

Ask HN: Moving from fulltime to contractor, need help figuring through rates. - eof

I started working for this company as a sub contractor.  Our rate (there were two of us) was $50/hour discounted to $45 after negotiations (they guaranteed X hours a month).<p>At the time, I had little experience (though I could do the work) virtually no portfolio or anything, and it was a struggle to find new work.  I eventually went to work directly for this company full time, hired at 55k+ and renegotiated to 70k+ after 6 months.<p>I am leaving the company basically because I want to have my own free time, etc and am now in a position where I will be able to get plenty of work.  They are having a hard time filling my position with someone with my skills, etc.<p>I have informally agreed to work with them as a contractor over the summer to help train the new developer on our system, be an emergency backup, etc.<p>I have a very good relationship with this company, both as an employee and just friendships within the company.<p>They are a medium level of SOL if I just walk and don't give them work/help, but I don't want to leverage that at all, or at least minimize them feeling like I am squeezing them for all they are worth.<p>Does anyone have some pointers here on how to go about this?  Both keeping things as amiable as possible and maximizing my rate.
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kaisdavis
> They are a medium level of SOL if I just walk and don't give them work/help

The business is not your friend. The business is not your lover. The business
does not love you, the business is a business.

Yeah, they're SOL if you just walk. But they'd be just as SOL if you died /
were fired. Don't 'do them a favor' if they wouldn't do the same favor for
you.

> I don't want to leverage that at all, or at least minimize them feeling like
> I am squeezing them for all they are worth.

The company doesn't love you. It's a business relationship, not making a
website for your dad's war buddy. This is a job to put food on your table, not
a quick project for a buddy.

They don't love you. You are doing them no ill by 'squeezing' them for all
you're worth.

>Does anyone have some pointers here on how to go about this? Both keeping
things as amiable as possible and maximizing my rate.

Let's break this down. You want to keep things amiable as possible, but
remember that this is business, not a relationship. This isn't negotiating who
gets the kitten with your ex, this is negotiating how much food you get to put
on your table with a company. Again, they don't love you.

> Maximizing my rate

Well, how much do you need to earn, eof? That figure sets the baseline for
whatever you ask for, so figure out that baseline.

How much would you need to take in each month to cover all of your expenses
(food, rent, insurance, development, savings, taxes)? That's the minimum you
need to ask for.

How much do they pay employees in the industry? You were earning $70k after
6-moths, so we're looking at a per-hour / per-project equivalent to that.

How much would they pay the freelancer that will fill your shoes if you just
walked?

That's a lot of questions from me to you - sorry! - but it's questions that
need to be answered for you to figure this thing out.

You're quitting so you have free time and have a lot of work on the side. If
one of your other clients came to you with this exact same project, how much
would you charge them?

Charge your current employer no less than that. You're quitting so you have
the time and mental space to focus on what you want to do. Don't put yourself
at a lower rate because you 'owe' the company something. You owe them nothing.
The company doesn't love you. If it ever was more cost effective for them to
replace you with a bobble head, they would do it in an instant.

tl;dr:

• Figure out how much you need to live the life you want to live

• How much would you charge Joe X for this same work?

• Don't settle for less than that and don't be afraid to walk away if they
won't pay what you'd earn elsewhere. The company doesn't love you.

~~~
eof
Thanks for your in depth response.

I save roughly 50% of my take home now living somewhat luxuriously. My living
expenses will be very low when my fancy lease ends up; probably around
~1k/month.

It's tough though, because I am worth more to this company than any other
company in the world; since I hold a lot of specific knowledge.

I think your most relevant question is 'how much will they pay a free lancer
to fill my shoes if I walked'.

I also am probably confusing soon to be ex boss and coworkers with the company
itself. It is a small company, and more than just the company, my actual
friends would having shitty days at work if I just walked; but I don't doubt
for a second I would be replaced by the first working bobble-head hacker.

I definitely am not afraid to walk.

I took other advice in this thread (and elsewhere) and did the following. I
picked a rate that is just a little higher than I really feel comfortable
charging (but is nearly twice what I was charging 1.5 years ago free lancing)
and knocked it back a bit; and told them exactly what my rate was, and that I
would knock it back for them.

My boss glady accepted, and rejected the discount. So my rate will be $65 an
hour. The fact that they went _higher_ than I offered really just proves that
I am low balling myself? Eitherway, I am very happy with that rate.

~~~
kaisdavis
> The fact that they went higher than I offered really just proves that I am
> low balling myself?

Yes.

Your boss knew how much it would cost them to find a replacement - short or
long term - and your $65/hr came in below that. I am _ecstatic_ that you are
happy with that rate, but you probably could have earned more. Does it matter?
Probably. But you're happy, they're happy, and I'm happy.

Next step? Get it all in writing. Sign a contract with them. If you haven't
watched Mike Monteiro's excellent video on getting paid, take 40 minutes and
watch it: <http://vimeo.com/22053820>

Enjoy your freedom, EOF!

~~~
marklabedz
Don't forget, the cost to replace you is not your salary + search time. It
includes benefits, lost productivity, putting a roof over your head, providing
a phone etc. See <http://www.useit.com/alertbox/loadedcost.html>

------
oreilly
This can be very useful <http://freelanceswitch.com/rates/>

It'll let you know what you can charge based on your circumstances - consider
it a bottom line figure. Markets are such that supply and demand will alter
this (if your skills are short supply, like being one of the few developers in
the area, it's likely you can charge more)

------
mrbrandonking
An old freelancer's rule-of-thumb for calculating hourly rates is to take your
desired salary and divide by 1000. So, a freelancer would need to bill at
roughly $70/hour to make the equivalent of $70,000 in a year.

This rule-of-thumb is fairly accurate, considering time spent on non-billable
tasks as well as overhead and taxes.

~~~
ra
I contracted for about 12 years in all throughout my career, and this rule of
thumb is also consistent with my experience as a contrator.

you mention freelancing however, I think the rate needs to be a bit higher for
freelancing to take into account all the non-billable time.

------
allwein
What do you plan on using as your standard rate for other contracts?

My suggestion would be to use that rate with a 5 or 10 dollar discount due to
your relationship.

~~~
eof
Thank you for this suggestion. I did exactly this; they were happy with the
number and rejected the discount, insisting they would pay my full rate.
Probably means I went too low.

------
bartonfink
Do you know of someone with the skills they need who you could provide a
reference for? I would think that would go a long way towards smoothing over
your departure if you're concerned about that at all. Are they looking for
anything particularly rare?

~~~
eof
Not really for the area, this would be ideal.

It's also not rare skills; high level LAMP work; varnish proxy, random legacy
stuff to interface with. The problem is wanting someone on site; there are
just so few local developers.

