How This Freelancer Hacked His Hourly Rate(fastcolabs.com)
fastcolabs.com
How This Freelancer Hacked His Hourly Rate
http://www.fastcolabs.com/3021904/open-company/how-this-freelancer-hacked-his-hourly-rate
16 comments
The point of this isn't to pay his bills, I suspect - it's marketing, and apparently effective: he's made over 100 new business contacts at this point.
Exactly the point. Chances are, these people have long term projects for him and now he has become a trusted consultant. I absolutely love everything about this.
Yeah, I'm surprised he hasn't gone with some sort of exponential or logarithmic scale (eg. hit $10/hr then start increasing by $5 each hour booked).
He might accidentally zip past the optimum price point, but he'll get there a lot quicker.
He might accidentally zip past the optimum price point, but he'll get there a lot quicker.
Technically he should have used a binary search.
$1, $2, $4,...$64, $128. $128 is too much then do a binary search between $64 and $128.
$1, $2, $4,...$64, $128. $128 is too much then do a binary search between $64 and $128.
Would be interesting if the price rose by a certain amount for each hour booked, but also fell by a certain amount for each day with no apt booked.
Good point. Of course another interesting way to look at it might be to see if there are multiple maxima. Perhaps if he advertised a very high rate comparatively to the competition, he could find another stable price point. Or perhaps he might just be able to keep going, pushing the limit of what people will pay, while keeping up the high quality work. Bit of an Apple strategy! It does help if the product/service is very good of course.
I think it's too early to say if this is a successful experiment or not. His current rate is up to 107 (average about $53/hr so far). I imagine at least a few people were interesting to work with along the way.
His "market rate" is what people will pay him. Seems like he discovered what his ideal market rate is... $76 an hour.
He's up to $123/hr now...
That's currently $7503, with a current average of $61.
That's currently $7503, with a current average of $61.
But he has to work 62hr/week to get that? That's not so tempting.
How This Freelancer Hacked His Hourly Rate with one weird trick
Do you work for Upworthy? :)
I really like this idea. I'm planning on starting to freelance in a few months, and one of the things that really worried me was setting rates. I know how much runway I have to make it a success, and I'm confident I can get work pricing myself below market rates (anyone can sell $5 for $4 forever). But I've heard a lot of people say you shouldn't try to be the lowest-priced option, because then you end up with clients who don't respect your time. I was worried that I might have to choose between market rates and be outcompeted by people with better portfolios, and low rates and clients I didn't like. This seems like a great third way. Start out below market, and raise my hourly rate by $1 for every 100 hours. I'll have plenty of time for portfolio building, even if I have to hustle for people who aren't my ideal clients (which actually sounds like a necessary experience anyway). Then when my rate goes up, if those customers don't think my time is that valuable, we can just part ways.
Instead of aiming for a 'market rate', aim for a target utilization rate (# of billable hours / # of working hours) of something like 70%. The remaining time should be spent pursuing new work. If your utilization rate is higher than that, raise your rates.
Edit: If it's less than your target, you'll automatically be spending more time finding new work. Use the extra time to figure out how to make yourself more valuable to your customers to bring in more work. As a last resort, lower your rates (maybe the market has changed?).
Edit: If it's less than your target, you'll automatically be spending more time finding new work. Use the extra time to figure out how to make yourself more valuable to your customers to bring in more work. As a last resort, lower your rates (maybe the market has changed?).
With freelancing I started out below market rate and suffered for about a year. The problem is that the majority of people looking for a "deal" are not fun to work with. They often care more about a good price than a quality end result.. it is often a battle to prevent scope creep..
Realistically success as a freelancer is down to how well you sell. You may have the best portfolio but if you cannot connect with clients you are going to lose out on work.
In the end I focused on improving the way I sold myself to clients and things improved drastically. My portfolio was fairly average but I did well by simply instilling confidence in clients that they were in the right hands and a project would run smoothly with me charge.
Realistically success as a freelancer is down to how well you sell. You may have the best portfolio but if you cannot connect with clients you are going to lose out on work.
In the end I focused on improving the way I sold myself to clients and things improved drastically. My portfolio was fairly average but I did well by simply instilling confidence in clients that they were in the right hands and a project would run smoothly with me charge.
I'd suggest something like: pitching new clients at last_rate * 1.2 if you're starting more than three weeks out, last_rate * 1.1 if you're starting more than 1 week out, last_rate if you can start immediately, and last_rate * ( .95 ^ num_weeks_since_last_project) if it has been a while since you had work.
Also, avoid round numbers: $110 says "this is my market rate" $100 says "I am rounding up, let's negotiate"
The two keys to making this work are: 1) always be over delivering and learning and 2) keep utilization up, when your time is scarce you have real credible negotiating power on rates.
Also, avoid round numbers: $110 says "this is my market rate" $100 says "I am rounding up, let's negotiate"
The two keys to making this work are: 1) always be over delivering and learning and 2) keep utilization up, when your time is scarce you have real credible negotiating power on rates.
Yep, this is the typical way it is done. Low rate if you don't have clients, then raise the rates constantly to keep your amount of work down to something you can complete.
The key insight here is that it's complelety acceptable for freelancers to charge different rates for different clients. Many new freelancers, even if they accept that premise in theory, are uncomfortable asking one client to pay 300/hr if another is paying 100/hr.
That's only possible if you can infer a client's ability to pay and match your quote to their expectations. You can earn much more if you're able to adjust your rates on the fly, which is one of the reasons most freelancers do not list a rate on their public website.
That's only possible if you can infer a client's ability to pay and match your quote to their expectations. You can earn much more if you're able to adjust your rates on the fly, which is one of the reasons most freelancers do not list a rate on their public website.
I am thinking of stealing this idea to offer finance advise (mainly advise on: cash flow planning/forecasting, financial planning, how to read statements, setting up controls and reports). I like it because I would start cheap with little experience in consulting (while I do work in controlling in a multi co) and get more expensive the more experience I gain. Also, 1 to 3 hours buckets might actually work very well for this type of freelancing.
This is the freelancer's site mentioned in the article https://onehour.me/
The hourly rate is $91 at time of writing.
The hourly rate is $91 at time of writing.
And now it's $124... HN will do that for ya ;)
It's certainly a fun experiment, and could be a great way to introduce yourself to 91 potential long-term clients.
However, it's still too early to call it "hourly rate hacking" as the original blog post does.
There's no evidence that the method will work after the rate increases above the standard market rates. A few hourly slots per day, plus travel is very inefficient use of his time. He seems to be a competent developer with good business & design skills, and could probably book projects at $100-200/hour for full weeks at a time, instead of a few hours now and then for an average of $45.
However, it's still too early to call it "hourly rate hacking" as the original blog post does.
There's no evidence that the method will work after the rate increases above the standard market rates. A few hourly slots per day, plus travel is very inefficient use of his time. He seems to be a competent developer with good business & design skills, and could probably book projects at $100-200/hour for full weeks at a time, instead of a few hours now and then for an average of $45.
I think this would be a great pricing model if applied to tutoring for students. If you find a tutor useful, you'll go back to them. Conversely if you find they weren't helpful, you leave early. So it's up to the tutor to entice you to come back by providing value up-front.
However, the primary difference is that you do this logarithmic scaling per student rather than as a set price for everybody.
However, the primary difference is that you do this logarithmic scaling per student rather than as a set price for everybody.
Won't a linear increase function prevent anyone from hiring him in the future?
Right, but by the time he makes $3000/hr he can retire.
Which means USD 4.5M
(sorry, I OCD on numbers)
(sorry, I OCD on numbers)
Hey - I'm not a huge math guy, but I remember there is a formula for this and was curious. Can you refresh my memory on what it is? Thanks!
It's f(x) = (x0 + xn) * n/2
Where
x0 - is the first element (here: 1)
xn - last element (here: 3000)
n - number of elements (here 3000)
That makes it: $4,501,500
That makes it: $4,501,500
You are looking for the sum of all numbers in a linear function. The sum is equivalent to the area under the curve which you normally use calculus and integrate for. However, in the case of a linear function, it's just a triangle. So, you can take a short cut if you just "know" f(x)=x^2 / 2.
What does "know" mean? suspect? :)
imo, "can visualize". In my experience, those strong in math easily visualize math problems geometrically. This is opposed to, for example, having to grind through the quadratic formula.
Try to mentally (or on paper) graph the freelancer's pay. The x-axis represents "hours" and the y-axis represents "pay per hour". The function we get is the linear function "f(x) = x". I.e. for the first hour, he's paid $1; for the 300th hour, he's paid $300. A very straightforward graph. If we cut off our x-axis at $300, the graph looks like a right triangle.
If you want to find the total amount of money he's accumulated, all you have to do is find the area under the triangle (which is a special case of integration). For a triangle, geometry class taught us "Area = (1/2)(base)(height)". Calculus courses prefer that we integrate, which has broader application. Integration of "f(x) = x" gives us "f'(x) = (1/2)(x^2)". Our "integral" is equivalent to the "geometry-class equation" because for our particular triangle, the base is the same as the height. For comparison:
Area = (1/2)(base)(height)
f'(x) = (1/2)(x^2)
DoubleMalt is saying kjay's visualized "shortcut" (intuitively faster approximation) is slightly off. This is because the triangle in our actual problem looks like a staircase, and not a smooth slope. But kjay's shortcut has a margin of error of only about "-0.033%" which is a good enough approximation by most people's standards.
Also, DoubleMalt's equation should look like
x * (x + 1) / 2
instead of
x * (x - 1) / 2
Try to mentally (or on paper) graph the freelancer's pay. The x-axis represents "hours" and the y-axis represents "pay per hour". The function we get is the linear function "f(x) = x". I.e. for the first hour, he's paid $1; for the 300th hour, he's paid $300. A very straightforward graph. If we cut off our x-axis at $300, the graph looks like a right triangle.
If you want to find the total amount of money he's accumulated, all you have to do is find the area under the triangle (which is a special case of integration). For a triangle, geometry class taught us "Area = (1/2)(base)(height)". Calculus courses prefer that we integrate, which has broader application. Integration of "f(x) = x" gives us "f'(x) = (1/2)(x^2)". Our "integral" is equivalent to the "geometry-class equation" because for our particular triangle, the base is the same as the height. For comparison:
Area = (1/2)(base)(height)
f'(x) = (1/2)(x^2)
DoubleMalt is saying kjay's visualized "shortcut" (intuitively faster approximation) is slightly off. This is because the triangle in our actual problem looks like a staircase, and not a smooth slope. But kjay's shortcut has a margin of error of only about "-0.033%" which is a good enough approximation by most people's standards.
Also, DoubleMalt's equation should look like
x * (x + 1) / 2
instead of
x * (x - 1) / 2
another way of looking at it is just find the average amount charged(the middle number in this case) -> 1500, and multiply by the # of times charged (3000), and there ya go, its really the same math at kjay's, but just approaching it a different way.
[nitpick] actually it is x * (x - 1) / 2 in this case [/nitpick]
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The article seemed to suggest that he reset it every 2 weeks. Or at least they implied it by saying that by the price staying at $76 he had as many in the following fortnight. (Rather than none, if it didn't reset.)
I had an idea to do something frustratingly similar to this. Not the $wage++ aspect, but to offer discounted rates for 1-2 hours in order to build up interesting business contacts. "Micro-consulting".
Well done. 10% of these business contacts will likely want to hire this guy back at some three-figure number, and he will be able to choose the ones he wants to work with in the future.
Well done. 10% of these business contacts will likely want to hire this guy back at some three-figure number, and he will be able to choose the ones he wants to work with in the future.
It strikes me that an hourly rate that increases over the life of a project might be a way for a freelancer to skew his billable hours toward new development and away from maintenance. It also reflects the fact that the freelancer’s knowledge of a particular client becomes more valuable over time. On the other hand, an increasing hourly rate is a tougher sell to potential clients.
He should just couple it to his backlog.
Set a Reserve ($A), and for every reserved hour, ad $B.
So, with a reserve of $50, and 40 backlogged hours (at $1 each), the rate gets $90. Once you have less work on the roster, the price drops. When more gets booked in advance, the price rises.
Set a Reserve ($A), and for every reserved hour, ad $B.
So, with a reserve of $50, and 40 backlogged hours (at $1 each), the rate gets $90. Once you have less work on the roster, the price drops. When more gets booked in advance, the price rises.
Letting others tell you your price is the weakest negotiation position to be in. No wonder it's been holding steady at 76.
Does this guy show up to a job interview and when they ask for salary does he respond "you tell me?"
Your worth is a constant projection. Learn how to convince people of it, and he'll increase his rate three fold.
Does this guy show up to a job interview and when they ask for salary does he respond "you tell me?"
Your worth is a constant projection. Learn how to convince people of it, and he'll increase his rate three fold.
"started selling his time for $1 per hour, increasing the price by another dollar each time an hour was sold."
So I'm very confused by the methodology. That description (which seems to be taken from onehour.me) seems to indicate that the price is unbounded and monotonic.
So I'm very confused by the methodology. That description (which seems to be taken from onehour.me) seems to indicate that the price is unbounded and monotonic.
Thats a great PR move, I'm jealous.
I had unofficially been doing "startup therapy" for years, but I always treated it as a loss-leader for new business. Probably should have been charging for those meetings, oh well.
I had unofficially been doing "startup therapy" for years, but I always treated it as a loss-leader for new business. Probably should have been charging for those meetings, oh well.
(and made $120 in total)
This clever PR stunt might cost him a month of free work, or bring him a load of clients. I'd be curious to read a follow-up a couple months from now.
This clever PR stunt might cost him a month of free work, or bring him a load of clients. I'd be curious to read a follow-up a couple months from now.
but will it work for anything other than startups?
I do like the idea though - there is a lot of value in getting an audience to a critical mass
I do like the idea though - there is a lot of value in getting an audience to a critical mass
Does everything have to be "hacked" these days? Pardon me while I go "hack" my bathroom break.
I just read it as "smurf" and think of whoever is writing it as Brainy Smurf.
Yeah, I have small kids.
Yeah, I have small kids.
Hack your life, hack your rate, hack the planet. At this point I can imagine some people be confused if you actually used hack in reference to a tree, thinking you were talking about conservation.
Many people used to assume "hacker" meant "blackhat." Now, if they're paying attention but not part of the tech community, they likely think "hacker" means "janitor" or perhaps "blogspammer."
Many people used to assume "hacker" meant "blackhat." Now, if they're paying attention but not part of the tech community, they likely think "hacker" means "janitor" or perhaps "blogspammer."
I agree wholeheartedly. The internet has a way of repeating things over and over again until they're almost meaningless.
Your correct. One of those terms which is overused way too much to make click-baits.
This trend of over using the word is really hacking me off.
This freelancer seems to have contrived a way to work the equivilant of two billable weeks (spread out over a presumably longer amount of calendar time) at a tiny fraction of his market rate.
Hopefully the marketing effect of articles like this one will result in a significant uptick in his workload. If not, he's not only put in a bunch of work at a terrible bill rate. But he's signaled to the world that the correct price for his work going forward is $76/hour.
Not the best place to be. Here's hoping another hundred-odd people buy time from him so at least the final number looks respectable.