Comment by mbesto | Hacker News Reader

Comment by mbesto | Hacker News Reader

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> I'm dinging him for suggesting that bill rates have anything at all to do with full-time rates; the two are only partially related.

Huh? You just said you are dinging him for making a relationship but then admitting that there is a relationship (albeit partially).

Let's pretend a consultancy is the equivalent of rent-a-center and an individual consultant is a rented out TV. I'm a consumer and I want to rent the TV. I know the TV cost (I searched it on Amazon) and I know I'm just renting it for x amount of days. I know exactly what I'm getting for the price I pay; I get to watch TV for a certain period of time. When building a consulting practice this concept is a bit harder to achieve because the customer has no idea what they will get for $150/hr or $400/hr. They may get a TV that only works for half of the day or for a quarter of the day or half the screen only works sometimes. If it was that easy to assess a person's talent then the customer would just hire single contractors out.

I don't think Jason articulated what he meant by "worth" correctly. You're right in saying there are other values (hence worth) attributed to paying for consultants. However, I think what he is addressing is the fact that potential customers have a very hard time deciding what value your second, or third or fourth consultant is in your newly established consultancy practice. Who are you (as the consulting director) to tell the potential customer that your employee is worth $X/hr? Doesn't the customer ultimately assess the value of what they are buying?

Yes, that was an inartfully constructed sentence. No, consultancies are not like "rent-a-centers". The fallacy here is that the fundamental unit of commerce here is "talent/hour". Here's a sampling of all the things that have value in these transactions:

* An hour of talent

* A committed hour of talent a week from now

* A committed hour of talent a year from now

* Any number of commited hours of talent from the same person

* An hour of talent on 1 month's notice

* An hour of talent on 1 day's notice

* An hour of talent from a problem domain specialist

* An hour of talent from someone intimately familiar with your company's business processes

* Hours of talent rotated through a small group of people to keep them fresh, at less than 3x the cost of a single person

* Total scheduling flexibility over talent/hours

* A candidate for internal career development (management, architecture, etc)

* An A-player who poses no political threat to the company's org chart

Some of these are benefits of full-time employees and some of them are benefits of contractors. Some are benefits of staff-aug contracts and some are benefits of project-based consulting and some are benefits of transactional one-shot consulting/advisory gigs. It's naive to suggest that only a raw hour of exercised talent is worth money.

I deal with consultant price negotiations all the time and quite frankly it's one of the hardest challenges that consulting companies face. I think I might have lost you with my rent-a-center analogy; my point actually was to say that they aren't like rent-a-centers. In the case of a consultancy assessing the value of these transactions is extremely difficult do as a customer and more importantly as the owner of a newly established consultancy owner. Not to mentioned some of those transactions hold more value (and thus price/hr) to different sets of customers. This is really where the unfortunate math behind a starting a consultancy lies. At maturity (i.e. when you have consistent client pipeline) these are much easier to decipher.

EDIT: I just realized I did actually say "let's pretend a consultancy is a rent-a-center". I should have probably worded that differently - hence the confusion.

You and I are both firing on all rhetorical cylinders today, aren't we? :)

FYI, I find the conversation fruitful! The criticism is much appreciated, and readers will do well to hear your counter arguments.

I very much agree with your points, especially that "billable hours" is not the point, that expediency or rarity of talent can easily be more important.

A fuller, more accurate treatment of the concept has to include that. Perhaps it's still useful for folks to (sometimes!) think about optimizing the person/hour, since that is of course an important part of the equation, and optimizing it does help.

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