[HN Gopher] Lessons from six years as a solo consultant
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Lessons from six years as a solo consultant
Author : Edward9
Score : 239 points
Date : 2020-01-04 12:37 UTC (10 hours ago)
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| S_A_P wrote:
| I cant agree with this article. Ive been a solo consultant for 5
| years now. Here are my takeaways-
|
| -Maintain good relationships with anyone that can give you work.
| Most of the time you will ping pong between vendors for work.
|
| -Don't be afraid to build in "bench" time into your hourly rate.
| The rates listed in this article are much lower than I would
| recommend. I target 85% utilized in my personal model. I work in
| a niche and will not consider less than 150/hr for anything less
| than a 12 month contract.
|
| -Remember that despite the best of relationships and intents,
| contractors are expendable. You can and will get let go before
| employees. That is not a bad thing. In fact, its a gift. You get
| to leave before morale and expectations get too far out of
| control.
|
| -Do put rainy day money away into fungible assets. Savings
| accounts probably aren't great for that.
|
| -Do try to have multiple clients at once, if you can swing 2 full
| time gigs, most of the time this can be juggled in the short
| term.
|
| -If you get told you are rolling off, don't take it personal. I
| have the hardest time with this part of it. It is my nature to
| give my all when I am at a gig. When the let me go, I feel that
| it is an affront or personal. Its not, its business. If you do
| this, you will make more than many high level executive salaries.
| That doesn't count the equity side but making 2-400k a year is a
| real possibility.
|
| -When its time to leave you will know. The biggest upside I see
| in consulting is I have the freedom to leave when I cant deal
| with the bullshit anymore. -Every company has bullshit you will
| grow tired of. Honeymoon periods last 3-24 months, but there will
| always be bs.
| fao_ wrote:
| > I couldn't believe my ears. After regaining my composure, I
| answered: "I regard such behaviour as unethical, because our
| customer would suffer a substantial and unnecessary loss." [...]
| In hindsight, I should have terminated the project at that point
| [...]. The example shows how ingrained hourly billing is.
| Customers accept it as God given, although they know that they
| are ripped off.
|
| But that's the thing. Companies exist solely to make money.
|
| Let's say it again.
|
| Companies do not exist to create value.
|
| Companies do not exist to do cool things.
|
| Those are all secondary.
|
| Companies exist solely to make money.
|
| This is business school 101.
|
| The CEO and the rest of the workers were right in this instance.
| In this decision the agency was better off as a company if the
| person took the deal. The client at all times had the choice of
| going to a different firm that was cheaper, the customer in this
| case opted not to bother with doing those things (which might
| have cost them more in the long run anyway), and therefore had
| already committed to the cost that they would be charged.
|
| The job of the client company in this case is to extract as much
| value as it can from the consultants while paying them as little
| as it can. Clearly in this instance, given they were happy paying
| that cost, you weren't being paid as much as you could have been,
| based on the 'value' that you 'created'.
|
| I don't see why the person in question sees this as unethical. Or
| rather, I don't see why the person in question sees this as
| unethical under capitalism. Capitalism is an inherently unethical
| system, where the entire system is (From the top perspective)
| about ripping other people off as much as you can, or (From the
| bottom perspective) trying to ensure you get paid as much as you
| are worth to the company that you serve.
|
| If you don't like it, back projects to change the system, whether
| that's to introduce more regulation, or to change the system full
| stop so that gross wealth-hoarding cannot exist. Until then, you
| have to make a living and try and make sure that you and the
| people you support are better off. If you can 'create value' for
| others by doing that, then all the better!
| zenpaul wrote:
| I've been there and done that for better and worse. It sounds
| like the author wants to create their own agency which is a
| different game than being a solo consultant. If you really want
| to be a solo consultant...
|
| Lessons from 20+ years as a solo consultant:
|
| - Customers rarely know what they want.
|
| - Customers always change what they want.
|
| - Change control in fixed bid work is vastly more important than
| how smart or productive you are.
|
| - It takes an extraordinary amount of effort to find customers.
|
| - One gets customers by searching, networking, having other good
| customers and mastering useful technologies.
|
| - What matters long term is consistently making money every
| month.
|
| If you truly want to be a solo consultant:
|
| - Maintain good relationships with your customers.
|
| - Bill hourly and get paid no later than monthly.
|
| - Be willing to work with consulting agencies and accept their
| markup on your rate.
|
| - Always be learning and using new technologies.
|
| - Always be looking for the next opportunity.
| amelius wrote:
| > It takes an extraordinary amount of effort to find customers.
|
| Aren't there services to help with that?
| unreal37 wrote:
| I agree. As 20+ years as a consultant, I can't imagine billing
| "per project". That dream project where the requirements don't
| change and the scope is perfectly estimated in advance doesn't
| exist.
| hobofan wrote:
| Those responses are so funny to me, as there seems to be a
| complete difference in recommendations, every time this topic
| comes up.
|
| I'm also very happy with hourly billing, but the last time I
| saw a similar topic, the whole comment section was insisting
| that per-project billing is the only viable way to make money
| in consulting. Oh well..
| hanniabu wrote:
| It's a different strategy. Per project you take on more
| risk, but you can also typically charge a lot more (less of
| a barrier for the client to overcome than hourly).
| Enginerrrd wrote:
| The real answer is you do both depending on the situation.
| My best hourly has been doing per-project billing, but you
| need to be smart about it or you can end up working some
| hours for free. Hourly T&M is a nice situation to be in
| since it takes a lot of the risk out and lets you just
| focus on the work that needs to be done.
| [deleted]
| flyinglizard wrote:
| If you're in familiar territory, the product is well
| defined and the customer is reasonable - go for project
| billing. An example would be implementing some low level
| function for an embedded device. Anything you know is going
| to only take a few hours, bill per project (unless of
| course it's an extension of an existing hourly contract
| with a customer). Anywhere there's upside or difficult
| circumstances (such as unreasonable timeline due to
| external requirements, such as an upcoming event or demo),
| charge per project.
|
| But to be in that position you first need to build a stable
| revenue stream and that happens more easily with hourly
| consulting.
| zenpaul wrote:
| Good point. From this thread it is clear that people have
| made a go of it with project billing in some domains. I
| develop enterprise business systems that are generally
| too large and complex to reliably estimate or manage to a
| fixed budget.
|
| In any case, all it takes is one project with one
| unreasonable customer who demands extra work and then
| doesn't pay, to wipe out the gains from lucrative
| projects.
|
| Also, in the long term you accumulate responsibilities
| like mortgages and families that makes that low-risk
| monthly revenue stream so important.
| iudqnolq wrote:
| > But to be in that position you first need to build a
| stable revenue stream and that happens more easily with
| hourly consulting.
|
| I'm trying to get started with freelance work as a
| college student, and I've experienced the opposite.
| People want project-based billing because they don't
| trust me, or my ability to work "as quick as an
| experienced programmer".
|
| (For context, when I say starting I mean _starting_. I 'm
| currently working on my second contract ever. I have no
| non-internship work history. My first was for $50 for
| what ended up being 4hrs, my current was $300 for what I
| expect will take at most 20hrs. Then Upwork takes 20% for
| making the match and providing insurance against my not
| delivering.)
| flyinglizard wrote:
| I'd say that for 20 hours project, it's generally not
| worth the hassle to bill hourly. For small tasks people
| want to know what they're on the hook for, but once you
| go into the larger scopes with more variables and
| properly price your risks, you'd notice their reaction is
| much less welcoming.
|
| I don't know the exact nature of your work - is this just
| doing generalized programming work, or do you specialize
| in something (e.g. setting up a Wordpress site)? If what
| you do is repeatable enough, at some point you'd make
| good money working per project because you'll become much
| more effective. Of course it's more difficult to pull off
| when you do generalized work.
|
| This however has one very significant exception, and
| that's when dealing with a corporate client which would
| lead to more work.
|
| You see, any company that's larger than 20 employees
| separates the financial management from the technical
| staff. That means that if you've made it through
| negotiations and contract work setting an hourly
| framework with the financial side of the company, you're
| now another tool at the disposal of the technical people
| which could utilize you almost on a whim.
|
| With a project based setting you need to go almost to
| square one and renegotiate all the way down every time
| you want more work. It's not just a hassle for you - it's
| a hassle for the engineers who'd love to use your help.
|
| This, eventually, is what builds you a recurring revenue
| stream; making yourself available to the technical people
| at minimal friction. I've been responsible for a pretty
| significant corporate operation where my team was
| responsible for procurement of products and services the
| size of a respectable startup A round, and dealing with
| vendor onboarding, scope of work, legal approvals and
| financial signing at the VP/CFO level were a huge time
| waste. Contractors who billed hourly were much simpler to
| work with - waste time once and be on your merry way for
| months at a time. I try remembering that now when I
| crossed sides, back to consulting. Try make the life of
| the people who need your services as easy as possible -
| usually you'll have mutual interests.
| pmjordan wrote:
| _the whole comment section was insisting that per-project
| billing is the only viable way to make money in
| consulting._
|
| Generally, when someone gives you advice that's supposed to
| be 100% right in all cases, they either stand to gain from
| it personally or have no idea what they're talking about.
|
| In this case, the difference between the two approaches is
| mostly a question of who ends up with what risks. My wife
| and I run a two-person development contracting business,
| and we've done projects with both approaches. Both have
| worked well for us, but for the type of work we tend to do,
| most projects would not be suitable for fixed price
| billing.
|
| The reason is that most of our work consists of "deep
| dives" for figuring out if something is _possible at all._
| (Or more precisely, possible within a reasonable amount of
| effort.) So what usually ends up happening is we 'll agree
| on a capped research budget, and dig into the problem up to
| that number of days. If we find a solution before that
| time, great; if we find a fatal blocker before that time,
| well, not great but it's a result. Otherwise, we'll
| hopefully have found some leads to pursue in that time and
| can give a better estimate for how much more effort it'll
| take.
|
| Maybe it's possible to do this sort of project on a value-
| based basis, but I certainly haven't found one that seems
| fair, or that a client is likely to accept. The author of
| the original article likes to claim that with value based
| pricing, interests are aligned. Well, for this sort of
| project, one of the parties is likely to lose out massively
| if you agree a fixed price up front.
|
| And as for the author's assertion that your income is
| capped: you have one variable you can tweak: your rate.
| Charge more! We charge more than his "optimistic estimate".
| Sure, we're still not rolling in it, but we also don't work
| anywhere near 40 hours a week. And the implication that our
| incentive is to drag out projects to get more billable
| hours - well, I have a stronger incentive to make all my
| clients super happy so that they keep coming back for
| repeat business. This way, we have more requests coming in
| than we can feasibly accept.
|
| Of course, only touch open ended projects for savvy
| clients. The nature of our particular specialty means we
| work with tech companies who understand the nature of big
| unknowns in projects.
| marfusios wrote:
| You don't understand. $240K is not cool, $2M is cool.
| Good luck with hourly billing to get that kind of money.
| The only way to still doing what we love - software
| engineering (not some kind of managerial, leading,
| business role) is fixed price and re-selling already
| implemented stuff (same approach as lawyers).
| zenpaul wrote:
| Good luck making $2M as a solo consultant. In order to
| take on projects that big and maintain your customer
| pipeline you almost certainly have to build a team which
| is what I call creating an agency.
| burnte wrote:
| Most of my 27 years were as a consultant. Honestly, every
| time I hear someone talk about what you did, scope change, I
| ask, "What was the original definition in the contract?"
| Usually I hear back, "it was just a quote for the job, no
| contract."
|
| Scope changes aren't scary if you write a good contract. As a
| consultant, that's truly one of the most important skills,
| writing a well defined scope for contracts. That way when it
| changes, you're covered by change order fees.
| nosianu wrote:
| Anecdote:
|
| I - then working as a freelancer programmer for a few years -
| once had a (German company) customer where the person that I
| was supposed to work with was so unpopular and known as
| "difficult to work with" inside the company that the manager
| that had hired me for the job apologized profusely,
| especially that he had to place me in the same room with that
| person. All the people I had contact with were similar.
|
| Why was he never fired? Well, because he was so good, you
| could say he was _perfect_. So they gave him a room for
| himself - usually it was about four people per office and
| accepted the rest. And I say that with decades of job
| experience in many software companies in the US and in
| Germany. The documents describing what he wanted down to the
| last detail were just.. perfect! I ended up doing two
| programming jobs for them a year apart and both times I
| simply took the documents and worked on it from top to bottom
| until it was done. I never had to ask a single question,
| there never were any changes. Sometimes I had to explain a
| few things I did, but that was just usual communication,
| there never was anything unclear.
|
| And also, I never had any issues with that guy myself, even
| during the time we shared a room. He "merely" expected
| everybody to be on his level, other than that he was fine.
| Once a female colleague came into the room to ask him
| something, and in an exasperated tone he told her that he had
| already described everything she asked for in paper X in
| section Y. And he was right, what she had asked was right
| there. As always, he had everything _perfectly planned_ and
| documented well in advance. Of course, that 's no way to gain
| any social points and that woman was almost ready to cry (I
| had quite a few chats with people working in the other rooms
| and the women disliked him the most, but the men did too),
| but for better or worse, he was just too perfect and expected
| the same perfection from everybody.
|
| That was the first and only time I ever had such an
| experience, everybody else apart from that one guy is just
| working normally. Right now I have the exact opposite
| experience, I program for people who only have very fuzzy
| ideas what they want. Works too - you just have to treat it
| differently and have a different mind set. That one job is
| one of my most memorable experiences, including the social
| drama.
| tartoran wrote:
| Had similar experience that you described but with a
| professor in Uni. He was documenting everything clearly to
| the last detail and was unwilling to answer any question,
| he was even unwilling to listen to questions asked because
| the answer was documented. I learned a lot in that class
| but I got a pretty bad taste for this type of this
| agressive personality. I saw it as logical sadistic at
| times... In retrospect I think that professor had some sort
| of asperger or was on the spectrum. I wish I knew that
| them, I'd probably take it better
| chiefalchemist wrote:
| It's not that they don't know what they want. It's not that
| they change their mind. It's that they are oblivious to the
| cost (to you) of both. Furthermore, when the cost is fixed
| there's typically no incentive for them to be reasonable.
|
| I find it funny how often I hear, "it's just..." Really? You
| hired someone else because of your lack of knowledge/experience
| but suddenly miraculously you have complete clarity on what
| it's going to take?
| thdrdt wrote:
| I found billing per 4 hours works very well. The customer
| understands this and I can reserve a part of the day for one
| customer.
| tel wrote:
| Why do you suggest hourly? I understand fixed big puts all of
| the risk on you, but would you also consider daily or weekly
| billing as a reasonable compromise?
| AzzieElbab wrote:
| Larger clients are not flexible about how you bill them.
| Hourly is the only option. Never mind that you might be
| working on multiple projects, run training, meetings and so
| on
| grepfru_it wrote:
| In this case, I would still break out my work across
| multiple projects and types of work all charged at the same
| rate. If no other reason than to give me a breakdown of
| numbers to estimate future projects.
| zenpaul wrote:
| Billing hourly or daily is about the same. Weekly gets
| complicated. It is all about reducing risk, locking in
| cashflow and getting compensated for your time and energy.
| dboreham wrote:
| Weekly/Monthly billing means you can never take a vacation.
| And if you're going to suggest pro-rated weekly billing
| well that's just daily or hourly billing isn't it?
| jdminhbg wrote:
| You could certainly take week-long or month-long
| vacations, or take a month off of consulting to do things
| like business development or education. Generally, if
| you're at the level where you're billing engagements
| weekly or monthly, monetarily you don't need every single
| week to be filled with billable work.
| tel wrote:
| Weekly billing doesn't mean you work 40 hours, though.
| Additionally, one can imagine taking a week off or
| prorating a month.
| TuringNYC wrote:
| I did this for a short time, but one more important lesson I
| learned: The more $ you charge, the better you get treated by
| customers. The less $ you charge, the more abuse you take from
| customers.
| zenpaul wrote:
| Yes, absolutely.
|
| Also, once you get good rates, you ask for a higher rate from
| the next customer. If it is higher than their highest rate
| they tend to tell you what their highest rate is which gives
| you a great place to negotiate from. Like, maybe I'll take
| less if I can work remote 2 days a week.
| goblin89 wrote:
| I'm not so willing to engage with consulting agencies. I find
| it very difficult to deliver a good product with an added
| degree of removal from the final customer, which is how some of
| those agencies structure work in order to maintain their
| business.
| zerr wrote:
| What about creating own agency?
| [deleted]
| warlog wrote:
| I'm curious to learn about your adventures in value based
| pricing.
|
| I've worked as an independent consultant for 3 years and have
| priced by the hour, and using value based fixed prices...the
| latter with mixed results.
|
| I love Jonathan Stark's Ditching Hourly podcast... And I must
| recommend the 2bobs podcast with a shout out to Blair Enns on
| value based pricing and David C. Baker on expertise advice
| business.
| ghaff wrote:
| Not the OP but, when I did consulting/advisory work, we mostly
| did a combination of value-based and nominally value-based.
|
| What I mean by that is our large clients had subscriptions with
| us for advisory services, which included or could include some
| specific deliverables like reports but was mostly fairly open
| ended access for inquiries, press references, etc. I put these
| mostly in the value-based category.
|
| Then we had things like advisory days, speeches, etc. we priced
| on the basis of the deliverable value--but in practice there
| was a fairly close correspondence to time spent. In practice
| also, clients would end up turning a one day session into two
| half-day sessions for different groups, so from their
| perspective they were mostly buying our time on-site (plus
| travel, etc.). We tried to hold the line on pricing for value
| but I'd say we only had some success here.
|
| We'd also do custom research etc. for clients which, from their
| perspective, was almost certainly more value-based as much of
| our work was out of their sight. (Of course, from our end, we
| were mostly coming up with that pricing from a desired internal
| day rate.)
|
| I think the only time we nakedly charged by the hour was when
| we were doing legal work because that was just the way the law
| firm which was our direct client worked. (TBH, it was pretty
| nice to get a healthy hourly rate for _everything_ and it was a
| substantial job. Also somewhat open-ended work we weren 't
| particularly familiar with, so an up-front quote would have
| been difficult.)
| warlog wrote:
| My biggest challenge with value based pricing (VBP) was that
| it required an upfront discussion about the perceived value
| of the work, and my prospects/clients were often totally in
| the dark about "value".
|
| I don't think VBP works well for tech/biotech startups:
|
| -founders/exec can't define value
|
| -founders/execs are selling the dream (= infinite value) and
| don't want to pay for it.
|
| -startups want to hire brains, but pay for hands
|
| -founders/execs and especially managers want to focus on
| (minimizing) "costs", rather than unearthing or creating
| "value" with consultants.
|
| [Edit: formatting]
| ghaff wrote:
| Yes, we worked for (or at least were paid primarily by)
| mostly old-line enterprise IT companies. We talked to
| plenty of startups. But they mostly couldn't/wouldn't
| afford us even when we had good personal relationships with
| the execs. ADDED: I do know at least one firm that does
| mostly value-based advisory work for small companies; their
| approach is to have a fair number of low dollar small
| clients in addition to some larger ones.
|
| As I said, even with the big cos, a good chunk of what we
| did was at least roughly day-based. At one point, for
| example, we experimented with trying to price more
| strategic advisory work higher than make-your-product-
| launch-deck-better type of work and it never really flew.
| bullen wrote:
| There is a broader picture to these lessons that I would like to
| point out:
|
| Not only is it economical to do bad work if you bill by the hour;
|
| but it is also necessary to build flawed products to sell more of
| them.
|
| See printer inc, light bulbs, computers, everything that could
| last 100 years but doesn't...
|
| The other side of this is that energy is considered free, if we
| paid the real price for oil/electricity it would cost many
| thousands dollars per gallon/kwh.
|
| The only way for this to change is for the whole system to
| collapse, and that will happen during this decade.
|
| All arbitrary (not based on experience from nature) human skills
| are going away.
|
| But math, physics, chemistry and biology will stay; prioritize in
| that order.
|
| Build a good computer today, it will not become obsolete
| technically for the rest of your life.
|
| Buy a ARM computer that you use as desktop, it will be usable for
| the rest of your life AND it will teach you to become a better
| programmer!
| rgbrenner wrote:
| This would be better if it was about his experience from the past
| 6 years... whatever he's been doing definitely works.
|
| Instead it's ideas about what he wants to try in the future.
|
| In fairness, those ideas sound great... but this is more like an
| advisory notice to his existing clients about how things might
| change.
| k__ wrote:
| If found software consulting a bit boring, but quite lucrative.
|
| If you get a project that takes 3-6 months you make enough money
| for the year and a bit left for the next year.
|
| This means that you only need one customer to say "yes" per year.
| If you contact only 10 per month your success rate doesn't even
| have to be 1%.
|
| What I learned is, charge per week or month and never go for
| full-time.
|
| The month charging filters out all the tiny fishes and the part-
| time always gives you plausbile deniability when you can't answer
| the phone.
| unreal37 wrote:
| For a few years as a consultant, I was working 9 months and
| taking 3 months off in between. Can't complain about that.
| toxicFork wrote:
| How did you get the first consulting gig?
| k__ wrote:
| Wrote some application emails to companies that posted stuff
| online. AngelList or such aggregators.
|
| I had saved some money, I didn't have pressure. Talked to 4
| companies when I started, one said yes. Took 2 months or so.
| iudqnolq wrote:
| What experience did you have at that point? (Asking as
| someone trying to get a first job part-time in college).
| yomly wrote:
| Sorry I don't fully understand
|
| >the part-time always gives you plausbile deniability when you
| can't answer the phone.
|
| Do you mind elaborating as the rest of the comment is good!
| sudhirj wrote:
| Some customers expect you to be on call 24/7 if they think
| you work for them full time. Setting clear expectations that
| you always have other clients removes that.
| [deleted]
| Proziam wrote:
| Not the OP, but (I think) I get what he means.
|
| If you're working a project on a full-time basis, the client
| will expect to be able to call you up and get you on the line
| at pretty much any time (and yes, often outside of normal
| work hours, in my experience). If you're on a "part-time"
| basis, you don't have this pressure because the expectations
| are set differently.
| gist wrote:
| > the client will expect to be able to call you up and get
| you on the line at pretty much any time
|
| I get your point but maybe it's the opposite in some cases?
| People want to have someone they can get at a moment's
| notice and when they find that person they are more likely
| to a) Use them next time (where price is less of a factor)
| and b) recommend them to others.
|
| I say this as someone who has done quite well at consulting
| (and I do mean that) and that has no problem taking a call
| even on Saturday night. Now of course the devil is in the
| details and the particular client (goes w/o saying) but the
| counterpoint is that is how you build customer
| relationships and build a business. Fear of 'door number
| two' is what gets people to pay more the comfort of knowing
| someone is there for them.
| k__ wrote:
| Sure thing, I can totally understand this. I mean, we
| need many people doing jobs that are time critical.
|
| Other consultants can have these customers right along
| with those who want to bill by hour.
| Proziam wrote:
| I agree with you, and that's how I personally choose to
| work. There's a lot of folks who would prefer a different
| lifestyle if they could manage it though.
|
| Ultimately, the number one thing that gets repeat
| business is results. Because of that, I can totally
| imagine people who offer a smaller time commitment still
| being successful. Regardless, I definitely wouldn't
| recommend going the 'part-time' route to anyone that
| isn't already established enough to get away with it.
| nogabebop23 wrote:
| IF someone employees you full-time, the 40-ish hours they pay
| for is always interpreted as whenever they need you (if
| they're working you are too, right?). If you're part-time the
| mental model is you are only available for a very specific
| subset of hours (which a crisis rarely honours) or the
| expectation is you don't respond immediately because you're
| not a full-time engagement. Either way you don't have to be
| on call 24/7
| bubbleRefuge wrote:
| Agreed. And take on multiple part time projects.
| DrNuke wrote:
| It is products designed, made and shipped from you in the past
| that help set your personal brand as a consultant. You show
| something so that prospective clients can assess and trust your
| potential contribution in advance. Portfolio is the name, right?
| flyinglizard wrote:
| I shifted from mostly fixed price to mostly hourly based billing
| over the past year, and increased the rates. It's very easy to
| start a project with hourly billing, adjust the scope and expand
| as you go. It's very difficult to do that with a fixed priced
| project.
|
| But the biggest issue against fixed price is that companies are
| quite bad at pricing R&D activities (which is why they're usually
| running late and require office heroics to complete). When you
| try to put a realistic price on such an activity you may give
| your customer a sticker shock.
|
| I still do fixed price at places but only when the work stands
| alone and it's something I've done many times in the past.
|
| Working hourly, if you spread the work across multiple clients
| and provide good value for each, creates a structure where you
| cost each of them slightly less than a full time employee. My
| experience is that this is quite sustainable for everyone.
| ghaff wrote:
| There are a few general prerequisites for fixed pricing. They
| apply to hourly pricing as well but they're more important when
| the price is fixed.
|
| 1.) The project needs to be well-scoped with any significant
| out-of-scopes also explicitly specified.
|
| 2.) Client responsibilities/deadlines are specified.
|
| 3.) As you suggest, the work is predictable based on past
| experience and there aren't likely to be unexpected things that
| come up and significantly increase the time required.
| flimflamm wrote:
| Please take also the consultancy buyers perspective when
| assessing the value you bring in.
|
| Are you the only consultant who could figure out how to bring
| down the cost of the appliance (in the articles example) down by
| 1$?
|
| If not then your value is not as high as you used in the
| calculation. The potential client could find other consultants to
| do the same thing (price optimization of a mass product - service
| well available in the market). As there are more providers then
| estimating the "value" should take in to account that there are
| several offerers of service. It is now a tendering situation. I
| am now excluding a remote situation where all the offerers of the
| optimization service would collude in their offers.
| bsder wrote:
| > Are you the only consultant who could figure out how to bring
| down the cost of the appliance (in the articles example) down
| by 1$?
|
| I have _never_ seen another person or company be the
| competition.
|
| The competition is _always_ "do nothing".
|
| It takes real motivation somewhere to knock a company out of
| inertia if they can continue to muddle along.
| wayoutthere wrote:
| Consulting is a relationship business. The quality of your
| relationships determines how much you can sell your services
| for. Furthermore, solo consultants tend to specialize in a few
| specific niches where their services aren't a commodity. For
| commoditized consulting services, buyers will just go to a body
| shop.
| ghaff wrote:
| The same applies to advisory type consulting as well. Even
| people who are more generalist than others are still fairly
| specialized in the grand scheme of things. On the one hand,
| you don't want to be so specialized that almost no one is a
| potential customer. But get too broad and you're getting out
| of the realm of having knowledge/experience that people will
| pay a real premium for.
|
| I've long felt I had to keep pulling myself back a bit from
| dabbling in too many things at a relatively cursory level.
| wayoutthere wrote:
| I was actually meaning it in terms of advisory consulting
| since that's what I do :)
|
| But my experience has been very similar to yours -- I find
| myself focusing more and more on product strategy and less
| on engineering process as I move forward in my career.
| Clients are increasingly going to body shops for that kind
| of work, and I have no interest in competing in a race to
| the bottom.
| lmeyerov wrote:
| The customer perspective is more "this is my ROI, and thus
| budget I can request from higher up: should I therefore inhouse
| or contract, and if contract, how to allocate?" Predictability
| and quality from high val contractors matters more once you are
| in the budget green zone than focusing only on $.
|
| We build GPU graph-based visual and automation tech for
| investigating event and rich (high dimensional) data, and while
| our ultimate focus is a self-serve product, do project-based
| and annual fixed support contracts because we can fairly
| provide that combo of ROI, predictability, and quality. The
| situation is a bit diff as this mean we offer an effectively
| discounted product license / services combo, which aids the
| derisking in a couple dimensions.
| iakh wrote:
| > They call you. Your acquisition costs are close to zero. The
| million-dollar question is: How do you make potential customers
| contact you? >...a strong brand makes finding new projects so
| much easier: New projects find you! Be aware that building up
| your brand easily costs you 60 hours per month.
|
| Not sure how this is a compelling argument. 40% of your time
| seems like a lot more than close to zero
| ghaff wrote:
| I took it as just a statement of reality that people should be
| aware of. Especially for higher-level advisory work, i.e. not
| primarily writing code, a large percentage of time is "off the
| clock." Most of the independent consultants I know spend a lot
| of time writing newsletters, doing podcasts, speaking for free
| at events, in addition to whatever 1:1 marketing/sales they do.
| RHSeeger wrote:
| > Your acquisition costs are close to zero
|
| I think the point was that the acquisition costs are _not_
| close to zero. Rather, the acquisition costs are no longer
| specific to individual clients, they're general in nature. If
| you spend just as much time/money but don't spend it on
| specific client, then the cost for each client doesn't change
| (it's just the total divided by the number of clients).
| ghaff wrote:
| Good point. There clearly are acquisition costs. In
| marketing speak what he's basically saying is that your
| bottom of funnel acquisition costs are low. (I don't think
| they're quite zero because you still need to close a
| specific contract.) But top of funnel
| awareness/education/etc. is a large chunk of your time.
| Which for some types of consulting/advisory work rings
| absolutely true to me.
|
| e.g. https://trackmaven.com/blog/marketing-funnel-2/
| cosmodisk wrote:
| I did both hourly and project based pricing models when
| consulting. Each have pros and cons but for projects that aren't
| "off the shelve" and do require discovery days, lots of inputs
| from client and a level of solution design from the consultant,
| the key thing is milestones. This way you can fend off scope
| creep and also be very specific on deliverables.I.e.:created x
| feature: 10 hours( 15% of the overall project). As for the rates,
| one hits the ceiling pretty quickly with hourly rates: try
| pitching $500/h if you not a lawyer. That's why value based
| pricing is the only way to push it up as high as possible. It's
| one thing to say that you'll be charging $200/h for the next few
| weeks and another when you say you'd build something for $24K
| that'll make the company $500K over next 12months.
| weinzierl wrote:
| > An easy way to build up productised services is to keep the
| rights to use of the software that you write or that you oversee
| others writing. This works best for software that doesn't give a
| competitive edge to customers and that is not specific to
| customers. Your leverage is to give a discount on your fees, if
| you are allowed to keep the rights to use.
|
| I have never seen this going well. It is in my experience very
| rare that companies are willing to let the consultant keep the
| rights and when they do there is a big chance that they regret it
| and want the rights for a small fee later. I've seen this
| damaging the customer relationship in the past. I'm curious what
| other consultant's experiences are?
| Const-me wrote:
| Not sure I agree about fixed price point.
|
| When I'm spending 90% of the time developing software, especially
| if that's a stand-alone or well specified isolated components - I
| can quote after some initial research, and I agree it's a good
| way to go.
|
| For other clients I'm doing a job of technical lead. In that
| case, too much time is spent defining requirements, reviewing
| other people's work, writing project documentation, etc. These
| things are borderline impossible to estimate in advance. For
| these projects, I prefer hourly contracts.
| chiefalchemist wrote:
| Scrum is more or less a time & materials approach.
|
| Agreed. If it's small and finite - similar to an oil change -
| then a fixed price is doable. On the other, if the resuest is
| "the engine sounds odd and acceleration is off" then it could
| be anything.
|
| Anyone who is the latter but expects a fixed price must be
| avoided. They'll cost you more than you'll make.
| pnako wrote:
| I'm not really convinced by the argument regarding value-based
| pricing, because that's just not how markets work.
|
| The clearing price (in this case, of labor) is based on demand
| AND supply; it has nothing to do with how much value you bring to
| the table. Yes, it's true that maybe writing some piece of
| software will save some company ten million dollars per year.
| Should you get one million dollar for writing it? Maybe not, if I
| can find someone charging 60K to develop that same piece of
| software.
|
| There is one way to do that with software, though: royalties.
| It's used for middleware for games and movies. But it's more a
| risk-management tool for buyers than a sure path to profit for
| providers (i.e. with royalties you limit your losses if the game
| or movie does poorly).
| madsbuch wrote:
| So, in the end everything boils down to negotiation. Obviously,
| if you can't negotiate the $1mil deal, then you won't get it.
|
| Furthermore, the market is not perfect. Just because somebody
| wants to do the job for $60k it not mean that the company can
| even get into contact with this person.
| hectormalot wrote:
| Crucially: if you're more likely to deliver successfully
| you'll be able to price accordingly as well. E.g. if the
| perceived change of success with the 60k person is 80% and
| with you it's 90% then you're arguably worth a few 100k
| extra.
|
| (Now: that %-chance-of-succes is difficult to measure. Which
| is why it's a relationship business IMO :)
| Tom4hawk wrote:
| _All the customer's managers including the CEO sided with X, as
| they concluded that bending the company X to their will was more
| trouble than an individual. And anyway, I would be paid for the
| extra work._
|
| I absolutely don't understand why this is the problem. Something
| came-up (not because of you) and you will get paid for solving
| it.
|
| If you don't have time (other plans) or you just don't want to do
| that (good example: request is stupid and you know it will cause
| more trouble in the future) you can just tell that to your
| customer (or bump-up rate for this extra work).
|
| How value base pricing would solve the above issue?
| tra3 wrote:
| This is a problem from the perspective of the customer. Company
| X delivered a substandard product based on a fix bid. The
| customer then had to turn around and pay 10 weeks of hourly
| fees to this guy to finish it.
|
| Presumably, if magic of value pricing was realized X would be
| incentivized to finish it.
|
| Pretty unprofessional on X's part I'd say, so I understand why
| the OP nearly lost it.
| unreal37 wrote:
| The customer found someone to do the work and was willing to
| pay for it. If he had his customer's interests at heart, his
| objection should have ended the moment the customer made a
| decision. No need to "lose it".
| iakh wrote:
| I think that just highlights the downside of fixed bids,
| value based or not, that the author ignores. You come out
| ahead and are incentivized to finish early, but are
| deincentivized to do any additional work if you go past your
| costs plus margin
| 0xEFF wrote:
| I had a similar reaction. Something doesn't add up about the
| anecdote. His customer decided it was in their own best
| interest to pay his hourly rate to solve the problem. Partner X
| decided the same. What's the problem?
|
| It's quite the leap from there to an accusation of unethical
| behavior. I'd wager he had incomplete information or there's
| much more to that story.
|
| Edit: For example, Partner X might have said to the CEO, "I
| understand you're frustrated with the outcome, but it does meet
| spec and we advised you Z was missing from the spec you
| provided. You decided to keep Z out of scope. We're happy to
| add Z now, and we're also happy if the author adds Z. Your
| choice."
| koonsolo wrote:
| He reasoned in terms of days needed to fix the problem, and
| concluded that therefore X would be cheaper. But maybe the
| change management in the contract made it more expensive. So
| even if he needed more work on it, he was still the cheaper
| option and/or easier instead of a change request.
| 0xEFF wrote:
| Right. The real problem I see is the author accusing X of
| being unethical. Such an accusation damages any
| relationship.
| m0zg wrote:
| "Don't charge hourly" doesn't work for "researchy" work where you
| can't be certain things will work in the end or indeed how long
| they will take. I charge hourly. Setting a high hourly rate (if
| you can do it) prevents the "bullshit work" situation described
| in the article. Customer then finds it more cost effective to
| have their junior FTEs do bullshit work.
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