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My first month freelancing

alanhollis.com

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Re: My first month freelancing

#71

Post by RBerenguel »

stevejalim wrote: post #43

Shameless, shameless plug alert: if you found Alan's post interesting, you may also like the book I've almost finished writing. Check out http://freelancedeveloperbook.com The plan is to ship it before the end of June - am publishing via leanpub.com (great experience so far) and it'll be a paid-for book to cover the (many, many, _many_) hours I've put into it. When it's ready, I'll make a sample available so you can…

Signed up (even if the iPad layout is quite horrible :/) As a jack of all trades freelancer (data analysis, web development, advertising, SEO, reporting...) I'm very interested :)

Re: My first month freelancing

#72

Post by lotharbot »

tptacek wrote: post #7

People want to pay you hourly/per project, convince them it’s better for both you and them to pay you daily. I’ll explain why in a future post. I've burned many thousands of words here arguing the same point and will hopefully be able to spare you all a retread, so let me just say that I think a lot of good habits and useful dynamics emerge organically from this one decision. If you make no other careful strategic de…

I would phrase this as "bill based on your natural work increment".

If you're working at the thrift store putting price tags on shirts, your timeclock is probably in 5 minute increments. If you're a defense contractor bidding on a major combat platform, your minimum increment is probably ten engineers worth of salary. Anything smaller than "the increment" is probably a rounding error, which is a headache for both parties to track.

For independent software engineers and consultants, I can see reason to bill hourly, half-days, days, or weeks -- based on what's "standard" in terms of project size and work flow for you.

Re: My first month freelancing

#73

Post by Alan01252 »

hu_me wrote: post #70
tptacek wrote: post #28

Earlier quoted context omitted.

There are two common consulting arrangements in which a customer gets a discount for a commitment. The first is a retainer. Retainer hours come at a significant discount because they might not get used, but are billed regardless. The second is long-term forward-looking commitment. A monthly rate is at the short side of long-term commitment; a multi-month project feels like a more typical discounted commitment. You sh…

How do you professionally say no? This is one of the harder things for me when starting on a contract. I dont want to appear pushy and turn them away nor interested in going back to negotiating. Ps. I am from south asia so I also think there is a expectation of a need for haggling.

My response is something like this.

" I feel that my standard rate is justified due to my knowledge, the quality of the code I produce, my flexibility and my ability to learn and pick up new skills and technologies quickly. I have other clients who are paying my full daily rate and they very satisfied with the work I produce.

I completely understand if this is non negotiable. And I realise asking for an increase on the rate you offered may mean I may miss this opportunity to work with some exciting new projects, technologies and people which would be a great shame. "

Any feedback on the above would be greatly appreciated.

Re: My first month freelancing

#74

Post by Alan01252 »

patio11 wrote: post #51
ams6110 wrote: post #46

Earlier quoted context omitted.

This has to be regionally dependent. Around here there is no way you would get $2,000 day for web development. Best I have ever gotten is half that, for a one-day "emergency" engagement (i.e. drop everything and help me).

I just plucked a number out of the air, rather than picking a number which I felt was representative of web development. Also, I've harped on this a time or two, but there are people who get $2,000 a day for something which is indistinguishable from web development in terms of activities performed but which is sold as accomplishing business goals ("making lots of money") with incidental reference to programming. P.S.…

patio11, I'd like to say much of my stance on negotiating rates with people has come directly from reading comments you've made on hacker news in the past. Thank you!

If anything I still think I'm too lenient but this I'm sure will grow as my confidence dealing with clients grows.

Re: My first month freelancing

#75

Post by rapind »

hu_me wrote: post #70
tptacek wrote: post #28

Earlier quoted context omitted.

There are two common consulting arrangements in which a customer gets a discount for a commitment. The first is a retainer. Retainer hours come at a significant discount because they might not get used, but are billed regardless. The second is long-term forward-looking commitment. A monthly rate is at the short side of long-term commitment; a multi-month project feels like a more typical discounted commitment. You sh…

How do you professionally say no? This is one of the harder things for me when starting on a contract. I dont want to appear pushy and turn them away nor interested in going back to negotiating. Ps. I am from south asia so I also think there is a expectation of a need for haggling.

Culture can hugely impact your rate and flexibility. If your client belongs to a haggling culture and it's safe to say they haggle over everything (fairly common in some cultures), then I would recommend adjusting your base rate to compensate for the discount you will end up making.

I know if you try to sell a product in some cultures and refuse to budge on the price it could be considered an insult.

Re: My first month freelancing

#76

Post by tptacek »

lotharbot wrote: post #72
tptacek wrote: post #7

People want to pay you hourly/per project, convince them it’s better for both you and them to pay you daily. I’ll explain why in a future post. I've burned many thousands of words here arguing the same point and will hopefully be able to spare you all a retread, so let me just say that I think a lot of good habits and useful dynamics emerge organically from this one decision. If you make no other careful strategic de…

I would phrase this as "bill based on your natural work increment". If you're working at the thrift store putting price tags on shirts, your timeclock is probably in 5 minute increments. If you're a defense contractor bidding on a major combat platform, your minimum increment is probably ten engineers worth of salary. Anything smaller than "the increment" is probably a rounding error, which is a headache for both par…

Your natural work increment and your fee structure are not the same thing. When you freelance, you aren't being compensated solely for your effort; you are providing much more value than that. Factors that go into freelancers getting paid more include:

* Access to talent on predefined schedule

* Minimal commitment to that talent, instead of a year of salary

* Allocation of that talent to your projects as opposed to some other company's projects

* Ramp-up

* Ramp-down

* Travel and/or logistics & communications overhead

* Invoicing and receivables overhead

It is a really pernicious meme that developers should consider billing hourly because they work hourly. When you switch from salaried work to freelancing, you need to start thinking of your work product as a product, not simply the output of your brain connected to a keyboard for fixed periods of time. You don't price a product based on its raw cost structure; you price it according to the value it provides to customers.

Re: My first month freelancing

#77

Post by tptacek »

Alan01252 wrote: post #73
hu_me wrote: post #70

Earlier quoted context omitted.

How do you professionally say no? This is one of the harder things for me when starting on a contract. I dont want to appear pushy and turn them away nor interested in going back to negotiating. Ps. I am from south asia so I also think there is a expectation of a need for haggling.

My response is something like this. " I feel that my standard rate is justified due to my knowledge, the quality of the code I produce, my flexibility and my ability to learn and pick up new skills and technologies quickly. I have other clients who are paying my full daily rate and they very satisfied with the work I produce. I completely understand if this is non negotiable. And I realise asking for an increase on t…

"Hey, thanks for asking. Here's the deal: we work on a daily rate, because most of our projects demand our full attention for at least the majority of a day. In order to be fair to all our customers and to keep things manageable for us, we bill in one-day increments."

I don't really see why I'd say more than that. If a client kept pushing after that, I'd start saying things like "I understand; let's figure out how we can get your work bundled up efficiently into a day" (or, in my case, more likely: I'd bill a day for the time-consuming stuff and just let the single hours go).

Re: My first month freelancing

#78

Post by jakejake »

hu_me wrote: post #70
tptacek wrote: post #28

Earlier quoted context omitted.

There are two common consulting arrangements in which a customer gets a discount for a commitment. The first is a retainer. Retainer hours come at a significant discount because they might not get used, but are billed regardless. The second is long-term forward-looking commitment. A monthly rate is at the short side of long-term commitment; a multi-month project feels like a more typical discounted commitment. You sh…

How do you professionally say no? This is one of the harder things for me when starting on a contract. I dont want to appear pushy and turn them away nor interested in going back to negotiating. Ps. I am from south asia so I also think there is a expectation of a need for haggling.

Basically I just tell them the truth - that the project doesn't seem to be a good fit for my business right now. If they insist on knowing why, you can tell them the risk vs profit factor is too high for you at this stage. If they want to know what that means, you can just say that you don't think you can give a good estimate of the total project time/cost so you don't feel comfortable bidding on it.

If they're reasonable, they may agree to just go hourly then upon hearing a reasonable explanation. Sometimes they'll try to negotiate on the price. I tend to be very wary of clients that try to negotiate rates though because even if you get your rate you'll find yourself later arguing about hours, features, etc. Your rate can effectively be lowered if they pressure you into feeling that you are not working fast enough and bill 1 hour for 2 hours of actual work. People who like to haggle tend to haggle over every detail to get a bargain - not just price.

Re: My first month freelancing

#79

Post by lotharbot »

tptacek wrote: post #76
lotharbot wrote: post #72

Earlier quoted context omitted.

I would phrase this as "bill based on your natural work increment". If you're working at the thrift store putting price tags on shirts, your timeclock is probably in 5 minute increments. If you're a defense contractor bidding on a major combat platform, your minimum increment is probably ten engineers worth of salary. Anything smaller than "the increment" is probably a rounding error, which is a headache for both par…

Your natural work increment and your fee structure are not the same thing. When you freelance, you aren't being compensated solely for your effort; you are providing much more value than that. Factors that go into freelancers getting paid more include: * Access to talent on predefined schedule * Minimal commitment to that talent, instead of a year of salary * Allocation of that talent to your projects as opposed to s…

I don't mean that you should bill hourly if you can measure your work in hours. I mean that you should bill hourly if you want to run the sort of business where you work on six different clients' smallish tasks each day (say, simple web stuff with minimal ramping), like the setup ErrantX described elsewhere.

As you say, this is based on value provided to the customer. If you're working with clients who are going to want you to do $100-$1000 worth of low-complexity work for them in any given month, an hourly fee structure is going to let you serve that client base, while a daily structure would not. If you're working with clients who are going to want you to do $10000+ worth of work for them on a single project, a daily or weekly structure is going to be more convenient for everyone. If you're working for the DoD on military hardware, you might charge 10 figures of development fees and 8-9 figures per unit delivered.

Pick a billing structure based on what's natural for the sort of projects you're doing in the market you're serving.

Re: My first month freelancing

#80

Post by tptacek »

lotharbot wrote: post #79
tptacek wrote: post #76

Earlier quoted context omitted.

Your natural work increment and your fee structure are not the same thing. When you freelance, you aren't being compensated solely for your effort; you are providing much more value than that. Factors that go into freelancers getting paid more include: * Access to talent on predefined schedule * Minimal commitment to that talent, instead of a year of salary * Allocation of that talent to your projects as opposed to s…

I don't mean that you should bill hourly if you can measure your work in hours. I mean that you should bill hourly if you want to run the sort of business where you work on six different clients' smallish tasks each day (say, simple web stuff with minimal ramping), like the setup ErrantX described elsewhere. As you say, this is based on value provided to the customer. If you're working with clients who are going to w…

Ok, but there are a bunch of reasons why I think you should actively avoid "markets best served by hourly work":

* It positions you against the lowest-quality cheapest providers.

* It misaligns your incentives, so that you're penalized for doing a better job.

* It totally hides the cost of ramp-up and ramp-down (if you think clients push back on daily or project rates, wait until you charge them for 2 hours of "getting in flow").

* It forces you to be vigilant about time tracking lest you accidentally undercharge customers.

* Not to mention, with virtually any client worth doing business with, you (the consultant) are much more sensitive to the cost of a project than the customer is; it is a small miracle that the customer can get a programming project completed at all without potentially hiring and then firing 3 different people. So why is all the burden on you? Why is any of the burden on you? Key consulting idea: it's not the customer's money they're spending.

* It inclines you towards finicky accounting, the kind that charges a customer for a 45 minute phone conversation.

* It conditions your customers to take a fine-tooth-comb approach to project plans and invoices.

* Not to mention: it generates more invoices.

* It forces you to negotiate with clients in the worst possible numeric domain: where small deltas to proposed rates disproportionately impact the final cost.

* It obscures the final cost of projects in ways that make clients defensive, so that their immediate thought is "oh shit this is going to add up to lots of hours we better be careful".

* For that matter, it inclines your projects towards the small and away from anything ambitious.

* It impedes your own flexibility, so that you tend to miss opportunities to interleave projects or for that matter take an occasional long lunch.

* It forces you to account for every waking hour of your day in a way that daily rates don't, when we all know that only a small subset of your work hours are truly productive.

* It makes it harder for you to reasonable toss freebie work to your best clients without damaging the expected value of your time; for instance, I can cab over to a client in Chicago and spend 2 hours looking at a design with them for free without creating the appearance that my bill rate is arbitrary.

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