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Comment by cityzen | Hacker News Reader

I agree with this. I appreciate everything Patrick has spent his time writing and sharing but it's hard to reconcile the writing to the reality sometimes. There's a lot about his world I just don't understand. In this post (https://www.kalzumeus.com/2015/05/01/talking-about-money/) he talks about a 30k/week "rack rate" (I don't really get this term), yet he closed down his most profitable revenue stream which would allow him a good salary (i'd guess more than Stripe is paying) for a mere six weeks of work per year. I don't know Patrick and don't know his motivations but there is always a good deal of talk about being a salaryman (sounded miserable) and charging a lot of money, so why the most lucrative business he had was shuttered is beyond me.

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Why is this hard for you to understand?

I spent a lot of years helping scale a consultancy, and I walked away from that business for a year and a half to do Starfighter with Erin and Patrick. If you doubt how much money we made doing what I told Patrick to do (because my business partners told me to do it), well, Matasano's acquirer is a public company, and this is broken out in their financials. How was what I did any different from what he did?

Project-based consulting is lucrative, but also demanding and stressful. If you're doing the same thing over and over again to make money, then unless you start scaling headcount, it will get to feel like a treadmill. Meanwhile, if you try different things, some of them don't work out, and then people write comments like yours tearing you down and questioning your motives.

Some people just like to play armchair CEO I guess. Much respect to both of you though for pulling the wool back on this stuff.

Question about consultancy stuff... In your opinion is it easier or harder to scale one vs a product business, and do you think one type is inherently easier to scale earlier on?

I've been a part of successful product companies but haven't founded one.

The question of how to scale a product company has a very situational answer; it depends on how valuable the product is to its users and what the customer acquisition strategy is.

I think it's cognitively harder, at least in business terms, to scale a product company --- you have so many more variables to play with. But I also believe what Steve Blank says about this, in the sense that once you get a good set of values for those variables, the business sort of scales itself, in the same sense that a well-designed airplane "wants" to stay in the sky.

The business side of scaling a consulting company is mostly about people management and recruiting.

I think they're equivalently hard from a technical perspective. Maybe a consultancy is just a little bit technically harder.

Thanks for the insight. I worked at ad agencies for a while and it made me really come to dislike service businesses and found I prefer a product company with many customers. I think I like the notion of "customers" vs. "clients."

Have you found yourself to have a preference having been in both worlds? Is one inherently more enjoyable for you?

I don't think I saw this mentioned elsewhere in this thread, but another consideration is that, in his position, you have to do all of the sales and marketing yourself. Getting those 6 weeks of paid consulting work may require months of networking at conferences, cold-calling potential clients, making presentations and blogging to keep your public profile as an expert in the field up to date, keeping in touch with industry acquaintances, etc. $30k/week consulting engagements don't just fall on your doorstep, at least not until after you've spent years of work building up a reputation in the industry. Particularly when you live in Japan, and probably have to fly back and forth to the US on spec regularly to meet people, conference, etc.

Can other hackers comment on the $30K/week figure?

That number seems _excessively_ high. Having seen what top-tier lawyers and McK/BCG/Bain consultants charge, that rate seems almost absurd. Patrick is a celebrity amongst the HN set, but I don't think he has the cachet/reputation/prestige to get away with those "rack" rates with F500 executives.

This reminds me of of that recent indiehackers article posted here where they extrapolated one weeks of revenue to some absurd ARR figure.

I can see landing a couple of gigs at this rate, but it is disingenuous to present this is something he could land consistently...

I've invoiced 5-figures a day for short term gigs repeatedly. Many times to repeat customers.

This is actually a result of Patrick's "charge more" mantra. Confidence in the value provided and delivering on the value.

I can comment to the extent that I can confirm there are 6k/day consultants, and most of the ones I know aren't doing the kind of work where their 1-2 weeks of work generates 1-3% uplift on sales --- which is the kind of work Patrick did, and which a moment of thought will confirm for you pays for an extremely high consulting rate.

6k/day is high; quite high. But it's not implausible.

Well the 6K/day is not implausible. Doing it consistently, or just finding the clients willing to bite consistently, is what I find implausible.

If Patrick has the talent to lift sales by 1-3% in 1-2 weeks of A/B testing and optimization he should systemize his process/technique/magic and found a company around this talent and rake in millions.

I understand that you have more experience selling contracts in a B2B environment, so why not pivot Starfighter into this? Turn your star applicants into in-house consultants and train them on the Patio system and then go from there.

I heard Apple sales are down, might be a good place to start ;)

Because that's not what we started the company to do. See how this works? Yes: we could have made a bunch of money doing some variant of Starfighter that none of us were really committed to. But life is too short. Erin and I like what we're doing now instead, and Patrick likes what he's doing instead.

I feel like this is every HN discussion about "rates---comma---raising them": a mean-spirited attempt to convince the audience on the site that high rates aren't really possible, because if they were, the person telling you they're possible would be wealthy beyond the dreams of avarice. Once again: Patrick is just offering a more refined and savvy version of advice me and my Matasano friends gave him, and our outcomes are part of the record of a reasonable large public company.

This, by the way, is why I'll never write this kind of end-of-year wrap-up post (and, for the same reasons, why I'll never open source code unless I absolutely have to). It's also a big part of what I'm trying to get my hands around for the Starfighter wrap-up post. When we started Starfighter, everyone said "you're going to have such an amazing time because of all the HN credibility you have". But pretty much every time Starfighter actually came up on HN, I just wanted to hide under a rock. Even when the site is civil, it's still committed to grind away any joy you take either in accomplishing something near or even in just sharing something interesting you learned.

You could sort of understand an atavistic urge to shit all over someone sharing an interesting experience that was pleasant or impressive. There's a bad Morrissey song about that. But look what happens when you share an interesting story that obviously involved significant unpleasantness and an honest accounting of one's limitations: a giant thread full of people piling on to question your motives and life choices. You can't win.

It's like the worst possible version of "tall poppy syndrome", where the small- to- medium- sized anomalies get chopped down, but Elon Musk is a demigod.

I always appreciate blog posts, hn comments and tweets from both Patrick and you, but don't always make the effort to openly appreciate it, and maybe I should to balance the critics and cynics.

So. It seems clear to me that every project/venture that either of you have attempted, whether a mega success or not has clearly taught you both a lot, and both of you make attempts to pass some of that knowledge out. At times publicly, and frequently you'll see posts of people appreciating private feedback/help as well.

I admire specifically that when all three of you set out to do something that would have made you happy and be profitable. Yes, people like to talk of pivot, and changes; but if any of those change entirely what you wanted to build, what is the point? I'm glad you all chose to stop early enough to move on to the next thing, having learned new things along the way.

Your posts and Patrick's posts are always interesting, and insightful. I promise you, some of us lurkers are paying attention very closely.

Not even tall poppy syndrome, because if you dare to talk about how something went horribly wrong (aka you're a short poppy), people react in the way you describe above.

It's the crab bucket:

https://news.ycombinator.com/item?id=1465278

If you succeed, people have to tear you down (to feel better about themselves). If you fail and dare to be honest about it, people have to tear you down (in order to feel superior). People are terrified of failure because if it could happen to e.g. patio11 or you or me, it could definitely happen to them so they must immediately distance themselves by giving themselves the feeling of superiority, and because just telling themselves they're superior in a quiet room alone isn't good enough, they must perform it in public for an audience to get an extra hit. Clack clack clack go the claws.

Six weeks of billing per year != six weeks of work. I believe when he was consulting he also travelled quite a lot (both for engagements and to drum up business) - having a family makes that less attractive.

Agree with you 100%. To me, reading those kinds of posts are very misleading as they give you all the good stuff but none of the gory details of travel, how long it takes to close a deal, etc. I have clients all over the place, rarely travel and make a great money. It just seems very strange to me that someone that seems to have such a grip on billing, etc. can't seem to make these things work to his benefit.

A post that devoted equal time to all the boring stuff wouldn't be much of a read. I think where people get thrown is when he talks about the _technical_ skills required which he downplays. As software developers I think it's easy for us to think that doing really technically advanced work implies getting paid more.

Transparency isn't about things being exciting all the time, it's about being transparent. I would venture to guess that Patrick is not a 10x developer and his real skill is self promotion. I agree about equating really technically advanced and getting paid more and also agree that it's bullshit. Any independent developer should spend more time understanding sales and self promotion than learning another language, IMHO. You will get far more bang for your buck by being a good negotiator than you will from coding the bestest codez around.

Two things come to mind here: First, a "rack rate" typically means an advertised rate, which gets discounted under a variety of circumstances. Second, I believe that's gross, not net.

Net of what?

Expenses. ISTR that Patrick did a significant amount of travelling for consulting gigs. (Which may also be a reason for avoiding them now that he has a wife and child.)

Read the blog post I linked to. There is a section that specifically says "What I did to earn those rates" that does not mention AT ALL that he is spending half/one third/some/very little money on travel and expenses. I've been independent for nearly 20 years and I rarely include travel and expenses into this big bucket called "RATE". The more I think about it, if a significant amount of that money was used for expenses than it makes the whole thing look quite bad.

He even says at one point, "Spoiler alert: there is virtually no difference in the mechanics of work done between $100 an hour, $200 an hour, and $30k a week — all of the leveling up there is in sophistication on who you go after, what engagements you propose and deliver, and how you package things for clients." which would lead me to believe that he's just charging $30k a week, just as he would charge $100/hour.

I think people need to just take this stuff with a grain of salt. i have worked with quite a few large companies over the years and I don't believe any of them would pay $30k a week for: "I combined a modest amount of programming skill (typically Rails, Ruby, and Javascript) with substantial experience with using engineering skills to move marketing/sales levers, including by doing SEO, email marketing, A/B testing, (light) UX design (typically around high-value parts of a SaaS business like signup flows or purchasing pathways), etc. I turned down essentially any gig which was strictly engineering in character and rather aggressively went after bigger projects which were “closer to the money” every couple of months.". That said, I could very easily see a company hiring someone for a $30k contract to do those things, the weekly rate just seems extremely misleading to people that are struggling to charge even $100/hr (which is not a bad rate by any means).

I used to work in software training. We charged $4k/day as a base rate. Travel was charged separately. Most contracts were M-F. That's $20k/week, and that doesn't count that your employees weren't doing their jobs for that week, they were learning stuff. Also, literally our entire curriculum was open source, so it's not like that was secret sauce.

Yeah, it's not the exact skills you're talking about, but it's similar.

I guess I'm also confused about "I don't believe any of them would pay $30k a week for" vs "I could very easily see a company hiring someone for a $30k contract to do those things". Isn't hiring someone on a contract to do these things for a week consulting?

>I guess I'm also confused about "I don't believe any of them would pay $30k a week for" vs "I could very easily see a company hiring someone for a $30k contract to do those things".

I think cityzen mean $30k a week vs. $30k total. The wording was maybe a little loose, but that is what I gathered from it.

Key point is in your opening, "I used to work in software training. WE charged $4k/day" which would lead me to believe this was a company and not a person. In that instance, training, it makes complete sense to charge those kinds of rates.

My point about $30k a week is that if ONE person walked into a room and said, "Hi, I'm Bob, this is what I do and my rate is $30k a week" it wouldn't fly very far. Now, If ONE person walked into a room and said, "Hi, I'm Bob, this is what I do and it's going to cost you $30k" is very different, whether it takes 30 minutes, one week or a year.

From my experience, many people read Patrick's blog and similar blogs to try and understand the economics of how to make more money as an independent developer. At some point this stuff becomes more about luck than it is about actual development economics. The boring companies most developers have the "privilege" of working with just don't have the ability to make these connections and justify budgets like this, worded in the context of "this is my rate per week"

The company was two people, then three. That's all the bigger it was. You can do the same thing as a one-person company. The distinction isn't that large. (I did not make that much money but first, I was a special case and second, this is about price, not about wages.)

And I do think this advice is applicable to non-training stuff, but Patrick already wrote about it at length so I won't get into that here :)

> whether it takes 30 minutes, one week or a year.

Ah, sorry, I misunderstood. Thanks for clarifying.

For F-500 corporations, a $10k day delivering a training course with assessments isn't unheard of. But nobody is close to 100% utilized doing that work.

Absolutely. We _definitely_ weren't near 100% utilized.

I actually think that might be why bootcamps became an attractive proposition; it's much easier when you're selling months at a time rather than weeks or days at a time, in a sense.

I worked in consulting/training for 4 years now, but if this work would be 100% utilized, i would have quit after one year. So the rates must be high to allow for just 50% utilization or even less.

Yes, this too. I assume all three of us can agree that building salable courseware is demanding and sometimes tedious, and that actually delivering a course is fucking grueling, even when you're having fun doing it (which is not every time).

Sure - so let's say you have PI insurance of $100/week, and you do an international flight each week also at $1000/rt. This still leaves you with $28,900/week pre-tax? What other major expenses can you see with private software consulting?

A "rack rate" is not a typical rate, so he'd presumably take in less money than you're assuming. He lives in Japan and most of his customers would probably be in the USA, so if he wants to be able to function he should be flying business class. He also needs somewhere to stay, transportation, and food while in the customer's city; and it is the nature of consultancies to not have anywhere approaching 100% utilization, due to time spent on research, promotion, and networking, and the fact that gigs never fall neatly into your schedule.

I'd guess that "full time consulting" would work out roughly along the lines of

* Average billing per week of consulting: $15k

* Round trip business class airfare: $3k

* Hotel, food, transportation at destination: $2k

* Profit per week of consulting: $10k

* Weeks spent doing consulting per year: 20

* Take-home (gross) salary: $200k

I'd guess this is more than Stripe pays him, but not dramatically more; and if I had a wife and child I would certainly prefer to not spend half the year away from them.

If I were running a consultancy full-time, and didn't hire anyone, I'd model that as 35 billed weeks a year at $30k. Travel to a client is billed to the client separately via a magical sentence that Thomas taught me: "I will expense travel as per your standard travel policy." I'd assume roughly $50k to $100k in overhead (legal and tax advice, travel to conferences to do prospecting, etc).

I have never ran a consultancy full-time, and didn't particularly want to start now. It was certainly an option, but spending a few years building Atlas seems much more fulfilling.

Travel to a client is billed to the client separately via a magical sentence that Thomas taught me: "I will expense travel as per your standard travel policy."

How does that work exactly? I mean, logistically -- if you're coming in from outside, you generally won't know what their standard travel policy is.

Pitch the gig, sign the contract, then you do the boring logistical details. One of them is arranging travel. At my shop that was simple: "How doed $FOO handle business travel? Are you going to book my tickets/hotel or would you prefer to be invoiced for them?" "Great; send me a copy of your travel policy."

I also thought, early in my consulting career, this would be a big deal. It never was. Nobody who can hire 10 programmers is surprised what a trip from Nagoya to SF or NYC or Berlin costs.

What you're doing is putting the client on notice that (a) you're going to have to travel to complete the engagement and (b) they're on the hook for it. From there, things usually proceed as if you were an employee rather than a consultant: you ask them how you should book the travel, and you get it reimbursed later on.

I think you ask. Rephrased, "I expect to be reimbursed for travel, but will try to keep my airfare/hotel/per diem expenses in line with what your employees get. (Hint: provide me a copy of this policy.)"

> I have never ran a consultancy full-time, and didn't particularly want to start now

Just interested - does that mean that you've never actually been a full-time consultant?

And do you really think that it's within the realm of possibility to pull $30k/week for 35 weeks/year? (ie: $1m+ after your $50-100k in expenses).

Yes, I think it's approximately as straightforward as building a SaaS company from scratch. Which is to say "non-trivial" but very, very within the realm of possibibility.

I've written a ton on this topic, on HN and my blog. So has Thomas, among many others.

Professional services can be very lucrative; film at 11. My lawyer charges $750 an hour and my accountant $600. I have no difficulty believing they have 70% utilization. I know there are HNers that find this difficult to credit. If you take nothing else from the 3 million words I've written, take "you can charge vastly more for your skill set than you do if you connect the deliverables directly to business value." (True for consulting, regular employment, selling products, etc.)

It's boringly straightforward to scale the business after you've done it once. Success breeds success; you ask your newly satisfied client for referrals and follow-on work, you use case studies made with them to target firms at similar or slightly higher levels of sophistication, you turn the one-off engagement into something that you can predictably pitch and execute like a restaurant can predictably cook eggs to order, etc.

I don't know if Patrick could do that, but I've been on the other side of deals materially equivalent to those numbers.

A 30k rack rate at those utilization rate is a high number but not an impossible one.

It is not a number you will get for software contracting. It's one you'll get for solving business problems that cost/are worth much more to your clients than that.

Sometimes that involves software.

I don't doubt it. I've certainly seen people bill similarly (and obviously it doesn't involve writing that much code) - I'm just trying to put the pieces together in this context.

The examples I'm thinking about are entirely code-based, with virtually no business reasoning involved.

Why not just ask him rather than derive it from first principles?

That might puncture the brand-management force field.

Being a solo-consultant (or small firm) is extremely taxing from my experience and I stopped after 4 years of travelling too much, sleeping in stupid hotel beds, having 5 days of uninterrupted 120% work with 4-10 people, never getting to see the finished thing, not getting much appreciation. its just exhausting even though it easily makes a lot of money, you learn a lot, the job itself just sucks.

My experience exactly, started in 1998, stopped in 2002. I enjoyed the work but it was exhausting, add in the travel and it was just too much.

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