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Ask HN: What was your experience starting a tech consultancy?
507 points by amolo 12 days ago | hide | past | web | favorite | 256 comments
Basically share anything. Advice. Warnings. Stories. About the time you considered and also actually starting a consultancy.





Being able to sell and do the whole business BS thing is vitally important. If you can't do it, hire someone or get a friend/relative to help.

Under promise, over deliver. (slightly)

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

Charge for spec work.

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

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

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

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

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

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

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


Hiring people to sell is dangerous. Effective salespeople are money-printing machines. If they didn't know that about themselves, they wouldn't be effective salespeople. So there is a serious adverse selection problem here: the most effective salespeople have their pick of who to work for. The hiring pool for salespeople is full of --- dominated by, probably --- salespeople who are much better at selling you on why you should keep paying them despite them closing no deals than on selling your customers anything.

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.


No offense but on the pre payment thing you sound like someone who was fortunate enough to have a vast network of clients you already knew and trust. Which is not the case for most.

I've never asked for a pre-payment, but I've figured out a small project to do for them and made clear that at each milestone they're welcome to walk and I'll support their new person with whatever documentation they need though I won't offer "support" in the sense of hours of my life training people unless I'm getting paid, which is usually not a big deal. They don't seem to have a worry about paying you to train the new person, but do seem to worry that your emotions about being let go will impact the timeline.

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.


Things were pretty lean when we started, but sure, that might be true.

I've taken plenty of pre-payments. I agree that you shouldn't "need" one, but there's absolutely nothing wrong with requiring one. It sends the same message as a high rate, and gets everyone in the habit of paying for service / collecting payment for service from day one.

Otherwise, agreed on all points


I'd just say this: our current business has sharply better cash flow than Matasano's did (Matasano also didn't require pre-payments, but it did work primarily with larger firms, where this business works exclusively with startups), and our business would not be possible with prepayment. I only see downsides to prepayment, and my bias is to assume the need for them comes from accepting clients you should be rejecting out of hand. But I concede that this may be a quirk of my own experience.

> our business would not be possible with prepayment

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.


The problem is how to know which clients are trustworthy before the first project. For small shops, even one missed payment can mean a lot of trouble...

For new clients, I always do 50% up front. There’s no way I am doing a month of work on a handshake and a signature.

As far as I know, doing this is utterly routine among big-ticket consulting firms.

Oh, I guess they just call it a retainer. I guess I've never bothered.

No, I'm not talking about a retainer; in fact, a retainer is almost the opposite arrangement, where you take payment up front for a bucket of hours to be used (or lost, gym pricing style) over the period of engagement.

“Discovery” fee, of around 10%

Then paying 30% at three intervals during the project


Which is routine -- charging 50% up front?

Working for a month without prepayment, invoicing, and then waiting 3-6 months to get paid.

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).


These are all excellent and were all things that I practiced/discovered in my consulting days.

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.


+1 - I gave a reduced rate to a client who was tight on funds as a favor. They began referring friends (thinking they were returning the favor) but the new clients had the expectation of low cost. Clients attracted by low rates are rarely the kind you want to attract.

I generally agree, although whenever a rate is reduced for any reason, it should be stated out loud and in writing and on every invoice with a clear end date or specification for the reduction. Never let the special deal be forgotten as anything other than a special deal and after the deal is up, raise your rates back to normal without hesitation or apology.

Never reduce your rate. Always make it clear on the invoice what your rate is, and apply a clearly explained discount to the invoice. Discounts are temporary, rates are sticky.

Just offer to help them scope something you can do within their budget, and maybe it involves training them to do it themselves. Or just a better (simpler) design anyway with better milestones and focus on deliverable prototypes.

> The only thing I would add is: Never reduce your hourly rate for any client. ... 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.


> While you should not reduce your rate, it can be okay to write off your time.

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.


> 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.

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.


> 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.


Only when you do the wrong things will you learn what's right.

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.


Why couldn't you work less hours? Was it just a matter of hourly rate being too low for you to be satisfied with the income on fewer hours or is there something else?

Saying "no" is a challenge for human begins in all levels.

yes the backend of busines has got to be taken seriously. getting invoices out, paying bills, billing people etc these are the things that will kill your time. i am fortunate in that my spouse is a wiz at this so i can focus solely on doing the job.

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

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

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


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

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

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

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

Actually a good lesson for business in general.


What's wrong with it is that every spec will always be open to interpretation. You will interpret it as the minimum amount of functionality; the client will interpret it as the maximum. The only spec that isn't open to interpretation is the code itself. :)

That it's often extremely difficult and lots of overhead to have such a thing, and clients typically are larger than you and have less to loose by arguing about it endlessly.

That really depends on the project. One of the reasons I only take very small projects is that the scope is typically limited and clearly understood so it's easier to offer a fixed bid with little risk.

Nothing is wrong. Some of the best contracts I had were fixed cost (which is my preferred way to work over hourly). But - you need to be familiar with the system you'll be developing in, very good in what you do and price it at several multiples of your hourly assessment.

I really, really don't like working hourly - I'm not selling my time after all, but my services.


as the client, i would always split the project into 2 parts - a functional spec and a technical spec. my job was to interpret and write the func spec as a kind of pseudo-code version of what i thought could be built. then i would commission a fixed price job of interpreting the func spec and re-writing it as a technical spec ie, click a button and take the user to a summary of xyz turns into a bit of SQL. the tech spec must be written so that any programmer could use it to understand what needed to be done. then I'd ask for a fixed price quote to deliver on the assumption that i could get multiple quotes if needed.

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.


1. I would read "The Secrets of Consulting" by Gerald Weinberg

The biggest lesson (I think it was in that book) was that you're being hired as an expert on a topic. to be a Successful expert you must A) have an expert level of knowledge about the topic and B) LOOK LIKE you have an expert level of knowledge about the topic. Those are two separate, but essential things.

2. Go for 70-30 split of listening to talking.

3. Read Million Dollar Consulting by Alan Weiss

4. Make sure to read a lot in the early days, but don't expect to get more than two or three insights from any particular book (for example the insight in the Weiss book that has proven most useful was "Clients that are difficult in good times will be nightmares in bad times". That has been true in each and every case in 17 years in business)

5. By the time you're in front of someone (physically) your primary job is not to sell them on anything, but to de-risk your offering to them.


Addendum 6. When you make architectural decisions (creating some function in code instead of sql for example) go ahead and explain your reasoning to the client in some form or fashion. Volunteer this casually at a meeting. It creates a good bond between the two of you, and the client will probably reciprocate by telling you about some more "businessy" trade off or decision they've made. It also allows the two of you to communicate better in the future, and you will both know each other's implicit priorities better. Do this sparingly, but definitely do it. At worst the client will be bored, but at best it's a good force multiplier.

Great tips right there. Thanks.

If I could give you one piece of advice it would be this: Charge a small but reasonable fee for speccing a project. (My fee is $500 based in NYC).

There is nothing more demoralizing then spending a bunch of time and effort speccing out a complicated tech project and then getting ghosted by the potential client once you deliver the estimate. Once I started charging for speccing, this never happened again.

And, once I started charging for this process, my conversion rate on proposals delivered went up a tremendous amount.

I think a couple things are at play.

1. Many clients leads aren't actually serious but it can be difficult to figure that out, especially when you're new to the game. If somebody is willing to pay for this process, they're clearly serious about the project.

2. People respect you when you charge for your time like this. My agency got taken much more seriously by prospective clients as soon as we mentioned that we charge for this process.

3. By charging for it, it forced me to create a clear process and clear set of deliverables for that fee. Clients LOVE clear processes and clear sets of deliverables. It makes it much easier for them to say yes. They are like a warm security blanket for the decision maker.

4. I believe it was HN's Patio who taught me that as long as your offering is below $1000, it usually falls under the discretionary spending threshold for most departments, meaning it doesn't require boss/committee approval.

If a prospective client was surprised by this fee, I took them through my process of all the things I'd help them figure out along the way that they clearly didn't have figured out yet, and make it clear they were free to go with a different agency after this process was complete. No strings attached.

I believe that clients who understand the business value of that work are much better clients than the ones who do not.

Shoutout to Brennan Dunn for the idea to charge for scoping.


+1 on charging for specs.

We had some landscaping done and interviewed a few contractors. Only one charged for the upfront design work, but theirs was the most detailed proposal. We ended up going with them. I think they rebated most of the design fee, too.


Also, if you feel uncomfortable for charging for specs, you can always agree that the fee will be waived if the client decides to commit to the project.

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

Specs here means specifications. It could include things like requirements documents, acceptance criteria, wireframes--anything to create a shared understanding of the precise shape of the work product to be delivered.

Thanks

I love this approach. Well done. And patio11 wrote a ton of stuff on the subject, e.g. [0].

[0]: https://training.kalzumeus.com/newsletters/archive/consultin...


Fantastic read, thank you for sharing. I assume this may have a lot of carry over into things besides programming as well.

Would you be willing to share your speccing process?

It's all about getting to a point where I can write a proposal that will blow away the competition. I believe a great proposal includes:

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!


How many hours does this whole process take, on average?

Anywhere from 2 to 20 hours. Average is probably 4-5. But I have a ton of other proposals now that I copy and paste from and just fill in relevant details. Used to take me longer.

On the other side of point 3, as a person whose role is building analyses and products (often on spec or as part of a pilot project), a clear process for the pilot or spec-work, as well as a clearly defined set of deliverables (the product(s), a report, and a methodology workflow, a demo, whatever), is just as (if not more) important for your success as it is going to increase the likely hood of you getting the contract.

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.


What all goes into a spec for $500?

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.


It should show you know what you're talking about, communicate a path forward, and wet the client's appetite for more. For the project at hand if that means wireframes then so be it. However, for $500 i wouldn't spend more than a couple hours start to finish.

Somewhat related - I'll charge for analysis and a briefing doc as well before speccing the actual project. Sometimes in marketing clients don't know what the outcome they want is (other than, "make moar £££s"), so reviewing what they're doing is also another good funnel into a larger gig.

Again, this helps clarify the intent and scope when you launch into a larger engagement.


Do you also charge this for new projects from existing clients?

Depends on the the size of the new project. If the project is small, I usually don't. If the project is large, I tend towards a new speccing project.

Here are a few things I would recommend:

- Never do a fixed bid. Not even when the job looks small or you are desperate for work. Any time a fixed bid goes wrong, not only do you lose money and time, but it's unbelievably demoralizing.

- Hire people. If you do it all by yourself, you'll end up doing all the jobs. Fun for about 1 month and then exhausting.

- Be honest. This is the one thing I feel like I got right. When I didn't know how hard something was, I would just tell the prospect or customer that while simultaneously telling them how we were going to figure it out. This approach always got me customers that I could work with and who were patient with me when I was consulting.

- Net 30 or better terms. Cashflow on Net 60 or Net 90 is brutal.


The advice against fixed bids is a bit more nuanced - there are two problems at play.

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.


Fixed price is fine if: Not only you understand the scope, but the client does too. Make sure you write down exactly what you're going to deliver in your statement of work, and ANY DEVIATION, CHANGE, or ALTERATION is a change in scope and subject to a change request in writing with added cost.

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.


> Never do a fixed bid.

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.


> there can be nothing more profitable than fixed bids

This. Because you're not charging for your time, but for the value you add to the client's business.


I got burned by this as well. A very well known silicon valley company found me here, on HN (I solved one of their puzzles for fun). We agreed on a fixed-priced project. The project wasn't specced well, just a bunch of screen designs without describing exactly how they work. I kept asking for the specs, they always replied "yeah, coming soon, nothing to worry about!". I trusted them. Most of the screens were trivial, a few were complex. At first glance it all made sense. Started working, went through about a third of the project, till I got to one screen with some convoluted UI. It wouldn't work they thought it would, would require a massive redesign, lots of extra work affecting other parts of the app. I told them about it. At first they didn't believe. Then they agreed. Then they wanted me to do all the extra work as "in scope". I declined. Lost two weeks of pay.

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.


I wouldn't say it's your fault for not going through the exact UI logic, but more for not scoping the project properly from the beginning.

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.


>> - Net 30 or better terms. Cashflow on Net 60 or Net 90 is brutal.

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.


LOL.

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.


I automatically increase my bids by at least 30% if I learn there's a purchasing department involved.

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.


> Net 30 or better terms. Cashflow on Net 60 or Net 90 is brutal.

Even better... get paid in advance with a retainer, if you can swing it.


Been bit by this. In the past client doesn't get on my schedule till a deposit/retainer is made.

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

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


Came here to say this, although in a slightly different way. No matter what your bill rate is, if your commit is for xx hours per week/month, you're always going to feel like you're losing. Especially when you _inevitably_ encounter the customer who gets irate when you could only manage yy hours of brainpower in a week, even if those hours were superhumanly productive (and they probably were, amirite, or you wouldn't have burned out early for the week). In an age where so many people are seeing past the lie of butts in seats for 40 hours a week, don't be the one to subject your own self to the same.

this is a very good point. It's like handling dynamite but for an individual or very small team fixed bid is the only way to real revenue.

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.


> Never do a fixed bid.

Isn't the first rule of consulting literally that you should be billing by value, not by hours?


Yes. That said, there are some situations where you need to bill by time, but they should be rare.

I mean when you're getting started that's pretty much the only option. No one is going to believe that you're going to be able to deliver an entire app or whatever until you have a couple on your resume. But you certainly shouldn't aspire to be billing by hour.

Adding to the fixed bid thing, sometimes it’s far easier to hire a consultant at all if you convince your management that the price is fixed with crystal clear acceptance criteria. “Let’s hire a contractor for an indeterminate time at a high rate” is often a tougher swing.

Another thing higher-ups like is having several options presented:

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)


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

Nobody does this at first, and they end up with a bunch of cheap clients because they simply wanted to fill their pipeline, myself included.

The number I use and have seen others argue as well is take whatever your hourly rate was at a full time job and triple it for consulting (e.g, ~$70 hr salary = ~$200 hr consulting rate).


The number I use is that before tax money per month as a consultant must be at least double what my before tax money is as an employee.

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

I disagree with this, the client will always try to maximize value, your costs are hourly, I like the other poster who said never do a fixed bid. Clients benevolently keep asking for more and you benevolently keep saying yes and then that niceness on your part becomes a liability after a few days or weeks because now it all blurs into being "in scope". I would also always put the concept of scope discussion process into every contract.

I think of my costs as more "daily" than "hourly", to be honest.

Whether I have to work 5 hours or 8 hours on your project, either way my day is largely shot.


So don’t say “yes” to things that are out of scope.

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...”


> So don’t say “yes” to things that are out of scope.

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.


Very good advice. I recently had a friend with a strong background in sales and business development join me. He recommended higher amounts by estimating the value we were delivering rather than just the hours we were spending and things got so much better.

Alternate view that's worked well for me: not only do I not charge by the day, I don't even charge by the hour. I charge by the minute and tell them exactly what I did in the time I worked. Even when something takes me a paltry couple of minutes because I may have recently spent an hour on it for another client and I could easily charge more money for it. This level of transparency earns me an incredible amount of trust with my clients, who, so far, have each become "client for life." And the overhead isn't bad--a simple spreadsheet--complete a task, describe it in several words, enter the number of minutes spent, and everything gets summed up to the total amount due at the bottom.

EDIT: for clarity, I build RESTful API back-ends on AWS and support them with DevOps; I can see how my method may not work for other industries.


I once worked at a company in London who called an emergency plumber out who charged £5 per minute. It cost ten quid just to get him in through the front door and up the lift.

How do you know you're not leaving money on the table? It sounds as though people get a lot of value from your work, and they trust you, and want to continue working with you... So probably they'd be willing to pay more?

You're right, I don't know. I figure, if they are happy, I will get repeat business and referrals. If I'm charging too little, then they should be extremely happy and are even better champions of my work/name. That seems worth more than higher pay, long-term.

I believe you. Do you know if they actually read the detailed descriptions of work which you provide?

I've never actually asked or gotten questions about my invoices. So, either everything is crystal clear, or you're right, they don't look at them. I suspect every client probably looks at the first couple to get to know me and establish trust, and then just skims them thereafter. But it's nice for both of us--we can each review and see exactly what I did and how long it took.

Thank you. Yeah, I try to do the same with my invoices. My experience is about the same as yours. My current clients don't complain and they pay on time. It works well enough, but it takes longer for me to create each invoice.

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.


In 10 years of consulting, I've yet to see a client buy this line of thinking. Clients want an accurate forecast for cost and key assumptions being made to formulate that cost. At the end of the day, it's in their best interest to get a good price.

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.


Have you tried?

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.


You always charge hourly, it’s just that you don’t always expose it as such. All of your costs are either driven by time (rent, salry and benefits, SaaS costs, calories per day) or amortizable over expected number of billing hours. You need to know your total loaded cost per billable employee, because you’ll need to charge more than that for an hour of their time. In the end, fixed-price contracts are just really crappy T&M contracts from an estimations perspective.

Better yet - after the 'project' is done, charge T&M

Wow. Now it makes sense. When I told my first client I wanted to increase rate after finishing a basic prototype (which was the full scope of the project), he ghosted and left me a bad review on Upwork. Well, all in the game..

Don't bother with Upwork, it's a place where bad clients are looking for cheap labor.

Where do you find the good ones? Mostly LinkedIn? Reaching out on Hacker News?

Does $70 here mean take-home salary, pre-tax salary but without health-care, salary including health-hare benefits or something else entirely? What about retirement contributions?

I'm sure many people will know what "salary" in this context usually means, but clarification would be appreciated for the rest of us :)


Good point - yes, in general I’m tripling the number when I take my last pre-tax salary and divide it by ~2000 hours (40 hour work week across an entire year)

Hahaha.. Triple? Really?

Double your rate for each new client until you can't go higher and get work. Then back off in reasonable increments until you have just enough work to be happy.

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.


A helpful thing to remember is that large companies spend thousands of dollars a day just on printer paper.

How do you find such clients? I don't mean your particular channels, just the general idea.

I am a recent grad, talented I like to imagine, with an opportunity to do some consulting. If I know I can make X/hr elsewhere fulltime, is the 2.5-3x consulting/contracting rate still applicable, or does that apply to senior developers?

Regardless of level, you have to charge 2.5-3x to make up for the additional taxes you're paying, the benefits (health insurance, etc) you now have to pay full price for, and the inevitable gaps between contracts where you won't be making any money. Whether that bill rate is attainable varies depending on your skills, market, etc., but if you can't get that rate, then you're probably financially better off at the hypothetical fulltime job.

Isn't there a story about how a certain wine nobody bought but once they jacked up the price, its perceived value was higher and people thought it tasted better and it sold more?

It's the whole fashion industry. Pricing isn't correlated to raw cost, there's a whole science behind that.

I think this was Grey Goose Vodka?

This is the kind of mentality you must shake off if you want to succeed in consulting. $200 is not even a rounding error to most companies, and you expect to get paid less than that for solving their biggest problems?

Yeah this is what I've read/heard too. I went 2.5x but I probably could have gone higher when I personally did this. If you sell yourself based on the problem you're solving and not hours worked you can charge a lot more than you'd assume.

keep in mind, healthcare, taxes, and retirement costs are going to skyrocket. Uncle Sam hates it when you're not under the thumb of an employer. Only about a third of your hourly rate may actually make it to your checking account.

Health insurance is a problem. Solve it before you move to contracting.

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)


Or you can just do without healthcare. While there is some danger in that, it's considerably less dangerous than driving without seatbelts, which everyone used to do. I don't recommend no healthcare coverage, especially if you have a family in the childbearing years, but it's unlikely to be the end of the world, either, unless something really bad happens...

This has to be the worst advice I've ever read in this site

In other words, only part of your income is considered "salary" and thus subject to payroll tax. This often results in a significant tax reduction.

You can claim a lot of business expenses as deductions that you wouldnt be able to as an employee

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.


I make 300k as a consultant in NYC - I paid about 97k in taxes and healthcare last year. It's not nearly that bad.

FWIW, my experience is closer to 55%, in a fairly high-tax state to boot.

It can be difficult, but it's not that bad.


Depends on what else you need to service your clients. Some types of consulting require flights, hotels, dinners, equipment, et c.

I never had travel or meals I didn't bill to a client, no. Negotiate better. ;)

I work with small companies.

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.


It’s actually a reasonable estimate of salary + benefits + operating costs, adjusted to cover non-billable hours, with a small profit on top. I’d want a more formal cost accounting model, but as a rule of thumb it’s pretty solid. People cost a lot more than their salary.

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

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.

Good luck!


How far out do you normally set your Z?

2 to 3 weeks.

The start went like this:

Me: You need this database stuff done. I can consult for you.

Them: We are looking for a full time employee.

Me: Well I'm keeping an open mind here, let me just go through the interview process and see what we both think.

(interviews)

Them: OK we interviewed you and we want to hire you.

Me: After understanding more about the position, I need to be remote.

Them: We don't want to hire any remote employees. OK we'll hire you as a (remote) consultant.

Me: $$$

... time passes ... largest income year ever ...

At this point I failed to look for more clients, and it became a one-client consultancy and eventually died when they decided they wanted to convert me to a (remote) employee after all.


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

Getting paid a lot of money to build something that never gets users is draining and not fun. There are tons and tons of people — super naive entrepreneurs — that are willing to pay a lot of money to build the complex castle in the clouds they imagine, and are then surprised when no one switches over to use it. I’ve literally heard people say “no we can’t build an mvp, it only works if everything is there.”

Correct, this is definitely very draining. My solution was to add a marketing wing to my consultancy. That marketing wing is hyper focused on launch and growth strategy. A high percentage of my clients purchase this "upsell" and the projects go much better post launch. Win/Win. More successful projects = better case studies + more tech work on those successful projects + more marketing work, etc etc etc. It becomes a virtuous cycle.

If you don't feel up to adding this offering, partner with another agency who already does it.


I wore out my throat telling entrepreneurs that they needed money, users, or someone who could bring in either. I responded to the pain of selling shovels to people doomed to get stuck underground by going to established, profitable businesses only but I love the idea of having a marketing service.

Maybe you could get affiliated with some investors too? Why not?


This literally happens all the time. Build it, nobody shows up. Naive entrepreneurs often think people will simply flock to their SaaS app. "All we need to do is build it!" Forgetting about the other parts, like marketing, sales, support, documentation. Building it really isn't even half of the equation. The other parts are just as hard, often harder...

Its probably still more interesting than bug fixing other peoples crappy code.

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

I'll add don't get emotionally invested in the project or client. You'll end up working for free helping to "just get us over the finish line".

you're wrong. you can only ignore your conscience for so long if you have a particular set of morals/principles and fighting the urge to push back on decisions is exhausting because it creeps into every other decision you end up making on a project.

You are providing a service in exchange for money. As long as your service is good you have done your part. It’s not your business to decide whether your customers are doing the right thing. It’s up to them to decide what they want do. Maybe they just know what they are doing?

I wonder if you are trolling us, as you are wrong across several important dimensions.

First, your opinions about what you're working on are at least as important as your development contributions. Good clients light up when someone smart shows up and pushes back against their dumber ideas. It's unfortunately true that most leaders have unintentionally created social structures around themselves where, for several reasons, they are rarely disagreed with. Someone offering a compelling and assertive telling you not to do something before you do it will be regarded with the passion of a new lover. People inside of an organization are hamstrung by harsh social, political and personal setbacks if they are perceived as disagreeable and frankly, most employees need to believe their founder has a clear vision. Result: no honest feedback.

Second, even if you're totally fine taking a sociopathic view and accept money for work that you know in advance will fail, the people who work for you that trust you to find them projects where they can contribute to something meaningful will become depressed and resentful. They will do terrible work until they leave to find something more satisfying.

Finally, this is subjective but experience has led me to conclude that even the most confident and successful people never "just know what they are doing". Entrepreneurs are plagued by imposter syndrome and the vast majority of decisions they make are confident wild guesses based on incomplete data under stress.

The smarter the leader, the more energy they will put into surrounding themselves with smart advisors. And if you're good at your job, you're one of these key advisors and that's why they hire you: to have strong opinions and give a shit about them and their company.


We are talking about consultants here. They get hired for a job and are supposed to do it well. I have hired guys to do stuff that would be needed in case another idea didn’t work out. They did a good job and were appreciated for it but their work got thrown out. I still would hire them again because they did a good job.

I don’t really want a consultant who just came in and thinks he understands the whole situation. As consultant you should do the job you were hired for really well. You can make suggestions but in the end you should assume that the people who hired you know what they are doing until clearly proven otherwise.


It seems as though you are a client and not a consultant, which gives us a little bit of charity when trying to understand why you appear to be utterly clueless about how to be a great consultant.

Answer: you're not a sociopathic consultant, just a client who sees the hired help as a commodity chattel. That's you're perogative, but if you woke up today willing to be humbled, what you haven't realized is that by definition, you're working with below-average consultants who only care that you pay them.

The optimism is that an entirely wonderful future is possible if you accept that you just might be doing it all wrong.


This discussion is getting way out of hand and I really don't like your tone (“humbled” “sociopath” “clueless”) but do you really disagree that as consultant you should be doing what you are hired to do first? If you have been hired to give business advice do that. If you have been hired to do coding do that. Why would anyone listen to you if you haven’t demonstrated some ability and also have learned something about the business that has hired you?

Probably a designer. Gets asked to design a banner ad and ends up trying to rebrand the entire company.

On a serious note it took me a long time to understand that some clients do only want you to execute and do not want you to provide a more holistic professional assessment at every stage.


>Maybe they just know what they are doing?

the GOP is exactly about stupid money


I have no idea what you are talking about

>Getting paid a lot of money to build something that never gets users is draining and not fun. There are tons and tons of people — super naive entrepreneurs — that are willing to pay a lot of money to build the complex castle in the clouds they imagine, and are then surprised when no one switches over to use it. I’ve literally heard people say “no we can’t build an mvp, it only works if everything is there.”

I guess in my years as consultant I have not met a lot of people who could afford my rates and were clueless at the same time. Maybe I didn’t understand what they were after and what their business situation was but I almost always found out that they had spent much more time thinking about their business than I had so I learned to mind my own business and do a good job.

I like what you're saying, I got into making software to build new valuable things not to extract money from the next greater fool.

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.


Your moral obligation is to do what's in your contract to the best of your ability, and not to put anything in the contract that you can't be certain you can deliver on.

i'm not talking about morals here. i'm talking about the nitty gritty of building things in a stupid way simply because the customer so demands it because they have an immature notion of their business or product.

Who are you to judge that? Sure make suggestions but in the end we are all adults and are responsible for our actions.

If you are good at this job - understanding, caring about, clarifying, refining, building, integrating and maintaining someone's aspirational vision - then you are exactly perfect to make these judgements. Good clients appreciate and expect strong opinions and trust that their expensive advisors genuinely give a shit about their success.

If any of my clients suspected that I was only maximizing my consulting returns, I would have no clients.


why are you responding to my comments to other people?

My problem is now I have a resume full of failed projects. Not super great track record for getting new clients or getting a full time job.

That’s a consideration. But if you phrase it correctly, your part actually succeeded. You are not responsible for the whole company, only for your own part.

building a website that no one uses doesn't really demonstrate your skills at building scale-able systems.

It doesn't demonstrate you wrote maintainable clean code and it doesn't demonstrate that you wrote something that scaled more than 1 user.


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

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

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

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

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

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

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


In my experience being a tech consultant, I would focus on the following if I had a do-over:

1. Really work on systemisation of your workflow so you avoid the trap of just keeping your head above water with all the work.

2. Run it as a profit first business.

3. Hire and delegate the things you're not good at or don't protect the core value that you bring.

4. When delegating, make sure you also delegate the decisions and accountability of the results too.

I really enjoyed 2 books which I would apply, Profit First and Clockwork - both by Mike Michalowicz.

Second to that, I would really fall in love with why I run a consultancy business. For example, if my mission is to provide the best technical solutions that empowers the access of services to everyday people, then it can also align with your client's mission. If the thing you're passionate about solving is the same as what they are passionate about solving, then you work more as a partner than a supplier.


I had a partner who was afraid to charge extra fees to clients, for things like making small updates, adding features and tweaks, etc. he was under the assumption that the more sacrifices you do for the client, the client will be more committed.

but guess what, the client later left to another company who charged twice our cost. i fired my partner after that and not making that same mistake ever again.


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

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


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

Great stuff there. Thanks for sharing.

Pick a mail forwarding service that is high quality that can both scan and forward mail and packages with a very low turnaround time. Moving and having to update address info with N agencies and clients is a huge and unnecessary PITA.

After your first year, hire an accountant to audit your accountant, figure out which one is doing things in a way you agree with, use that one going forward.

Sell.


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

What do you do on your visit?

Sell, sell and sell. Hire people. It can be really hard to balance projects if you are alone. Either it’s too much work or too little. Don’t be just a coder. Go to meetings with business people and be part of finding the solution. Doing the actual work is the easy part. And sell. All the time.

always sell. _always_ sell

this being HN many of the readers here are engineers and scientists. The technical side of tech. consulting is only maybe 20% of the overall pie. Most of the work is in forming and nurturing relationships in your industry and clients. It's the relationships that bring you billable work and billable work is all you have to keep the lights on.


When I started consulting, I got given the advice to join the local chamber of commerce. I was skeptical but it was very helpful in terms of meeting the local players. Would recommended it especially outside the traditional tech hub cities

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

- sales

- networking

- sales

- accounting

- become your own project manager

- handle client requests, emails, phone calls,

- changes, followups, meetings

- writing contracts

- sales

- play well with client's partners

- marketing your previous work

- did I mention sales?

Kudos to anyone who can manage all these.


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

My experience:

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

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

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

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

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

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

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

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

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

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

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


I joined a consultancy startup a couple years ago. Set aside culture aspirations and your office decor for a second, here's the truth.

1. demand 75% utilization from everyone in delivery. That means 75% of a 40 hour week is billed to a client.

2. If your PMs are happy then the client is happy, if the client is happy then the project is fine. Talk to your PMs often.

3. Bridge sales and delivery with a liaison who has a foot in each department. Give them the authority to tell sales to STFU and also to tell delivery get it done or else.

edit back to #1 a billed hour is your only source of revenue in consulting. Further, there are only so many hours to sell. Do some math and let that guide you in project decisions.


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

There are two sides to this. Most clients will want some form of cost control on their end. If the final proposal has ambiguity, you best bet the client's procurement team or relationship manager will want to discuss this. They have people they report to as well, and it's in their best interest to get the best price. The forecast has to have some form of predictability/reliability, otherwise prospective clients will simply stop returning your emails.

> procurement team or relationship manager will want to discuss this

The trick is to find clients who have authority to make decisions without approval from HR or Procurement or wherever.

Despite being a one-person consultancy, I did a multi-month project for a global telecom company. As you would expect, this company has a complicated vendor management system, project approval process, budget approval process, and so on. But because my client was a decision-maker (and not a mid-level manager), none of that mattered...

They wanted my help and they needed it fast, so they told me not to worry about the red tape and that they'd deal with it. The only time I heard from procurement/AP was a friendly request for my W-9 form.

Getting pushback from other departments about value-based billing means you're not dealing with the right person. The right person, a decision-maker, will make those problems go away if they really want to work with you.


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

Not sure what you mean exactly. I never work through RFPs, and that's the point. If you find someone who really needs your help (not just anyone), they will get you through the necessary hoops and deal with bureaucracy on your behalf.

Are you saying those who go to RFP to keep cost control transparent really don't need the help? It's also kind of egotistical to assume a company needs you and you alone to solve their problem. If the problem is big and important enough, rest assure there's more than one shop that has an idea as to how to fix it.

I also think we're talking apples to oranges. A one person shop may approach contracts differently than a shop with 13 across 3 time zones.


> It's also kind of egotistical to assume a company needs you and you alone to solve their problem. If the problem is big and important enough, rest assure there's more than one shop that has an idea as to how to fix it.

How is it egotistical to say that you’re good enough at what you do that people will make their bureaucratic procedures go away to get you to work for them? It’s either true or it isn’t. The number of people who are literally the only person who can solve a given problem will always be minuscule but being one of the top five people in a very expensive niche is an achievable goal. Being the only one of those people with a public profile and a consulting practice is also achievable.

Think of academic expertise. I’m confident people go to Peter Norvig and ask him as an individual with incredibly deep, broad and publicly known Algorithms skills to do work for them and if they make it too bureaucratic he just declines the work. Likewise economists like Alvin Roth with mechanism design or other hairy, expensive and lucrative problems.

This model of being very good and being known to be very good works for individuals. I’d be shocked if there aren’t one man consulting shops that bill $1m a month, very expensive expertise exists, at a minimum in finance. They probably have a secretary but a principle plus minimal support staff consultancy.


Yeah we're too far into the weeds here... My only goal was to say that hourly billing is not always a requirement, even when dealing with large orgs.

w9 form would have been for full-time salary work?


I think there are positives and negatives to both. Fixed fee projects can come back to bite you if you underestimate.

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

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


Expect to spend about 50% of your time actually “doing work” of consultancy for clients and the other 50% doing things like: Marketing, Business development (sales), Negotiations, kick-off meetings, contracts, Invoicing and chasing payments.

In fact in the early days, the proportion of your time doing “non-work” work will be significantly higher than 50%.


What kind of consultancy do you want? I'd think long and hard about that.

A one person consultancy where you have one main client at a time is vastly different than a 4 person consultancy where you are doing mostly project management and sales is vastly different than a 15 person consultancy where you are doing hiring and people management.

Pick where you want to go before you start. (You can change goals as you go, of course.)


I'm currently trying to get very skilled at being a one-person consultancy to understand things well, before I shift over into building a ~four-person one. Do you have any thoughts on how to pull this off?

How to pull off a 4-man-shop:

- Have so much work on your table that you have to hire people. Don't force your growth. If you're doing a good job, you'll get more work to do.

- Make sure that the people you have in your team are committed and are able to organize their lives. Cultivate your company - e.g. have some rituals like weekly breakfasts and table tennis. Small things that increase the bond. Pay the salary on time, be open for personal conversations (personal growth of your employees is important) and remember their birthdays. Appreciation of their work is extremely important.

- Plan to spend some time (sometimes a lot of time) to guide your new employees. Try to build checklists for every reoccurring process.

- Build up savings. You should have 4-6 months of monthly income for every hire on your bank account e.g. if you want to hire someone for $4000, you should have $16k in the bank. Why? Because they may a) need longer to be productive, b) have personal issues or get ill, c) are not good in their jobs but you've noticed it too late (it happens).

-- We started to hire with less savings and I wouldn't repeat it. It's good for your sleep if you know that you'll be able to pay your employees regardless of anything bad that might happen.

Good luck!


Thanks!

Hah, I am afraid I'm the wrong person to ask. I did the one person consultancy for years and never had the courage to step up and hire someone to get to that next level. (Now I'm at a 15 person consultancy, but got hired in after they go to that level.)

Maybe another commenter can speak to your question.


It worked. Time and material was fine for me.

Charge more than you think is right, market rates are exorbitant. Invest in your spare time. Invest in professional society time. Invest in your training. Communicate explicitly and often to set and define expectations.

Have a sales pipeline. Don't be a one client consultant. Abundance mentality.


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

I don't mean anything in particular, only the generic having a good sales pipeline. Thinking ahead, what is planned for sales "in the pipeline" for 1 quarter down the line, 2 quarters down the line and so on? Will it be an extension of existing project? More projects with the same client? Any other small engagements you can juggle on the side? Bring on an extra partner and deliver and work together? It's just normal business speech for planning ahead I'd say.

Thanks!

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

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

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

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

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

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


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

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


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

http://clientsfromhell.net/


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

It is one of the first skills you should master.

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

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

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

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

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


(1) Charge different rates based on onsite vs remote service. e.g. $75/h onsite vs $50/h remote.

(2) Charge a retainer for 'instant' contact. e.g. $200/month to cover cell-phone bill so you can be reached 'anytime' and/or resolve issues immediately. The other side to this is: I will reply within 15 minutes, but only able to address the issue when I am available.

(3) Charge for travel time as part of onsite-service. My billings begin when I leave my home.

(4) always give 3 quotes and specs. (minimum, adequate, suggested)

(5) Never charge for things that you learn. "It took me 3hrs to set that up, but i'm only going to charge you for 1hr because I learned X." They think they get a deal, and your worth increase. The key to that is communication. Make sure they KNOW they got a hell of a good deal.


Sounds as though you could be earning a lot more. Why should the client not pay for work just because you learned something along the way? What does the cost of a phone bill have anything to do with the value of having an expert on-call? (Would you set pricing for a SaaS product based on hosting costs?)

The point behind the 'monthly retainer' is that if only 1 client agrees to it, I make small% profit each month by doing nothing, but in reality when I have 10-20 clients all agreeing the same thing, it passive income that goes a long way.

So 10 clients all doing this = $2000/month. On average I get 1 call every 2-3 months. So that is significant income just to be available. As part of that (especially if it's a 10-15 minute "ssh in, do X and done" job) everybody is happy.

Note: Most of my clients are small'ish Tool & Die shops, these are the kinds of places that still run a multi-million dollar GM contract on a DOS-based MS-BASIC kludge. So my environment and the mentalities of the area are vastly different then a big metropolis like New York, LA, Toronto, etc.

They think they are getting something for free. Because I've upgraded most of their systems from the kludge to some things more robust, I do less work and get paid more.


If I may ask, what kind of work do you do for them?

I like working with manufacturing people: machine shops, motor rewinders, etc. One of my current clients retrofits old machine tools (think 20hp planers using 0-10V controls) with new digital controls. I always enjoy discussing that kind of stuff.


Just generic sysadmin related stuff.

> Charge different rates based on onsite vs remote service. e.g. $75/h onsite vs $50/h remote.

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.


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

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Some of my favorite actionable books are:

Managing the professional services firm

First break all the rules

Five dysfunctions of a team

Spin selling

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

Getting to yes

Blue ocean strategy

E-myth (revisited?)


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

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

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


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

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

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

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


Don't run out of cash. Don't do business with assholes. Ask attorneys how much you should expect to pay for a service before engaging them. Outsource everything that isn't your core business until you are big enough that bringing it in-house makes sense.

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

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

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

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

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

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

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

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

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

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

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


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

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

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


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

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

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

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


It's OK to charge a fee for anything. It's not good business, though.

Why not? If you are delivering value, you should charge something for it. Whether you call it a "fee" or something else is up to you.

It's penny-wise and pound-foolish. Many of the best contracts you can land won't pay for you to do scoping work. Contra the graphic designer orthodoxy, spec work is in fact the norm for the seriously well-compensated professional services sector.

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.


I understand. We used to not charge for specs, and this resulted in a lot of "spinning wheels" where we would spend a bunch of time (e.g. 5-10 hours of engineer time) on the specs, and the client would come back with "OK, we will discuss internally and let you know if we have any questions!" and we would never hear back from them. This hurt our bottom line quite a bit, when added up.

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.


Yes, that's the norm with all clients. It's the idea behind spec work: sometimes it works out, sometimes it doesn't. My advice is, again, look at it like karma.

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.


> Don't charge money to scope projects

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.


Yes, I would especially recommend it to solo consultants.

I'm struggling with this advice, and thinking either the projects you scoped, or the scope itself, are different to what I have in mind.

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. ]


I'm just going to keep this simple and give you my perspective, which you can take or leave (feel free to ask more questions):

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.


My rates are already high for outside London (UK), but I hear you. They're the wrong type of clients, so I've optimised for extracting every last dime (as you wrote in a sibling comment).

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]


Thank you for your answers!

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?


Yes! Pre-filter aggressively! And, yes, sometimes client relationships just aren't going to be as remunerative as you hope they'll be.

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.


I think what Patrick is saying is that you are not certain you'll take the project. He is certain. That's why he doesn't charge for scope.

I'm Thomas. :)

Sorry. You are my two favorites in HN and I was a bit sleepy.

No problem! A flattering mix-up.

ALSO, IMPORTANT:

Your website doesn't matter even a little bit.


There is an inverse correlation between profit margin and utilization (% of year you're billable).

So if you are selling billable time of your employee at a 30% markup over cost, then you need that employee billable 70% of the year JUST TO BREAK EVEN.


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

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

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


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

-Manage your cash flow.

-Get good contracts.

-Insurance shouldn’t be overlooked

-Manage your receivables

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

-Define perfect fit clients (will take a while)

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

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

-don’t underestimate branding and visual design

-manage your cash

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

Hope this helps


Great comments here.

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


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

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


Can you give a vague hint as to your niche to give us an idea of the kind of services you render? iOS? HFT? Mobile games? Marketing? US taxes? GDPR compliance?

Thanks!


I do Robotics!

On average I find approximately 2 jobs worth applying a month. Robotics is not really that popular on Upwork so there are not many jobs available but also there is little competitions.


I do Robotics!

On average I find approximately 2 jobs worth applying a month. Robotics is not really that popular on Upwork so there are not many jobs available but also there is little competition.


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

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

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

Contractors take direction from their clients; consultants give it.

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

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

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


Ran a consultancy for years

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

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

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


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

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


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

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


Don't ever underbid. It's never worth the additional overhead and the client demands are inversely proportional to how much they're paying relative to the job's value.

1. Your experience will be different than everyone else's because of who you are. I was always told to raise my rates, I charged too little, etc... But I never had a conscience problem with my rates. When I was ready, I raised them without worry. Be patient with this. Some of the pricing recommendations comments on here would never work for me personally, so do what works for you. Just get started and learn from your mistakes.

2. Ask for a portion of money upfront as soon as you get the ok from your client to start work. (1/3 - 1/2) I usually do this after making an estimate and sometimes a full proposal, really depends on the client's needs and the size of the project. Let them know in the estimate (before you ask for up front money) that you will be asking for it when you get the ok to start.

Long term clients that pay well I don't ask for anything up front anymore, as they always pay on time with no hassles. Some clients (that I won't work with anymore) I charged 100% up front, as they had taken advantage of me in the past. (I no longer work with them)

3. You may end up with a client that makes your life so miserable you just want to quit and get a job and fast food place. Find a way to politely end your work with these clients, unless you really need the money... which happens.

4. When making an estimate, break out the costs into a few sections like, minimum requirements, nice to have, extras, and dream features. Put a price on each one. This is really useful because you don't have to worry about your pricing, and you are giving your client control over how much they want to spend with you.

The worst feeling was handing a client one number, and them balking at it and now you don't get the work. Most of the time the client is happy to take on all the work. In reality they almost never do the last two unneeded bits of work because they change their minds so much, or reality with testing shows those features are needed. (depends on the type of work you are doing of course) But they will still pay for you to do it. But will likely change the budget to something more important later.

I did art, design and animation before as well, and these rules applied in the same way.

5. Much of what I do with my clients is education. Be decent, patient and helpful. They have no idea how software development works and are often confused about why some things are necessary and others aren't. After a few years, I get fewer questions and more trust.

The newer the client, the more diligent you need to be with documentation and communicating very, very clear expectations. If the client says "why didn't you do X, Y and Z?" If you expressed expectations clearly, you can show why you didn't do them in a way that is helpful to your client instead of infuriating.

6. Never start work until you get an official ok, I almost always require it in an email/writing of some kind with new clients so there is no misunderstandings. When I was starting out I have started work on a few projects thinking I was going to get paid only to get an angry response later...

7. Change orders. This is a big one... If you were careful to layout expectations, this helps both you and your client. Expectations help your client because they can hold you to what you said you would do. They help you because then if the client asks for something outside the scope of the agreed upon work, you need to get comfortable telling them "this is outside the scope of this project", and that you will need to make a new estimate for this extra work.

This is the biggest issue I've seen with new people starting work. Why? Because every single client changes their mind at some point, and you need to be ready for that.

My solution to easing clients into this change order is to tell them upfront (saying things in advance is always more helpful than in the middle of a problem) that they get say 3 changes for free after the project is finished, and any changes after that will require more payment/estimate. And any changes from the documented scope (expectations) will require an estimate.

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

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


Triple the estimate.

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