Ramit Sethi and Patrick McKenzie on Getting Your First Consulting Client
kalzumeus.com
kalzumeus.com
Ramit and I recorded three of these interviews on starting consulting businesses, although we have poor message discipline so we couldn't resist talking product as well. The next one is about pricing. (It could be "Charge more!" for an hour, but isn't, although I hit that theme a few times.)
On a related but unrelated note, my usual podcast with Keith Perhac (and special guest Brennan Dunn next time) also is going to be a consulting-stravaganza next time. We talked the origin stories for our three consulting businesses (I run a sole-prop consultancy as roughly a 20% time project, Keith runs a small practice, and Brennan runs a fairly large many-people-at-full-time-utilization consultancy) and what we've learned along the way about hiring, pricing, cashflow management, chasing invoices, pipeline, and all that fun stuff.
My totally subjective opinion is that, if you're a freelancer or consultant, any one of these will be probably more useful than the entire rest of my blog put together. If you liked any of that, you'll like these, probably a lot.
If you provide value, and you're good at what you do, why not ask? If it's because you can't handle being told no once in awhile, maybe Rejection Therapy[1] is the best way to go. The game can be applied to all aspects of life, not just getting higher hourly rates.
I still can't believe Brennan's only charging $39 (with promo code) for it.
I do the "sign up for 6 month contracts on-site" style of consulting. Do you have advice for those people?
Thanks for a very timely podcast (at least for me). Now to read the rest.
for example, asked your rate, just double the amount you thought of. If you build in plenty of ceiling, you can have the other guy look like a negotiation genius to his boss, and you still have achieved your original goal. But don't ever just cut your rates, ask for something in return - IP rights to software, endorsements on your site, just don't cut your rates. (I have, I always regret it)
PS I think tpateck has "don't cut your rates" as a tattoo. :-)
PPS - getting something in return really makes the other guy look like a negotiating genius
However, I've made (and am still making) many of the mistakes that you both talked about in your interview, so it's a great reminder to pop into earn1k and rework through some of the modules.
As a side note, I also used the principles behind earn1k to launch a physical product business in my local area and the biggest tip I took out of earn1k was to not do ANYTHING that was an indirect way of getting clients. It's been two months and I already have 5 of the best restaurants in my city as clients.
Thanks for the call!
Thanks for saving me ~40 hours of brain-melting work this month. The product is awesome. (And built on top of mturk, which just makes my head explode... your Q/A processes must be Space Shuttle quality.) Take my money. Take more of my money. Take as much as you need. I would be a very, very sad podcaster if I had to hire a freelancer to do this every time.
It's a brutal industry, though, lots of price pressure, and seemingly becoming commoditized.
You're right there -- I was reading the first few paragraphs and thinking "thank God I'm reading this now and not 6 months down the line". So much actionable advice.
Here's a question for you: as someone making money from both services and products, but who has avoided the VC-lottery-ticket startup game, what's your opinions on starting a service business vs starting a product business?
I'm in the early days of building an e-commerce startup while freelancing on the side. Even though my day rate is on the low end, I'm still earning more than most people my age in the UK (I just graduated), except maybe junior IB analysts, and I'm pretty confident I could earn way more, especially if I focus on freelancing^ full time. Pitch myself at a much higher level, start hiring a few people, build a service business.
^(Yeah, I know, I should say "consulting" and not "freelancing").
But the obvious downside is that a service business isn't scalable. A scalable product business is much better, if it's a success. Plus Steve Jobs and Elon Musk would never have made the history books, or had the same impact on humanity, if they'd sold services instead of products -- but they're the 0.001%. What's your opinion?
I like celery, and I like peanut butter, and despite them not being obvious complements they work together in a way better than even the sum of the delicious parts. I sort of feel the same way about products and consulting. I enjoy nothing in my work life so much as I enjoy making and marketing software. It affords me an unbelievable amount of freedom in arranging my day-to-day and month-to-month affairs. I get to pick everything I work on. Yay.
In consulting, I occasionally have to do things I don't really enjoy. (Contracts -- bah, not fun.) On the other hand, I get to work with very smart, fun, good people, which is something I genuinely miss when I'm in the BatCave working on my own stuff. The challenges are new and different as compared to working on my own stuff, and I get to take a look at something entirely novel every month or two instead of once-in-a-blue-moon. (Last big win for BCC? May-ish. Last big improvement to the state of the art, for the narrow art-field of small software devs? Hmm, years ago. Last big win for a consulting contract: last gig, and happens almost every gig. Last big improvement to the state of the art, for the narrow art-field of B2B software companies: last gig, and happens maybe every other gig.) Also, there's the money thing. I'm not terribly motivated by money, but I'm now a recently married man, and the combination of consulting + products is even more stability than products alone was.
But the obvious downside is that a service business isn't scalable.
Not scalable like Oracle/IBM/SAIC are not scalable, or not scalable like charging only $20k a week is not scalable? Because both of those strike me as accomplishing many of the goals I could ascribe to the word "scalable."
What's your opinion?
I suspect that there's a real fundamental values gap (or a vastly different collection of weights and terms in utility functions, if you swing that way) which make my opinion less useful to you than it might otherwise be.
"I suspect that there's a real fundamental values gap (or a vastly different collection of weights and terms in utility functions, if you swing that way) which make my opinion less useful to you than it might otherwise be."
I'm very curious as to what exactly you mean here. I have an inkling what you mean, but it sounds a bit like:
"So which did you prefer, Paris or India?"
"Well, they're both great, in very different ways. You like adventure and I like relaxation so my preference will be different to yours".
"But you've been to both and I haven't been to either, so I just want to hear what they're really like, and what the guidebooks don't tell you..."
I'll send you an email, would love to hear more of your thoughts if you have time.
Let's say there's a particular worldview, call it A, under which Musk is a heroic figure. (There are infinitely many, but pretend that we can narrow it down to one well-specified one, for the sake of illustration.) Let's call my worldview B. A and B do share occasional points of overlap, but they're very, very, very different from each other. A is, in fact, so different from B that if I describe some salient ways in which B is different, I think many people who subscribe to A would think I was intentionally picking a fight with them.
One minor codicil in B is "All else being equal, do not pick message board fights, and most especially do not pick fights on message boards at 6:30 AM in the morning."
Can I ask what the improvement was ?
I'll Byte. ;)
If you covered it in one of the still unreleased portions of the interview, I'll just wait.
Oftentimes, I feel like I could bring a lot to some company's table, but no one will even consider my offer because of my geographical situation.
Oftentimes, I feel like I could bring a lot to some company's table, but no one will even consider my offer because of my geographical situation.
How are you identifying clients? How are you pitching them? Do you have problems with leads when you get to the "By the way, I'm in Russia" question? Does that happen a lot? I think you can probably finesse the location issue if you pitch a) more prospects and b) better prospects.
To be honest, I just responded to some web-published offers for contract work I saw anywhere, and I didn't have any measurable progress at all. Most of them just didn't respond, but those who did told me that they weren't interested because I wasn't from US, so it disappointed me (after all, I'd spent non-trivial time writing a reply, not just blanket-bombed them with my resume) and hurt my confidence. For now I've got a regular job, but when I decide to move on, I will certainly try to do more and better prospects.
Thank you for the answer, Patrick, it means a lot to me.
In the spirit of this post, it pays to be active where potential employers are. If you want to work with HN type of companies, then being an active member of this community is one of the surest ways to success, especially if you have physical barriers such as being in a different country.
My consulting business (shameless plug: http://argonautlabs.com) got started by me reaching out to someone I knew via Twitter and asking if he needed any help in his consulting business. At that moment, he didn't, but he asked me to send him what my skills were. I did. Two weeks later, he sent me an email with something that was going to take 6-8 hours that he didn't really want to mess with. I did it well, and that led to more work from him. From there it spread by word of mouth. People I did work for referred me to other people, and it just grew from there.
Feel free to email me if you want to talk more. I'm always happy to help another freelancer out.
I heard this so often, agreed, but at still continually surprised to find out that I've underpriced myself.
My initial rates 18 months ago were X. I gradually increased it, hitting 2X a little while ago.
Decided to try 2.3X. No objections from clients. Will have to try an even higher rate for new clients.
I have found that this doesn't work via email, for me and my industry (tutoring). If I have someone on the phone, it's easy to convince them of my expertise. And if the rate is too high for them, they'll tell me. If I still want to work with them, I can figure something out.
By email, I'm more likely to receive no reply. So now I push all conversations to the phone.
But really, I should be raising my rates (more). So should you, probably.
Rate discussions should be conversations, and email is too slow moving to really be practical. Don't say, "This is my new rate." Instead try to really get at the heart of why you're being hired, what kind of returns are practical, and speak in "Doing X will produce $Y benefits for you and cost you $Z".
Don't misunderstand me: I have lost clients because I raised my prices. Maybe that was a failure on my part to adequately explain the reasoning behind the increase and the value they were getting. Regardless, those aren't the kinds of clients I want anyway. I don't want to deal with someone complaining their invoice is $1480 instead of the $1450 I estimated.
So: I'm genuinely curious, have you seen something that tells you that there's a clear advantage to doing it that way, especially where it's better for the customer somehow? e.g., does that give them a chance to gather sales leads or actual phone conversations from more serious customers?
And do you think that that sort of behavior translates down to smaller businesses? Should I not be saying, "I hate that, it sucks", and posting our rates on our site?
There is a time and a place for carefully-written Likert surveys with control questions and large samples. Psychological research, election polling.
Customer research is about learning the realities of someone else's world. What you're aiming for is more a structured conversation than a statistical survey. Are you both speaking the same language, are you overlooking any major cultural or procedural factors, what emotional responses occur repeatedly and what triggers them?
Doing this once wasn't that expensive. We try and avoid renegotiating with each client on anything important, because it tends to be an expensive, time consuming process and nevertheless changes are never in your favours:(
Where we've done work without a contract it has a much higher probability of problems arising.
I haven't gotten a single call or email about it. If people like you, they will refer you to everyone who will listen. If they don't, they'll talk bad about you to even more people. Offering a few hundred dollars or even more is, in my experience, not going to sway them one way or the other.
Have you tried offering professional recruiters a referral fee? I wonder if they'd work double hard getting a fee on both ends? Or is that just not done?