
My first year freelancing - Alan01252
http://alanhollis.com/my-first-year-freelancing/
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tptacek
It's good to do the exercise of doubling your salary and backing it out to an
hourly to figure out what your cost floor is, but it's easy to show how this
_still_ gets you an under-the-market result: consulting companies can pay
market salaries, handle 70-80% utilization, and still have strong margins.

The "correct" way to work out your rates is to raise them until you drop down
to a target utilization rate by shedding the clients who don't value your
work. It's awfully hard to do this in practice, but it gives you an idea of
what you're aiming for.

As always, let me remind you: _don't bill hourly_. You are not a furniture
mover.

~~~
effbott
>don't bill hourly

I hear this a lot, but I'm not sure how to implement it. Some people have
suggested that freelancers ought to bill for the entire project, but in doing
so you run the risk of losing money by underestimating the amount of work and
time involved. Some have also suggested billing daily instead of hourly, but
if the client expects a "day" to mean "8 hours", how is that any different
than just billing an hourly rate?

How do you handle your billing?

~~~
tptacek
Without getting into a big long billing discussion, just change your minimum
billable time from an hour to a day. If you spend less than a day working for
your client, bill them the day anyways. Just make it clear up front that you
bill in daily increments.

Serious clients won't even blink. Most of the people you work with at serious
clients aren't even spending their own money, and so daily or weekly billing
simplifies their lives anyways.

~~~
podperson
Or quote on deliverables providing estimates for development time, then charge
quoted prices for those deliverables (fractionally based on progress if the
customer is hours-focused). Be honest about this.

So if you estimate something at 40h @$100/h and get it half done in four
hours, bill 20h. This is a two edged sword — estimate well. (Do charge for
scope creep though.)

I give clients the option of being billed this way or by the hour. The
argument for this option is fixed costs and at least some guarantee of
satisfaction. They're also paying for results and not activity.

~~~
tptacek
Everything in this comment would be fine if you just changed "hour" to "day".
As it stands, though, you've needlessly complicated your pricing by making it
too granular.

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shawnee_
_Retainers are a great way to add security to what is ( or can be ) a pretty
uncertain financial path, however they don’t come without risks. You have to
make sure any retainer you agree to works for both you and the client. If the
client is asking for 24/7 on call support you either need to refuse, or charge
enough for this support that you could then afford another two of you to look
after the customer._

The best solution I've found is to require a _Good Faith Deposit_. (
<http://www.hackeress.com/goodfaith> ) For this, charge ~ what you'd charge
for 1 day of work, even if the client just wants to meet "for coffee". It's
really hard to draw the line where the chitchat ends and the actual work /
scope-framing / brainstorming begins. How many times have interviewers brought
in or set up phone interviews with people they have zero intention of hiring,
just to "pick their brains"? I ended up learning the hard way that this
happens way too often. By the time I figured it out, I was out a lot of wasted
time. (WePay and a couple other companies did this to me after my post here on
HN awhile ago).

I call it a Good Faith deposit because even though non-contractual meetings of
Good Faith _should_ be the norm, they're _not_. Getting viciously screwed over
as an employee and a contractor (and even as an interviewee) more than a
couple times brings this harsh reality into focus. So I made a decision going
forward: the ONLY kind of clients I want to team with are those willing to
respect my time and experience enough to work with me in Good Faith.

~~~
auctiontheory
It's a nice idea, especially if the client is an individual, but most
corporate HR and accounting systems are not set up to pay this kind of deposit
in advance of considerable paperwork.

I hope I'm wrong - counterexamples welcome.

~~~
damoncali
Every accounting department (that is, every company big enough to have an
accounting department) I've ever worked with wanted a contract number on my
invoice. If you're not in the system, you aren't getting paid. And you're
doing well to get net 30, let alone upfront. I don't think this would fly with
my individual clients either.

Interesting thought, though. I've always considered the first few hours as
part of the cost of sales. At some point you just stop and say, "we need a
contact". Until then, it's marketing. Not saying that's the only or best way
to do it, but it seems to be the usual way.

~~~
tonyedgecombe
If you take a hard line with the purchasing department they will usually bend.
Buying services isn't like buying commodities, they can't go to another
supplier to buy Damon's time and they have to buy because that is their job.

~~~
damoncali
Admittedly, I've never forced the issue. Maybe I should.

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akamaka
Great blog post, and congratulations on your success so far.

My biggest problem so far with trying to work as a freelancer has been
figuring out exactly what type of work I should be pursuing. I've got a pretty
broad skill set, from back-end to front-end web programming in several
languages, adequate graphic design skills, and experience with native mobile
platforms. While having more skills is a good thing, I feel like it makes it
more difficult to market myself successfully.

Has anyone else had this problem? Did you try to focus on one area that you
liked the most? Did you pursue what seemed to be in greatest demand? Or did
you find a way to successfully market yourself without limiting yourself to
one type of work?

~~~
Wilya
I was in the same situation. I can do back-end web programming, and some lower
level things in C or mobile apps.

Right now, though, d3.js gives me 80% of my income. It's something I like, and
I noticed a lot of demand, so I sort of happened naturally. Focusing in a
single area has the advantage that you can become really efficient at it, much
more than if you hop between completely different projects every two months.

I still have a bunch of side projects in every language under the sun, because
that's what I like, and because the market won't stay the same forever, but
focusing professionally on only one area (that you reasonably enjoy) for a
time simplifies marketing a lot.

~~~
skwosh
> Right now, though, d3.js gives me 80% of my income. It's something I like,
> and I noticed a lot of demand

Very interesting.

If you don't mind my asking, what kind of work are you typically doing with
d3? Visualising what kind of data and for what purpose?

~~~
Wilya
I mostly design small, self-contained visualizations for small businesses. The
data I get and the level of "visualization design" I have to do depend a lot
on the client.

I have worked among others with data on local traffic (congestion and travel
times), interaction between players on a field during a game, computing
performance, some internal manufacturing metrics. I think there's quite a few
areas where people want dashboards that are both fancy looking and
informative, either for their clients or for themselves.

Some people just have a vague notion of some data they somehow want to
display, others have quite precise demands (typically: "I've seen this d3
example and I want the same with this and that specific interaction/effect
added.")

~~~
asands
Wilya, how do you find work for d3.js? What's the best way for a freelancer to
market their experience in a relatively small open source library?

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6twenty
Great article. One thing I'm struggling with as a freelancer is finding
clients - I'm based in a small town in New Zealand, so I'm a long way from the
opportunities in the UK and USA. How do you track down and approach new
clients (who are likely to be happy with your rate)?

I also feel like being in New Zealand hampers my ability to charge a higher
rate. I don't know for sure, but I suspect that companies here are used to
paying lower rates simply because there's less talent here than overseas.

~~~
svmegatron
It sounds trite, but have you tried contacting companies in the UK and USA?

If written communication between you and the client is strong, it's often an
advantage to the client to have someone working out of sync with them. At the
end of their day, they dump some stuff into $ISSUE_TRACKER_OF_CHOICE. When
they get back the next morning, it's done.

~~~
6twenty
No I haven't, but that brings me back to the first question - how do you
research which companies to contact?

~~~
miloshadzic
Try asking the ones you'd like to work with.

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tunesmith
I've never understood all the salary-to-hourly conversion formulas. In my
experience, they are different markets and different kinds of workers. It
sounds like this particular formula roughly equates a $100/hr contractor
(working at fulltime) as a $100k/year employee. Other people say that you
should take your salary (in thousands) and then double it to get your
freelance hourly rate, but to me that seems ridiculous. $100/hr sounds great
to a 50k employee, but 50k sounds laughable to a $100/hr contractor. Others
say to take your salary (in thousands) and add 20% overhead, but that still
seems pretty ridiculous.

At more senior levels, it seems swapped. Contractor rates seem to have a
pretty strong resistance point around $120/hr (if you go by a recent hacker
new survey), I think partly because if you go above that point, that's what
agencies and consultancy firms and teams tend to charge. Meanwhile, salaries
for the same general technical fields seem to go higher than that pretty
easily. I'm seeing 130k - 150k pretty commonly in java enterprise positions,
more when you figure in bonuses with big companies.

Seems like people at around that level would be well-served to switch to daily
or weekly billing, but when you're working with larger companies or vendors,
that's a pretty big switch for them. I've tried that approach with a Very
Large company and was shut down pretty quickly.

~~~
nerveband
Hah, I can barely get clients to pay $50/hr an hour for Graphic Design and Web
Design work let alone $100/hr. These formula conversions baffle me as well.

~~~
roel_v
Not to be an asshole about it, but design work is not software engineering
(which I assume the GP was talking about).

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bmac27
A potentially stupid but relevant question as I'm just getting my feet wet in
the consulting arena: does discipline matter at all when it comes to this
doubling/tripling of day job rate formula?

~~~
napoleond
If by discipline you mean "type of work" then no, it doesn't matter. If by
discipline you mean "self-discipline", ie. "how much time you actually spend
working in a day" then it does matter, _with the caveat that clients pay for
results, not time-in-chair_.

~~~
bmac27
Sorry for the confusion. I meant the former, as in my case, search marketing
(SEO/inbound marketing) vs. programming. Most people I know working full-time
in search don't approach the salaries/rates that developers make and speaking
broadly, I know a lot of skills translate better in consulting than others do.

That said: bottom line is that I should be charging a lot more than I am now.
:)

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illdave
If you're looking to start freelancing - keep in mind that you'll need some
money in reserve as it can take quite a bit longer to be paid (i.e. if you do
a month's work and bill at the end of it, you can't rely on them immediately
paying that invoice).

From my experience, invoices that say "Payment due within 14 days" have a
greater chance of being paid quickly than invoices that said "Payment due on
receipt".

Also, the general rule of thumb is - if you're not sure you're charging the
right amount, you're almost certainly undercharging.

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SkyMarshal
_> A lot of freelancing is being able to understand who a good client is and a
bad client. We as developers are incredibly privileged right now, supply seems
to be heavily out striping demand and therefore we can afford to be picky._

I suppose what you mean here is that supply of work is heavily outstripping
demand for it, but a better way of saying that is demand for developers is
heavily outstripping supply of them.

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scottshea
Totally agree on the price. There have been many of these types of posts on HN
in the time I have been following it and all have said the same thing.

~~~
a-priori
The important part of that is that the OP says "This is the _minimum_ rate you
should charge per day."

You should actually charge as much as you can get away with, as much as people
are willing to pay you.

~~~
scottshea
Agreed. A friend of mine keeps raises his bidding price as he gets overloaded.
If they pay the amount then great; if not it is better than saying "no" to
potential business.

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timjahn
Some great advice in this post. I think the importance of staying in touch
with colleagues cannot be overstated.

Your network is your greatest asset.

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justplay
I am also freelancer but not so experienced. But my client love my work and
They use to come back to me when ever they need help. Usually I don't charge
my client as hourly rather the work I did.

