Blog Tags: 

Advice on breaking into freelance consulting, contract work, standard rates, wages and billing practices

Not too long ago, a friend told me he was quiting his day job to try going out on his own as a freelance consultant/contractor and asked for some friendly advice regarding wages and billing practices.

I may not have been the ideal person to ask, as I had never worked in the exact market my friend was going into. On the other hand, in my twenties, a few years back I did work as a computer security consultant.

Plus, in TurnKey's earlier days we gained a bit of experience taking on a few contract jobs here and there to fund the project while we tried to explore whether the whole services/consulting angle was something we wanted to develop further into a business.

So I figured I would share what I knew, give him a few pointers. The details might vary but the basic principles probably didn't change much. Then I read through what I came up with and realized other people in similar circumstances just might find this stuff useful.

Breaking into freelance consulting/contract work

  • Breaking into consulting is a chicken and egg problem. From the client's perspective it's hard to find top notch people because it can be hard to tell them apart from posers who are going to give you a bad experience. Personal branding and social proof go a long way. People are eager to pay good wages to those that can show they have the right stuff and have an impressive list of high profile clients. One power technique for breaking the chicken and egg problem is to hunt down the highest profile clients you can find, and offer them to work for free on a trial basis. Make sure they're not assholes though. Most high quality people aren't. Once you prove yourself they will be happy to provide you with more work and you can use the reference as a social proof.

    I think this guy from Quick Sprout used this technique to break into Internet Marketing. Basically, he managed to convince TechCrunch to hire him "for free".

  • Under-promise and over-deliver. Never the other way around.

  • Most business is repeat business

  • The best way to get new clients is word of mouth - do extremely good work with existing clients. (I think this is true for any sector)

  • Build up a strong portfolio of your work to show to potential clients.

  • If you find yourself fielding too many unproductive inquiries into your services, try filtering out the non-serious clients by stating typical costs up front. This way if someone is looking for a sucker they will look quickly elsewhere and not waste your time.

  • Don't work with assholes. They aren't worth it.

  • Be careful with freelancing sites. Most seem to be structured such that they encourage a "race to the bottom" that all but guarantees low quality work for pitiful wages. This is not good for either side. One exception seems to be oDesk, which I looked at a while back for Drupal consulting. Their paid-by-the-hour model seems designed to limit the negative dynamics you see elsewhere.

Standard rates, wages and billing practices

  • Rule of thumb: yearly salary / 1000.

    So if the market value of your skill set/experience level is $125,000 a year, that would translate into $125/hour.

    Never forget that that salaries are negotiated for full-time employment on a yearly or multi-year basis. Volume discounts apply. Contract workers are temporary, don't get any benefits and have significant overhead in non-billable hours (marketing themselves, recruiting new clients, unsuccessful negotiations, etc.).

  • Range of hourly wages (take this with a grain of salt. This probably needs to be periodically adjusted for inflation, currency fluctuations, economic conditions, etc.)

    • $200/hour - famous superstar developer. Talks at conferences, publish books, senior developer for an open source project, etc.
    • $150/hour - superstar developer. Very good, high in demand
    • $100/hour - experienced developer
    • $75/hour - mediocre developer
    • $50/hour - inexperienced student fresh out of college that knows "computer stuff"
    • $10/hour - you want fries with that? (this is what starbucks pay)
  • Never do an unknown amount of work for a fixed amount of money. This is a proven recipe for disaster.

  • Be up-front about expenses. No nasty surprises

  • Make sure you ask for the fair value of your work once you break into the market. People use pricing as a quality signal so if you ask for too little they might think you suck.

  • We already knew this: Contract/consulting work sucks in general since it can't scale, is hard work with many gotchas and regardless of how well you do will never make you rich.

    Most hackers use it as a stepping stone to develop their own scalable services/products.

  • If you do really good work you will soon find yourself overworked. This is a signal that you need to raise your prices.

  • If you're overworked - increase your rates.

  • Charge corporations a 25% premium (any company that is large and/or public) more to deal with all the inevitable red tape and soul crushing bureaucracy.

  • Use Freshbooks for billing

Comments

Anon's picture

Thanks for the advice, I found a lot of it useful. God dammit I sound like a web bot. The advice on volunteering and tier billing was particularly useful to me. Freshbooks sounds like a good idea, but I wonder if there's an equally reliable open source alternative out there--will search on.

clary's picture

Muchas gracias, de muy buena ayuda. 

Henry Gray's picture

Looks an interesting piece of work. Thanks for sharing 

Pages

Add new comment