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.
You should learn how to "sell". That means a bunch of different things depending on how you decide to sell and is a basic business decision you should make early on. Make the decision such that your team can do the sales work. Hire sales when you have your process proven and nailed down.
37signals really got hiring right: you should (generally) hire a role after you've figured out how to do it yourself and doing it over and over again is becoming a material drag on the company.
If you feel like you need a deposit to start a project, don't do the project. In 14 years of consulting, including software development projects, I've never taken a prepayment. I can't remember a real problem I've had. I can, however, think of a lot of clients I've said "no" to because they didn't seem to have their shit together.
Their real worry is that you'll suck and delay things, by making clear that you understand that such things happen and will help as you can if it does you improve trust. And you should really be doing that anyway ethically. And realize that sometimes you're just not the right person for the job and to help them find the right person if you want to build a strong network.
Otherwise, agreed on all points
Not exactly sure how this is possible. Any mature business will split up a project into milestones. Whether payment is due at the beginning of a milestone or at the end, makes little difference to the business overall.
I prefer to charge new clients at the beginning of each milestone, starting work after they pay. Existing clients I'm happy to charge after the work is completed, because there's a working relationship there already.
Before I started doing this, I had payment issues several times a year. Since I started doing this, I haven't had a single payment concern and have never had to even think about it.
Then paying 30% at three intervals during the project
I fully understand that people starting out in consulting work don't want to do this, or can't. That's OK. But I don't think it's a good idea to build this constraint into your practice as a principle; it will keep you from growing your business.
The way Jeremy and I started Matasano --- it's probably more accurate to say the way Jeremy started it, since he's ultimately the person who founded Matasano, back when it had its original name, for his cat --- was to do "serious" consulting projects on the side while working a full-time job. I don't think he was taking prepayment for those projects, and if he was, I sure didn't see any of that money. So that's one way to maybe start consulting without depending existentially on up-front payment.
I also understand that there is a class of client --- one I think people new to consulting believe is much easier to acquire --- that can't reasonably be trusted without prepayment. I agree that's a thing, too. If you need these clients to boot up, that's fine, and I'm not dragging people for taking them. But here's a constraint you should build into your practice: your mid-term goal should be to say no to these clients, full stop, not trying to find a way to fit them into your pipeline.
Also: I can only tell you what's worked out for me and the weird group of people I know. I feel pretty confident about this stuff as business advice but I could obviously be wrong. I'm not going to waste everyone's time tediously disclaiming that though (this one tedious disclaimer excepted).
The only thing I would add is: Never reduce your hourly rate for any client.
For repeat clients they will expect that rate again. Many of your clients may know each other. They talk to each other and soon many of them will be asking why you can't give them a discount. You can offer discounts in exchange for an action (like quick payment mentioned above).
Never devalue your time.
I generally agree with this, but there are some exceptions:
1. For large, repeat clients that have demonstrated loyalty, it's okay to offer a modest discount, no more than 10%. You still cite your rack rate on the invoice, but at the end add a "Loyalty Discount" so they know they are getting this discount for a reason.
2. While you should not reduce your rate, it can be okay to write off your time. If it takes you 20 hours to do something, but you're afraid the client will balk at the bill and run away, rather than lowering your rate, invoice them for 10 hours, or whatever seems reasonable.
3. When you're just starting out, and have limited understanding of the value of your skills compared to the competition, you may not know what your rate should be. In these cases, you may want to consider flat rate arrangements.
Strongly disagree. This is a failure of communication. If you're billing by the hour, your client should have a general idea of how long something will take. A lower bound and an upper bound. Time-box all tasks.
As soon as you know you're going to break through the upper bound, stop work, inform the client, provide a new estimate, and let them make the call.
Eating the difference defeats the purpose of working hourly.
> you may not know what your rate should be. In these cases, you may want to consider flat rate arrangements.
Disagree with this as well. If you don't know what your rate should be, how can you name a flat rate? You should know what your competition is asking for and ask for slightly more, because you're better.
In a world with perfect information, you'd be right. Unfortunately, people have to make decisions with incomplete and potentially misleading information all the time. Demanding perfect time-boxing ahead of time is a recipe for disaster.
Dear client, this task will take 2 to 6 hours. If I find out it will take longer than this, I will reach out.
Dear client, I am 1.5 hours into this task. Based on my experience, it look like it will take 7 to 10 hours instead. Should I continue?
For all of this to work well, you need to have experience in estimating well and also understand that whatever number pops into your head, multiply it by 2 and tell the client that. I have never had a client be pissed at me because I finished something for less time/money than they were expecting.
That said, this sort of thing should really be used for highly indeterminate tasks, like fixing bugs.
There's something to keep in mind about the nature of time. It's possible to make a billion dollars in a day, but it's not possible to spend more than 24 hours in a day.
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.
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.
I really, really don't like working hourly - I'm not selling my time after all, but my services.
the benefit is that my coder who wrote the tech spec should be very comfortable with what is needed and i get to sell a lower risk $$ to my managers.
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.
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.
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.
1. A deep understanding of why the client is doing this project and how it delivers value to the client. Stating specific estimates of dollars this project can create/save or time/hassle it can save is a great thing to try and figure out and include. But be sure to state these are estimates and use large ranges. The goal isn't to be specific, just to illustrate the scope of the problem/opportunity. Most proposals DON'T have this. This alone will let you stand out from the crowd.
2. Understanding key stakeholders. Who will be involved in the project on the clients end and how will you bring them into the process in a way they'll be comfortable with.
3. Outline processes to get to success. What will the project look like from the day to day. How will you project manage? How will you communicate. What meetings will be needed? Will there be user testing? Who will do what - on your team and theirs?
4. Break up the project into larger chunks/variations. What is the smallest chunk that can deliver value ASAP. How can additional chunks be added in a modular, step by step approach that can bring value? Monolothic Yes/No proposals having a lower conversion rate than a "Menu of Options" the client can mix and match to their liking. Get creative!
5. What support options will you offer after the project ends? Will you disappear on them and leave them to fend for themselves? Will you train their team? Will you help them hire/transition to internal tech teams?
6. Include case studies for clients you've done something similar for before. This de-risks the project from the clients end and a big part of vendor decision making is de-risking.
So my speccing process is asking a bunch of really specific and pointed questions so I can make a great proposal. Sometimes I send them an online survey to fill out before our first speccing meeting. Sometimes it's just a meeting. But I've honed a long set of questions over time that get me the answers I need to write a great proposal. Then really listen to answers to those questions.
Somebody in this thread asked if I make wireframes in my speccing process. I prefer a collaborative whiteboarding session in the speccing meeting if it will help flesh out what the project is. It's much more fun and allows you to demonstrate your ability to work with them and incorporate their feedback on the fly.
But your proposal should be more about the problem you're solving and how you're going to solve it than about the lines of code/screens you're going to create. Don't be a craftsperson. Be a problem solver!
The more structured my pilots have been, the higher the success rate has been in terms of turning them into contracts. This also is a time where you can set and measure client expectations (so that sales/ account managers), don't get out of control with their promises.
I've been chatting with a few other freelancers who's spec process gets all the way to wireframes and is something like 40 hours * their hourly rate.
$500 seems like a perfect middle ground.
Again, this helps clarify the intent and scope when you launch into a larger engagement.
- 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.
1. You do not fully understand the scope of the project, or think you do but actually don’t. In these cases a fixed bid will be catastrophic.
2. The client themselves do not fully understand the scope of the project, or think they do but actually don’t. This is even more of a disaster for a fixed bid, because even if you give them exactly what they asked for it isn’t going to be what they needed, and that’s what they’ll measure success against.
The advice for fixed bids deals more with the question of value capture. If by hard work, study, and practice, you have a way to deliver $1,000,000 of value to a client, it makes sense to charge (at least) $100,000 for it, even it takes only an hour. This is technically a fixed bid, but not in the traditional sense. Here you understand exactly what it is your client needs, how you’re going to do it, and what value they will derive from it, and so charge a percentage of that value instead of an hourly rate.
Also write down in your SOW that anything you send to client for review or as a deliverable, is considered accepted by client if they don't say anything about it for 2 days.
A little more nuanced view of this: if you know the client, their business and their systems well, there can be nothing more profitable than fixed bids. I have quadrupled my normal rate this way and ended up with happy clients. If you don't know them well, then, yes, fixed bids can be very, very risky unless you figure out a way to corner the risk.
This. Because you're not charging for your time, but for the value you add to the client's business.
Again, this was not some cheap and poor startup, a major company that just raised a ton of money with lots of tech media coverage.
In the end, it's my fault for not going through the exact UI logic on each of the designs, but it's easy to miss when there are 100 designs.
If there is a clear scope laid out in the initial contract it's more clear who is on the hook for anything outside the scope, and easier to recoup losses when the client fails to deliver the requirements properly.
On top that, offer a 5% discount if they pay within 30 days. Helps with a lot of accounting departments.
Charge another $5/10 an hour if you want to compensate.
I once onboarded as a vendor for a large, inflexible client and had to choose between two possible payment terms.
something like: EITHER Net 90 OR a schedule of discounts for any payment earlier than that (e.g 1.5% for 30 days and 3% for 15 days). and I wondered how many of their vendors simply jacked up their rates or fees to compensate, thus saving the inflexible client nothing. I guess this is very common.
Invoicing an engineering manager who needs things to happen tends to be the least friction from my side.
Even if it costs more on the purchase, inflexibility does help streamline business operations. Any business who can just mandate "this is how this process is going to work" and make it stick is going to benefit from not needing to make bespoke agreements with every little vendor they co-operate with. I believe WalMart is the classic example for this case.
You need to learn how to do fixed bids and then have processes to support it.
Think of it this way, you have 40 hours * sizeof(yourteam) to sell per week. There's a ceiling on $/hr or you price yourself out of the market and you don't have a time machine to create more hours. You can either add people to the team or detach the price from time with a fixed bid.
If you don't want hundreds, if not thousands, of consultants in your company then fixed bid is your only path forward.
Even better... get paid in advance with a retainer, if you can swing it.
Isn't the first rule of consulting literally that you should be billing by value, not by hours?
a) I can do this in 4-6 weeks, but we can also hire a consultant who can probably do this in 6-8 weeks and it is going to cost roughly this much (in this particular example I had intimate knowledge of the system and was proficient with the framework/tools).
b) Look, we don't have anyone on the team particularly suited for this project. We can either train ourselves, but the project will take about two months, or we can hire an expert who can probably do that in a month, and this is going to cost roughly this much.
Of course, be very conservative with your estimates and think hard, if someone from outside of the company can do the project faster (green-field project with unknown tech) or slower (upgrading internal system, for which the original developer is still around, but busy earning money for the company)
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).
Whether I have to work 5 hours or 8 hours on your project, either way my day is largely shot.
The recurring thing here seems to be that consultants keep putting limits on themselves and then justify it.
“I have to charge hourly because...”
“I have to agree to go out of scope because...”
To expand on this, at the end of every contract is an SOW (statement of work). This explicitly and very clearly outlines what work is to be performed, how it will be performed, when it will be performed, and how long it will take.
At the end, I like to put a small sentence. The client can always request to change the scope or add things to the scope, the consultant will provide a cost and timeline for the change and once paid for, the consultant will perform the work.
I always say "yes" when a client asks for additional work. Then I tell them how much it's going to cost in addition to what we already agreed.
The number 1, cardinal rule, always is ... never work for free. If you don't value your work, nobody else will either.
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.
OTOH, a while back I had a client that told me to stop detailing everything on my invoices. They just wanted a total number of hours. I think maybe it had to do with the review process upstream. Fewer details gave the higher ups less to scrutinize and complain about, I guess. And none of the other contractors were providing such detail.
This doesn't mean you can't over-forecast the hours needed in a week to deliver x, it can be an iterative/incremental process. But don't think for a second a client won't want to see how you came up with your pricing model before signing an SOW.
In my six years I’ve never had to switch to hourly billing. The most pushback I encounter to this idea is from other consultants, often before they even try it.
I'm sure many people will know what "salary" in this context usually means, but clarification would be appreciated for the rest of us :)
I work in biotech. Companies don't blink at anything. $3,000 / day? Yup. No problem.
Money doesn't mean anything to a company where the entry price is 15 years of infrastructure build and raw materials that run in the millions if not billions. If it does, you have a braindead manager, so move on.
Taxes, on the other hand, are completely skewed in favor of consulting. Look at 401k contributions, for example. The limit for your contribution is the same, but your company can contribute a lot more on top of that. And talk to your accountant about how you decide on your salary; that's an important number and it's not straightforward to decide what it is. (It's certainly not your entire income)
The IRS now has a 20% deduction for passthrough entities up to 450K or so
You can put approximately 40K or 25% of income (whichever is less) into a solo 401K. Much more than a typical company 401K
There are ways to pay no FICA, by distributing through a limited partnership. You can save 15K up to the cap on those taxes, but then you will hurt your social security which requires 40 quarters of W2 wages to max out.
Healthcare will potentially cost more, but once you have around 6 employees you can join a PEO and get grouped in with other small business and get a typical cost for a business.
There are products (such as insurance ) that can shield a much larger portion of your income. For example, you buy income insurance that pays out any year you take a loss. You "pay" for it with your profit for that year. That counts as a business expense so you pay no tax on it. They keep track of your account balance+growth and you can borrow from your own account with no tax consequences. You can essentially withdraw the money at favorable tax rates if you ever take a loss.
It can be difficult, but it's not that bad.
Some clients prefer a simple bill and clear mental model of the costs. I make (slightly) more money on the bills in which I don’t break out my expenses than the ones that I do.
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/
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.
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.
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.
... 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.
If you don't feel up to adding this offering, partner with another agency who already does it.
Maybe you could get affiliated with some investors too? Why not?
It doesn't demonstrate you wrote maintainable clean code and it doesn't demonstrate that you wrote something that scaled more than 1 user.
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.
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.
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.
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.
the GOP is exactly about stupid money
Sure a contract is a contract but a contract represents a minimum legal obligation, and I like to do and receive a little more than the minimum legal obligation.
If any of my clients suspected that I was only maximizing my consulting returns, I would have no clients.
* 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.
 - https://www.thenorthstarlabs.com/
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.
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.
Here is another good one, which applies to tech consulting just as well: https://tomcritchlow.com/2019/04/04/the-strategic-independen...
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.
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.
- become your own project manager
- handle client requests, emails, phone calls,
- changes, followups, meetings
- writing contracts
- play well with client's partners
- marketing your previous work
- did I mention sales?
Kudos to anyone who can manage all these.
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
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.
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.
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.
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.
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.
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.
2) Go for the boring stuff you could do in your sleep. The most profitable projects are usually the most boring projects.
In fact in the early days, the proportion of your time doing “non-work” work will be significantly higher than 50%.
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.)
- 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.
Maybe another commenter can speak to your question.
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.
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".
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).
(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.
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.
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.
I don't know. I think the rate should be the same but you just add "traveling expenses".
> 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.
Bad idea. Do you want to be available in 2AM Sunday morning while you are at bed with your significant other. (or even alone). If your client requires 24/7, then hire 3 on-site that cover the 24 hours day (8-8-8). You'll probably need more for weekends. Your bank doesn't offer 24/7 services, why should you?
> Never charge for things that you learn.
Unless you should know it and it is general knowledge. Otherwise charge for it. It is part of the job. Also if you don't know it because of inexperience, your rates are probably lower. So a more experienced worker will take less hours but charge more per hour. Same result, same wage.
- 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.
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.
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.
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
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
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.
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).
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.
I'm just one perspective on this, there are others on the thread. But this stuff is all I've been doing since 2005 and I'd make a case that I've gotten reasonably good at it, so I'll go to bat for my perspective here and say that the advice to charge prospects for scoping work is bad, and you should avoid it.
It stopped happening entirely once we started charging a token fee. We realized that if we could convince clients to pay for a spec, even if it's a small amount, we have basically "soft-closed" them, which makes the rest of the engagement easier because money has already exchanged hands and trust has been built. Indeed, in our CRM system we move such clients to "existing customer" category, because that's what they are, and we treat them as such. (It also gives us the opportunity to name-drop them when needed, e.g. "we have done business with X").
It does occasionally give clients pause, especially if they are, like I said, just shopping around, and need convincing. But we don't care too much about such clients anyway.
If you get to a point where pre-sales work is grinding you down to the point where you need to do something about it, the right response is to raise your rates, so that the work that does close offsets the work you do on projects that don't. You should be constantly doing that anyways (it's hard! we're not awesome at it either, though we do try to do it once a year), so look at spec work as a forcing function.
That's another reason charging for nickel-and-dime rustproofing stuff like specs and proposals is bad business: it's way less valuable than actual delivery, and so charging for it makes it harder for you to set high rates.
Would you recommend this even to a solo consultant, where scoping can take multiple days with the prospect of that time being lost? I'm in a situation where the potential client desperately needs a scope developed, but I don't feel I can risk doing it for free as it might take a week.
Can you expand on the type of projects you would do scoping for free for?
Last year I spent 2 and a bit weeks doing paid scoping, because the client knew where they wanted to get (replace a legacy system), didn't know how it worked, didn't know how their business process was structured. Short of a value-based pitch (which has failed with them in the past) the alternative was a guess.
Afterwards we agreed to go onto build the new system. [ There's a whole 'nother side story as I'd lost money on every project I'd done with them before, so this time opted for time & materials - which sort-of worked, but as their max budget was fixed, as was much of the scope, resulted in considerable stress. Still looking for the lesson to learn. ]
Spend as much time as you think you need to come up with an educated guess.
Build a proposal that quotes a fixed time for the project, but bill the project T&M. Include in your proposal a provision for overage, pro-rated at a daily rate.
Don't bill for scoping work. If it takes 2 weeks to scope your typical project, and those 2 weeks are dragging your practice down, what I'm hearing is that you should raise your rates on delivery, not that you should try to charge some secondary "discovery" rate for or (god forbid) try to bill at your delivery rate.
Thinking about it, I have a mental block around not billing. I want to see the balance tick up, hour by hour. Any non-billable time is wasted time. Not being paid = no self-worth = I'm wasting my time & got to try harder.
So billing for value, where I haven't "earned" the money by working for it, or putting in a speculative 2-weeks to scope - I'm fighting myself.
[Corollary: I'm very (too) risk averse]
Do you pre-filter clients at all to ensure they have the budget? I've done scoping work for free, only to learn afterwards that the clients budget was 10% of what it needed to be. Do you just accept that as part of doing business, or is there a way to avoid it?
The question I put to you is, would you rather get good at extracting nickels and dimes from clients of a wide spectrum of quality, or would you rather get good at making sure the clients in your pipeline are mostly all high-quality? Billing for scoping time is a good way to get good at the former, and a good way to stay bad at the latter.
Your website doesn't matter even a little bit.
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.
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.
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.
How do you guys promote yourself, those that work alone without agency of some kind ? Word of mouth or web site or something else ?
I'm currently trying out to see if a newsletter can work and I managed to get one project through it so far.
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.
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 competition.
-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
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.
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"
You can sell your invoices to factoring companies and have the money within 48hours for 2-3% of the invoice total.