Hacker News Reader

Comment by codetrotter | Hacker News Reader

> I’m doing part time consulting, mainly for people I worked with in the past who have started companies, just to scratch the tech itch

How do you pick you hourly rate? If a friend of yours of the past came to you and asked you to consult for him, and your friend offered you say $80 USD per hour, would you find it offensively low? For someone who doesn’t have a lot and wants to hire consultants for their small projects, I think offering $80 USD per hour is not bad. But I’m curious to know how that amount feels to a potential consultant if the consultant already had a lot. Or do you prefer taking a percentage of shares in your friend’s company as pay? Or something else?

View on HN

I am happy to take whatever they offer (including helping for free) depending on where they are at. I don’t need it really and I’m happy to help. But most people at least that I’ve worked with are happy to do what’s fair. I haven’t ended up in a hostile negotiation or anything close to it.

FWIW I’ve done similar for friends who are on a tight budget , consulting for 1/2, 1/3 1/5 “regular” rate. Sometimes with equity but not always.

I’m nowhere near rich, but when I was consulting full time of I had enough hours to hit my “ok” target for the year, it felt right to be flexible with some of the rest of my time …

> How do you pick you hourly rate?

A fair formula that i was given years ago is;

Take the annual salary you would be paid if you were an employee, add 30% to it for overhead/profit and divide by 48 (working weeks in a year) to get your weekly rate. Divide by 40hrs to get the hourly rate.

Another one is to take your annual salary, divide by 250 (working days in a year) to get your daily rate and increase that by 30%, billing in daily units.

The above formula can and should be tweaked based on the project, client, your needs etc.

The tricky thing about formulas like this is that it is very domain dependent.

What you describe is a reasonable approach for a freelancer who expects to bill most working hours. It falls apart for a lot of consulting scenarios where you bill fewer hours and spend more time generating work. In that case you may be better off setting rates so that e.g. 1000 billed hours will reach your base target salary equivalent...

I did say the formula would need to be tweaked as needed ...

OTOH, this is more or less how clients themselves expect to be billed so if you deviate too much without any logical explanation, they will simply go elsewhere.

> OTOH, this is more or less how clients themselves expect to be billed

Again, very much depends on the context. Contract engineering that maps roughly to n FTE is often as you suggest, consulting rarely.

If you are already “FIRE” and do it for fun, or you can schedule all 40h per week on billable work this works but I would increase by 50%.

If you need to do marketing to get clients, meet clients, etc to close contracts then I guess you should expect only about 20h per week of billable work as the rest is on you. So you need to at least double the hourly rate.

Reply on news.ycombinator.com