[Silhouette]

Just as a minor PSA: I get that certain consultant types around these parts are always saying "raise your rates", and I get that a lot of people who work freelance do undercharge and often significantly, but the advice has very limited value unless it has some sort of quantifiable element attached to it. Otherwise, with due respect to those consultant types, it sounds a lot like "We're obviously smarter than you, because we charge enough and we're sure you don't" without any real data to back up such a claim.

Obviously rates vary dramatically according to many factors other than the desire of the freelancer/consultant/whatever who wants to charge them: location, industry, level of experience/credibility/relevant specialist skills, and so on. But without even a general indication of how much the poster child consultants of HN have succeeded in putting their own rates up before dispensing this advice endlessly to everyone else, it's hard to take seriously the idea that an average freelancer who isn't Internet famous is going to jump from their normal rate to something on a different kind of level, at least not without fundamentally changing the way they're working in a lot more ways than just the cost per unit time on invoices.

Let me ask a very simple question, which hopefully those consultants might be able to answer without giving away anything sensitive about the specific rates they are personally charging right now: if the going rate for freelance software development work in your area is typically in the range $x-$y, and you have moved via successive rate increases and repositioning what you offer to $z, approximately what are the ratios between x, y and z? For extra marks, since in the podcast a comparison was drawn with the way lawyers charge, how would z compare to a typical range for lawyers working in the same area and with the same kinds of clients?

[adrianhoward]

Let me try and spin the "raise your rates" advice in a different way - since it's a piece of advice I give pretty often too.

It's not necessarily due to undercharging that I advise folk to "raise your rates" - it's because it's a fantastic client discovery mechanism.

You want clients who pay more. The clients who pay more tend to get more value from your work.

So at any point the clients you have that are willing to pay more are generally better clients (for you and for them). So if you raise your rates and only support those clients you get a set of better clients who are going to be happier with your work, and give you more money.

Those clients, in turn, allow you to find similar good clients. Through recommendation and marketing for those clients. So you grow your set of good clients.

You'll then find a subset of those will be willing to pay more - because you provide more value for them.

Repeat. You will find that some of the work you do changes radically - at least in the way you sell it - during this period.

Raising rates isn't (just) about extracting the most money from your clients as possible. It's a way to help you find the clients who you will serve best - and because of that they're more than happy to pay you more.

To answer your end questions (and this is a little bit unfair since this is the second time I've started my own consultancy so have probably moved through the levels a bit faster this time - and I have a very strong idea of where my value-niche is).

If normal hourly is $x to $y - then I very deliberately started at $y just under 2.5 year ago (I very much do not want the clients who want the cheapest possible solution - learned that lesson ten years back ;-).

Currently my effective hourly rate (I don't actually charge by the hour any more so clients never see that number) is about what my day rate was when I started - so about 1:8, 1:9... something like that. Looking back with 20:20 hindsight I could have made that transition quicker if I'd been braver.

After a conversation a little while back I have discovered there are people doing similar stuff to what I'm doing with a slightly different kind of client for about five times what I'm charging. This is being actively addressed ;-)

[manmal]

They do mention in the podcast (rather at the end) that internet famous is not customer famous. Patrick is well-known only to HNers and then some, but not to all CEOs in the world. Much seems to come from word of mouth.

Do you think Patrick or Brennan are übermenschen? Can they program 30x as good as you? They focus on bringing value to clients, discarding pride in technical perfection (well maybe they do, but your customers don't want to hear it anyway). It's taking development focus from "how you do" it to "what you do". Once you do that, your methods change over time - at least that's what I got out of this podcast. Of course you can't demand 100k for an app from a bootstrapped startup - but you can demand 100k for an app which makes a bank some more millions per year.

[Silhouette]

To be clear, I'm not asking because I'm concerned about my rates. I don't work full-time on contract projects as I have other business interests as well, but even when I do, I seem to be somewhere around what Patrick considered the sweet spot in terms of size of client, who I'm dealing with, etc.

I just wish that if people who have been consulting for a relatively short time themselves want to share their advice with others who might be thinking of going down that path, they would give some sort of meaningful context to guide those other people about what to expect in practice. Otherwise, we're going to have a whole load of people who were actually on perfectly respectable if not exceptional rates, who were happy doing the work they were doing, whose clients were happy with the work they were doing, and who can't conveniently tie their personal contribution to an X% increase in the total profits of their clients, yet who then think they should be charging 10x as much and start going after new clients with unrealistic expectations. In most places, the software development industry is still quite a small world, and I'm genuinely concerned that such an approach is going to damage young developers' careers.

To be frank, I'm deeply skeptical about the current round of Tim Ferriss-style "Make More Money Than God In Five Minutes" discussions on HN. There are some interesting perspectives, and I'm certainly not criticising Patrick or any of the other guys for volunteering their points of view. But I do think quite a lot of that advice is going to be hard for many people to apply in practice, because the context won't be the same, and I do think it's borderline irresponsible to push the advice in as general and unqualified a form as sometimes happens, even if it happens with the best of intentions.

[mgkimsal]

This is slightly a plug for my conference, but is also the motivation behind it.

I've been in software dev for 18 years or so. I set up a small shop 12 years ago, went bust after 4 years, then went solo again in 2007. I've not expanded beyond myself (so far), but have been hopefully getting better at what I do, both in terms of software but also business skills.

A couple of years ago I started seeing an uptick in questions from people in the area: "How much do you charge? How do you decide what to charge? How do you write a contract? How do you get clients? How should I do XYZ? What tools do you use?", etc.

People who know me know I love to talk, so I'd happily answer. I started to realize though, that I was only giving one perspective. Even when I'd qualify that perspective as "this is just my experience", it didn't help them very much. I started getting other people I knew involved in the discussions, getting their perspectives, which were sometimes vastly different than mine, and they'd arrive at different conclusions. Eye-opening to say the least.

At the point, the idea of the conference (http://indieconf.com) was born - an event to bring people together to foster the learning, Q&A and networking which helps those questions get answered with far more perspectives than I could offer on my own.

Reading a book is not necessarily bad, but being able to ask questions about those books' ideas face to face, get answers, and have discussions about those topics has worked out decently for the conference over the past couple years.

[bdunn]

I am in a VERY low-tech, slightly rural area where the median income is somewhere north of $30k a year. In no way does that affect my pricing, and I charge more than most Bay Area consultants.

My method is pretty simple: understand the client's business, get to the root of why they're thinking they need Project X, and then only proposing solutions that have a high likelihood to return a positive investment (this sometimes means having hotly debated arguments with said clients.) In short, in no way do I position myself as "tell me what you want and I'll build it."

The end result has been positive growth and ROI for my clients, which makes my hourly rate immaterial if the product I deliver yields steep dividends.

[patio11]

Like Brennan, I live in a VERY slow-tech, more-than-slightly rural area. That isn't my pricing anchor, though.

Suffice it to say that I was charging a rate many American engineers my age would have been (too) happy to take when I started out, and my most recent rate is 7.5X that, and in a few months I'll be putting 10X on proposals and winning a similar percentage of them.

Lawyers who made their last client millions attributable to a two week engagement probably do better than me, but the typical lawyer working for my clients didn't do that recently, so without knowing anything about their rate card I'm going to assume it's below mine.

We're really not just blowing smoke here.

[Silhouette]

Thanks (to both of you) for the replies.

We're really not just blowing smoke here.

I'm not claiming you are. On the contrary, I agree your argument, under the right conditions. However, I am concerned that you are generalising way, way too much and you're setting up a lot of naive but entrepreneurial young developers for a nasty reality check.

Here in the UK, the vast majority of freelance/contract work isn't the kind of lucrative consultancy gig that various HN regulars seem to be arguing everyone should move towards. Obviously there is a significant amount of high-end consultancy work around, but mostly the freelance market is more about having a flexible workforce, where local businesses can bring in extra resources on demand without the overheads of full employment and freelancers retain a lot more flexibility than full-time employees working for a single employer. The freelancers are often still working with others, it's just for a specific project and with arm's length management etc.

Now, please consider that there is usually no way for someone in that position to demonstrate the kind of direct value contribution that is the basis for your arguments to clients that much higher rates are justified. If nothing else, it may be impossible to properly separate the value of contributions from different contractors working on the same project.

Moreover, it's all very well arguing that your contribution has raised £X for the client (for some impressively large X) and so you are worth a significant chunk of that £X in fees, but this relies on the fact that the client can't buy a contribution of equal worth to them for a lower price elsewhere. There are numerous highly skilled freelancers who by their nature are always looking for the next job, and unless some sort of mass unionisation happens or you're talking about an extremely specific niche where literally only a tiny number of consultants could do the job at all, you simply aren't going to be competitive at 10x the going rate. Sure, maybe you're worth it, but that still doesn't help if any of 20 other people with a similar skill set is willing to do the job to a similar standard but for only 2x the going rate.

So while I have no objection to pointing out that developing valuable skills and then pitching yourself as a consultant in a certain field can be extremely lucrative relative to being a freelance code monkey, I do think it's misleading at best to suggest that all, or even most, freelance software developers can just put their rates up rapidly and change themselves into consultants in the way that worked for you guys (and to some extent for me, I suppose). The strategy doesn't scale to the freelance software development industry as a whole, and in many cases it would never work if individuals tried to do it alone without taking the relevant part of their profession along with them en masse. Even if it did, it would probably mean doing a very different job and potentially giving up some of the benefits or choices that motivate many people to turn to freelancing in the first place.

[sedev]

"Moreover, it's all very well arguing that your contribution has raised £X for the client (for some impressively large X) and so you are worth a significant chunk of that £X in fees, but this relies on the fact that the client can't buy a contribution of equal worth to them for a lower price elsewhere. There are numerous highly skilled freelancers who by their nature are always looking for the next job, and [...] you simply aren't going to be competitive at 10x the going rate. Sure, maybe you're worth it, but that still doesn't help if any of 20 other people with a similar skill set is willing to do the job to a similar standard but for only 2x the going rate."

This is why Mr. McKenzie is forever telling people "don't be a commodity." You are describing competition among commodity programmers. Don't be a commodity. You can - and I am paraphrasing him here - take yourself almost entirely out of the "commodity programmer" pool by a number of simple changes, such as not calling yourself a programmer, quantifying the business value you're adding, and negotiating confidently (part of which is not anchoring the price of your work to the price of commodity work).

You have more power than you think to stop being an interchangeable part. Being an interchangeable part sucks, you're right! Mr. McKenzie is trying to point out to you that you can stop.

[Silhouette]

This is why Mr. McKenzie is forever telling people "don't be a commodity."

I've never noticed Patrick himself use that exact phrase, so I'm a little wary of putting words into his mouth here, but let's consider your point in isolation.

The basic principle here is that in order not to be that kind of commodity programmer, you must have some combination of skills, knowledge and resources available that is both rare and valuable.

Programming is hardly an esoteric skill set, and neither is being able to speak "business" to business people. Do these skills have value? Absolutely, often a great deal of it. And sure, not everyone in software development is a great developer, and not everyone in software development is good at communicating with non-technical people who play other roles in the wider organisation. But for the argument to work in more than a handful of exceptional cases, it doesn't need "not everyone" to have those skills, it needs "almost no-one" to have those skills. If what you offer isn't rare, chances are you're offering a commodity service whether you realise it or not.

In reality, there are many, many people out there with the technical and communication skills to make the kinds of high-value contribution that Patrick and co talk about. Many people do it all the time, whether as freelancers or employees. And while a lot of those people would have difficulty formally quantifying the value they offer, not least because they might be working as part of a team whose results are only measured in aggregate, I don't think the real problem is a lack of recognition from smart management (those wonderful people that consultants like to call "good clients") of the contributions made. That is usually only a factor if you're working for someone who really is a bad employer/client, in which case there are many employers/clients you could work with instead who would acknowledge your contribution more honestly.

But even in a positive environment, it is not easy to stand out and change how you are viewed. You can't just raise your rates dramatically above most other people's rates if you're working in a competitive market, which freelance/contract software development certainly is. So you have to create a new market, where the rules are different. But at that point, you're not really doing anything like freelance/contract work any more, you're building a complete new business, with all the pros and cons that come with that.

Now, I don't think anyone would disagree that running your own independent business is by far the most lucrative way to make money in a field like software development. I certainly wouldn't, and on HN of all places I don't have to tell anyone about the potential returns of entrepreneurialism. All I'm saying is that it's a completely different job to being a freelancer/contractor who happens to charge much higher rates and put "Senior Consultant" on their business card, and I dispute any general claim that the transition is necessarily either possible or in the best interests of most people who work successfully as freelance contractors today.

[infinite8s]

Not in this post, but a quick search on HN shows patio11 saying that ("don't be a commodity") many times:

http://news.ycombinator.com/item?id=3261769

http://news.ycombinator.com/item?id=4555558

http://news.ycombinator.com/item?id=4556091

Those are only the most recent.

[mgkimsal]

For me, as a solo developer/consultant, my standard rate is about 50-80% more than most other solo developers I know in the area. My CPA is $25/hr more than my standard rate. Attorneys in the area are anywhere from $50-$100/hr more than my standard rate. Does that help at all?

My area is Raleigh, NC, and currently all of my active clients are in NC.