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

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

#241

Post by cunac »

dfsegoat wrote: post #4

Embarrassing but honest: Pay your taxes on time (quarterly), assuming you are US based and on a 1099. Put that money away as soon as possible with ea. payment - just like an employer were withholding it. I managed my finances poorly, and it gets increasingly difficult to catch up. All good now but was the most expensive lesson I learned. Edit: seeing other replies here, I would meet with a tax/financial person from t…

What I did in the past is to use the highest marginal tax rate for both corp tax and personal tax and leave that aside as our Dutch friend said it is actually a nice bonus at the end so you feel 2x better

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

#242

Post by ghaff »

rahimnathwani wrote: post #236
ghaff wrote: post #199

Earlier quoted context omitted.

I'm not sure it's fraud but it's probably not a good practice. Standard "mileage charges" in the US are actually set by the IRS. I assume it's similar in other places so that's a well-established practice for car-related expenses. I'm not sure how else you would do it as there's no way to directly capture expenses other than fuel. I assume that in most cases billing some standard travel day rate/per diem (perhaps bas…

The mileage charges set by the IRS are for 'computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes', i.e. they're used to work out your tax bill. There are similar mileage rates in the UK, published by HMRC. They have the same purpose. The mileage rate you agree with your client needn't be related to those rates at all.

Fair enough. It's pretty common to use them for billing purposes as well but if, for example, you mostly drive to client sites and want to use mileage as a proxy for billable travel time it would be perfectly reasonable to add an uplift to mileage rates over the IRS rate.

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

#243

Post by greggyb »

From a business perspective - regardless of the content of consulting/freelancing:

People respond to incentives and everything that matters to you and to the client is up for discussion.

I do a mix of project work, training, and team/design coaching. I have a graduated rate schedule. If we're doing a long-term project, I'll typically price work out at the week level and bill at what comes out to be a lower effective hourly rate. This is fine, because these things are planned in advance and I can schedule around them. For customers that want to be able to get an hour or two of time nearly on-demand, I bill a much higher effective hourly rate and bill at 15 minute intervals.

I value my time, and I value being able to plan for things. I incentivize clients to do this by charging them more for things that are relatively inconvenient.

I like being paid on net30 terms - this is how I plan my cash flow. If a client has a blanket rule for net60 or something else, I'll discuss with them my preference, and will typically offer early payment discounts, something like a 2.5/30 net60. Again, incentivizing my preference. I'd rather have a predictable cash flow.

Regarding the second item - it's always worth discussing something. I've never had a customer issue with schedule or scope when we've talked through what's happening. Your work matters to your customer. Keep them apprised of what's happening.

I will typically have active work with 3-5 clients at a time. I have a mix of remote clients and those that prefer on-site presence. For much of the last month and a half, I worked out of one client's office, but had daily standing commitment from 12-5 for another remote client. The on-site client was fine with this, because we discussed the schedule. They prioritized the on-site presence and immediate availability.

I typically won't work full time for a single client. I consider full-time to be 40hr/wk for more than two consecutive weeks. This doesn't mean I have no long term clients, just that we work out schedules that work for both of us. This is because I value my schedule flexibility and don't want to be beholden to a single client. My clients get this.

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

#244

Post by ghaff »

defen wrote: post #212
dataflow wrote: post #55

Earlier quoted context omitted.

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…

Unfortunately hotels are succumbing to the same sorts of fees and restrictions that much of the rest of the travel industry has. As you say, the premium for cancellable rooms usually isn't that much. (Where I work we're supposed to book cancellable as standard practice.) But whereas cancellable used to mean by 6pm the evening of your arrival. Now it often means a day or two in advance. Which is usually fine for changes of plans but doesn't necessarily help when travel goes sideways.

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

#245

Post by sabon »

dceddia wrote: post #6

Just a few hours ago I saw this post on Product Hunt: "Freelancember is a collection of 31 gifts for freelancers, one for each day. Templates, checklists, guides how to get better clients, raise your rates, etc." Might be helpful! https://www.producthunt.com/posts/freelancember Some other folks mentioned taxes -- I highly suggest reading the book Profit First and implementing the system. I'm not a freelancer myself,…

Freelancember has listed most of the mistakes indeed, along with the solutions on how to solve or avoid them.

Example: https://freelancember.com/excuses-for-not-raising-your-rates... - how to deal with raising the rates and not ending up stuck at the bottom level.

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

#246

Post by ghaff »

calabin wrote: post #12
im_down_w_otp wrote: post #5

Setting my rates too low. Here's what I figured out those many years ago. Clients who are cheap are also really into wasting your time and trying to micromanage the project. Clients who will pay a lot more also give you latitude to do your job (after all they're paying you to be the expert). Keep jacking up your rates with each new client until you hit a ceiling. Whatever you're charging now, without even knowing wha…

I can second this piece of advice. When I first started our small consulting firm we didn't know how to scope explicitly enough and didn't charge enough even if the projects did stay within the scope of work. Don't be embarrassed of your rates. If they're flirting with but not plainly past what potential clients are willing to pay, you're in/around the right territory. Additionally, explicitly the definition of succe…

>When I first started our small consulting firm we didn't know how to scope explicitly enough and didn't charge enough even if the projects did stay within the scope of work.

I used to have one client who was otherwise both a good customer and a nice person but he was terrible for constantly trying to incrementally increase scope. It was always an effort during the SOW process to really nail down exactly what the deliverables were.

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

#247

Post by ghaff »

Spooky23 wrote: post #205
zerr wrote: post #70

Earlier quoted context omitted.

Yeah, such projects happen and it always surprises me - why can't such shops find in-house devs (with regular salaries) for such projects?

Turf. Big orgs aren’t good at sharing developers or other staff, people “belong” to their feudal lord. I had a friend billing $300 to zone luns on a SAN (ie he had nothing to do and spent his days studying) while the team 50 feet away was working 16 hour days on something he could do. The difference was that they worked for different big shots.

A more charitable way to put it is that people have "day jobs" that are being paid for out of someone's budget. I'll help people in other teams out--I have a pretty flexible job description anyway. But if someone wants a week of my time you can be sure they'll need to get my manager's approval. Which seems pretty reasonable. Most organizations wouldn't work very well if everyone just worked on whatever caught their fancy on a given week.

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

#248

Post by amyhoy »

Over a decade, I went from doing grunt work freelancing — data entry, HTML conversion, etc — to charging about $500 an hour as a true consultant.

Freelancers do what they're told. Consultants advise the client on what they should do.

When you start out, it's natural to think you're Doing A Thing (whatever skill you have & want to charge for) rather than Running A Business. I started out thinking "I'm here to make web pages and get paid for it!" and that made it very easy for people to take advantage of me. I would do exactly what the client asked for and then they would complain about it.

By the end of my consulting career, VPs would come to me with their ideas and I'd feel free to say "I'd love to work with you, but that idea won't fly. Here's what you SHOULD do." And they would go with it!

I realized that I could have positioned myself as the expert much earlier on in my career, and saved myself a lot of stress of trying to do every little thing the client asked, no matter how foolish.

The business mindset also means service agreements with initial deposits, work schedule with intermediate payments, kill fees and more.

I now run a product biz — the star being a time tracking SaaS for freelancers http://nokotime.com

Turning my catch-as-catch-can freelance business into a real consultancy is what made me able to charge more, work fewer hours, and have less stressful projects (bc I was the actual boss rather than a tool to be used by the client) and build the SaaS on the side.

Someone else mentioned Freelancember. Guess who made it? Me! Based on all my mistakes and years coaching others to level up like I did. http://freelancember.com

I highly recommend the book The Secrets of Consulting, which is like "the inner game" rather than explicit stuff like contracts, taxes, etc which are covered elsewhere.

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

#249

Post by csomar »

pbhjpbhj wrote: post #193
csomar wrote: post #148

Earlier quoted context omitted.

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.

Could you explain why you think it's fraud (and where you're from might help too). In the UK there's, for example, a standard "mileage charge" which people tend to claim for driving to a place for work. It's not "the cost of travel" it's an approximate. When a company charges for sending an operative to a site, they pay the operative £10 ph, and charge the company receiving them £100 -- presumably you think that's fr…

> Could you explain why you think it's fraud

I was just asking. You are putting "travel expenses" @ $xxx which doesn't seem to include your rate; so it should be how much you spent to "get there". If you want to charge extra (and I think you should since it's time you spent for the client) then maybe put "travel expenses" + "x hours spent traveling".

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

#250

Post by LoSboccacc »

monkeycantype wrote: post #126
mkbkn wrote: post #28

Earlier quoted context omitted.

Don't know the ideal scenario in the tech industry but in the advertising/marketing industry, it's useful to charge by a project. One may try to calculate (in their mind) how much time they will take to complete the project and then quote a fixed amount based on the no. of hours that came up.

I've made movies and software. I'm extrapolating from movie experience to imagine I know something about marketing and advertising. I'd feel more comfortable presenting a fixed project quote for a creative project than a software project, because in the case of a creative project I can choose to dedicate a fixed amount of time, and have the result - to be judged subjectively - that I was able to produce in that time.…

an essential aspect of fixed hour contracts is that requirements need to be sorted from the most critical to the nice to have and the client needs to be prepared to drop the nice to have if the budget doesn't stretch to them

which is the whole point of the agile manifesto

which is why agile fails under most circumstances, as having fixed time, requirement and budget but under scrum and sprints is anything but agile.

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