(3) As you work for clients, keep a sharp eye for opportunities to build "specialty practices". If you get to work on a project involving Mongodb, spend some extra time and effort to get Mongodb under your belt. If you get a project for a law firm, spend some extra time thinking about how to develop applications that deal with contracts or boilerplates or PDF generation or document management.
(4) Raise your rates.
(5) Start refusing hourly-rate projects. Your new minimum billable increment is a day.
(6) Take end-to-end responsibility for the business objectives of whatever you build. This sounds fuzzy, like, "be able to talk in a board room", but it isn't! It's mechanically simple and you can do it immediately: Stop counting hours and days. Stop pushing back when your client changes scope. Your remedy for clients who abuse your flexibility with regards to scope is "stop working with that client". Some of your best clients will be abusive and you won't have that remedy. Oh well! Note: you are now a consultant.
(7) Hire one person at a reasonable salary. You are now responsible for their payroll and benefits. If you don't book enough work to pay both your take-home and their salary, you don't eat. In return: they don't get an automatic percentage of all the revenue of the company, nor does their salary automatically scale with your bill rate.
(8) You are now "senior" or "principal". Raise your rates.
(9) Generalize out from your specialties: Mongodb -> NoSQL -> highly scalable backends. Document management -> secure contract management.
(10) Raise your rates.
(11) You are now a top-tier consulting group compared to most of the market. Market yourself as such. Also: your rates are too low by probably about 40-60%.
Try to get it through your head: people who can simultaneously (a) crank out code (or arrange to have code cranked out) and (b) take responsibility for the business outcome of the problems that code is supposed to solve --- people who can speak both tech and biz --- are exceptionally rare. They shouldn't be; the language of business is mostly just elementary customer service, of the kind taught to entry level clerks at Nordstrom's. But they are, so if you can do that, raise your rates.
This reads as one of those "how to draw an owl" memes, step 1. draw a circle; step 2. draw the rest of the owl.
I've been trying to succeed at consultancy for the last couple years, and here's my list of (realistic) steps
1) Reach out to your network and see if anyone is looking for help that you can provide
2) Realise that clients don't care about your background, or skillset, they're 100% focused on what results you can provide and how fast
3) The usual advice from the lucky ones is to always raise your rates, "raise your rates after every contract!" etc. but a more realistic approach is to lower your rates when you have to. I wish I could get steady work at my usual rates, but sometimes I will take on side gigs at a lower hourly rate just because they help keep you afloat
4) Despite what people may say, consultants that can speak both tech and business are very common. They might not be very good coders, or very good biz people, but they are common. Differentiating yourself comes down to personal network rather than any substantial difference in output.
5) Specialists are paid a lot better than generalists. If you're an awesome cloud migration expert (like OP) focusing on that will likely bring more clients and revenue than trying to branch out to other areas
Most other advice is good, but it's important to notice that it won't apply to most folks when they're starting out. I still love the freedom that working for myself affords me, and that it's allowed me to do things that I would have otherwise not been able to, but it's a lot of work, and a good chunk of my time is spent essentially working for free (writing proposals, chasing up payment, etc)
It is a catch 22: unless you are spending at least half your time prospecting new clients it is hard to keep a steady income, but it is hard to invest that much time in the commercial side of your "one man show" if you are not charging high enough.
Every beginner underestimate how much salesmanship it takes to run a successful freelancer career.
Yes, it's very difficult to balance and it's been an interesting experience in the sense that no one really cares about what work you've done in the past; if they like you on a personal level they'll hire you.
I'm comfortable doing sales, but it's maintaining that balance that I find difficult – if I spend too much time pitching I make no money as I have no employees to deliver the work and if I spend too much time working I get stuck in a cycle of feast and famine.
Yup - another resource is "the E-myth revisited" which makes the point that if you want to be a baker, don't start a bakery because now you're dealing with taxes, permits, hiring, vendors, marketing, etc - not just baking.
Similarly, if you want to spend all your time programming, a true, short term consulting business isn't going to get you there.
I'd assume that (if all goes well) you'll bill 1000 hours a year (about 50% utilization with the balance going to sales, marketing, accounting, updating software, keeping up to date with the industry, etc). It's conservative (assuming you sell enough to be busy 40+ hrs a week every week), but it's better than assuming you'll bill 2000 hrs (40 hrs x 50 weeks) and finding you have to work 70 hours every week just to get by.
I'd just like to offer a doubling down on this. If you are a software consultant you are first a salesmen and second a software developer (maybe third if you include marketing as a separate category from salesman)
I want to jump in and clarify something on point (4).
It's not my argument that it's hard to talk a good game about business and tech at the same time. Lots of people can do that.
Rather, when I wrote that, I was reacting to a long string of own-goals people were reporting about their consulting practices on HN. I saw people freaking out about scope changes, about advanced payment, about counting billable hours, about acceptance criteria, and about payment terms. I was reading people complaining about working conditions issues that are totally appropriate for full-timers to bring up, but not generally at-the-market issues for businesses relating to each other, which is what consultancies are.
Most people who write a lot of comments on HN are self-evidently equipped to represent themselves well to businesses, at least in writing. That's not a concern of mine.
Instead, I'm more interested in seeing people take full ownership of the services they want to be offering their clients. Companies hire consultants to solve problems. The more completely and decisively you can solve those problems, and the less drama you inject in solving them, the more valuable your consultancy is.
So, patterns I see among high-value consultancies --- not just the ones I've helped manage but also those run by friends and peers --- include not pushing back on scope changes, accepting industry norms on payments, not demanding up-front payment, not trying to bill for ticky-tacky stuff like individual phone calls, not being afraid to provide a reasonable estimate up front, not charging for proposals, and not pushing the (probably totally reasonable for graphic designers!) graphic design field's orthodoxy about spec work.
Not for nothing, but I see similar patterns among other professions; I get the same professional courtesies from my accountant, for instance, and from our legal (Grellas Shah, highly recommend). I've gotten similar courtesies from BigLaw firms as well, and it's no surprise: the invoices we generated selling Matasano would have paid for 10x as many random phone calls as we possibly could have generated.
The most common reaction to these observation comes from fledgeling consultancies that work with small customers on small projects. If that's where you have to be, I understand and I'm not trying to condescend. But if those are your clients and you expect to grow your business, one of two things is going to happen:
(1) You are going to stop serving clients that require you to bill hourly, account for phone calls, demand up-front payment, and charge for proposals.
(2) You are going to find a way to scale SMB clients so that you're delivering them mechanically and without a lot of interpersonal interaction, in the same manner as, say, the big PDF-to-HTML shops do.
In the meantime, do what you gotta do to keep afloat! That was the point of the original post I wrote there (I'm a bit mystified about why that post is the one everyone points to for my consulting advice; I've written what I think are more important things about consulting here). You start somewhere, and then you progress towards operating like a more mature, larger business.
I completely agree with all of this, when I started I absolutely hated being petty about things like payment delays or changes in scope; and I didn't agree at all on charging for phone calls or for proposals.
And this would all be fine if my clients (generally well funded startups, post series-A) didn't push back on budgets, but they almost always do, at least for me. So then it becomes about how mercenary I want to be, when I know the company is not willing to pay full price.
To be honest, I probably won't be doing this for too much longer.
Curious about what types of consultancies these are? Are they generalist consulting shops that do custom app development or specialist shops similar to your own or patio11's?
If you were going to generalize, it'd be to "firms that mostly work with larger or established companies, for which a median deal size exceeds $50k and LTV of customers was at least 6 figures". There are a number of generalist consulting shops that fit this bill.
(0.4) Start building a portfolio. Nobody will hire you without examples of past work or past clients they know. Blog posts, LinkedIn recommendations, case studies, screenshots, mockups, anything is better than nothing.
(0.6) Give free advice to your friends, former roommates, former classmates, former colleagues. Sit down, have coffee, listen to their app idea, compliment them, show them who did it already.
(0.8) It’s hard to meet people if you work at a desk. Conferences and meetups can help you build your network.
(1) At this point, every month at least two people should be reaching out to you about software projects.
We're billing over 500k per year in retainers right now and taking on more implementation work. We work out of an extra room in a house (we're a 2 man partnership). Why would we need an office? Alan Weiss never had one...
I think it rather depend on if you invite clients in your office, or you visit the clients on-premise. If all you do is on-premise meetings then having a swanky office is fairly redundant. You'd maybe rent something fancy looking for a day for some beauty shots on your website, but even that seems redundant to me.
finding clients who are convinced you can do whatever you want to sell.
Find clients who need what you want to sell and convince them is the solution. It's not easy and in my experience they won't all be convinced (some ever) but if you can provide what you're selling then clients only need persuaided enough to pay a deposit, first payment or some other initial small invoice and trust/capability will be build/demonstrated when first building clientele. Once you have more work than time raise your rates as high as you can without decreasing your earnings. Then if you can get to step 7 hire a convincing sales person first.
I don't know if this is a cultural difference or something, but in the UK no client will ever pay a deposit on an invoice for consulting work. I normally get paid within 30-90 days of the work being done (it sucks)
Possibly is, my experience with a few current London based clients in my day job is often recieving pushback and delays on any initial deposits or pre-payment. Holding firm that the clearly defined payment terms are a prerequisite for work commencement has been the most effective approach, even if it involves some uncomfortable emails or meetings. Polite but firm push back on a clients reluctance is very often sucessful even if momentarily uncomfortable.
I'd suggest to try proposing reasonable payment terms as soon as possible, terms that are as favorable to you as they may or possibly are willing to accept, and upon discussion (or a note included in the proposed terms) respond that an initial deposit is a firm requirement before commencement of any billable work, but you are flexible and willing to discuss a customized draw (payment) schedule if it's required (or.. you're not willing). You may be surprised how many clients will accept your terms, even after declaring them unacceptable, once you (re)affirm the terms as a firm, mandatory requirement. Willingness to walk away is often a strong, persuasive signal of competence and/or high demand of your service and can provoke decisions to be made more promptly by potential clients.
You can factor an intrest charge for payment delays that will encourage prompt payment, calculate by percentage and then format your payment terms to represent these differences as discounts for prompt payment instead of penalties for late payment. A secondary benifit of using these now slightly increased rates combined with prompt payment discounts is that you will be able to slightly increase your effective rate for recurring clients by adjusting these discount amounts in the event you can't or don't want to propose a higher rate. Also, IME (in the US) the initial disclosure of late payment terms or penalties may be a requirememt when including compounded interest on an outstanding debt amount in a situation where legal action to recover debt becomes necessary.
As tptacek mentions Net-30,40,50,...90 are all common terms, you should expect and plan for longer payment windows and more term flexability as invoice amounts increase. An advance from an invoice factoring company is an available option, you could price this into your rate at a default of Net-60 and offer a Net-10 and Net-30 discount based on factoring cost.
Same here. Although there is often some flexibility with smaller companies it is seen as unprofessional to ask for a deposit up front. An alternative approach is to break the work up into smaller chunks and have the payment for those resolved before continuing. For example (as someone mentioned above) an initial assessment of the issue, or making a project plan could be one of the first steps that provide the client with something of value and at the same time show you they do pay on time.
With large companies in UK unfortunately the payment terms are what they are (usually 30 days after invoicing in my case). If you don't like it, they'll find someone who does. It is up to you to decide if the higher rate they are able to pay covers the cost of the delay.
Interesting timeline. Whilst I love how it’s broken down, it just looks so much harder than just making a product and focusing on that. At least you don’t have to raise your price as often and not worry about not having enough contracts.
Comments
Tptacek
https://news.ycombinator.com/item?id=4247615
(1) Start a freelance practice.
(2) Raise your rates.
(3) As you work for clients, keep a sharp eye for opportunities to build "specialty practices". If you get to work on a project involving Mongodb, spend some extra time and effort to get Mongodb under your belt. If you get a project for a law firm, spend some extra time thinking about how to develop applications that deal with contracts or boilerplates or PDF generation or document management.
(4) Raise your rates.
(5) Start refusing hourly-rate projects. Your new minimum billable increment is a day.
(6) Take end-to-end responsibility for the business objectives of whatever you build. This sounds fuzzy, like, "be able to talk in a board room", but it isn't! It's mechanically simple and you can do it immediately: Stop counting hours and days. Stop pushing back when your client changes scope. Your remedy for clients who abuse your flexibility with regards to scope is "stop working with that client". Some of your best clients will be abusive and you won't have that remedy. Oh well! Note: you are now a consultant.
(7) Hire one person at a reasonable salary. You are now responsible for their payroll and benefits. If you don't book enough work to pay both your take-home and their salary, you don't eat. In return: they don't get an automatic percentage of all the revenue of the company, nor does their salary automatically scale with your bill rate.
(8) You are now "senior" or "principal". Raise your rates.
(9) Generalize out from your specialties: Mongodb -> NoSQL -> highly scalable backends. Document management -> secure contract management.
(10) Raise your rates.
(11) You are now a top-tier consulting group compared to most of the market. Market yourself as such. Also: your rates are too low by probably about 40-60%. Try to get it through your head: people who can simultaneously (a) crank out code (or arrange to have code cranked out) and (b) take responsibility for the business outcome of the problems that code is supposed to solve --- people who can speak both tech and biz --- are exceptionally rare. They shouldn't be; the language of business is mostly just elementary customer service, of the kind taught to entry level clerks at Nordstrom's. But they are, so if you can do that, raise your rates.
This reads as one of those "how to draw an owl" memes, step 1. draw a circle; step 2. draw the rest of the owl.
I've been trying to succeed at consultancy for the last couple years, and here's my list of (realistic) steps
1) Reach out to your network and see if anyone is looking for help that you can provide
2) Realise that clients don't care about your background, or skillset, they're 100% focused on what results you can provide and how fast
3) The usual advice from the lucky ones is to always raise your rates, "raise your rates after every contract!" etc. but a more realistic approach is to lower your rates when you have to. I wish I could get steady work at my usual rates, but sometimes I will take on side gigs at a lower hourly rate just because they help keep you afloat
4) Despite what people may say, consultants that can speak both tech and business are very common. They might not be very good coders, or very good biz people, but they are common. Differentiating yourself comes down to personal network rather than any substantial difference in output.
5) Specialists are paid a lot better than generalists. If you're an awesome cloud migration expert (like OP) focusing on that will likely bring more clients and revenue than trying to branch out to other areas
Most other advice is good, but it's important to notice that it won't apply to most folks when they're starting out. I still love the freedom that working for myself affords me, and that it's allowed me to do things that I would have otherwise not been able to, but it's a lot of work, and a good chunk of my time is spent essentially working for free (writing proposals, chasing up payment, etc)
It is a catch 22: unless you are spending at least half your time prospecting new clients it is hard to keep a steady income, but it is hard to invest that much time in the commercial side of your "one man show" if you are not charging high enough.
Every beginner underestimate how much salesmanship it takes to run a successful freelancer career.
Yes, it's very difficult to balance and it's been an interesting experience in the sense that no one really cares about what work you've done in the past; if they like you on a personal level they'll hire you.
I'm comfortable doing sales, but it's maintaining that balance that I find difficult – if I spend too much time pitching I make no money as I have no employees to deliver the work and if I spend too much time working I get stuck in a cycle of feast and famine.
THIS 100%!
Yup - another resource is "the E-myth revisited" which makes the point that if you want to be a baker, don't start a bakery because now you're dealing with taxes, permits, hiring, vendors, marketing, etc - not just baking.
Similarly, if you want to spend all your time programming, a true, short term consulting business isn't going to get you there.
I'd assume that (if all goes well) you'll bill 1000 hours a year (about 50% utilization with the balance going to sales, marketing, accounting, updating software, keeping up to date with the industry, etc). It's conservative (assuming you sell enough to be busy 40+ hrs a week every week), but it's better than assuming you'll bill 2000 hrs (40 hrs x 50 weeks) and finding you have to work 70 hours every week just to get by.
I'd just like to offer a doubling down on this. If you are a software consultant you are first a salesmen and second a software developer (maybe third if you include marketing as a separate category from salesman)
I want to jump in and clarify something on point (4).
It's not my argument that it's hard to talk a good game about business and tech at the same time. Lots of people can do that.
Rather, when I wrote that, I was reacting to a long string of own-goals people were reporting about their consulting practices on HN. I saw people freaking out about scope changes, about advanced payment, about counting billable hours, about acceptance criteria, and about payment terms. I was reading people complaining about working conditions issues that are totally appropriate for full-timers to bring up, but not generally at-the-market issues for businesses relating to each other, which is what consultancies are.
Most people who write a lot of comments on HN are self-evidently equipped to represent themselves well to businesses, at least in writing. That's not a concern of mine.
Instead, I'm more interested in seeing people take full ownership of the services they want to be offering their clients. Companies hire consultants to solve problems. The more completely and decisively you can solve those problems, and the less drama you inject in solving them, the more valuable your consultancy is.
So, patterns I see among high-value consultancies --- not just the ones I've helped manage but also those run by friends and peers --- include not pushing back on scope changes, accepting industry norms on payments, not demanding up-front payment, not trying to bill for ticky-tacky stuff like individual phone calls, not being afraid to provide a reasonable estimate up front, not charging for proposals, and not pushing the (probably totally reasonable for graphic designers!) graphic design field's orthodoxy about spec work.
Not for nothing, but I see similar patterns among other professions; I get the same professional courtesies from my accountant, for instance, and from our legal (Grellas Shah, highly recommend). I've gotten similar courtesies from BigLaw firms as well, and it's no surprise: the invoices we generated selling Matasano would have paid for 10x as many random phone calls as we possibly could have generated.
The most common reaction to these observation comes from fledgeling consultancies that work with small customers on small projects. If that's where you have to be, I understand and I'm not trying to condescend. But if those are your clients and you expect to grow your business, one of two things is going to happen:
(1) You are going to stop serving clients that require you to bill hourly, account for phone calls, demand up-front payment, and charge for proposals.
(2) You are going to find a way to scale SMB clients so that you're delivering them mechanically and without a lot of interpersonal interaction, in the same manner as, say, the big PDF-to-HTML shops do.
In the meantime, do what you gotta do to keep afloat! That was the point of the original post I wrote there (I'm a bit mystified about why that post is the one everyone points to for my consulting advice; I've written what I think are more important things about consulting here). You start somewhere, and then you progress towards operating like a more mature, larger business.
I completely agree with all of this, when I started I absolutely hated being petty about things like payment delays or changes in scope; and I didn't agree at all on charging for phone calls or for proposals.
And this would all be fine if my clients (generally well funded startups, post series-A) didn't push back on budgets, but they almost always do, at least for me. So then it becomes about how mercenary I want to be, when I know the company is not willing to pay full price.
To be honest, I probably won't be doing this for too much longer.
Curious about what types of consultancies these are? Are they generalist consulting shops that do custom app development or specialist shops similar to your own or patio11's?
If you were going to generalize, it'd be to "firms that mostly work with larger or established companies, for which a median deal size exceeds $50k and LTV of customers was at least 6 figures". There are a number of generalist consulting shops that fit this bill.
(0.2) Keep your day job.
(0.4) Start building a portfolio. Nobody will hire you without examples of past work or past clients they know. Blog posts, LinkedIn recommendations, case studies, screenshots, mockups, anything is better than nothing.
(0.6) Give free advice to your friends, former roommates, former classmates, former colleagues. Sit down, have coffee, listen to their app idea, compliment them, show them who did it already.
(0.8) It’s hard to meet people if you work at a desk. Conferences and meetups can help you build your network.
(1) At this point, every month at least two people should be reaching out to you about software projects.
You should put: - get a shiny office - raise your rates even more
Somewhere in there. Don’t underestimate the image of your business, unless you wanna play the “solo star” career.
Also, write about what you know and do somewhere (a blog, a specialized magazine): it gives you credit.
We're billing over 500k per year in retainers right now and taking on more implementation work. We work out of an extra room in a house (we're a 2 man partnership). Why would we need an office? Alan Weiss never had one...
I think it rather depend on if you invite clients in your office, or you visit the clients on-premise. If all you do is on-premise meetings then having a swanky office is fairly redundant. You'd maybe rent something fancy looking for a day for some beauty shots on your website, but even that seems redundant to me.
Anybody here that did it that way and succeeded?
In my opinion the main road-blocks are finding clients who are convinced you can do whatever you want to sell.
Find clients who need what you want to sell and convince them is the solution. It's not easy and in my experience they won't all be convinced (some ever) but if you can provide what you're selling then clients only need persuaided enough to pay a deposit, first payment or some other initial small invoice and trust/capability will be build/demonstrated when first building clientele. Once you have more work than time raise your rates as high as you can without decreasing your earnings. Then if you can get to step 7 hire a convincing sales person first.
I don't know if this is a cultural difference or something, but in the UK no client will ever pay a deposit on an invoice for consulting work. I normally get paid within 30-90 days of the work being done (it sucks)
Possibly is, my experience with a few current London based clients in my day job is often recieving pushback and delays on any initial deposits or pre-payment. Holding firm that the clearly defined payment terms are a prerequisite for work commencement has been the most effective approach, even if it involves some uncomfortable emails or meetings. Polite but firm push back on a clients reluctance is very often sucessful even if momentarily uncomfortable.
I'd suggest to try proposing reasonable payment terms as soon as possible, terms that are as favorable to you as they may or possibly are willing to accept, and upon discussion (or a note included in the proposed terms) respond that an initial deposit is a firm requirement before commencement of any billable work, but you are flexible and willing to discuss a customized draw (payment) schedule if it's required (or.. you're not willing). You may be surprised how many clients will accept your terms, even after declaring them unacceptable, once you (re)affirm the terms as a firm, mandatory requirement. Willingness to walk away is often a strong, persuasive signal of competence and/or high demand of your service and can provoke decisions to be made more promptly by potential clients.
You can factor an intrest charge for payment delays that will encourage prompt payment, calculate by percentage and then format your payment terms to represent these differences as discounts for prompt payment instead of penalties for late payment. A secondary benifit of using these now slightly increased rates combined with prompt payment discounts is that you will be able to slightly increase your effective rate for recurring clients by adjusting these discount amounts in the event you can't or don't want to propose a higher rate. Also, IME (in the US) the initial disclosure of late payment terms or penalties may be a requirememt when including compounded interest on an outstanding debt amount in a situation where legal action to recover debt becomes necessary.
As tptacek mentions Net-30,40,50,...90 are all common terms, you should expect and plan for longer payment windows and more term flexability as invoice amounts increase. An advance from an invoice factoring company is an available option, you could price this into your rate at a default of Net-60 and offer a Net-10 and Net-30 discount based on factoring cost.
Same here. Although there is often some flexibility with smaller companies it is seen as unprofessional to ask for a deposit up front. An alternative approach is to break the work up into smaller chunks and have the payment for those resolved before continuing. For example (as someone mentioned above) an initial assessment of the issue, or making a project plan could be one of the first steps that provide the client with something of value and at the same time show you they do pay on time.
With large companies in UK unfortunately the payment terms are what they are (usually 30 days after invoicing in my case). If you don't like it, they'll find someone who does. It is up to you to decide if the higher rate they are able to pay covers the cost of the delay.
30-90 days is pretty normal, and what you should probably plan for if you're doing high-dollar consulting.
I mean, yeah, for whatever that's worth.
Interesting timeline. Whilst I love how it’s broken down, it just looks so much harder than just making a product and focusing on that. At least you don’t have to raise your price as often and not worry about not having enough contracts.
Making a product might be easier. Getting enough people to buy it to turn it into a profitable business, not always easier :)