I just finished my first 8 months of consulting work and while this is true, it is so difficult to actualize. When we had zero projects, I would take any meetings I could get. A part of me would hope that during the meeting, the client would realize where I could add value and increase their willingness to pay. In reality, however, it was the client who tried to push down our rate time after time. A hard lesson for a novice, but I lost hundreds of hours to clients that I knew, deep down, didn't have the budget.
With that being said, this is dangerous advice to internalize pre-maturely. Without underpricing yourself in the beginning, it's difficult to derive self-worth (IE: confidence) and increase your rate later on. And the last thing you want is an early freelancer to turn down work because they think they are worth more.
TLDR; Underpaid work might just be a rite of passage in freelancing. It was for me.
Looking back, all freelancers should probably wait to start until they can secure an "anchor client". A company or individual with a solid business who can provide consistent cash flow to the freelancer. One anchor tenant won't pay for a whole shopping mall, and neither will one anchor client meet all the freelancer's needs and goals. But it definitely helps stabilize the situation, and empowers freelancers to be more selective about their other clientele.
Aside from that - having enough savings on hand to pay for 6-12 months of all expenses (business and personal) is also a necessity. Otherwise you'll start taking on poor clients (and I mean "poor" literally, as in they don't have additional budget to spend, even if they wanted to), which in turn will make you more desperate, taking increasingly shittier jobs. The freelancer death spiral is brutal but can be avoided with careful planning.
By-the-way, these anchor clients usually aren't exciting or fun. In fact, they're usually creatively boring and predictable.
And when the end of runway is approaching, you will become desperate, and you will take on a terrible project. Then it will take a really long time before you build up your runway again to the point where you can hold out for better projects.
Basically, hold out, but don't wait too long.
This is the sentiment that makes you justify charging too little.
I've negotiated fixed-price deals where I'm quite certain I can get the job done in x number of weeks, based on having done something similar before. And that's a quite leisurely x weeks, where I'm not really feeling any uncertainty about any part of the project (ie I know what APIs will be used, business logic seems simple, research is done already). At the same time setting a leisurely schedule also means if there is something unexpected, you can spend a bit more time solving it. Or take a break when you're ahead.
Regarding the customers, being choosy appears to be very important. Anyone who mentions outsourcing to (somewhere cheap) is politely moved on. Anyone who doesn't grasp what they're after (a social network, with an iOS and Android app, and videos, and ...) is quoted a longer timeframe. Customers also need to be made aware of the importance of feedback, as in the agile model. That way they always get what they asked for, and you don't waste time on what didn't come to mind.
[0] http://www.kalzumeus.com/2015/05/01/talking-about-money/ If you haven't read this, it's fantastic
How many years have you been doing this? It doesn't sound like you've been at this for too long.
> I've negotiated fixed-price deals where I'm quite certain I can get the job done in x number of weeks
This works fine for a client who wants a very concrete x, y, or z.
There's a problem with this sort of client. They only want x, y, or z and after you give it to them, well, you're done.
If you have that sort of client and you're charging by the hour, you're an idiot. Quote them a fixed price at something like 500 per hour for what you estimate the work will take. They'll go for it, you make bank.
At some point in your freelancing career you're going to start feeling jealous. Of the "normal" guy. They guy who wakes up every morning knowing he has a full day of work and is working for the same person he worked for yesterday. He knows what to expect, how things operate, etc. Everything is stable.
Stability is an illusion, but it's a nice one.
At this point, you're going to start looking for clients who don't want x, y, or z. You're going to look for clients who need x. And some more x. Then some more x. They keep needing x and there's no end.
These clients are professionals. They know the industry. They're not really clients, they're middle men. They're agencies, marketing guys, whatever. They have a constant stream of work. They know it. And they know the best way to maximize their profit is to pay you by the hour. They will only pay you by the hour. They will laugh if you suggest anything else.
It's alluring to you, because you get a ton of work, all the time and you're still billing twice what you'd get working a regular job, and you still get to work from home, set your own hours, specify your own tooling, etc.
At some point, you'll get tired of this and decide you want to be the middle man. You start getting your own clients, hiring other guys to do the work ... and guess what? You're going to pay them by the hour. Because that's how you maximize your profit.
Now, I know there are one-man armies out there who have their own clients, bill fixed price, do all the work themselves and are always busy. I know they're out there because I used to do that. It's exhausting. You have to constantly keep marketing yourself, keep working of course, and wear a bunch of hats at the same time. At some point, you'll have the desire to "outsource" the marketing portion of the equation and that's when you'll start billing by the hour.
My experience of working for agencies is they want to pay a fixed price and will laugh you out of the agency at the idea of paying hourly. They don't want risk; they want you to take the risk for their project specification ('cause they've already quoted the client, so you'd better cost less than they quoted...)
What kind of middle men are these who pay per hour?
Or are you talking about contracting, not freelancing?
Getting to a point where risk and cost of change are client problems is ideal, because they are no longer willing to waste your time or nitpick. I charge a daily rate, rather than hourly, but same principle.
> I know they're out there because I used to do that. It's exhausting. You have to constantly keep marketing yourself, keep working of course, and wear a bunch of hats at the same time.
That's me right now. Any tips on making the switch?
There's not going to be one correct answer to this question - per-hour rate or total project cost. And regardless of which one is best an hourly rate is still a useful productivity metric.
With the hourly model you're protected as a freelancer. Regardless of the number of revisions, if the project takes 10 hours or 100 hours, you will get paid. (Though if the hours required are going to increase 10-fold you'd better communicate that to the client.)
I have several clients who prefer the hourly rate model. Which is fine by me. It helps me hit my weekly/monthly/quarterly goals. Also, we both save on the administrative headaches of having to spec out, estimate and approve every single change. And as a freelancer anything that reduces my non-billable work is a big plus.
The downside for me: the client gains any increase in my productivity. If I increase my productivity per hour by 25% it takes me less time and I make less money. But the client still receives the same amount of value from my work, and pays less for it. And since most skilled workers become more skilled and more prolific over time this productivity transfer almost always occurs.
Fixed cost projects can be more lucrative since I pocket any productivity gains. Imagine I've secured a $2000 fixed-cost project. If I can knock it out in five hours, I've secured an effective rate of $400/hr. The downside, of course, is if my productivity lags - say I spend 100 hours on the project - then my effective rate plummets to $20/hr.
Every fixed-cost project should be measured hourly. Even a big-ticket project will suck if you work yourself into a minimum wage to complete it. I use the hourly metric to determine productivity. When this metric starts to drop during a fixed-cost project, that's when I reach out to the client to figure out a budget increase.
So - which one is better? Hourly or fixed-cost? Most of the time it doesn't really matter. If I'm working a fixed-cost project and my productivity metric falls, I ask for more money. If I'm working an hourly project and it's going to take more time implement revisions, I'll tell the client and get approval. Regardless of the project type if the scope changes you're going to need to ask for more money/hours.
BUT - if the project is in a domain I have deep knowledge in, and I can be relatively assured of a fixed scope (with only minor changes), I will go fixed-cost every time. I want to capture my productivity and maximize my profit from it.
It may just be a shortcoming of the approach that my company tried; we're open for trying again as none of us like clocking time like lawyers.
I wish regular employers would adopt this more as well. My value is what I do/produce, not how much time I spent doing it. Some days I produce massive amounts of value, while others I barely get anything valuable done. I'd like a work place that would encourage me to go home and enjoy myself on the bad days and stay as long as I want on the good days, instead of expecting a regular 40 hour work week every week (I have flex, but on average...).
On the other hand, I guess my employer has this issue too. We usually have an upper (money or time) limit on a contract but charge by the hour. And this is pretty much the standard in my industry and a requirement from our clients. How did we end up this way? It makes no sense!
In the words of Stephen King, "Amateurs sit and wait for inspiration, the rest of us just get up and go to work."
Very often the value is in just showing up and doing the work. Even if the work isn't your best work, it's still better than no work. You can always fix bad work later. Even if you throw it away and start again, you've already primed yourself on the problem.
Also, I don't think software development is very comparable to writing a book. Unless you need to finish a book every day, your mistakes one day can easily be fixed the next.
In software, if your bad work on a project is committed to a place where it affects others, it may very well be too destructive to be worth it.
I can see where he's coming from.
If you charge for results only, then any change in what is desired means a renegotiation. Attaching a dollar figure to every "could you also ..." gets old quickly.
For your regular employer what you are after is ROWE - results only work environment - https://en.wikipedia.org/wiki/ROWE
This is very rare where I work.
Many get too hung up in the value of the services they provide when what they are really selling is trust.
The people that manage to make good money on freelancing aren't always the best at what they do, but they are good at managing expectations and making the client feel like they made the right hire.
If you see problems ahead with the timeline, communicate and let them plan around your delays otherwise you are surprising them in the worst way.
Clearly some of them were on very different paths than me. I taught myself and charging anything over $30/hour would have been deceitful. I couldn't imagine delivering that much value when I was starting.
"I read a blog post or a book on how to charge more."
This is not to say that a post like this doesn't have any value - or a book like Brennan Dunn's book. But sometimes, when I read stuff like that, I wonder how much is actually survivorship bias and how much one can REALLY learn from a post like this.
It's a bit like Amazon reviews of books: Half of them are for people who have read the book and start to discuss things retrospectively.
So when I quit and self-declared myself a consultant, I went straight to charging premium weekly and monthly rates, as Patrick and others have recommended.
It wasn't $30k/week, and it still took many months to stop feeling like a fraud, but two years later I'm earning a living by working with extremely interesting and successful clients. I altogether skipped the dreaded "cheap freelancer living week-to-week" stage, and I give a lot of credit to Patrick's articles for that.
The set of freelancers working right at the rate they should be is orders of magnitude smaller than those who are far undervaluing their work because they've never even really tried to dramatically increase their rates.
You are right though, that reading blog posts is not going to create that change—for me it really came the first time I said what I thought was a high rate ($135/hr), and there was no pushback at all from the client. I was kind of amazed at first that they thought I was worth it, but with one success in the bag, it gave me the confidence to move forward.
To be sure, for some freelancers, timidity in asking for more is holding them back, but it has to be combined with an honest self-assessment of how much you could reasonably ask for.
I've done 100 hours of work for company X, and they were easily able to recognize > $300k of value from that project. Another 100 hours of work for company Y, and they were struggling and complaining about a $7500 charge for that time, as they "didn't see the point" (the original sponsor did, but the rest of the team wasn't executing on the whole project, and nothing was getting done, hence little value arising from anyone's time).
Finding more projects like company X, and fewer like company Y, becomes it's own fun exercise.
We love making money with programming, not by marketing/SEO/etc...
So the most interesting for us is how to make 30K/week by only pure engineering.
Read Justin Jackson's story about the Mayor vs. the Ad Agency
Whichever price model you chose, you must learn early which clients are just wasting your time. There are no hard and fast rules, often it's just a gut feeling, but here are the mistakes I used to make & how to try to avoid them:
1) People who want to discuss their site for an hour or more on skype are not proper businessmen.
Look for people who's time is money - they have some key questions for you, they don't just want to "chat" about their idea. People who just want to chat - get your hourly rate mentioned early. If you tell them "I charge X" and they still want to talk a bit, then go with your gut, but don't talk more than 15min. with anyone without giving some indication of the price.
2) Don't lower your price unless you are repeatedly being rejected at that price level BY THE TYPE OF CLIENT YOU WANT.
That second part is important - your price will screen out the little projects you aren't really after. Don't worry if it is doing that job. But others will reflexively ask for a better deal, and won't push back hard if you don't budge. $10/hr less at "full-time" costs you $20,000 year that you'll never earn back.
What always seemed to happen to me was, the moment I agreed to a lower rate, someone would come along who was willing to pay full rate, and now I'm massively stressed trying to do everything.
3) Ask to see any specs and/or designs early - offer to sign an NDA right up front
This is to let you see how prepared they are, how professional they are, and if the work is defined well enough to be able to offer a weekly rate. Weekly rates are great, but they can be a harder sell for certain types of work.
4) Weekly rates are NOT risky if you define the number of hours/amount of work you can reasonable expect in a week.
Project rates are dangerous. Weekly rates just mean, "Of course I can do that! You understand that will cost X, correct? Would you like to cut something else out, or just approve the overrun?"
Weekly rates DO mean you need to be professional - you are promising 40-50hrs of actual work. For that reason I often go hourly to keep my personal flexibility.
4) Don't run out an "prepare yourself" for the techs you'll need for this project before signing the contract.
This is for the younger folks starting out, mostly back-end developers. Create a career learning plan of technologies you want to improve at, and use down time to study those. Don't jump around to new languages/server tools/whatever that a potential client mentions & never get good at anything.
To a point that's ok, when you really ARE new and need to get familiar with what is out there & being used, but get away from that habit quickly. If it looks useful, schedule it in your Career learning plan & visit at the appropriate time.
I know there's plenty more, but I think those are solid enough that I feel comfortable offering them to people.
Good luck!
A lot of people see freelancing as some sort of gateway to doing what you enjoy on your terms. I suppose that's half true. The other half is marketing yourself and building a client base. Both halves are necessary.
If you're willing to take a major haircut off your rate (both in terms of what you bill and the service fees you'll pay), you can get low-end clients on the freelancing sites. That should really be seen as training wheels though and not a permanent solution. Low-end clients pay less, give you more grief, and the projects are less interesting.
>If the original title begins with a number or number + gratuitous adjective, we'd appreciate it if you'd crop it. E.g. translate "10 Ways To Do X" to "How To Do X," and "14 Amazing Ys" to "Ys." Exception: when the number is meaningful, e.g. "The 5 Platonic Solids."
