[b20000]

i have the impression the max contracting rate is 175/hr. when you ask for more, “HR says they never seen such high rates”… that doesn’t leave you with much in california. and i think that once you move to a cheaper place you cannot demand that rate. so how can you increase your rate as a software engineering contractor?

[dbrueck]

$175 is definitely not the ceiling for the US. "HR says they never seen such high rates" is a negotiating tactic - you have to counter. Of course, you also have to be worth it by establishing a track record of being a subject matter expert, delivering the results, and being great to work with.

Another way to get exceptionally high hourly rates is to do per-project or per-phase bidding, but that has its own pitfalls, so a good in-between can be to have some of both.

[b20000]

per project, as in "fixed price"? you say you will do the job for 50K, then hope you can actually pull it off. seems very risky unless there is a provision in the contract to renegotiate without any consequences when it turns out it will take longer?

I don't even understand why they involve HR since it's none of their business. After all, you are a professional service provider. How would you counter?

[dbrueck]

Yes, the risk is one of the main pitfalls I was alluding to, and the best way I know of it mitigate that are the 2 I mentioned - per-phase and having some hourly rate in there too. A renegotiate-with-zero-consequences provision is unrealistic - that's too lopsided in your favor - but some provision to reassess if things are just completely out of whack is reasonable. But yes, there is always risk in this model, so it pays to start conservative and to really get good at it. But to some degree you want that risk, as the risk and reward are related to each other of course - if it's uncomfortably risky, then maybe a more stable 9-5 salaried job is a better route.

As an example of what mixed billing might look like, you might scope out the work for a basic website and then your proposal would boil down to $20k for the initial phase of the site, and that includes 5 hr of customizations not covered in the requirements doc, and then $200/hr for additional customization beyond that, and then already have a rough breakdown of what will be included in phases 2 and 3. The 5 hours you've built in to the bid is your way of recognizing that no requirements doc is going to be 100% comprehensive (nor is your client going to know with 100% certainty up front exactly how they want everything). The hourly rate beyond that shows that you're willing to let some stuff be added, so they don't have to totally stress about getting the requirements doc 100% right. And then the rough sketches of future phases helps prevent you from getting stuck in just hourly mode for everything after the first phase - if they start asking for a really big chunk of work you can say, "yes, we can definitely do that, but that's a big enough chunk of work that it'll really delay the initial launch of the site - let's talk about putting that in phase 2".

One huge advantage of milestone- or phase-based billing (assuming you do it right) is that you are rewarded for efficiency and optimization - improving your skills, creating reusable libraries/templates, finding trusted people you can outsource un-fun work to, etc. - because you are billing on value provided, so over time you hopefully reduce your costs while the value you provide stays the same or increases. If you are always billing at an hourly rate, you have limited incentive to improve in those ways because you end up passing all of those gains on to your client.

> I don't even understand why they involve HR since it's none of their business. After all, you are a professional service provider. How would you counter?

Exactly right, and I think you counter by essentially saying that (in a nice way). But really you want to make the conversation about value you're providing and that if you really get down to the nitty gritty, it's a good deal for them. Don't forget that they aren't paying employment taxes for you, or paying you benefits like medical and paid vacation - those are big numbers. Also, part of the appeal of a contractor/consultant is that it doesn't have to be a long-term commitment, and they don't have to invest in finding or creating the skills you bring to the table. All of these really matter, so it's ok to make them part of the discussion. There are more subtle things too - in talking with them, you can usually get a sense for the level of dysfunction in their org and, if it's not so much that you want nothing to do with them, you can really play up things like your ability to deliver quickly.

There are some cases where you have to stand firm and be willing to walk away. If it's a client you really want to land long-term, then occasionally you might decide to do a smaller introductory project at a lower rate with them as a way to build the relationship and prove out your services, with a clear understanding that this is a good-faith concession you're making and not a permanent reduction of your rates. And then in that intro project you do your best to absolutely kill it and be a great person to work with such that when it is done, they are more convinced than ever that they want to keep working with you and that your services are worth it.

[csdvrx]

> “HR says they never seen such high rates”

The company isn't desperate enough! When SHTF, other concerns take precedence. Like if they have a deadline they can't hold, or a problem that has been messed up before.

> so how can you increase your rate as a software engineering contractor?

Increase steadily every year, to select companies that value your rare skillset. If you are asked at inconvenient times, practice surge pricing like Uber. It will also help you realize how acceptable such prices here.

In finance, rates >$1000/hr do exist. If I'm on vacation, there's an automatic multiplier to that, minimum of *2 in the US, more if I'm abroad.

But competent people that deliver on time (and are always available when you need them) are so rare that it isn't much of a problem.

And to protect regular clients from sticker price shock, I have a "full refund no question asked clause". But I can (and will) fire them if I think they abuse it.

[missedthecue]

You can get higher rates, but not for extended periods of time, or as a reliable income. Only for a short time as you advise/solve an emergency issue. The highest hourly rate I've ever seen was in London for a very specific banking tax issue that only existed briefly. It was the equivalent of $7500 an hour.

[b20000]

thanks. when I was thinking of higher rates, I meant 400-500/hr, sustained, basically working full time for a client or half time for 2 clients each. your full refund clause sounds interesting. has that helped win clients over who would otherwise not have brought you in?