termed
as "XYZ corp developed an app to ... " or "XYZ corp worked with ABC inc to
..."

I guess it comes down to a metal shift in always describing things your
company has achieved, instead of things you as an individual have done.

~~~
koevet
We are to small to even think of compete in one of the bids for a large
company or the government. The majority of our engagements result from some
kind of personal contact my partner or myself have in in our previous life as
freelance consultants.

Nevertheless, I see your point. It's just difficult to apply just yet.

We also considered removing the "team" page from our site altogether and just
discuss generically about the technologies and clients we have been working
with.

I did my homework and went through some marketing and web-marketing books. My
catch is that for professional services companies - especially at the early
stage, the "who are those guys" question is the first that springs to mind to
a prospect and it would be suicidal to remove a reference to the admittedly
impressive experience that we have accumulated along the years.

~~~
timv
I'm not sure whether it's helpful for your situation but the way I've seen
this succeed in the past is to bring more people in while you're already
there.

Big consulting firms do it, and do it badly, and get a bad reputation for it
(but then keep getting hired back anyway), but if you do it well, it can work
out fine.

My suggestions:

1) When you're on site somewhere keep an eye open for areas where one of your
hired-guns could help solve a problem the client has.

2) Don't bring someone on just because it helps your company, only do it if
you really believe it is in the client's interests.

3) Only bring in people you really trust, getting this wrong is deadly.

4) Be willing to make little or no money on it at first - this is primarily
about marketing, not immediate income. But make it clear to the client that
it's a special price and it may go up next time. Generally I find that the
best angle is either to say "I think they can really provide value here, give
them a trial and I can bring them in at 25% off their normal charge rate" or
"Because you've been a great client, I can do a special deal this time, so you
can see what else we have to offer".

5) Make sure you represent them as one of your people, not a freelancer. If
they're good you want the client to come back to you and ask for them again,
and not to think they can go direct.

------
polyfractal
I feel like every post by Patrick should be printed out and taped to the wall.
So many great lessons in his writing. Thanks patio!

Question of my own: if you are breaking into consultancy, how do you go about
cold-calling potential clients? Say you've identified a few clients that you
think you could help. What kind of email do you send them?

Go the honest route and say "Hey, I'm new but I want to help your business
make more money...I'll take a cut of whatever increased revenue I derive,
otherwise you dont have to pay me" ?

Or go with the "I know what I'm doing route" and just pitch that you are a
professional doing this all the time?

~~~
patio11
So there's some sort of difference in the neurological makeup of developers
and business owners around the phrase "you don't have to pay me." Developers
think that proposition decreases risk. Business owners think _exactly the
opposite_. It suggests that there's such significant project risk associated
with employing you that the market forces you to self-indemnify for that risk
upfront, which _virtually no other service provider they use does_. (Separate
from what your client thinks of it, it also puts your paycheck at the mercy of
clients' ability to e.g. follow through on your recommendations. Clients
generally _earn_ the results they get from working with outside consultants,
just like they earn the results they get from working with their own
employees. The ones who do everything in their power to make engagements a
success tend to do better than ones who... don't. You probably still want to
get paid when they... don't.)

I'm not totally opposed to some sort of variable payout mechanic to pricing,
but the vast majority of my engagements are structured "I work X weeks at $Y
per week." By the time I've sold you on the engagement, I should have been
able to sell you on X __$Y being an acceptable price to pay for the risk-
discounted probability space of all possible outcomes to the engagement. (n.b.
If you do variable payouts for anything, you need to figure out how to
transfer a large percentage of the upside from the client to you for the math
to work out.)

If I personally was selling you an engagement, and you said "What happens if
this doesn't lead to an improvement in the business?", the very next words out
of my mouth will be "It is _entirely possible_ that this engagement will not
lead to an improvement in the business. The vast of my engagements have been
successes. Some of them, like the ones we talked about earlier, were
incredible successes. Let's talk about ways we can be more likely to make this
engagement successful. If you do not believe that this engagement is likely to
be successful, we will not do this engagement." (I'd also independently
decline an engagement where I thought it wasn't likely to be a win or would
meaningfully damage the business in event of a failure. I typically work for
companies with revenues in the eight figure range -- if they set fire to my
entire paycheck, nobody goes home hungry.)

As to what you personally could offer for risk reducers, absent a history of
doing exactly this thing before, I might suggest reaching back into your
portfolio of other things you have done and showing off ones which
demonstrated likelihood of success. In my first few consulting engagements, my
main portfolio piece was "similar work which I did for my own business worked
out well, as evidenced by a few years of blog posts; here's a few I like."
After the first few engagements, well, BCC was no longer the most credible
piece of evidence I could point to.

~~~
polyfractal
Great, thanks Patrick. I didn't even realize that I was self-indemnifying my
abilities up front with a phrase like "for free"...but in retrospect it is
exactly that. If I'm confident in what I can do...why the need for offering
free services?

Thanks for the advice, I'll try to put this into practice. :)

------
eldavido
This post is great advice if you want to work doing consulting for large
companies run by MBAs/business people that view technology as "IT": a tool for
solving business problems. I'd guess 90% of programmers earn their living this
way, so I agree with it, to a first approximation.

What Patrick doesn't acknowledge is the huge role of culture/norms in
business, and how these differ based on geographic region, and the backgrounds
of the founders.

Revenue and profit attribution are human processes that involve a lot of bias.
If a salesperson sells twice as much product, should he earn twice as much
compensation? How does marketing's work on improving the company's
positioning/messaging, engineering's product work, and/or the overall state of
the economy factor into this calculation? Who really "created business value"
here?

The other problem is bigness: as companies get bigger, it's way harder to
measure whose contribution is helping the company succeed, whereas it's a lot
more obvious when only a handful of people are involved.

I'm an engineer, but I work at a product company. If the product is better, it
sells more, and we get compensated more, along with sales, marketing, and the
whole team. People in Chicago (where I grew up) still bring this dumb 19th
century management model to their companies, and it's exactly why (1) all the
best innovators and engineers head to the west coat, and (2) why I personally
got the hell out of there. I wanted to be a professional programmer, someone
who made peoples' lives better by shipping a superior product, and get
compensated accordingly, not some IT lackey selling some nebulous concept of
'business value' to some feet-on-the-desk small-business-owning ex-investment
banker who wouldn't know the difference between Objective-C and HTML.

------
acconrad
This is all well and good, but the biggest reservation I have about all of
these consulting blog posts is who should do this and who shouldn't? I feel
like consulting is easier to consider when you're a seasoned programmer (10+
years) because you have the accumulated knowledge to really provide value to a
company when you're not an employee. I'm almost 27, is my lack of years of
experience going to prohibit me from attaining consulting gigs? If I can
optimize your front-end code, get you higher performance and SEO rankings, are
you going to hesitate / ignore me because of my lack of years in the field?

~~~
trapexit
"If I can optimize your front-end code, get you higher performance and SEO
rankings, are you going to hesitate / ignore me because of my lack of years in
the field?"

This is a testable hypothesis. Test it.

Seriously. Most people who fail are defeated not by external forces, but by
forces from within. Stop worrying and start testing.

------
s04p
To be very honest, this reads like the typical Shoemoney "how to earn $100k
within x weeks" article. It's not a big secret that SEO and conversion
optimisation can generate a lot of value, and I guess you consult a lot about
these topics?

~~~
whileonebegin
I was thinking the same thing, even down to the sign-up form for the
newsletter. Not that there's anything wrong with that, shoemoney has done
quite well and his posts are usually quite good.

------
SonicSoul
ha, when i saw the headline and read the first paragraph i assumed this was a
sales pitch for something.. but after scrolling down to the bottom and not
finding anything i shortly realized this is the author of kalzumeus.com which
is the source of some of the best advice I (as a programmer) have read on the
internets.

One gotcha here is that not every programmer can be as successful doing such
business consulting. I think it is a different skill (muscle?) that must be
developed in order to talk with suits and create the aura of instant value. I
wish i knew how to train that muscle more :)

~~~
brc
1st lesson : stop using language like 'suits'. They are just people with
budget to spend on problems they need fixed. The key here is that talking to
people is a skill which can be learned. The way to learn is to start, and make
some mistakes and learn quickly.

------
laurentoget
A more appropriate title could be 'Get rich and famous quick by posting
articles about quickly becoming rich and famous on Hacker News'.

------
flyinglizard
Here are my lessons after 6 years running a consulting firm in a pretty
specialized business (high end ARM/embedded stuff), from the top of my head:

1\. Avoid billing by hours, exactly for the reasons listed here. You can only
lose like this; it carries more administration overhead, more friction with
the customer and at the end there's a max budget allocated on the customer's
end anyway - it's not like you can bill indefinitely if things don't go as
planned.

2\. Always charge fixed price for projects. Remember the budget allocation
from #1? Use it. Bill twice as much in the beginning but avoid charging the
customer even a penny more for delivering the work you're committed to, even
if that means 'losing' money (you don't really lose when consulting, only earn
less).

3\. Work alone. Hiring people may seems like a good idea but then you've got a
financial burden in the slower periods (and these always come when you least
expect them). You can make good money alone, and you can make good (and great)
money when you have 8+ people working for you but between 2 and 8 employees,
you're busy full time getting enough work for the team and your margin on
these employees simply isn't big enough (just think of the office costs).
Besides, I don't like the whole pimping thing where you sell someone else's
skills; YMMV.

4\. You _are_ a business problems solver. Don't tell a customer "no", just
jack up the price if needed. If you intend to have a large project with them,
don't charge them for general consultancy around the project. Happily give
them your time for free; make your money on the project itself, not the
meetings around it.

Edited to add something quite important, IMO: Whenever first meeting a
customer, I try to get a high level picture of the business they are in, the
product they are looking to develop, who will use it and so on - even if they
are just looking for me to develop a specific component. It's very easy to
fall into "XY Problems", and understanding the project environment would make
it easier to assess the work and rates.

5\. Remember there are people in a corporate environment on the other side.
Make them look good in their company; give them whatever help needed and be
their go-to guy. It's really important for the long term (and as fellow human
beings). Don't ask for money for small modifications or changes, think of the
administrative process they need for each line item - it makes them look
incompetent or just annoys them with bureaucracy. You'll more than make up for
that in the following work.

6\. Long term, your entrepreneur skills are better spent at build your own
business. Consulting is good for the free spirited folks that don't want a
corporate environment, or for making a quick buck on some lucrative projects,
but it's hardly a way to get rich and it's quite wearing in the long run.

Nevertheless, I think that professionally, consulting has been the greatest
thing I could have done. The variety of projects, technologies and corporate
environment (30+ customers here, most repeating) is great for your own
development.

~~~
tibbon
Also, I always keep in mind that at some positions; there are people who
_want_ to spend more money if they can. Spending more this year might mean a
bigger budget next year. Sometimes power at the company is somewhat stacked by
who manages a larger spend each year. And sometimes perception of quality has
to do with what you spend. A $60k consultant must be better than a $6k
consultant right?

~~~
jacques_chester
In fact I just a few weeks ago lined up a nice little contract on this exact
basis. A customer had a budget allocation that they'd won but had been slow in
lining up the work from another department in the same organisation. So now
it's come to me, because they "need" to spend the money before the end of the
year.

~~~
eupharis
Meh. But doesn't it make you throw up a little inside? Don't get me wrong. I
want to make a ridiculous amount of money. But I want to make it by creating a
ridiculous amount of value. Not because I figure out how to game lame,
inefficient, entrenched business model number 13 in ways X, Y, and Z.

~~~
jacques_chester
Sure, it bugs me sometimes.

But I _am_ actually creating value for my clients beyond helping them game a
broken budgeting process. I will be saving them potentially thousands of hours
of tedious labour and freeing up qualified specialists for much more
productive tasks.

The good comes with the bad, sometimes.

~~~
eupharis
Ah, ok. Obviously you know the details of the situation far better than I.
Just something I spend a lot of time thinking about.

------
chanux
Pardon my ignorance. What does a consultant do?

~~~
patio11
In broad strokes, make businesses money.

In a little more detail, I (personally) work mostly for B2B SaaS businesses
and know a few things which tend to work for generating incremental growth in
revenue. If you've followed my blog or HN posts they won't sound all that
impressively new: write drip email campaigns, do A/B yet, redo pricing tiers,
optimize conversion funnels, etc etc.

There are many other consulting specialties out there, obviously, but that
seems to be a mutually happy place for my abilities and clients' businesses.

~~~
enjo
Just to be clear:

This is different than "freelancing" or "contract development". This is more
traditional business consulting. You're going in and changing processes and
structures more than anything else.

It might be around a specific goal like "make our signups more effective", but
you're not just writing some code. You are going in an helping them to change
their mindset by incorporating feedback (A/B testing) and new methodologies to
run their business better. You get paid so much because the results don't just
result in better signups, but in a transformed company at the end.

To do this type of consulting you need extreme credibility. Either a big
business win, an ivy league education, or something equally as impressive.

~~~
tptacek
This meme about there being "contractors/freelancers" and then "consultants"
is toxic.

In the markets that Patrick and Jason Cohen and Brennan Dunn are talking
about, almost the entire difference between "freelancer" and "consultant" is
"how you price engagements".

It is true that consultants value-price engagements, so that they collect a
percentage of the revenue or cost-savings derived from their code instead of a
scaled hourly rate. And it's true that to do this, consultants have to think
about the actual business context of their code, and be able to confidently
propose the value of that code to a real business.

But that's where the differences end! Patrick is writing code on his
engagements. He's using the same problem-solving methods you're using. On a
day-to-day basis actually delivering for clients, he's writing code to generic
metrics and then optimize them. The only thing he does differently from you is
that he chooses to work on metrics where he knows he can make a case for
revenue directly attributable to the metric.

It does _not_ take a "big business win" or an Ivy education (WAT?) to
"consult" for clients as opposed to "contracting" for them. You don't even
have to be particularly attentive to your clients businesses, because so many
people have built and written up methodologies for using code to make money
for businesses; you can literally start by reading up on those, and offering
them to clients who don't already do them. How many of your freelance gigs
were for clients with sophisticated email marketing systems? How hard do you
think it is to send triggered email updates to clients? Start there.

~~~
roflc0ptic
>>many people have built and written up methodologies for using code to make
money for businesses

Would you mind pointing out some examples, or naming the field of literature?
When I googled "optimizing business processes with software" I got a bunch of
ads for software. I'm not entirely sure what I'm looking for.

~~~
napoleond
Umm... well... for fear of stating the obvious, Patrick's blog (see TFA) would
probably be a really good place to start. You should also watch every video at
<http://businessofsoftware.org/category/video-2> \-- they are presented in the
context of helping software companies become better but a lot of the ideas
presented could be flipped around (I'm especially thinking of applying various
forms of business analytics to more traditional companies).

~~~
roflc0ptic
Obvious or not, it hadn't occurred to me. I'll check out those videos, too.
Thanks.

------
Jach
Apart from "be awesome", "know your abilities well", and "manage project scope
carefully", do you have any advice on not choking? Have you ever had to scale
back on delivering what was initially agreed upon?

------
flurpitude
Sigh... I'd settle for someone giving me $100 per hour.

~~~
TallboyOne
If you don't have a large variety of jobs to pick and choose from, you're not
doing it right.

I'm going to rant here a moment...

The secret to getting more work than you can handle (and charging $100/hr,
which is not difficult)... DONT SUCK.

I swear to god, 95% of people out there suck, your competition.

Send emails to your phone, and answer them right away when you're out and
about, even on weekends or when you're out having a drink. If you're busy,
just say you got their email and will get back to them when youre in the
office. Try to answer < 15 minutes.

The amount of replies I hear that say "wow you are so responsive and get back
so fast, I love it" is a lot more than you would expect. These are my repeat
clients. These are your people and you should take care of them.

It's SO easy too, and so many people wait days to reply. That doesn't mean you
need to always be working either, or that you need to suddenly be at the mercy
of your email, it just means be responsive to inquiries. VERY responsive.

As far as working, dont leave loose ends. This usually means fixing up those
little nagging issues that they probably won't notice. Leave them with
something stellar, and go the extra mile even if it means only 5 minutes of
work extra fixing something they never asked you to fix or paid you for. It
takes 5 minutes, and makes a tremendous impression on them.

I'm making this statistic up, but based on what I see it's gotta be over 90%
of people don't do just a few simple things. They take a while to reply,
deliver sub-par product, don't communicate well... it has nothing to do with
their actual site or product they're delivering, just how they handle
themselves, then they whine about not having work. (flurpitude, I'm not
referring to you as whining, just people in general).

PS: it seems counter intuitive (I'm going to get a lot MORE bs work and bs
replies), but it actually seems to eliminate them entirely. People respect
your time and your skill, and they dont' waste your time with stupid questions
or emails. They're also willing to pay top dollar for your services without
giving you a hard time or anything.

~~~
jasonswett
You might be right about that. I'd like to offer another perspective, though:
if you get into the habit of quickly replying to all emails, I think your
clients will develop an expectation that you'll always quickly reply to
emails, which it's not always possible or desirable to do, at least for me.

Also, if you immediately attend to every email that hits your inbox, that
means you probably won't have contiguous chunks of real productivity in your
workdays.

I usually wait a good couple hours to reply to any email, even if I'm not
particularly busy when I receive the message. This a) sets an expectation for
responsiveness that I can live up to, b) allows me to have contiguous chunks
of productivity (I often close email entirely, which my clients know), and c)
demonstrates to my clients that a certain level of discipline: I'm not jumping
on every email, tweet, etc. that comes my way right when I see it (not that I
think that's what TallboyOne is suggesting - he's talking about work-related
emails).

None of this is meant to be a criticism of anything TallboyOne has said. What
works for him might work better for some people than what works for me.

~~~
TallboyOne
That is indeed true, but the part I left out for brevity is the part about
client expectations, which must also be handled. I disagree however that it
makes you appear needy. If you ARE needy, you're going to seem needy no matter
what you do. I can assure you though the client would rather have you reply
sooner than later... just set the expectation that you can drop them at any
time (subtly obviously, you wouldn't say that to their face).

Consider the following scenario:

A) Email exchange which takes 2 days, for a fix to a site... you quote $800
and they hesitate

B) An email exchange where you take no more than 2 minutes to reply, even at
11pm. They are happy that you got back to them so quickly, and you quote
$2000. They agree.

This happens quite a lot in my experience. To the point where it's extremely
noticeable and can't be chalked up to coincidence.

I just mentioned what works. If your goal is to get a huge amount of work for
$100-200 an hour, then replying right away will get you significantly there
(skill aside). Everyone waits hours to respond, so it's the norm. If you want
to stand out, you need to be outside the norm.

As far as being at the mercy of your email, in practice this genuinely doesn't
really mean any difference than if I wait. You're still going to write the
email, it's just a matter of when. My productivity remains the same. If I'm
very deep in a project, chances are I need a break anyway (I'm bad with taking
breaks when I need them). If I'm really busy with some other task common sense
would be required, obviously there are exceptions.

Sidenote: I don't necessarily do this with well-established clients who I've
worked with for years. They already know the scoop. I'm more talking about new
people, new leads, new projects where they don't recognize your value yet.

------
debacle
What if you're already a consultant, but are tired of Internet marketing (and
its related accoutrements)? Is there a pivot for that?

~~~
bmelton
SAAS? PAAS? I think it's fairly well known that Patrick consults to help fund
his other projects, with the ultimate goal of becoming independent of
consulting in favor of passive income. (Apologies if I'm mischaracterizing
Patio's intent -- that's at least how it always seemed to me.)

Alternately, you could raise your rates a bunch, save the difference and try
to retire early.

~~~
debacle
It might just be me, but I don't see a market for consulting based on writing
RESTful APIs.

I could be very wrong about that, though.

~~~
bmelton
Generally speaking, there's always a market for expertise. If that's your area
of expertise and are markedly better at it than the next guy, there's a market
for it. The key is in figuring out the niche

"I can train your people to build better APIs than you have now, and hence
enable much better engagement from the customers of your API" -- that's a
value proposition, and people are willing to pay for it.

"I can build your company's RESTful APIs to better engage your developer
community" -- that's a totally different one in both feel and purpose, but one
that you'd likely find customers for.

The only thing you need to do is be able to back up those claims, be
personable, and ideally, be able to demonstrate how much value you can add to
your customers, in dollar terms, how they would benefit from your services.

If you don't believe there to be value, then you just need to think about what
your company is paying you for now (assuming employment), and how they're able
to justify said employment and still make a profit.

~~~
debacle
Maybe I'm just not used to that kind of consulting. eCommerce is much closer
to the real dollars than web services.

------
mlemming
After reading the article and the comments, I'm having a bit of a "a-ha!"
moment with the billing question (by week, why didn't I think of that).

I have been an independent technology consultant for 12 years now, with a
variety clients (big and small) and I'd say "successful" over all. I generally
follow all of the good advice principals mentioned in these comments (mostly
think long term with a client, don't charge for the small stuff, make the
client feel important, etc).

The one item that keeps coming up over and over is that I'm "independent".
It's just me. I get hit by a bus and my clients are out of luck. Now I agree
that generally speaking they don't want anyone else working on their projects,
but at the same time they would really like some backup. This seems like a
nearly impossible problem. I'm not interested in hiring anyone for the reasons
mentioned here. Plus, acting alone doesn't appear to give me the ability to
get the really big projects ($1M+). Clients aren't going to give "just me" a
project of this scale, it wouldn't be good business sense.

So, I've been stuck with letting "IT consultancy firms" find me work on
several occasions. They get to mark up my rate, often mix me with other
techies, and basically get to sit back and collect money for something that
I'm delivering. I'm the one at the client, building the relationship, looking
for more work, etc. It's always bothered me that because I'm not a "firm", I
don't appear to bill higher rates or win bigger projects. Honestly, it's just
me delivering the work anyway. Hopefully this makes sense.

The only way I've come up with to reverse this course is to create a firm
where I partner with follow IT consultants and we own the firm. Ownership, I
think, is the key. If I work for an existing IT firm, I make a nice hourly
rate but I have nothing to show for it at the end. Meanwhile, the firm's
ownership, who often are not techies and do not have technology skills, gain
everything at the end of the day. If the technology staff owns the firm, then
that builds in all sorts of interesting incentives. Now the owners actually
have a reason to refer other technology people to the firm, builds firm value.
Clients see the combined value of the firm, thus hopefully opening the doors
to bigger projects and better value. Plus, the "backup" problem is solved
since clients understand that there is a team.

I haven't quite figured out how to get this off the ground (really just
started thinking about it over the last couple of months), but it's
interesting to me that other independent IT consultants haven't done this
already. Or, maybe they have and there's some obvious reason why it doesn't
work.

------
Swizec
Reading this ... man, I'm not even at $100/hour programming yet.

~~~
bsimpson
I started freelancing out of college. Took a job, raised my prices, took a
job, raised prices, etc. until I felt friction in the market.

Then, I got hired by one of my clients and asked to find someone to fill my
former shoes as a freelancer.

I was charging $90 an hour. They were relying on firms like the Creative Group
who have the ability to charge 100% markup on the people they hire out. As a
result, I realized the people I was competing with at that rate could barely
tie their own shoes.

I decided in that moment that I was pricing myself into the wrong league and
need to raise my prices considerably if I ever get back into freelancing.
Thanks to this post, I'll be billing by the week. =)

On a related note, there's room for massive disruption in the contract labor
space. It's not hard to come up with a service that provides a lot more value
within the current economics of that market. I'm not sure contract labor is a
business I'm passionate enough about to start, but if anyone wants that have a
chat about it, let me know.

~~~
Swizec
Well I'm out of college since 2 months ago. Going from there :)

I'm at the point where I'm feeling the first friction in the market; still
figuring out what type of lube it needs.

(big part of the problem might be the market itself, I'm focusing on working
with startups)

------
zrail
This is a great article, but one thing it doesn't really address: how does one
get started doing this while still keeping a day job? I would love to start
charging for value by the week, but if I can only spend 10 hours a week on a
particular contract, how do I sell that?

~~~
reubensutton
I think the point isn't really that he's charging by the week, it's that he's
selling the value he provides to the company, rather than strictly selling his
time.

------
chatmasta
When I hear "consulting," I think about escaping the grunt work that is actual
programming. How much of your time as a "consultant" do you spend actually
programming? What other tasks do you do on a day-to-day basis?

~~~
patio11
Talking to clients, getting buy-in for things I want to make, looking at
metrics, thinking, learning about the product / space / company / etc,
assorted engineering stuff that isn't programming (wireframes / specs / tests
/ demos / docs / etc), writing copy, etc etc.

Time allocation varies greatly depending on the client and what we're working
on. I've had engagements where I spent 100% of my time talking and I've had
engagements where I spent as-close-to-100%-of-time-as-practical in heads-down
going-to-ship-this-project mode. Most engagements fall somewhere between the
two extremes, clustered away from heads-down-programming.

~~~
chatmasta
Do you have engineers on payroll to whom you can outsource the bulk of the
actual programming, or do you have a network of independent contractors that
you keep going back to?

~~~
patio11
I know people who do both, but I do neither. If a code is written for an
engagement I'm brought in for, either I write it or a client gets it written
by the engineering team. (I work for software companies.)

------
lhnz
How early can I start doing this? I'm young but confident and I do feel like I
have something to offer people already. I guess it's getting the first client
which will be tricky...

~~~
Alex3917
"How early can I start doing this?"

Read the book Million Dollar Consulting. It pretty much gives a step-by-step
guide, from lead gen to writing proposals to how to bill by value:

[http://www.amazon.com/s/ref=nb_sb_ss_c_0_19?url=search-
alias...](http://www.amazon.com/s/ref=nb_sb_ss_c_0_19?url=search-
alias%3Dstripbooks&field-keywords=million%20dollar%20consulting)

It repeats itself a lot and is generally poorly written, but there's still a
reason why it's been the top consulting book for decades.

~~~
pfanner
I have absolutely no idea how people start consulting. How old are they? Did
they work something else before? Did they major in anything? Are they all
independent or work at consulting companies?

~~~
ams6110
Yes.

~~~
ams6110
OK, the point is any of these things could be the case, or not. Some people
start consulting immediately. Some don't start until they have been working
"regular jobs" for 20 years. Some start young, some start old, etc. There is
no one way to start. Just start.

~~~
saryant
There's only one consistent answer to any questions WRT consulting and that is
"it depends."

I've been in your shoes before, trying to figure out exactly what consultants
do and how to start doing it. Once I gave up on finding a simple answer and
just _did it_ I started to understand the game.

------
chatmasta
This is the best article I've read on HN in a long time.

------
komlon
You just go and be a contractor. There are tons of contracting positions open
in London that will pay £500 - £600 per day. It's easy to make over £100k
(pounds) if you're a good contractor.

[http://www.cwjobs.co.uk/JobSearch/Results.aspx?Keywords=core...](http://www.cwjobs.co.uk/JobSearch/Results.aspx?Keywords=core+java&JobType1=20&LTxt=london&Radius=5)

~~~
flyinRyan
A contractor (contract based, usually 3-6 month intervals, low paid) is a
totally different thing to a freelancer (higher bill rate, hourly ad hoc
projects usually) and a consultant (much higher bill rate, but project based
instead fixed interval based).

------
ana_hilinsky
Thank you for writing this. It's too often that I feel alone in the world of
dev consultancy! I've been running my company for 3 1/2 years, I started it
straight out of college in 2008 when I realized job opportunities were slim to
none and I'd have to figure out how to pay my rent regardless.

The most important lesson I learned all these years: find a reputable client,
do good by them and watch word of mouth spread. Our biggest asset is the great
referrals we get from our clients.

It's all too often that we end up taking over a project that was done by some
previous consultant/freelancer where they obviously didn't care about the
client relationship and let the work get sloppy. It's a shame! (Also, I'm not
talking about tiny projects for no name brands, I'm talking about major
retailers, musicians and sometimes fortune 500's).

------
jeremysmyth
To be a consultant, rather than an hourly-rate freelancer, you need two
things:

\- insight

\- reputation

The reputation (from prior work) gets you in the door, and the insight (from
your wealth of experience in the field, which you have, right?) is what gives
you the right to call it a "practice", and the right to get you the 5- and
6-figure paychecks for each engagement.

Insight is more than just experience; you'll have to offer something unique
and valuable for each customer that they can't just get from their local
recruitment agency for commodity rates.

You have to be able to communicate at senior management level, in big picture
terms, but also operate at the ground floor and all the way up. You must be
able to advise at each level of the organisation, while understanding the nuts
and bolts of the guy doing the programming (and quite probably doing it
yourself).

------
SonicSoul
Patrick, while being such a web marketing guru, how come you named your page
title (and article path) "consulting" instead of using the title? I realized
this after bookmarking you in pinboard and later realizing there is a mystery
"Consulting" entry in my links feed.

------
d0n1
I couldn't help but post, I run a very similar business model to the one that
is described in the article and i can confirm that it is a very successful
model. We are slowly at the stage of try to scale out.

The "terrifying cashflow" problems are very real, we take the model of taking
a modest wage as to not cripple it the cash flow. We also have put on our
first staff member which we are pretty excited about.

Its interesting to hear that others are using the residual cashflow to create
a product. We have tried to generate a couple of differente products but it
hasn't out performed the consulting arm.

------
tieTYT
At the end of your article you said to hit reply if you want to hear more, but
I didn't see a reply button so maybe you meant post it here?

I'd like an article about the transition from being an employee of a company
to being a consultant. I've never been a consultant before and it's extremely
intimidating to think about quitting my job. Did you/do others usually do this
all at once, or is there a way to do it gradually? As gradual as possible,
ideally.

Does it make sense to have a weekly rate if you only work 2 hours a day after
your day job?

------
davemel37
Great Point about asking what they can cut to get to their budget... This is
the reason why when negotiating media buys with commissioned salesmen, you
should always give them a budget first and stick to it, and than negotiate for
more exposure...This way, the salesmen's commission remains in tact, and he
fights to get you what you want, because he wants the sale... Instead of being
in a situation where every penny you try to cut in your media spend, he views
as a cut to his commission. Great Post.

------
whileonebegin
The title is also a little confusing. It's not about making $XX,XXX per week
programming. Rather, it's about marketing. I'm not sure the same rates would
apply to developers becoming "consultants". I think it's something like this
(two different tracks):

Web Site Developer => Marketing/SEO => Consultant => $XX,XXX OR Programmer =>
ISV => Product => $XX,XXX

------
joseph
What are some good resources for learning how to handle corp to corp paperwork
(contracts, billing, insurance, etc)? It's very easy to land contracts through
agencies, who handle all of that stuff for you, but billing these kind of
rates through them is not possible, since they are going to take a large cut
for themselves.

~~~
jacques_chester
Form a working relationship with an accountant. This is exactly the sort of
advice they are good at.

------
tiramisucode
I'm just a beginning Ruby on Rails programmer right now, and I would love to
start consulting on the side. Not just for the money, but just to gain
business savvy. Negotiating and delivering goods is an essential skill I
believe a business owner should have.

------
pknerd
A question comes across my mind; being a developer how one can make a
difference between working as a freelance or given consultancy? At the end of
the day you're going to write code, No?

Answers by you guys may help many freelancers who might prefer to follow
Patrick.

------
freework
I imagine you must know a lot about programming to make this work? Ho often do
you tun down jobs because the work is too over your head? Or you don't know
the language the work is required to be written in?

------
jwingy
On a related note, does anyone have some informed opinions on the best type of
business entity (e.g. LLC vs S-Corp vs C-Corp, etc.) to set up for a
consulting business such as this?

~~~
logn
You mean LLC vs Corp? I'd go with an LLC. Corps have more formalities like
required meetings, minutes, etc. And they're set up to be invested in. LLC
should protect your assets without having to jump through too many hoops. The
taxes differ, consult a tax pro. You can always convert an LLC to a corp down
the road.

That being said, I consult on the side and am trying to grow my business and
haven't set up any company yet. It's a little risky but then again I'm not
doing the kind of work where I'm likely to get sued, and I don't have many
assets.

------
pknerd
Not sure but kind of relevant post in Inc:

<http://www.inc.com/marla-tabaka/charge-customers-more.html>

------
robbyishere
The choice of varying fonts makes me suspect he is trying to sell something?
It looks like a get rich quick spam page, what do yall think?

------
Dramatize
Has anyone had success with ecommerce consulting?

~~~
ana_hilinsky
Yes, do you have any specific questions? We do a lot of Magento builds for
medium sized retailers.

~~~
atsaloli
What does medium sized mean? My friend has an online store that grossed 5
million USD in the last year, he is looking for help him next-gen'ing his
Magento store as well as SEO. Is that something you'd be good at? He wants one
solution provider for both re-doing his store and SEO.

~~~
ana_hilinsky
Can you send me a quick email so we can take this off the board? I'd be happy
to either help or point you in the right direction. ana@buildrx.com

We do work for retailers such as True Religion Brand Jeans, Joie Clothing,
Tart Collections.. (all Magento based).

------
dschiptsov
"Finding a bigger fool" method _because I'm, air quotes, "Internet famous."_?

Oh I get it, it's very clever.

Placing narcissistic postings on HN in an a proper time (Monday, morning) with
a catchy headline and provocative wording, including digits is a nice work, of
absolutely nothing special.)

~~~
sabat
No idea why this would be downvoted except for the fact that Patrick Can Do No
Wrong. He's wildly opinionated, questionably successful before his sudden
consultancy (he wrote a mildly successful Bingo card program in Java), and
self-satisfied beyond measure.

~~~
emmett
Because it's mean spirited and adds nothing of value to the conversation. Your
comment is similar; your dislike of Patrick is based entirely on who he is and
doesn't bother to engage with the content of the essay at all.

~~~
nvarsj
I'm not sure I agree that the post above has no relevance. Every time I
encounter (an extremely highly voted) patio11 post, my used salesman alert
starts blinking. The guy is obviously a master at garnering karma and links,
SEO, what have you, while seemingly providing some value. And he makes his
money from this combination. So it is useful to realize where the OP is coming
from (self-promotion) when considering the validity of his posts, since they
are largely anecdotal.

------
dreamdu5t
Everyone is talking about something different when they say "consulting."

I get the feeling some people are talking about freelance marketing with
revenue-sharing, freelance development work, freelance sys admin work, and
then business advice.

