Comment by jacquesm | Hacker News Reader

Comment by jacquesm | Hacker News Reader

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Hey there Thomas,

I've taken your bit and amended the page (hope that's ok).

http://jacquesmattheij.com/be-consultant/pricing

I agree with you in general that lowballing is bad when done categorically, but for a starter-upper it can help to get off the ground quickly, shifting to a higher hourly rate within several months. The problem I see here is that when you're new you have to somehow overcome the lack of reputation, and one tool you have in this respect is price.

Thanks for the critique, it's much appreciated.

As for the smart marketing bit, I asked if it would be ok to post this on HN and got the suggestion to post it elsewhere and link it here, because of the length of the post, it really was written for the express purpose of helping out those that are either wondering about starting their own business or that are already operating one. The basic idea was that if it saves a few people some headache that it is already worth doing.

Originally it was one huge page but I figured I'd better split it up a bit to make it more maintainable.

The purpose of the poll I posted a while ago about peoples employment status, was to find out how many people would be interested in something like this.

Here's another great reason not to lower your rate:

If your client base is large companies, all of which have professional purchasing departments, you will never get your rate back. Rate hike discussions are zero-sum negotiations in which either you continue working at your original rate or the purchaser takes a job performance hit. It may be easier to acquire new customers at a higher rate than it will be to jack the rate up on an existing customer. And eventually, you're going to run across clients you really want, under competitive RFP situations, where they'll demand "most favored" rates --- so that 60% "entry" rate is now your permanent negotiating floor, no matter where your industry goes.

Discount with project scope, or with deliverable depth, or with long-term support, or with scheduling flexibility. Some of these non-financial perks are more valuable to your clients than the monopoly money they're spending out of IT budget --- all the more reason not to send an "amateur" signal with a below-market rate. Don't discount with rate if you can possibly avoid it.

Again, good points! But you really have to keep in mind that there are more size customers out there than 'large companies', plenty of companies that require IT services are in the medium bracket (say 10 to 100 employees).

They're also usually quite price conscious, especially in the current climate. Even the bigger ones are looking at their budgets with a pretty sharp eye.

(depending on the market you're active in), you can wonder though, do you want or not want the customers that are shopping around based on price only ?

Food for thought.

There is a big difference between your consulting rate and the cost to a customer to get job X done. I'm not saying a scheduling system for your local dentists office needs to be a six-figure job; I'm saying, pull the right levers to get the number where it needs to be. Specifically:

* You can make 24/7 support a line-item premium service.

* You can make support after a 2-week "acceptance" period a line-item premium service.

* You can have your basic rate include a 6-week window for delivery, at your shop's discretion, and make a more predictable delivery date a line-item premium service.

* You can have formal typeset documentation be a line-item premium service.

* You can have access to improvements and feature requests incur a full consulting dev cycle on your basic rate, and offer a line-item premium service to do point- and major- release updates for N years.

* You can staff projects with timelines that allow you to juggle 3-4 projects for different clients simultaneously (even if you do them serially, you preserve the scheduling flex to deliver them all at once), and offer a line-item premium to get a 100% or 200% improvement in time frame.

* In bare-knuckle negotiation with a client who is just being a good businessperson and determined to get the lowest rate possible, you can strip off features from their requirements, down to the minimum they could conceivably accept and still call the project a business win, and negotiate over features instead of rate.

If you do all of these things, you're rustproofing. But if you're not prepared to do any of them, your only lever is going to be your consulting rate, and the dynamics of the freelancing market are going to tend to drive your rate down over the medium term.

You consistently provide very logical advice in the freelancing arena, no doubt from years of experience. I would like to see your version of this book.

This is why it's sometimes better to go free than charge a low price.

One arts group site in particular I transitioned to a CMS, redesigned, did training with several members, implemented dynamic galleries, ... that would have been way beyond their means to pay; instead they pay me for hosting (a pittance!) and I get to support an arts group that create some great inspirational work.

If I low ball it and charge them then the publicity is "this guy is really cheap" and there'd be no way to live on what I'd earn from that. As it is I get to charge a normal rate and the arts group get to tell everyone how generous I am!

I'd see if you could get them to provide you some free advertising in return for your goodwill. Good word-of-mouth advertising is worth it's weight in gold.

Same goes for releasing open source software.

Arts is a tricky area. I started out on the bridge between arts and software and I've learned that that is charity work.

I agree with you that if you want to do that sort of thing it is better to charge nothing. The 'lowballing' I had in mind was more of an incentive to pick you over a contender with an established reputation.

It finally happened, I agree with you entirely, though I'm sure we can find something here to argue about - erm, web design isn't art .. discuss.

I am also against a low initial rate. I did this when I started, and it was a mistake. My initial low rate often attracted clients who did not value your work. These clients have tried to squeeze every penny they could out of me with technicalities and ambiguities. They tried to add "small changes" all the time that are hard to say no to since taken separately they are minor, but collectively they are not. And even after all this, they still tried to bargain and get discounts.

Once I increased my rate, people treated me more seriously and valued my work more. People who will pay more have been more okay with hourly rates and realize that additional changes will cost more.

ok, that makes good sense.

The problem is that what I've written is just one guys experience, it really helps to have many perspectives on this.

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