Every freelancer starts out undervaluing their work(kenwestgaard.com)
kenwestgaard.com
Every freelancer starts out undervaluing their work
http://kenwestgaard.com/the-gurus-got-5-questions-set-rate/
16 comments
Shopping malls have this thing called "anchor tenants" - usually a big-box retailer who pays for massive square footage, which in turn stabilizes the mall's cash flow.
Looking back, all freelancers should probably wait to start until they can secure an "anchor client". A company or individual with a solid business who can provide consistent cash flow to the freelancer. One anchor tenant won't pay for a whole shopping mall, and neither will one anchor client meet all the freelancer's needs and goals. But it definitely helps stabilize the situation, and empowers freelancers to be more selective about their other clientele.
Aside from that - having enough savings on hand to pay for 6-12 months of all expenses (business and personal) is also a necessity. Otherwise you'll start taking on poor clients (and I mean "poor" literally, as in they don't have additional budget to spend, even if they wanted to), which in turn will make you more desperate, taking increasingly shittier jobs. The freelancer death spiral is brutal but can be avoided with careful planning.
Looking back, all freelancers should probably wait to start until they can secure an "anchor client". A company or individual with a solid business who can provide consistent cash flow to the freelancer. One anchor tenant won't pay for a whole shopping mall, and neither will one anchor client meet all the freelancer's needs and goals. But it definitely helps stabilize the situation, and empowers freelancers to be more selective about their other clientele.
Aside from that - having enough savings on hand to pay for 6-12 months of all expenses (business and personal) is also a necessity. Otherwise you'll start taking on poor clients (and I mean "poor" literally, as in they don't have additional budget to spend, even if they wanted to), which in turn will make you more desperate, taking increasingly shittier jobs. The freelancer death spiral is brutal but can be avoided with careful planning.
It's not just freelancers, agencies need them too. Most agencies exist and die on a relatively small handful of anchor clients, if for no other reason than stable cash flow so they can make payroll.
By-the-way, these anchor clients usually aren't exciting or fun. In fact, they're usually creatively boring and predictable.
By-the-way, these anchor clients usually aren't exciting or fun. In fact, they're usually creatively boring and predictable.
Agencies need to be careful though - when your relationship with your "80% of the billings" client sours, you've got a _big_ problem.
https://insolvencynotices.asic.gov.au/browsesearch-notices/n...
https://insolvencynotices.asic.gov.au/browsesearch-notices/n...
I can attest to this. Thing is, once you have an anchor client, you need to be reaching for the next one. You never know what might happen to their business...I can attest to that, too.
The other problem with not taking undervalued work is that your runway is not infinite, while the market's is. So you might just run out of money before you land that client you're holding out for.
And when the end of runway is approaching, you will become desperate, and you will take on a terrible project. Then it will take a really long time before you build up your runway again to the point where you can hold out for better projects.
Basically, hold out, but don't wait too long.
And when the end of runway is approaching, you will become desperate, and you will take on a terrible project. Then it will take a really long time before you build up your runway again to the point where you can hold out for better projects.
Basically, hold out, but don't wait too long.
This is why the word "underpriced" always seems wrong to me in this context. Your price at the beginning has to be lower because your profile is lower, which means you have a weaker negotiating position. "Underpriced" only becomes the right word if your rates aren't rising in conjunction with your profile, which does happen for sure, but isn't the case right at the beginning.
"Your price at the beginning has to be lower because your profile is lower"
This is the sentiment that makes you justify charging too little.
This is the sentiment that makes you justify charging too little.
So, to relate this back to the original article – all these people interviewed started with low prices at the beginning and built up their profile, raising their rates along the way. I look at that and think, well that's a good and clearly proven model, and it makes sense why it works that way. I don't look at it and think, well they should have started out with higher prices right from the start, since clearly they were worth it all along!
"I don't look at it and think, well they should have started out with higher prices right from the start, since clearly they were worth it all along!"
Emphasis on "too little" in my comment leading up to your reply.
And it's not about what they are worth it's about what the solution is worth to the person buying. Almost always more than the developer/worker thinks their time is worth.
Emphasis on "too little" in my comment leading up to your reply.
And it's not about what they are worth it's about what the solution is worth to the person buying. Almost always more than the developer/worker thinks their time is worth.
So what is the alternative? If you don't have any cheap clients (cheap labour) or portfolio (free labour), how do you convince clients what you're worth?
Arguably, you can invest some of your time in your own portfolio projects that demonstrate the particular skills and value you want to promote. It's not an exact science, and harder in some industries than others, but not impossible, and it's something that too many folks (me included) tend to gloss over or ignore.
Keeping a relevant industry-related blog won't necessarily convince every single client, but it's one of those things that can swing someone's mind to committing to you when there's not a lot of other obvious signals.
Keeping a relevant industry-related blog won't necessarily convince every single client, but it's one of those things that can swing someone's mind to committing to you when there's not a lot of other obvious signals.
Why is it better to do free work to build a portfolio of non-professional work, rather than building it by starting with lower-paying engagements?
HeyLaughingBoy nailed it, but there's another couple of points that got missed in the replies/discussion.
1. It's not "free work", it's just ... stuff you do. Maybe you release it out and other people benefit from it, maybe you just do it to demonstrate skills.
2. Per #1, you get to demonstrate whatever you want to learn. Do you want to learn how to use Twilio APIs? You could wait for a client engagement that might need Twilio, or you could try to force Twilio in to a client project where it's not needed, or you could... just play with Twilio, produce something demonstrable, and use that to show what you know about using Twilio. It's great when you can show your skills having real value to real past client projects, but absent that demonstration and experience, you'll be experimenting on your new clients to a degree. Learning on your own dime (and time) can also inspire a degree of confidence that you actually know XYZ before you're engaged to do XYZ.
1. It's not "free work", it's just ... stuff you do. Maybe you release it out and other people benefit from it, maybe you just do it to demonstrate skills.
2. Per #1, you get to demonstrate whatever you want to learn. Do you want to learn how to use Twilio APIs? You could wait for a client engagement that might need Twilio, or you could try to force Twilio in to a client project where it's not needed, or you could... just play with Twilio, produce something demonstrable, and use that to show what you know about using Twilio. It's great when you can show your skills having real value to real past client projects, but absent that demonstration and experience, you'll be experimenting on your new clients to a degree. Learning on your own dime (and time) can also inspire a degree of confidence that you actually know XYZ before you're engaged to do XYZ.
When you build your client base and you start off by charging a low price, any referral work you get (and it gets to be a large portion of your work as the base grows) will have a harder time with raised rates.
The underlying psychology shows us that we undervalue ourselves whereas other people tend not to since they view us as experts. They are generally willing to pay a lot more to have a solved problem than we would want to charge.
Start high and go higher until you meet resistance.
The underlying psychology shows us that we undervalue ourselves whereas other people tend not to since they view us as experts. They are generally willing to pay a lot more to have a solved problem than we would want to charge.
Start high and go higher until you meet resistance.
> any referral work you get … will have a harder time with raised rates.
This does not seem to mesh with the posted article where they interviewed lots of successful people who started out charging on the low side and were able to aggressively increase over time.
I get what you're saying in this thread, that people tend to not charge enough. Sure, I'm right there with you. What bugs me is this meme that seems to suggest that there's something wrong with doing whatever you can (like charging less) to get your foot in the door. It's intimidating.
This does not seem to mesh with the posted article where they interviewed lots of successful people who started out charging on the low side and were able to aggressively increase over time.
I get what you're saying in this thread, that people tend to not charge enough. Sure, I'm right there with you. What bugs me is this meme that seems to suggest that there's something wrong with doing whatever you can (like charging less) to get your foot in the door. It's intimidating.
I agree with your sentiment, my point is that people too often believe that low rates will get their foot in the door.
Many times what would happen is someone would get two or three bids and avoid the lowballer because quality is associated with higher pricing. So you're shooting yourself in the foot.
Now this doesn't always happen but I would suggest to stick on the side of trying to charge more than you're comfortable with. You'll be surprised what you can get your foot in the door with.
Many times what would happen is someone would get two or three bids and avoid the lowballer because quality is associated with higher pricing. So you're shooting yourself in the foot.
Now this doesn't always happen but I would suggest to stick on the side of trying to charge more than you're comfortable with. You'll be surprised what you can get your foot in the door with.
It's not that it's better, but it can be done independently of anything else. i.e., the only thing stopping you from starting to build a "non-professional" portfolio this very minute is time availability.
But you need a history of engagements to build a client portfolio.
But you need a history of engagements to build a client portfolio.
Notice some say they started out at less than $25 an hour. Others started out at $50 or more. The difference isn't in profile, it's in what they were asking when they got that first client.
Definitely true, but also note that none of them started at anything we would consider to be "a lot".
I agree with you, but when we are discussing "price", we are not discussing it as a function of profile. We are discussing it as a function of raw skill. If two people (one experienced and one in-experienced) were asked for a proposal on the same specs, the experienced one would demand a much higher rate, even if the final output would be the exact same. Using the word "underpriced" from the lens of competency makes sense. Your ability to gain trust/respect from a client? Different story..
To play devil's advocate: hiring a less-experienced freelancer is a riskier investment than hiring an experienced freelancer with a big portfolio and many references. Even if the two candidates are of equal skill, the hiring party can't know that. Thus, price is a function of what you can reasonably expect to get from a candidate.
Being an inexperienced freelancer is akin to being a borrower with an under-established credit rating. Regardless of whether the borrower is sitting on a mattress full of millions, he or she will still pay higher interest rates until his or her credit is better established.
Being an inexperienced freelancer is akin to being a borrower with an under-established credit rating. Regardless of whether the borrower is sitting on a mattress full of millions, he or she will still pay higher interest rates until his or her credit is better established.
I guess I just don't think that's a very realistic view of "price". Nothing is priced based on innate value, but rather a complex interaction between value and the ability to market that value.
It has to be lower, but you don't know how much lower. It's probably not as much lower as you think. If they would have paid more, you didn't charge enough. Obviously it's hard to know that at the beginning.
Spot on. Perhaps best to try starting higher than you think and slowly lower until you start getting gigs.
However, by pricing yourself high you opened the table to negotiation. Better that than enter low and they accept on the first try, in which case you know you've undersold yourself.
I don't get why people are so keen on the per-hour model. This puts a lot of pressure on you to be fully productive and count hours like a lawyer. It also makes you think you're losing money when you're not billing, and the customer likewise feels the time/money pressure.
I've negotiated fixed-price deals where I'm quite certain I can get the job done in x number of weeks, based on having done something similar before. And that's a quite leisurely x weeks, where I'm not really feeling any uncertainty about any part of the project (ie I know what APIs will be used, business logic seems simple, research is done already). At the same time setting a leisurely schedule also means if there is something unexpected, you can spend a bit more time solving it. Or take a break when you're ahead.
Regarding the customers, being choosy appears to be very important. Anyone who mentions outsourcing to (somewhere cheap) is politely moved on. Anyone who doesn't grasp what they're after (a social network, with an iOS and Android app, and videos, and ...) is quoted a longer timeframe. Customers also need to be made aware of the importance of feedback, as in the agile model. That way they always get what they asked for, and you don't waste time on what didn't come to mind.
I've negotiated fixed-price deals where I'm quite certain I can get the job done in x number of weeks, based on having done something similar before. And that's a quite leisurely x weeks, where I'm not really feeling any uncertainty about any part of the project (ie I know what APIs will be used, business logic seems simple, research is done already). At the same time setting a leisurely schedule also means if there is something unexpected, you can spend a bit more time solving it. Or take a break when you're ahead.
Regarding the customers, being choosy appears to be very important. Anyone who mentions outsourcing to (somewhere cheap) is politely moved on. Anyone who doesn't grasp what they're after (a social network, with an iOS and Android app, and videos, and ...) is quoted a longer timeframe. Customers also need to be made aware of the importance of feedback, as in the agile model. That way they always get what they asked for, and you don't waste time on what didn't come to mind.
In Patrick (Patio11)'s blog with his consultancy rates [0] he switched very early from hourly payments to weekly - that seems like a really nice tradeoff. You're not counting hours, if the scope changes you can adjust pretty fluidly, and you're not having to go chasing gigs all the time.
[0] http://www.kalzumeus.com/2015/05/01/talking-about-money/ If you haven't read this, it's fantastic
[0] http://www.kalzumeus.com/2015/05/01/talking-about-money/ If you haven't read this, it's fantastic
> I don't get why people are so keen on the per-hour model.
How many years have you been doing this? It doesn't sound like you've been at this for too long.
> I've negotiated fixed-price deals where I'm quite certain I can get the job done in x number of weeks
This works fine for a client who wants a very concrete x, y, or z.
There's a problem with this sort of client. They only want x, y, or z and after you give it to them, well, you're done.
If you have that sort of client and you're charging by the hour, you're an idiot. Quote them a fixed price at something like 500 per hour for what you estimate the work will take. They'll go for it, you make bank.
At some point in your freelancing career you're going to start feeling jealous. Of the "normal" guy. They guy who wakes up every morning knowing he has a full day of work and is working for the same person he worked for yesterday. He knows what to expect, how things operate, etc. Everything is stable.
Stability is an illusion, but it's a nice one.
At this point, you're going to start looking for clients who don't want x, y, or z. You're going to look for clients who need x. And some more x. Then some more x. They keep needing x and there's no end.
These clients are professionals. They know the industry. They're not really clients, they're middle men. They're agencies, marketing guys, whatever. They have a constant stream of work. They know it. And they know the best way to maximize their profit is to pay you by the hour. They will only pay you by the hour. They will laugh if you suggest anything else.
It's alluring to you, because you get a ton of work, all the time and you're still billing twice what you'd get working a regular job, and you still get to work from home, set your own hours, specify your own tooling, etc.
At some point, you'll get tired of this and decide you want to be the middle man. You start getting your own clients, hiring other guys to do the work ... and guess what? You're going to pay them by the hour. Because that's how you maximize your profit.
Now, I know there are one-man armies out there who have their own clients, bill fixed price, do all the work themselves and are always busy. I know they're out there because I used to do that. It's exhausting. You have to constantly keep marketing yourself, keep working of course, and wear a bunch of hats at the same time. At some point, you'll have the desire to "outsource" the marketing portion of the equation and that's when you'll start billing by the hour.
How many years have you been doing this? It doesn't sound like you've been at this for too long.
> I've negotiated fixed-price deals where I'm quite certain I can get the job done in x number of weeks
This works fine for a client who wants a very concrete x, y, or z.
There's a problem with this sort of client. They only want x, y, or z and after you give it to them, well, you're done.
If you have that sort of client and you're charging by the hour, you're an idiot. Quote them a fixed price at something like 500 per hour for what you estimate the work will take. They'll go for it, you make bank.
At some point in your freelancing career you're going to start feeling jealous. Of the "normal" guy. They guy who wakes up every morning knowing he has a full day of work and is working for the same person he worked for yesterday. He knows what to expect, how things operate, etc. Everything is stable.
Stability is an illusion, but it's a nice one.
At this point, you're going to start looking for clients who don't want x, y, or z. You're going to look for clients who need x. And some more x. Then some more x. They keep needing x and there's no end.
These clients are professionals. They know the industry. They're not really clients, they're middle men. They're agencies, marketing guys, whatever. They have a constant stream of work. They know it. And they know the best way to maximize their profit is to pay you by the hour. They will only pay you by the hour. They will laugh if you suggest anything else.
It's alluring to you, because you get a ton of work, all the time and you're still billing twice what you'd get working a regular job, and you still get to work from home, set your own hours, specify your own tooling, etc.
At some point, you'll get tired of this and decide you want to be the middle man. You start getting your own clients, hiring other guys to do the work ... and guess what? You're going to pay them by the hour. Because that's how you maximize your profit.
Now, I know there are one-man armies out there who have their own clients, bill fixed price, do all the work themselves and are always busy. I know they're out there because I used to do that. It's exhausting. You have to constantly keep marketing yourself, keep working of course, and wear a bunch of hats at the same time. At some point, you'll have the desire to "outsource" the marketing portion of the equation and that's when you'll start billing by the hour.
> These clients are professionals. They know the industry. They're not really clients, they're middle men. They're agencies, marketing guys, whatever. They have a constant stream of work. They know it. And they know the best way to maximize their profit is to pay you by the hour. They will only pay you by the hour. They will laugh if you suggest anything else.
My experience of working for agencies is they want to pay a fixed price and will laugh you out of the agency at the idea of paying hourly. They don't want risk; they want you to take the risk for their project specification ('cause they've already quoted the client, so you'd better cost less than they quoted...)
What kind of middle men are these who pay per hour?
Or are you talking about contracting, not freelancing?
My experience of working for agencies is they want to pay a fixed price and will laugh you out of the agency at the idea of paying hourly. They don't want risk; they want you to take the risk for their project specification ('cause they've already quoted the client, so you'd better cost less than they quoted...)
What kind of middle men are these who pay per hour?
Or are you talking about contracting, not freelancing?
> My experience of working for agencies is they want to pay a fixed price and will laugh you out of the agency at the idea of paying hourly
Mine too, and I've been at this game for 16 years.
In fact, my usual experience is agencies coming to me with no design or functional specs (even back-of-an-envelope stuff) and wanting a price.
The only time I ever charge by the hour is for maintenance programming.
Mine too, and I've been at this game for 16 years.
In fact, my usual experience is agencies coming to me with no design or functional specs (even back-of-an-envelope stuff) and wanting a price.
The only time I ever charge by the hour is for maintenance programming.
> Or are you talking about contracting, not freelancing?
Those things mean different things to different people and there's a lot of gray in between the two. I can add another word to make things even murkier. Consultant.
But in the end, yes, I am.
As a freelancer, if you're charging by the hour, you're either making a horrible mistake or you're really contracting and don't have a choice in the matter.
That was kind of my point and also that it's not necessarily a bad thing.
Those things mean different things to different people and there's a lot of gray in between the two. I can add another word to make things even murkier. Consultant.
But in the end, yes, I am.
As a freelancer, if you're charging by the hour, you're either making a horrible mistake or you're really contracting and don't have a choice in the matter.
That was kind of my point and also that it's not necessarily a bad thing.
Yep.
Getting to a point where risk and cost of change are client problems is ideal, because they are no longer willing to waste your time or nitpick. I charge a daily rate, rather than hourly, but same principle.
Getting to a point where risk and cost of change are client problems is ideal, because they are no longer willing to waste your time or nitpick. I charge a daily rate, rather than hourly, but same principle.
Looks like you have big experience in this field :)
In addition to your collection, my usual style of work: I almost don't spend time to "marketing myself", I rarely switch clients (usually clients prefer to work with me full-time and even more), I use per-hour rate (because 100% of clients I had chance to work with, didn't know full set of features they need, and most of the time goes exactly to additional features). I'm learning new things constantly, listening podcasts, watching video tutorials, reading blogs, trying out new things in practice - it's not a luxury but necessity, otherwise soon you will meet more skilled competitors :) My price for stable (by freelancing measures) income is lack of "jackpot projects ", when you can make few thousands for week and relax rest of the month. I don't have free time, I feel exhausted often. I don't work over 40 hours limit to have time for family. My family very happy when I finally can spend few hours with them :)
I have a question. Where did you find these middlemen you were talking about?
> I know they're out there because I used to do that. It's exhausting. You have to constantly keep marketing yourself, keep working of course, and wear a bunch of hats at the same time.
That's me right now. Any tips on making the switch?
> I know they're out there because I used to do that. It's exhausting. You have to constantly keep marketing yourself, keep working of course, and wear a bunch of hats at the same time.
That's me right now. Any tips on making the switch?
I like having my foot in both doors. I work some of my time with an agency and the rest with my own clients. This gives me the stability/constancy I want, but also allows me to pursue my own clients (and to charge them a ton more, knowing I have the agency to fall back on, if I need to).
> Any tips on making the switch?
Yeah, find an outfit that's a good fit. Make sure they're flexible, understand the industry, and that there's no personality conflicts. You should have a very easy, comfortable relationship.
> Where did you find these middlemen you were talking about?
They're all over the place, looking for you. You just need to be found or you can find them. There's a ton of them. Probably quite a few on this thread. Make yourself easy to contact. You'll bump into them eventually or you can actively look for them by researching some larger projects in your niche. Larger projects require multiple people and that brings the agencies out, since they're able to bring multiple people onto a project pretty quickly and effectively.
> Any tips on making the switch?
Yeah, find an outfit that's a good fit. Make sure they're flexible, understand the industry, and that there's no personality conflicts. You should have a very easy, comfortable relationship.
> Where did you find these middlemen you were talking about?
They're all over the place, looking for you. You just need to be found or you can find them. There's a ton of them. Probably quite a few on this thread. Make yourself easy to contact. You'll bump into them eventually or you can actively look for them by researching some larger projects in your niche. Larger projects require multiple people and that brings the agencies out, since they're able to bring multiple people onto a project pretty quickly and effectively.
"They're all over the place, looking for you. You just need to be found or you can find them."
Expanding your network on LinkedIn can help.
Expanding your network on LinkedIn can help.
Hourly is good because it allows for the client to change the scope mid-project. And they will always change the scope mid-project. You have to have a way to either charge for everything possible up-front (which usually means building in padding that will price you out of the bid), or have a way to easily charge for the scope changes that they request.
> I don't get why people are so keen on the per-hour model.
There's not going to be one correct answer to this question - per-hour rate or total project cost. And regardless of which one is best an hourly rate is still a useful productivity metric.
With the hourly model you're protected as a freelancer. Regardless of the number of revisions, if the project takes 10 hours or 100 hours, you will get paid. (Though if the hours required are going to increase 10-fold you'd better communicate that to the client.)
I have several clients who prefer the hourly rate model. Which is fine by me. It helps me hit my weekly/monthly/quarterly goals. Also, we both save on the administrative headaches of having to spec out, estimate and approve every single change. And as a freelancer anything that reduces my non-billable work is a big plus.
The downside for me: the client gains any increase in my productivity. If I increase my productivity per hour by 25% it takes me less time and I make less money. But the client still receives the same amount of value from my work, and pays less for it. And since most skilled workers become more skilled and more prolific over time this productivity transfer almost always occurs.
Fixed cost projects can be more lucrative since I pocket any productivity gains. Imagine I've secured a $2000 fixed-cost project. If I can knock it out in five hours, I've secured an effective rate of $400/hr. The downside, of course, is if my productivity lags - say I spend 100 hours on the project - then my effective rate plummets to $20/hr.
Every fixed-cost project should be measured hourly. Even a big-ticket project will suck if you work yourself into a minimum wage to complete it. I use the hourly metric to determine productivity. When this metric starts to drop during a fixed-cost project, that's when I reach out to the client to figure out a budget increase.
So - which one is better? Hourly or fixed-cost? Most of the time it doesn't really matter. If I'm working a fixed-cost project and my productivity metric falls, I ask for more money. If I'm working an hourly project and it's going to take more time implement revisions, I'll tell the client and get approval. Regardless of the project type if the scope changes you're going to need to ask for more money/hours.
BUT - if the project is in a domain I have deep knowledge in, and I can be relatively assured of a fixed scope (with only minor changes), I will go fixed-cost every time. I want to capture my productivity and maximize my profit from it.
There's not going to be one correct answer to this question - per-hour rate or total project cost. And regardless of which one is best an hourly rate is still a useful productivity metric.
With the hourly model you're protected as a freelancer. Regardless of the number of revisions, if the project takes 10 hours or 100 hours, you will get paid. (Though if the hours required are going to increase 10-fold you'd better communicate that to the client.)
I have several clients who prefer the hourly rate model. Which is fine by me. It helps me hit my weekly/monthly/quarterly goals. Also, we both save on the administrative headaches of having to spec out, estimate and approve every single change. And as a freelancer anything that reduces my non-billable work is a big plus.
The downside for me: the client gains any increase in my productivity. If I increase my productivity per hour by 25% it takes me less time and I make less money. But the client still receives the same amount of value from my work, and pays less for it. And since most skilled workers become more skilled and more prolific over time this productivity transfer almost always occurs.
Fixed cost projects can be more lucrative since I pocket any productivity gains. Imagine I've secured a $2000 fixed-cost project. If I can knock it out in five hours, I've secured an effective rate of $400/hr. The downside, of course, is if my productivity lags - say I spend 100 hours on the project - then my effective rate plummets to $20/hr.
Every fixed-cost project should be measured hourly. Even a big-ticket project will suck if you work yourself into a minimum wage to complete it. I use the hourly metric to determine productivity. When this metric starts to drop during a fixed-cost project, that's when I reach out to the client to figure out a budget increase.
So - which one is better? Hourly or fixed-cost? Most of the time it doesn't really matter. If I'm working a fixed-cost project and my productivity metric falls, I ask for more money. If I'm working an hourly project and it's going to take more time implement revisions, I'll tell the client and get approval. Regardless of the project type if the scope changes you're going to need to ask for more money/hours.
BUT - if the project is in a domain I have deep knowledge in, and I can be relatively assured of a fixed scope (with only minor changes), I will go fixed-cost every time. I want to capture my productivity and maximize my profit from it.
That can be the goal. In my last experiment with this short of going to pure fixed bid, we had a client running an Excel spreadsheets to figure out exactly what they were paying for hour, for each developer even. We finally just gave up and switched them to a pre-paid hourly rate per developer on the followup projects. Some other clients are happy with a retainer that gets them a certain level of work without sweating the hours.
It may just be a shortcoming of the approach that my company tried; we're open for trying again as none of us like clocking time like lawyers.
It may just be a shortcoming of the approach that my company tried; we're open for trying again as none of us like clocking time like lawyers.
Per hour guarantees that you're going to get paid for all your work. Fixed-price often makes clients think they can squeeze in a bunch of changes for no cost. While there are things that can mitigate this, like contracts, statements of work, and communication, it still can lead to a bigger headache than necessary.
> No one is paying you for your “time,” they are paying you for a result, so stop charging for your “time.”
I wish regular employers would adopt this more as well. My value is what I do/produce, not how much time I spent doing it. Some days I produce massive amounts of value, while others I barely get anything valuable done. I'd like a work place that would encourage me to go home and enjoy myself on the bad days and stay as long as I want on the good days, instead of expecting a regular 40 hour work week every week (I have flex, but on average...).
On the other hand, I guess my employer has this issue too. We usually have an upper (money or time) limit on a contract but charge by the hour. And this is pretty much the standard in my industry and a requirement from our clients. How did we end up this way? It makes no sense!
I wish regular employers would adopt this more as well. My value is what I do/produce, not how much time I spent doing it. Some days I produce massive amounts of value, while others I barely get anything valuable done. I'd like a work place that would encourage me to go home and enjoy myself on the bad days and stay as long as I want on the good days, instead of expecting a regular 40 hour work week every week (I have flex, but on average...).
On the other hand, I guess my employer has this issue too. We usually have an upper (money or time) limit on a contract but charge by the hour. And this is pretty much the standard in my industry and a requirement from our clients. How did we end up this way? It makes no sense!
> Some days I produce massive amounts of value, while others I barely get anything valuable done. I'd like a work place that would encourage me to go home and enjoy myself on the bad days and stay as long as I want on the good days, instead of expecting a regular 40 hour work week every week (I have flex, but on average...).
In the words of Stephen King, "Amateurs sit and wait for inspiration, the rest of us just get up and go to work."
Very often the value is in just showing up and doing the work. Even if the work isn't your best work, it's still better than no work. You can always fix bad work later. Even if you throw it away and start again, you've already primed yourself on the problem.
In the words of Stephen King, "Amateurs sit and wait for inspiration, the rest of us just get up and go to work."
Very often the value is in just showing up and doing the work. Even if the work isn't your best work, it's still better than no work. You can always fix bad work later. Even if you throw it away and start again, you've already primed yourself on the problem.
Sometimes the cost of fixing bad work is actually greater than just doing it right when your mind is capable of it.
Also, I don't think software development is very comparable to writing a book. Unless you need to finish a book every day, your mistakes one day can easily be fixed the next.
In software, if your bad work on a project is committed to a place where it affects others, it may very well be too destructive to be worth it.
Also, I don't think software development is very comparable to writing a book. Unless you need to finish a book every day, your mistakes one day can easily be fixed the next.
In software, if your bad work on a project is committed to a place where it affects others, it may very well be too destructive to be worth it.
On the other hand, there's been a lot of value for me clearing the calendar on weekends and just playing videogames for 48 hours. Really sets priorities straight and freshens me up for the upcoming week. This is best used when I can't even make the effort to do "bad work".
I can see where he's coming from.
I can see where he's coming from.
It's a fine line. Sometimes the best thing to do is to walk away and leave the problem for another day. Other times you're just making excuses because you don't know how to solve a problem.
Learning which is which comes from experience I would assume.
Learning which is which comes from experience I would assume.
I charge by time, even though I am producing results. The biggest advantage is that it deals with changes in the specs, addition or removal of features, new environmental issues (eg also test on ARM, use a cluster).
If you charge for results only, then any change in what is desired means a renegotiation. Attaching a dollar figure to every "could you also ..." gets old quickly.
For your regular employer what you are after is ROWE - results only work environment - https://en.wikipedia.org/wiki/ROWE
If you charge for results only, then any change in what is desired means a renegotiation. Attaching a dollar figure to every "could you also ..." gets old quickly.
For your regular employer what you are after is ROWE - results only work environment - https://en.wikipedia.org/wiki/ROWE
A hybrid approach works fine too. A fixed price for the prototype on a date; time and materials for changes after that point.
Changes in the specs requires negotiation anyway if you have a contract with an upper time/cost value. Charging by the hour doesn't solve that, unless you have a no limit contract that puts more or less all the risk on the client.
This is very rare where I work.
This is very rare where I work.
Value of items produced isn't always so easy to measure.
Which is probably exactly the reason why charging/paying by the hour is the default. Much easier to reason about, and much easier to measure.
Every freelancer starts out not having a lot of experience being freelancers and so they make the typical mistake of thinking about their clients as their employer rather than as an investment in a relationship that needs to be developed over time.
Many get too hung up in the value of the services they provide when what they are really selling is trust.
The people that manage to make good money on freelancing aren't always the best at what they do, but they are good at managing expectations and making the client feel like they made the right hire.
Many get too hung up in the value of the services they provide when what they are really selling is trust.
The people that manage to make good money on freelancing aren't always the best at what they do, but they are good at managing expectations and making the client feel like they made the right hire.
Managing expectations is so important and you really should learn it early on in your career. If you pad your expectation and then deliver it early you delight. On time and you are still ahead of most freelancers/employees.
If you see problems ahead with the timeline, communicate and let them plan around your delays otherwise you are surprising them in the worst way.
If you see problems ahead with the timeline, communicate and let them plan around your delays otherwise you are surprising them in the worst way.
Exactly. I found that most clients care way less about "world class" quality than they care about delivering on time since their job is rarely to deliver quality but rather simply to deliver.
Please don't fuck around with the scroll behavior.
What did they do? I don't notice anything different.
Smooth scrolling but that interferes with my scroll rate and vimium which also optionally does smooth scrolling.
Generally, web designers really shouldn't touch scroll behavior at all, it's rather bad practice.
Generally, web designers really shouldn't touch scroll behavior at all, it's rather bad practice.
I noticed this and was instantly aggravated by it (it's especially obvious on a Mac because it doesn't do the "rubber-band" bounce at the top and bottom). What purpose does it even serve on this page?
"When I first started, I charged less than $100/hour."
Clearly some of them were on very different paths than me. I taught myself and charging anything over $30/hour would have been deceitful. I couldn't imagine delivering that much value when I was starting.
Clearly some of them were on very different paths than me. I taught myself and charging anything over $30/hour would have been deceitful. I couldn't imagine delivering that much value when I was starting.
We didn't know how much value our work provides and was worried about giving our clients a raw deal. I think there's nothing wrong with starting with a low rate until we are confident in our abilities.
And yet, nobody answered question #2 (What was your defining moment when you realized you were worth more than what you were charging) like so:
"I read a blog post or a book on how to charge more."
This is not to say that a post like this doesn't have any value - or a book like Brennan Dunn's book. But sometimes, when I read stuff like that, I wonder how much is actually survivorship bias and how much one can REALLY learn from a post like this.
It's a bit like Amazon reviews of books: Half of them are for people who have read the book and start to discuss things retrospectively.
"I read a blog post or a book on how to charge more."
This is not to say that a post like this doesn't have any value - or a book like Brennan Dunn's book. But sometimes, when I read stuff like that, I wonder how much is actually survivorship bias and how much one can REALLY learn from a post like this.
It's a bit like Amazon reviews of books: Half of them are for people who have read the book and start to discuss things retrospectively.
Before I quit my job to start consulting, I read all of (every... single... one) Patrick McKenzie's blog posts and podcasts. That gave me the knowledge that there is a market for results-oriented, bullshit-free consultants, and that clients in that market are willing to pay for results.
So when I quit and self-declared myself a consultant, I went straight to charging premium weekly and monthly rates, as Patrick and others have recommended.
It wasn't $30k/week, and it still took many months to stop feeling like a fraud, but two years later I'm earning a living by working with extremely interesting and successful clients. I altogether skipped the dreaded "cheap freelancer living week-to-week" stage, and I give a lot of credit to Patrick's articles for that.
So when I quit and self-declared myself a consultant, I went straight to charging premium weekly and monthly rates, as Patrick and others have recommended.
It wasn't $30k/week, and it still took many months to stop feeling like a fraud, but two years later I'm earning a living by working with extremely interesting and successful clients. I altogether skipped the dreaded "cheap freelancer living week-to-week" stage, and I give a lot of credit to Patrick's articles for that.
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I am that person. Read Brennan's book in 2012 and im making 3-4x as much net today as I was then. Is it entirely due to that book? No, of course not, but it did shift my thinking and start me down a road of continually pushing the boundaries to charge more. Which I often feel I'm pretty terrible at, but at least I'm trying.
The set of freelancers working right at the rate they should be is orders of magnitude smaller than those who are far undervaluing their work because they've never even really tried to dramatically increase their rates.
The set of freelancers working right at the rate they should be is orders of magnitude smaller than those who are far undervaluing their work because they've never even really tried to dramatically increase their rates.
For me, reading blog posts helped build my confidence to be able to ask for higher rates—seeing that lots of other people charge over $100/hr can really help to convince yourself that you're worth that.
You are right though, that reading blog posts is not going to create that change—for me it really came the first time I said what I thought was a high rate ($135/hr), and there was no pushback at all from the client. I was kind of amazed at first that they thought I was worth it, but with one success in the bag, it gave me the confidence to move forward.
You are right though, that reading blog posts is not going to create that change—for me it really came the first time I said what I thought was a high rate ($135/hr), and there was no pushback at all from the client. I was kind of amazed at first that they thought I was worth it, but with one success in the bag, it gave me the confidence to move forward.
I agree. I constantly see advice of the form, "You just need to insist on being paid what you're worth", as if a furrowed brow and a firm handshake can make just anyone able to charge enormous amounts.
To be sure, for some freelancers, timidity in asking for more is holding them back, but it has to be combined with an honest self-assessment of how much you could reasonably ask for.
To be sure, for some freelancers, timidity in asking for more is holding them back, but it has to be combined with an honest self-assessment of how much you could reasonably ask for.
For every one good freelancer there are 100 crappy freelancers. The way you go up is via reputation. No better way than working with clients. When you have no reputation you start at zero when you have reputation you can command your price. If you want to start at a high rate prove yourself on GitHub. The gurus might not have been gurus when they started. 😊
This. I think good freelancers forget how many bad freelancer there are out there poisoning the waters. Before you can charge like a professional you need to be able to prove you are one.
While I sympathize with the 'value pricing' sentiment, and do use in in some pricing situations, part of the 'value' measurement comes down to the other party's ability to execute and extract the value from whatever I (or my team) produce. Having a time factor in there (X hours, Y weeks, whatever) and having part of all of the price be affected by the time put in reduces that issue, but also generally will tie you to lower profits of any sort.
I've done 100 hours of work for company X, and they were easily able to recognize > $300k of value from that project. Another 100 hours of work for company Y, and they were struggling and complaining about a $7500 charge for that time, as they "didn't see the point" (the original sponsor did, but the rest of the team wasn't executing on the whole project, and nothing was getting done, hence little value arising from anyone's time).
Finding more projects like company X, and fewer like company Y, becomes it's own fun exercise.
I've done 100 hours of work for company X, and they were easily able to recognize > $300k of value from that project. Another 100 hours of work for company Y, and they were struggling and complaining about a $7500 charge for that time, as they "didn't see the point" (the original sponsor did, but the rest of the team wasn't executing on the whole project, and nothing was getting done, hence little value arising from anyone's time).
Finding more projects like company X, and fewer like company Y, becomes it's own fun exercise.
One thing to remember - those who charge 30K per week (e.g. patio11) do so by doing the work they don't enjoy, and this would be even more non-enjoyable for more hardcore engineers here.
We love making money with programming, not by marketing/SEO/etc...
So the most interesting for us is how to make 30K/week by only pure engineering.
We love making money with programming, not by marketing/SEO/etc...
So the most interesting for us is how to make 30K/week by only pure engineering.
I had trouble remembering which question corresponded to which number as I read the article. It would have been nice to include the question above each person's answer (or maybe a hover over the number reveals the number, or something similar).
Had the very same idea. To be able to read this, I opened a TextEdit window where I copy&pasted the questions.
I'm one of the "gurus" - feel free to ask more questions here (see bio for more background)
There are so many tangents to go off on, but let me pick this one thing to comment on:
Read Justin Jackson's story about the Mayor vs. the Ad Agency
Whichever price model you chose, you must learn early which clients are just wasting your time. There are no hard and fast rules, often it's just a gut feeling, but here are the mistakes I used to make & how to try to avoid them:
1) People who want to discuss their site for an hour or more on skype are not proper businessmen.
Look for people who's time is money - they have some key questions for you, they don't just want to "chat" about their idea. People who just want to chat - get your hourly rate mentioned early. If you tell them "I charge X" and they still want to talk a bit, then go with your gut, but don't talk more than 15min. with anyone without giving some indication of the price.
2) Don't lower your price unless you are repeatedly being rejected at that price level BY THE TYPE OF CLIENT YOU WANT.
That second part is important - your price will screen out the little projects you aren't really after. Don't worry if it is doing that job. But others will reflexively ask for a better deal, and won't push back hard if you don't budge. $10/hr less at "full-time" costs you $20,000 year that you'll never earn back.
What always seemed to happen to me was, the moment I agreed to a lower rate, someone would come along who was willing to pay full rate, and now I'm massively stressed trying to do everything.
3) Ask to see any specs and/or designs early - offer to sign an NDA right up front
This is to let you see how prepared they are, how professional they are, and if the work is defined well enough to be able to offer a weekly rate. Weekly rates are great, but they can be a harder sell for certain types of work.
4) Weekly rates are NOT risky if you define the number of hours/amount of work you can reasonable expect in a week.
Project rates are dangerous. Weekly rates just mean, "Of course I can do that! You understand that will cost X, correct? Would you like to cut something else out, or just approve the overrun?"
Weekly rates DO mean you need to be professional - you are promising 40-50hrs of actual work. For that reason I often go hourly to keep my personal flexibility.
4) Don't run out an "prepare yourself" for the techs you'll need for this project before signing the contract.
This is for the younger folks starting out, mostly back-end developers. Create a career learning plan of technologies you want to improve at, and use down time to study those. Don't jump around to new languages/server tools/whatever that a potential client mentions & never get good at anything.
To a point that's ok, when you really ARE new and need to get familiar with what is out there & being used, but get away from that habit quickly. If it looks useful, schedule it in your Career learning plan & visit at the appropriate time.
I know there's plenty more, but I think those are solid enough that I feel comfortable offering them to people.
Good luck!
Read Justin Jackson's story about the Mayor vs. the Ad Agency
Whichever price model you chose, you must learn early which clients are just wasting your time. There are no hard and fast rules, often it's just a gut feeling, but here are the mistakes I used to make & how to try to avoid them:
1) People who want to discuss their site for an hour or more on skype are not proper businessmen.
Look for people who's time is money - they have some key questions for you, they don't just want to "chat" about their idea. People who just want to chat - get your hourly rate mentioned early. If you tell them "I charge X" and they still want to talk a bit, then go with your gut, but don't talk more than 15min. with anyone without giving some indication of the price.
2) Don't lower your price unless you are repeatedly being rejected at that price level BY THE TYPE OF CLIENT YOU WANT.
That second part is important - your price will screen out the little projects you aren't really after. Don't worry if it is doing that job. But others will reflexively ask for a better deal, and won't push back hard if you don't budge. $10/hr less at "full-time" costs you $20,000 year that you'll never earn back.
What always seemed to happen to me was, the moment I agreed to a lower rate, someone would come along who was willing to pay full rate, and now I'm massively stressed trying to do everything.
3) Ask to see any specs and/or designs early - offer to sign an NDA right up front
This is to let you see how prepared they are, how professional they are, and if the work is defined well enough to be able to offer a weekly rate. Weekly rates are great, but they can be a harder sell for certain types of work.
4) Weekly rates are NOT risky if you define the number of hours/amount of work you can reasonable expect in a week.
Project rates are dangerous. Weekly rates just mean, "Of course I can do that! You understand that will cost X, correct? Would you like to cut something else out, or just approve the overrun?"
Weekly rates DO mean you need to be professional - you are promising 40-50hrs of actual work. For that reason I often go hourly to keep my personal flexibility.
4) Don't run out an "prepare yourself" for the techs you'll need for this project before signing the contract.
This is for the younger folks starting out, mostly back-end developers. Create a career learning plan of technologies you want to improve at, and use down time to study those. Don't jump around to new languages/server tools/whatever that a potential client mentions & never get good at anything.
To a point that's ok, when you really ARE new and need to get familiar with what is out there & being used, but get away from that habit quickly. If it looks useful, schedule it in your Career learning plan & visit at the appropriate time.
I know there's plenty more, but I think those are solid enough that I feel comfortable offering them to people.
Good luck!
Tangential: if someone wants to get into freelancing, how does one go about it? How do you find gigs? I'm into HPC, Hadoop, etc. and have been contemplating freelancing, for a change.
It depends on what area you want to target. Big data would be a niche field. You would need to know your market. Your market being any niche market where big data is relevant. You then target players who are small enough to need your services, but not large enough to need someone full-time doing what you do.
A lot of people see freelancing as some sort of gateway to doing what you enjoy on your terms. I suppose that's half true. The other half is marketing yourself and building a client base. Both halves are necessary.
If you're willing to take a major haircut off your rate (both in terms of what you bill and the service fees you'll pay), you can get low-end clients on the freelancing sites. That should really be seen as training wheels though and not a permanent solution. Low-end clients pay less, give you more grief, and the projects are less interesting.
A lot of people see freelancing as some sort of gateway to doing what you enjoy on your terms. I suppose that's half true. The other half is marketing yourself and building a client base. Both halves are necessary.
If you're willing to take a major haircut off your rate (both in terms of what you bill and the service fees you'll pay), you can get low-end clients on the freelancing sites. That should really be seen as training wheels though and not a permanent solution. Low-end clients pay less, give you more grief, and the projects are less interesting.
Isn't the title "12 Gurus Got 5 Questions About How They Set Their Rate"?
HN has some form of "no numbers in titles" policy. I'm not even sure list articles are allowed at all.
Right, but not against the numbers per se (or else it could just be machine-filtered), but about titles artificially framed in the listicle format:
>If the original title begins with a number or number + gratuitous adjective, we'd appreciate it if you'd crop it. E.g. translate "10 Ways To Do X" to "How To Do X," and "14 Amazing Ys" to "Ys." Exception: when the number is meaningful, e.g. "The 5 Platonic Solids."
https://news.ycombinator.com/newsguidelines.html
>If the original title begins with a number or number + gratuitous adjective, we'd appreciate it if you'd crop it. E.g. translate "10 Ways To Do X" to "How To Do X," and "14 Amazing Ys" to "Ys." Exception: when the number is meaningful, e.g. "The 5 Platonic Solids."
https://news.ycombinator.com/newsguidelines.html
Anyone else being asked for a user and password?
I just finished my first 8 months of consulting work and while this is true, it is so difficult to actualize. When we had zero projects, I would take any meetings I could get. A part of me would hope that during the meeting, the client would realize where I could add value and increase their willingness to pay. In reality, however, it was the client who tried to push down our rate time after time. A hard lesson for a novice, but I lost hundreds of hours to clients that I knew, deep down, didn't have the budget.
With that being said, this is dangerous advice to internalize pre-maturely. Without underpricing yourself in the beginning, it's difficult to derive self-worth (IE: confidence) and increase your rate later on. And the last thing you want is an early freelancer to turn down work because they think they are worth more.
TLDR; Underpaid work might just be a rite of passage in freelancing. It was for me.