* Your price sends a signal that attracts particular clients, and the ones you attract with lowball prices are the worst, most demanding kind.
* Your ordinary good clients aren't shopping on price, beyond a vague notion of what the normal range of prices for your field is. Remember: they're generally not spending their own money.
* Any client big enough to have a purchasing department is never going to let you get your rate back; their whole job is to prevent vendors from ever raising rates.
* There are a zillion things you're selling as a consultant that you don't realize you're selling, from schedule flexibility and freedom to fire at will to answering phone calls about the project deliverable 3 weeks after the project is done to not having to pay benefits and payroll taxes to documentation, and you're much more likely to forget to capture this stuff in your prices than you are to overcapture it.
I'm not sure I've ever met a new consultant that had unrealistically high rates. But most new consultants I've met have had unrealistically low rates.
If a client balks at your rate, you can still get the project cost where they need it to be: negotiate on scope instead of rate.
I‘ve been billing hourly for over ten years now, and I agree that it is cursed.
But as much as I’d like to switch to daily/weekly billing, it feels like I would never allow myself to leave the desk to run errands, play with the kids etc - because I promised to work the (whole?) day/week.
Even if you don’t actively tell clients when exactly you do work, clients can see your away/offline status in Slack/Teams, or they might call you out of the blue, which would feel to me like being caught with pants down - talking about a failed deployment on the phone in the supermarket?
And I’d be worried then that the client comes to the conclusion “Oh that guy, bills the whole week but doesn’t even work in the afternoon. What a slacker!”.
There is no relationship between your billing increment and the specific times you're at your desk. You bill a day for any day that you do significant work for the client; that's it. The notion that billing a day means you've booked 8 contiguous desk hours for your client is just hourly billing thinking; that's part of the reason you want to stop billing hourly in the first place.
This and your other comments really helped getting an intuition for why daily/weekly billing is preferable over hourly - thanks for patiently reiterating this.
Especially your point „daily billing means I don’t work on other projects that day“ seems like a framing that could work well for me.
I think "don't double book yourself" is a good rule of thumb, especially when you're getting your sea legs, but there are ways to do that, with daily (or weekly, or monthly) billing, once you know what you're doing and you're confident about your scheduling and your business relationships and the way you set expectations.
The one expectation you should never set with your clients is hour-by-hour accountability. It's not even a win for the client: it just creates anxiety.
Reasonable clients who hire you to deliver a project three months from now don't expect you to work 24/7 for 90 days non-stop. They expect you to deliver what was agreed in three months. They happily pay for those three months because someone calculated it will save/make them more money. They don't care what happens in between as long as you keep them regularly updated, don't disappear on them, and respond to emails and calls in a timely fashion.
Ask yourself if you want the type of clients that obsessively check your online status on Slack. Most clients don't have time for that because they have other things to worry about.
If you're deploying something, it's prudent to sit tight for a while and monitor things. You can shop for celebratory champagne later.
If they absolutely expect you to pick up the phone the minute they call, hire someone to answer the calls for you. Now they have a dedicated account manager. Charge them appropriately.
If you want to read more, the OP of this comment chain, tptacek, wrote here a lot about charging daily/weekly vs hourly (and other nuggets of wisdom about consulting). Query `site:ycombinator.com tptacek hourly` in your favorite search engine. Here's an example: https://news.ycombinator.com/item?id=4103417
But tbh, customers aggrieved at your working practices are simply not worth having. If they don't trust you enough to do the work, they probably won't trust the output of it either, which all that it entails (not paying etc).
I've been a consultant in a previous life, and the best customers were invariably the ones who just let you get on with the job.
Depends on what a "call" represents. A 15 minute chat, happens once every other week or so? Just do it, don't count them. A 2-hour meeting? If it's part of prospecting for new business, you do it and eat the cost; if it's the readout for a project you've delivered, then you accounted for that cost in your SOW. If it's ongoing support, and they're not a house account you bend over backwards to keep happy, book a billable day or set them up on some kind of use-it-or-lose-it bucket of retainer hours.
1. Sane customers value determinism more than they value maximizing the productivity of a single hour. They're engaging you because they want a thing done, and the order of their concerns is: (i) assurance that the thing gets done, (ii) getting the thing on a predictable schedule, (iii) getting the thing done sooner, (iv) that they're not making a fool out of themselves by paying way over the market for the thing and (v) how much they pay. Note how far down the list the actual absolute billing number is.
2. Conduct a thought experiment: imagine you have a project that is going to take you a week to finish. Now imagine you take 100 Provigils (don't do this) and get the project done in 3 days instead. Who should get the economic benefit of that efficiency, you or your client?
You're metering, but at a lower level of granularity. You don't care about squeezing the maximum customer value out of ever hour, or maximizing hours you bill but don't do work in, because you're just not tracking hours. You work at an ordinary pace. Some days you're going to give your client 9 hours worth of productivity because you're in flow; sometimes they're going to get 7. It doesn't matter.
The only really important thing about your interval is that you can't book two clients on the same staffing in the same interval. If you bill daily, you as a general rule don't book two customers on the same day (really, I wouldn't do it in the same week).
> But as much as I’d like to switch to daily/weekly billing, it feels like I would never allow myself to leave the desk to run errands, play with the kids etc - because I promised to work the (whole?) day/week.
Bill by the project and this problem is solved.
That said, I'm one of the weird ones who prefers to bill hourly whenever possible.
So I keep hearing this, but I haven't seen it actually working in practice.
My wife has been (trying to) freelance since we moved to the US. She applied the playbook, rejected lowball offers, and negotiated higher rates.
The result? She has worked about a total of 2 months out of 1.5 years. The pipeline is dry and nothing is coming her way. In retrospect we regret not accepting some of those lowball offers. Sure, the rates suck, but not having a job sucks more.
My cynical take is that blanket statements like that are unrealistic and even harmful for some.
I agree. The original advice is very solid, but it applies after you're established yourself. Freelancers live and die on reputation, and when you're new, you have no reputation one way or another.
So the first thing a new freelancer has to do is to establish a good reputation. This means having a client history. Never forget that the world is smaller than you think, and people talk to each other about these things -- even if they're competitors.
This means that it can be a good idea to accept jobs that don't pay what they should. But the new freelancer still needs to get value that offsets the lower financial return, and that value is, basically, word-of-mouth and references.
That said, new freelancers (of any sort) have a very strong tendency to think that the "going rate" is much lower than it actually is. Talk to other freelancers in your area to learn what clients are used to paying before even thinking about setting a price.
One thing I had success with, and I've seen others have success with, is to make a proposal at the going rate, but add in an offer to take a substantial discount in exchange for permission to use the client's name as a reference, in marketing materials, etc. Especially if the client is well-known and respected.
The hardest part of being a freelancer is starting out, when nobody knows who you are. Once you have a couple of good clients under your belt, it gets much easier to find new ones.
The basic idea is that you don't want the client to think that you're a discount freelancer, but that you're offering to get some of your compensation in a different form than cash.
Because all of this has to balance out with another fundamental truth: people will tend to judge the worth or quality of a thing by its price tag. If it just looks like you're cheap, you will be perceived as being lower quality. And what most clients want is quality work, delivered as promised. Your compensation should encourage them to expect that, or at least not actively signal the opposite.
Do whatever you need to do to get on your feet. But you're probably not going to win much business by outcompeting incumbent vendors on price. There's a going rate for things; it's a band of rates. Price somewhere in that band, until you're on your feet, at which point you should start a process of raising your rates that ends when you retire.
I agree entirely. The problem for newcomers is getting the first couple of clients. Discount pricing can help with that. But it needs to be clear to even those clients what your real rate is and that they're getting a discount.
Just so we're clear: I'm saying discount pricing isn't likely to help you get your first clients, because most serious buyers of consulting services aren't making their selection primarily based on price, but rather on how certain they are that the project will complete successfully. Cut-rate pricing is a good way to lock in subcontracting arrangements, though.
I'm lucky enough to have a 9 to 4, but I do freelancing on the side as well. I've gotten lowball offers after sending contracts over, one in the past week that was 35% below my rate, which I already thought was low to begin with. If nothing can be worked out I'm able to politely refuse, but I'd be pretty sad if I wasn't financially secure to begin with and had to barter with these types.
I'm not sure if it's been mentioned yet, but one other idea is equity, whether it's with the company or ownership of IP/software. At the moment I have a client who has offered that I have all rights to the software I'm creating for them, in exchange for a rate of about 50% less. Of course this may or may not make sense depending on the company/project, but just thought I would mention it. Good luck to you and your wife.
Personally, I turn those down. When I'm freelancing, I'm doing it specifically to maintain a high degree of flexibility. Non-scoped jobs take flexibility away.
But I think this is a personal call sort of thing, and may be right for you, depending.
Huh? Staff augmentation contracts are super common. They're definitely not illegal. And the risk in employment classification mistakes is to the employer, not the contractor.
* Your price sends a signal that attracts particular clients, and the ones you attract with lowball prices are the worst, most demanding kind.
* Your ordinary good clients aren't shopping on price, beyond a vague notion of what the normal range of prices for your field is. Remember: they're generally not spending their own money.
* Any client big enough to have a purchasing department is never going to let you get your rate back; their whole job is to prevent vendors from ever raising rates.
* There are a zillion things you're selling as a consultant that you don't realize you're selling, from schedule flexibility and freedom to fire at will to answering phone calls about the project deliverable 3 weeks after the project is done to not having to pay benefits and payroll taxes to documentation, and you're much more likely to forget to capture this stuff in your prices than you are to overcapture it.
I'm not sure I've ever met a new consultant that had unrealistically high rates. But most new consultants I've met have had unrealistically low rates.
If a client balks at your rate, you can still get the project cost where they need it to be: negotiate on scope instead of rate.
Never bill hourly. Hourly is cursed.