It’s one of the most common questions a consulting newbie asks: How much should I charge?
I was a software consultant for three and a half years. First I was into Plone, then I worked on a big Zope 3 project, and more recently I’ve done some Rails stuff. I still do the odd gig here and there as I make the transition to running my own company.
If you’re currently looking for contract work, the rate you charge will be one of the most important decisions you make. The more you get paid, the more freedom you have to either work fewer hours now, or save up and run around the world later. Your hourly rate is also an important part of your self-marketing strategy.
Here are four simple tips for determining what your skills are worth:
1. You’re probably aiming too low.
Contrary to what you might think, selling yourself as an “affordable” consultant is not a good thing. The same client who turned you away at $50/hour may have hired you for $90/hour. If that seems strange, think of it this way: If you were going to pay someone by the hour to operate on your heart, would you go with the guy who charges $30/hour, or the guy who charges $300/hour?
Clients that look for really cheap consultants tend to be a pain in the ass when it comes time to collect, and they often squirm every time your estimate changes.
Don’t feel guilty about going for the gold. Take comfort in knowing that whatever someone is willing to pay you, they intend to make back at least tenfold. On my first contract, I asked for and got an hourly rate that was four times what I was making as an employee. Later, I even doubled that rate for some projects.
Also, don’t look at what other people are charging. First, they’re also probably aiming too low. Second, their skills and experience might be very different from your own.
2. Don’t do fixed-rate contracts.
(My experience is biased towards software consulting. This point won’t necessarily apply to all types of consulting work.)
Creative work is organic and somewhat unpredictable, which makes it a poor fit for fixed-rate contracts. In these types of projects, someone always gets burned: either the client gets shoddy work, or the consultant does a great job but ends up working for $5/hour.
The best way to balance the risks on both sides of the equation is to bill by the hour and give your client regular progress updates. If a task is taking longer than expected, let them know right away and offer options for how best to proceed. Rather than resisting the organic nature of creative work, learn to use it to your advantage.
If for some reason you must do a fixed-rate contract, think very, very long and hard about how many hours it will take you to complete the work, and multiply that by the figure you came up with in #1. Then triple it.
3. Keep it simple.
I’ve heard of some people billing by the hour for the analysis and design phase, then doing fixed-rate for the implementation. Others wonder if they should charge interest on late payments, or offer incentive packages for clients that offer you more work.
Keep it simple. Have one standard hourly rate, and increase it by 50-100% for really short-term work.
4. Use the Wisdom of Crowds (TM).
Your skills are worth no more and no less than what somebody is willing to pay for them. To figure out your true market value, send out 10 CVs every day, and test different rates. Do this every weekday for at least one month. If yours is the kind of work that can be done with just a laptop and a latte, there are probably plenty of online jobsites and company websites you can use for leads.
For example, it was only five or six months ago that I got into Ruby on Rails consulting. Having no professional experience with this specific framework, I knew it would be an uphill climb. But two weeks and 80 CVs later, I landed a contract working on a high-profile website with a team of Rails geeks distributed around the world. Over the next couple months more responses from my “shock and awe” campaign kept trickling in, even though I’d sent out no more CVs. I found another client at a rate that was even better than what I’d been working for in my area of expertise pre-Rails.
If you’re serious about getting paid what you’re worth, “shock and awe” should be your bread and butter tactic for finding work you enjoy at a rate you’re happy with.
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