Ask HN: What mistakes did you make when starting as a consultant/freelancer? • Hacker News Board

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#211

Post by m0zg » Sat, Dec 07, 2019, 4:44 PM UTC

mdorazio wrote: post #155

m0zg wrote: post #113

Earlier quoted context omitted.

Nah. Just create an LLC and make an S-corp election if flying solo. That way you can pay yourself a salary, and pay the income tax just from the salary as opposed from revenue, which is much larger. There, I just saved you at least a hundred thousand dollars (if you're in the US and charging market rate). You can totally do it yourself - it's not complicated.

It's not quite that simple. If you're not cheating, you have to pay yourself a market rate salary that you are fully taxed on (you are setting your market rate at a reasonable level, right...?) and you're still going to be taxed on the business distribution in excess of your cost basis, just not federal payroll or self-employment tax. Be careful of state laws and fees as well - California specifically really loves to…

I'm not in CA, my condolences to anybody who is - it's a notoriously business hostile state. I pay myself about $14K/mo pretax (modulo B&O which is paid on revenues) - enough to comfortably sustain a family of 3 in my area. This is obviously lower than market rate for what _I_ do, but not out of the line for software engineering in general. I also don't do any distributions. I expect that at some point I'll only be working _very_ part-time on whatever it is my clients want me to do, and spend the rest of the time on my own stuff, and this is where most of the tax savings will come from: you pay less tax overall if the salary you pay yourself yearly is less.

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#212

Post by defen » Sat, Dec 07, 2019, 4:44 PM UTC

dataflow wrote: post #55

defen wrote: post #52

Earlier quoted context omitted.

> Travel like a professional and bill the client. One additional tip here is to purchase cancellable / refundable airline tickets and hotel reservations. You don't want to get stuck with the bill if your client cancels a meeting or whatever. Made this mistake with a long-term client where it wasn't worth trying to get reimbursed for travel expenses for a canceled meeting.

But what about the much higher prices?

In my experience the difference for hotels isn't too much - $20 - $30 / night, so that shouldn't be a problem.

For flights, you have a couple options. Either make the client buy your tickets, or tell them about your policy of purchasing refundable tickets. Alternatively, you could just eat the change fee (but that has its own set of issues - if you use the ticket personally, you need to pay income tax on the cost of the ticket; if you use it for a different client meeting, billing THAT could be tricky) or you could just write it off as a loss.

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#213

Post by m0zg » Sat, Dec 07, 2019, 4:46 PM UTC

jimnotgym wrote: post #135

m0zg wrote: post #122

Earlier quoted context omitted.

My wife is an accountant, and here's a protip on how to make sure that a client never "overlooks" a payment: put a penalty clause in your contract that says the client is to pay 1.5% of the balance every month after the payment is due, and the client is responsible for any recovery fees. Your invoice will always be paid on time. If the client does not agree to this, walk away. It's a laughable amount of money, but th…

Penalty clauses are not always enforceable. Early payment discounts are... I mentioned it in my post, but the number one reason a reasonably sized company doesn't pay is that your invoice is not on their ledger. Call their accounts payable dept up after a few days, check they have the invoice, ask them when it will be paid. Don't be shy, this is what they expect!

Doesn't matter - they work anyway. Nobody in accounts payable is going to get into the details of whether things are enforceable or not. They'll just pay your invoice instead.

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#214

Post by HeyLaughingBoy » Sat, Dec 07, 2019, 4:48 PM UTC

csomar wrote: post #148

londons_explore wrote: post #80

Earlier quoted context omitted.

Do you actually forward receipts to the client and have them pay to the cent? I always find it easier to just have a fixed line item for "travel to client events", and usually I end up coming out ahead by a substantial margin by not booking fancy hotels.

Isn't that fraud? You are supposed to charge exactly how much the travel expenses did cost. If you think you should charge for the travel time proportionally to your work rate, then you should do that but have these separate. It's possible a client will ask you for the travel expenses receipts and it would not be nice to show him that there is difference between what you charged and what it did actually cost.

You should expense (to the IRS) what the actual expenses are, but you can charge your client whatever you agree on.

e.g., a month ago someone wanted me to travel to their site.

Although I didn't end up going, my fee to do that would have been much more than just the travel (6 hour drive to another state) and hotel costs: I also have to factor in that while I'm travelling, those are hours I can't bill to any other project, so the client would have been billed for the full two work days of travel even though my out of pocket costs would have been much less.

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#215

Post by smrr723 » Sat, Dec 07, 2019, 4:57 PM UTC

jppope wrote: post #206

Everyone here covered 99% of the things I would say so I'm going to add a few important ones that people missed. - Estimation. Devs are notoriously bad at it... so don't think of it as an estimation of the amount of time something will take, think of it as a negotiation with the goal of getting them to agree to the most amount of time something could take. If your estimation doesn't seem ridiculous to you then you di…

> Estimation. Devs are notoriously bad at it

I wouldn't say devs are bad at it. It's more that software development is very hard to estimate. Unless you're doing exactly the same type of work with an identical setup every time - like billing people to install a Wordpress site, it's often impossible to estimate the exact amount of days or hours something will take, especially if you're being paid to fix a bug or a problem to which you don't yet know the solution.

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#216

Post by angvp » Sat, Dec 07, 2019, 5:22 PM UTC

Those were the errors I made for a project I was a consultant/freelancer:

- Not charging the right price per hour, because "I was starting, this was an opportunity". - Not putting boundaries on client limits, as in, "no you can't call me whenever you want" (especially if you live in a different timezone) I personally understand they need to have an answer, but they can do perfectly fine by e-mail and you'll have to set to them a deadline for replies, for example "I will call/or reply you as soon as I get the e-mail" on the contract. - I didn't bill them for every cost they make me do like travel meetings and other general costs, so at the end my profits were even low. - I didn't had a contract, that was completely solid, so, get a lawyer who can draft you a solid contract with all your needs. - I was so overswamp of work that I couldn't manage all the expenses, or other time that I didn't bill to them, so also, get an accountant if you are charging them with something that might be funky.

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#217

Post by danielovichdk » Sat, Dec 07, 2019, 5:23 PM UTC

The problem with consulting as a developer is that you can't charge as much as it costs to fix shit properly. Endless fucking story. Developers are mostly crap which treat their work as any other working man.

You are there on the floor with these men, lowest in the hierachy, selling your time which you can't scale.

You can't set a price on your time, it's something you will never get back, but if you absolutly must sell it, sell it expensively and to people you values your time.

Fuck doing work with lousy people and companies. It's not worth it.

Time doesn't scale

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#218

Post by franze » Sat, Dec 07, 2019, 5:23 PM UTC

Charge by the hour.

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#219

Post by D-Coder » Sat, Dec 07, 2019, 5:27 PM UTC

prox wrote: post #157

Roark66 wrote: post #111

Earlier quoted context omitted.

It is cool when that happens, but it is extremely important to define the scope of work very well when it does. As if the client had a different expectation for the time frame don't be surprised if they then continue bothering you about details of integration of your feature with the rest of their project for a month.

Yeah, also be careful before you say yes; I had a similar opportunity, insanely good money , but when I interviewed a few devs who’d work for them they had a terrible rep for getting out of scope, moving the goalposts and communicating badly.

I worked at a minicomputer manufacture (okay, Prime Computer). Software enhancements large enough to need a proposal always included a section "Non-goals of this change."

This section laid out the things that might sound like they are related but would not be part of the enhancement. For example, a speed-up of the filesystem might have a non-goal of adding new file types.

Re: Ask HN: What mistakes did you make when starting as a consultant/freelancer?

#220

Post by herewego » Sat, Dec 07, 2019, 5:30 PM UTC

angvp wrote: post #216

Those were the errors I made for a project I was a consultant/freelancer: - Not charging the right price per hour, because "I was starting, this was an opportunity". - Not putting boundaries on client limits, as in, "no you can't call me whenever you want" (especially if you live in a different timezone) I personally understand they need to have an answer, but they can do perfectly fine by e-mail and you'll have to s…

I generally disagree with the “charge more” recommendation in the beginning. The reality is that until you have a sustainable client base, taking lower rates is often a necessity. In time, though, you should raise your rates to be market center.

One more mistake I would add was that I didn’t specialize at first. I marketed myself as a general full-stack software developer and that was the wrong move. Now I specialize in a particular area that I focus on and excel at and that is something companies are willing to pay for. The value proposition is clear; they’re paying for a specialization that they won’t ever have (or need long-term) in-house.

Edit: I own and run a very profitable consulting company, among other things.