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Kalzumeus Podcast 3: Growing Consulting Practices, with Brennan Dunn

75 points by fooandbarify 14y ago

patio11 14y ago
Happy to answer questions, to the extent possible. This dovetails quite a bit with the Ramit Sethi interviews earlier, but is largely about the mechanics of businesses as they get away from the solo consultant stage. There is some very important math in there for folks looking to expand by hiring. (Copious hat tips due to Thomas for much of the advice here. Except the bad stuff, that's mine.)
- sprobertson 14y ago
  I'm currently juggling multiple freelancing gigs, working too much and charging too little. Over the last few months I've experienced some serious burnout, and have since hoped to start following Brennan and everyone else's advice and start charging more. What steps can someone in my position take while in the middle of (multi-month) projects?
  - patio11 14y ago
    Deliver promised milestones, collect wins, tell clients as milestones are delivered that you were happy things worked out for them and, since your business is maturing, you're switching to day rates to maintain your ability to focus to be able to focus on their projects. Clients unwilling to pay your day rates will be serviced as your schedule permits. If you're burned out, then that can be the first day after never. Your health and happiness get priority. I'd probably also take the opportunity to raise rates.
- bdunn 14y ago
  Also, since much of this episode is dedicated to growing a consultancy, I'm happy to formally announce that I'll be launching a 2 day, intensive online workshop next month on just that. Emails in my profile, let me know if you'd like to be on the announcement list (going to cap the workshop at 25 people)
- deadbea7 14y ago
  How do you charge if onsite presence is required for an engagement? This could either be due to a client requirement or you need to do interviews with developers for an architecture/code review. Should you add a separate line item for travel + lodging expenses or just bundle it together with the consulting rate? I feel like you're at a disadvantage if the client can see that you're more expensive compared to local talent because of the added travel expense, especially if you're coming into a place with plenty of competition, such as the valley.
  - ErrantX 14y ago
    Always charge expenses. Of course, that depends on the expense. Generally I'd say if you need to overnight then it is an expense to charge for - if you're driving for an hour then definitely don't :) (in the UK we can get tax relief for mileage in relation to our business, so I generally don't charge for travel if I have to drive less than 3 hours - otherwise I end up being "paid" twice :D). Taking the piss with expenses (one place I worked hired an consultant analyst who literally charged for everything - including the 30p it cost him to use the toilet at the train station) is as bad as not charging them. If they want you because you bring value they will happily pay this cost. On the other hand if they are put off by this added fee then they are probably not the sort of client you want - especially as those costs are probably a small portion of what they are paying you for a days work! On the other hand; if you soak up expenses to get that contract you are a) in the mindset of letting them set the rate (even if they never knew about it) and b) eating into your profits. Neither is a good situation to be in (next time they might want you all week, and that can get expensive fast). However; I don't know about your situation, but if you don't live in the valley why are you trying to compete in the market there? I live in the countryside in the UK and used to believe my main market would always be London (~3 1/2 hours away by car, less by train). I've learned this is nonsense, and even the nearest towns to me have LOTS of developer work available. You might also think that being out of the hub means less money. I've also found this to be untrue in practice, because no one works out here (they are all focusing on the big cities). Desperation for quality talent means that often, more money is on the table.
  - mgkimsal 14y ago
    For projects where I travel to a customer, I've switched to an all-inclusive day rate. However... I quoted a project which I (thankfully) didn't get, based on the person I was talking to being in SC (few hours drive or short flight). Turned out the project would be onsite in North Dakota, which was a $1200 flight. That was a lesson learned :) Other than that, I still am primarily hourly, because I have multiple ongoing projects that don't lend themselves to 'day rate' work. Newer stuff I take on next year will likely be 'day rate' based, with travel and hotel expenses outside a short driving radius line-itemed.
- manmal 14y ago
  Being an ordinary iOS and Android freelancer paid by the hour or the day (based in Europe), can you give advice on how to get known as the guy who delivers value? How to become visible? Also, does this kind of value-driven work also work remotely, or do you always travel to customers?
  - patio11 14y ago
    I personally prefer first engagements to be on-site, so that I can meet the team and be something other than the voice on the telephone, but I've done it remotely, too. You make mobile apps for businesses, right? So you're getting their brands carried on the trusted device that their customers hold their entire social selves on, which is carried in their front pocket 24/7, which they caress when in bed and which they can't bear to be separated from even when in the bathroom. And your app. Their brand. With them the entire time. Or, if you're making apps with a transactional component to them, like say the Chipotle online ordering app, "Um, it's going to make you several hundred million dollars this year. This will be mentioned in your annual report. You're going to look like a hero for greenlighting this project." works, too.
zissou 14y ago
Talk economics to me, baby. As an economics PhD drop-out who left [after year #2] to start my own consulting company based on my PhD research, I can relate with so much of what I've heard so far (I'm only at 22mins at this point). Also, as a person who went from the economics/business (albeit, academic) life -> developer life, I agree with your observations about how programmers suck at economics (err... business). It is a much easier transition (relatively speaking) to go from an econ/business person --> compsci/developer than it is compsci/developer --> econ/business person. You can't learn economics overnight, but I can certainly figure out how to create a tool that solves a specific problem overnight, because some guy wrote a tutorial about how to use <some technology> to solve <a congruent problem>. I'll try and update my post later after I've finished the podcast.
- ErrantX 14y ago
  I think you're simplifying. It's easy to follow an online tutorial; but if that is what a consultant is doing then he is a very low quality consultant. Conversely; I have an engineering background but found it very easy to pick up the basics of good business, at least how it applies to consultancy. Of course, I'm not trained in economics, but I figured out enough to get by (you could make an argument business sense isn't really related to economics - some wildly successful businessmen have never been educated in even the basics, they just saw and opening and sold). What you seem to be suggesting is that an econ/business person could buy a programming 101 book and start making big bucks as a consultant software engineer. In theory I'd like to say that's rubbish, in practice I know of several people who do this. Can't condone it though: the underlying drive for a consultant should always be - "I have a valuable skill, here is what it is worth"
- dm3 14y ago
  The thing is, at least in my experience, there is absolutely no need to have _any_ academic background in order to be a good businessman. What you do need to have is smarts (see the possibility), tenacity (grab the possibilty) and relentlessness (convert the possibilty to value). The actual background that you have will only affect the range of possibilities available to you.
- manmal 14y ago
Alan01252 14y ago
This was my favourite Podcast so far. A few things I really took away from it ( which I'll be implementing in my own freelancing /consulting business ) in no particular order 1. Charge more..... 2. Sell yourself as someone who solves business problems, not as someone who implements technical solutions 3. http://thunderboltlabs.com/ http://thunderboltlabs.com/ - An excellent example of how to sell yourself as a developer, without selling yourself as a commodity coder. Their hourly rate does makes my brain melt. 4. Learn the language of yours customers. This is something I've really got to work on, I have now idea how business people speak. 5. When you're teaching a potential customer new things in your sales pitch you've already won the sale. I'm not sure I've summarised number five very well. So here's an example from my own limited experience. When I've stepped into a design agency who's looking for a developer and I start talking about version control, the latest technologies, previous projects and how I could make their business better I've actually felt the atmosphere change in the room. At that point I know I'm walking out of there with a new client. There's more hidden gems in this Podcast and I'm sure I'll be reading / listening to it again before the days out. So much to learn.... being self employed is awesome.
- ErrantX 14y ago
  > Learn the language of yours customers. This is something I've really got to work on, I have now idea how business people speak. Not just their language, but their lifestyle and culture. A big portion of my clients are Jewish; this is because an early client was Jewish and I learned the little things like... sending emails late on Friday afternoons will rarely get a response till Monday. Or, Mondays are bad days to be in touch because a lot of Jewish holdays fall on them. Etc. etc. I picked up a ton of clients because word got around that "hey, there's this guy who is easy to work with" > Their hourly rate does makes my brain melt. Is that the hourly rate for both of them? (they say they work in "pair programming style"). Given the mass of skills and experience they bring that seems and extremely good rate.
  - Alan01252 14y ago
    Good point! Thanks Tom. I assumed it was for one person but now you've mentioned it, that is probably for them both. In which case I guess it's less extreme on my brain.
Silhouette 14y ago
Just as a minor PSA: I get that certain consultant types around these parts are always saying "raise your rates", and I get that a lot of people who work freelance do undercharge and often significantly, but the advice has very limited value unless it has some sort of quantifiable element attached to it. Otherwise, with due respect to those consultant types, it sounds a lot like "We're obviously smarter than you, because we charge enough and we're sure you don't" without any real data to back up such a claim. Obviously rates vary dramatically according to many factors other than the desire of the freelancer/consultant/whatever who wants to charge them: location, industry, level of experience/credibility/relevant specialist skills, and so on. But without even a general indication of how much the poster child consultants of HN have succeeded in putting their own rates up before dispensing this advice endlessly to everyone else, it's hard to take seriously the idea that an average freelancer who isn't Internet famous is going to jump from their normal rate to something on a different kind of level, at least not without fundamentally changing the way they're working in a lot more ways than just the cost per unit time on invoices. Let me ask a very simple question, which hopefully those consultants might be able to answer without giving away anything sensitive about the specific rates they are personally charging right now: if the going rate for freelance software development work in your area is typically in the range $x-$y, and you have moved via successive rate increases and repositioning what you offer to $z, approximately what are the ratios between x, y and z? For extra marks, since in the podcast a comparison was drawn with the way lawyers charge, how would z compare to a typical range for lawyers working in the same area and with the same kinds of clients?
- manmal 14y ago
  They do mention in the podcast (rather at the end) that internet famous is not customer famous. Patrick is well-known only to HNers and then some, but not to all CEOs in the world. Much seems to come from word of mouth. Do you think Patrick or Brennan are übermenschen? Can they program 30x as good as you? They focus on bringing value to clients, discarding pride in technical perfection (well maybe they do, but your customers don't want to hear it anyway). It's taking development focus from "how you do" it to "what you do". Once you do that, your methods change over time - at least that's what I got out of this podcast. Of course you can't demand 100k for an app from a bootstrapped startup - but you can demand 100k for an app which makes a bank some more millions per year.
barry-cotter 14y ago
Bits that were not obvious in retrospect and not previously covered in Patrick's writings or just obviously really important. 1. Patrick's consulting rate has more than septupled since he began consulting (or possibly just this year, can't remember.) 2. The longest he has ever waited to get paid by a client he would be happy to work with again is nine months. 3. On a related note: The bigger your client is the more bureaucratic BSthey will have so they get the special “I expect dealing with you on a business level to be hell” surcharge. 4. Becoming a consultancy is a different deal from being a consultant, even an extremely high end one. Brennan made less as yhe principal of a consultancy than as a consultant for the first year and a half. If you take the commendable attitude that making payroll is sacred you should have $30K set aside for “Despite cashflow issues, we made payroll” purposes. 5. On a related note: When the business has a bumper year employees get a 3-5% payrise. When things are looking like shit they still get paid what was previously negotiated, on time. Most people are, quite sensibly, risk averse. If they want the upside they can take the downside too. There is a great deal more that's very valuablr in the transcript, like the discussion of the change in attitude that comes with charging more nut those struck me especially. Oh, and there's a link to a tptacek ccomment that is step by step guide to making LOTS AND LOTS OF MONEY.
- barry-cotter 14y ago
  3. Not a surcharge an anti-discount 4. That's 30k per employee. I'd have edited the original post but commenting on HN from a Lenovo phablet is hell.
mgkimsal 14y ago
SHAMELESS PLUG: While I understand not everyone can attend, http://indieconf.com http://indieconf.com is a conference dedicated to these sorts of topics, and Brennan will be speaking there. If you'd like to meet him face to face, this is an opportunity to do so, while also meeting with other solo consultants/freelancers looking to grow.
tom_b 14y ago
I would love to hear more about shifting the "offering commodity skills" to "I produce measurable business value" mindset. From Patrick or other HN'ers. My career path has always been very conservative, e.g. "What skills do I need to be employed by corporations at salary X?" Even today, I struggle with a strong and compelling internal voice that says "oh, learn blub and enterprise platform ZZZZ" and then you will be seen as more valuable. I know this is a extremely limiting mindset, but breaking free to a new viewpoint has proven difficult.
tocomment 14y ago
Ok, let's do a concrete example. All of this seems very hand-wavy to me. Scenario: A client asks me to do support and maintenance on an internal accounts receivables tracking app. How do I justify asking 300/hour or whatever you guys are suggesting? How do I give them substantial business value from that?
- patio11 14y ago
  How much time is wasted on accounts receivable every month? What's the average fully-loaded cost of their employees tasked with AR? What's the percentage of uncollected invoices? What happens if we cut the time wasted by 10% and bring in one or two extra invoices a month? Oh, we just made you several hundred thousand dollars in the first year? Interesting. What is that worth to you? "I'll write up a document explaining the plan, but in broad strokes, we're going to work on the user experience so the team spends less time fighting this tool and more time being effective in chasing receivables. Also, we'll build a new workflow which automates the early stage of receivables collection." (I would start thinking "Automated emails or Twilio replacing a human employee doing either is pure win in the early stages of collection" but you're the guy in the client's office, figure out what they'll except.)
  - tocomment 14y ago
    Very interesting. So if their system is already highly optimized, or it's a small company so any gains wouldn't translate into large amounts of money, you'd suggest to pass on the opportunity? Also, what happens if you improve the UX and make new workflows but the profits don't materialize for some reason? Would you not get paid?
    - patio11 14y ago
      I prefer working with companies where I can create value versus in companies where I can't. If your small company thinks their internal one-off AR system is important enough to hire a dev for, that should be worth Serious Money (TM) to the company. If it isn't, tell them "Look, you trust me to deliver wins for the business. This engagement isn't a win for you. If you absolutely need that system worked on, I can recommend someone for it. But let's talk about somewhere where I can make you a couple hundred thousand dollars: ..." Would you not get paid? No, of course you get paid. The client bears all execution risk. That's why, when you make them 10 million, they get the vast majority of that 10 million. If clients expect you to shoulder downside risk then they should expect you to capture much of the upside. (Here's words I like: "Well, if you expect me to bear the risk for this project, I want to share equitably in the rewards, too. My sense of equitable is that if I'm responsible for doubling the company's sales I should end up owning half the company. Or, you know, you could just pay my rates.")
adrianhoward 14y ago
Your paycheck is, occasionally, a burnt-offering to the gods of Trusted Third Party Opinion, just like it is sometimes a magical talisman against Blowback If This Goes Sour. Worth it for that line alone. There's a special art in being the one who gets the idea through purely because you're a third party and not the internal person/team. Some of my happiest gigs are when I've ended up getting paid to teach management to listen to the team and implement their suggestions. Everybody wins ;-)
adrianhoward 14y ago
So if you’re dealing with, say hypothetically (not a client), Bank of America, you will not budge the Bank of America purchasing department, because they just don’t care ProTip: Make friends in the purchasing department and learn their rules. There are often ways to game the system... For example: Some may have a global rule that they must take advantage of any discount greater than N% on the invoice if it's just a case of moving the payment date. Offer an N+1% discount for payment up front to that department and you will automatically have payment up front. Suddenly your cashflow looks much happier ;-) (edit: Also - you never punish people for late payment. You reward people for early payment. Of course the numbers may look the same either way ;-)
- pc86 14y ago
  Why would you not punish people for late payment?
  - adrianhoward 14y ago
    Because it's more effective not to (in my experience anyway). Instead use the same numbers and make it look like a great deal. So rather than. "Your bill is $10k, pay after Dec 15 and you get fined an additional $5k" say "Pay by Dec 15 and get our discount rate of $10k, otherwise get our standard rate of $15k" Numbers are the same. Very different reaction from people. Discounts are something people want. Having time-limited discounts is a classic sales technique. People don't want to lose out. Some departments are required to take discounts, but encouraged to fight late fees. Fines are annoying, but the effectively give you a structure and excuse for doing the bad thing. There is no logical difference - but people aren't logical.

75 points by fooandbarify 14y ago

Happy to answer questions, to the extent possible. This dovetails quite a bit with the Ramit Sethi interviews earlier, but is largely about the mechanics of businesses as they get away from the solo consultant stage. There is some very important math in there for folks looking to expand by hiring. (Copious hat tips due to Thomas for much of the advice here. Except the bad stuff, that's mine.)

sprobertson 14y ago
I'm currently juggling multiple freelancing gigs, working too much and charging too little. Over the last few months I've experienced some serious burnout, and have since hoped to start following Brennan and everyone else's advice and start charging more. What steps can someone in my position take while in the middle of (multi-month) projects?
- patio11 14y ago
  Deliver promised milestones, collect wins, tell clients as milestones are delivered that you were happy things worked out for them and, since your business is maturing, you're switching to day rates to maintain your ability to focus to be able to focus on their projects. Clients unwilling to pay your day rates will be serviced as your schedule permits. If you're burned out, then that can be the first day after never. Your health and happiness get priority. I'd probably also take the opportunity to raise rates.
bdunn 14y ago
Also, since much of this episode is dedicated to growing a consultancy, I'm happy to formally announce that I'll be launching a 2 day, intensive online workshop next month on just that. Emails in my profile, let me know if you'd like to be on the announcement list (going to cap the workshop at 25 people)
deadbea7 14y ago
How do you charge if onsite presence is required for an engagement? This could either be due to a client requirement or you need to do interviews with developers for an architecture/code review. Should you add a separate line item for travel + lodging expenses or just bundle it together with the consulting rate? I feel like you're at a disadvantage if the client can see that you're more expensive compared to local talent because of the added travel expense, especially if you're coming into a place with plenty of competition, such as the valley.
- ErrantX 14y ago
  Always charge expenses. Of course, that depends on the expense. Generally I'd say if you need to overnight then it is an expense to charge for - if you're driving for an hour then definitely don't :) (in the UK we can get tax relief for mileage in relation to our business, so I generally don't charge for travel if I have to drive less than 3 hours - otherwise I end up being "paid" twice :D). Taking the piss with expenses (one place I worked hired an consultant analyst who literally charged for everything - including the 30p it cost him to use the toilet at the train station) is as bad as not charging them. If they want you because you bring value they will happily pay this cost. On the other hand if they are put off by this added fee then they are probably not the sort of client you want - especially as those costs are probably a small portion of what they are paying you for a days work! On the other hand; if you soak up expenses to get that contract you are a) in the mindset of letting them set the rate (even if they never knew about it) and b) eating into your profits. Neither is a good situation to be in (next time they might want you all week, and that can get expensive fast). However; I don't know about your situation, but if you don't live in the valley why are you trying to compete in the market there? I live in the countryside in the UK and used to believe my main market would always be London (~3 1/2 hours away by car, less by train). I've learned this is nonsense, and even the nearest towns to me have LOTS of developer work available. You might also think that being out of the hub means less money. I've also found this to be untrue in practice, because no one works out here (they are all focusing on the big cities). Desperation for quality talent means that often, more money is on the table.
- mgkimsal 14y ago
  For projects where I travel to a customer, I've switched to an all-inclusive day rate. However... I quoted a project which I (thankfully) didn't get, based on the person I was talking to being in SC (few hours drive or short flight). Turned out the project would be onsite in North Dakota, which was a $1200 flight. That was a lesson learned :) Other than that, I still am primarily hourly, because I have multiple ongoing projects that don't lend themselves to 'day rate' work. Newer stuff I take on next year will likely be 'day rate' based, with travel and hotel expenses outside a short driving radius line-itemed.
manmal 14y ago
Being an ordinary iOS and Android freelancer paid by the hour or the day (based in Europe), can you give advice on how to get known as the guy who delivers value? How to become visible? Also, does this kind of value-driven work also work remotely, or do you always travel to customers?
- patio11 14y ago
  I personally prefer first engagements to be on-site, so that I can meet the team and be something other than the voice on the telephone, but I've done it remotely, too. You make mobile apps for businesses, right? So you're getting their brands carried on the trusted device that their customers hold their entire social selves on, which is carried in their front pocket 24/7, which they caress when in bed and which they can't bear to be separated from even when in the bathroom. And your app. Their brand. With them the entire time. Or, if you're making apps with a transactional component to them, like say the Chipotle online ordering app, "Um, it's going to make you several hundred million dollars this year. This will be mentioned in your annual report. You're going to look like a hero for greenlighting this project." works, too.

zissou 14y ago

Talk economics to me, baby. As an economics PhD drop-out who left [after year #2] to start my own consulting company based on my PhD research, I can relate with so much of what I've heard so far (I'm only at 22mins at this point). Also, as a person who went from the economics/business (albeit, academic) life -> developer life, I agree with your observations about how programmers suck at economics (err... business). It is a much easier transition (relatively speaking) to go from an econ/business person --> compsci/developer than it is compsci/developer --> econ/business person. You can't learn economics overnight, but I can certainly figure out how to create a tool that solves a specific problem overnight, because some guy wrote a tutorial about how to use <some technology> to solve <a congruent problem>. I'll try and update my post later after I've finished the podcast.

ErrantX 14y ago
I think you're simplifying. It's easy to follow an online tutorial; but if that is what a consultant is doing then he is a very low quality consultant. Conversely; I have an engineering background but found it very easy to pick up the basics of good business, at least how it applies to consultancy. Of course, I'm not trained in economics, but I figured out enough to get by (you could make an argument business sense isn't really related to economics - some wildly successful businessmen have never been educated in even the basics, they just saw and opening and sold). What you seem to be suggesting is that an econ/business person could buy a programming 101 book and start making big bucks as a consultant software engineer. In theory I'd like to say that's rubbish, in practice I know of several people who do this. Can't condone it though: the underlying drive for a consultant should always be - "I have a valuable skill, here is what it is worth"
dm3 14y ago
The thing is, at least in my experience, there is absolutely no need to have _any_ academic background in order to be a good businessman. What you do need to have is smarts (see the possibility), tenacity (grab the possibilty) and relentlessness (convert the possibilty to value). The actual background that you have will only affect the range of possibilities available to you.
manmal 14y ago

Alan01252 14y ago

This was my favourite Podcast so far. A few things I really took away from it ( which I'll be implementing in my own freelancing /consulting business ) in no particular order 1. Charge more..... 2. Sell yourself as someone who solves business problems, not as someone who implements technical solutions 3. http://thunderboltlabs.com/ http://thunderboltlabs.com/ - An excellent example of how to sell yourself as a developer, without selling yourself as a commodity coder. Their hourly rate does makes my brain melt. 4. Learn the language of yours customers. This is something I've really got to work on, I have now idea how business people speak. 5. When you're teaching a potential customer new things in your sales pitch you've already won the sale. I'm not sure I've summarised number five very well. So here's an example from my own limited experience. When I've stepped into a design agency who's looking for a developer and I start talking about version control, the latest technologies, previous projects and how I could make their business better I've actually felt the atmosphere change in the room. At that point I know I'm walking out of there with a new client. There's more hidden gems in this Podcast and I'm sure I'll be reading / listening to it again before the days out. So much to learn.... being self employed is awesome.

ErrantX 14y ago
> Learn the language of yours customers. This is something I've really got to work on, I have now idea how business people speak. Not just their language, but their lifestyle and culture. A big portion of my clients are Jewish; this is because an early client was Jewish and I learned the little things like... sending emails late on Friday afternoons will rarely get a response till Monday. Or, Mondays are bad days to be in touch because a lot of Jewish holdays fall on them. Etc. etc. I picked up a ton of clients because word got around that "hey, there's this guy who is easy to work with" > Their hourly rate does makes my brain melt. Is that the hourly rate for both of them? (they say they work in "pair programming style"). Given the mass of skills and experience they bring that seems and extremely good rate.
- Alan01252 14y ago
  Good point! Thanks Tom. I assumed it was for one person but now you've mentioned it, that is probably for them both. In which case I guess it's less extreme on my brain.

Silhouette 14y ago

Just as a minor PSA: I get that certain consultant types around these parts are always saying "raise your rates", and I get that a lot of people who work freelance do undercharge and often significantly, but the advice has very limited value unless it has some sort of quantifiable element attached to it. Otherwise, with due respect to those consultant types, it sounds a lot like "We're obviously smarter than you, because we charge enough and we're sure you don't" without any real data to back up such a claim. Obviously rates vary dramatically according to many factors other than the desire of the freelancer/consultant/whatever who wants to charge them: location, industry, level of experience/credibility/relevant specialist skills, and so on. But without even a general indication of how much the poster child consultants of HN have succeeded in putting their own rates up before dispensing this advice endlessly to everyone else, it's hard to take seriously the idea that an average freelancer who isn't Internet famous is going to jump from their normal rate to something on a different kind of level, at least not without fundamentally changing the way they're working in a lot more ways than just the cost per unit time on invoices. Let me ask a very simple question, which hopefully those consultants might be able to answer without giving away anything sensitive about the specific rates they are personally charging right now: if the going rate for freelance software development work in your area is typically in the range $x-$y, and you have moved via successive rate increases and repositioning what you offer to $z, approximately what are the ratios between x, y and z? For extra marks, since in the podcast a comparison was drawn with the way lawyers charge, how would z compare to a typical range for lawyers working in the same area and with the same kinds of clients?

manmal 14y ago
They do mention in the podcast (rather at the end) that internet famous is not customer famous. Patrick is well-known only to HNers and then some, but not to all CEOs in the world. Much seems to come from word of mouth. Do you think Patrick or Brennan are übermenschen? Can they program 30x as good as you? They focus on bringing value to clients, discarding pride in technical perfection (well maybe they do, but your customers don't want to hear it anyway). It's taking development focus from "how you do" it to "what you do". Once you do that, your methods change over time - at least that's what I got out of this podcast. Of course you can't demand 100k for an app from a bootstrapped startup - but you can demand 100k for an app which makes a bank some more millions per year.

barry-cotter 14y ago

Bits that were not obvious in retrospect and not previously covered in Patrick's writings or just obviously really important. 1. Patrick's consulting rate has more than septupled since he began consulting (or possibly just this year, can't remember.) 2. The longest he has ever waited to get paid by a client he would be happy to work with again is nine months. 3. On a related note: The bigger your client is the more bureaucratic BSthey will have so they get the special “I expect dealing with you on a business level to be hell” surcharge. 4. Becoming a consultancy is a different deal from being a consultant, even an extremely high end one. Brennan made less as yhe principal of a consultancy than as a consultant for the first year and a half. If you take the commendable attitude that making payroll is sacred you should have $30K set aside for “Despite cashflow issues, we made payroll” purposes. 5. On a related note: When the business has a bumper year employees get a 3-5% payrise. When things are looking like shit they still get paid what was previously negotiated, on time. Most people are, quite sensibly, risk averse. If they want the upside they can take the downside too. There is a great deal more that's very valuablr in the transcript, like the discussion of the change in attitude that comes with charging more nut those struck me especially. Oh, and there's a link to a tptacek ccomment that is step by step guide to making LOTS AND LOTS OF MONEY.

barry-cotter 14y ago
3. Not a surcharge an anti-discount 4. That's 30k per employee. I'd have edited the original post but commenting on HN from a Lenovo phablet is hell.

mgkimsal 14y ago

SHAMELESS PLUG: While I understand not everyone can attend, http://indieconf.com http://indieconf.com is a conference dedicated to these sorts of topics, and Brennan will be speaking there. If you'd like to meet him face to face, this is an opportunity to do so, while also meeting with other solo consultants/freelancers looking to grow.

tom_b 14y ago

I would love to hear more about shifting the "offering commodity skills" to "I produce measurable business value" mindset. From Patrick or other HN'ers. My career path has always been very conservative, e.g. "What skills do I need to be employed by corporations at salary X?" Even today, I struggle with a strong and compelling internal voice that says "oh, learn blub and enterprise platform ZZZZ" and then you will be seen as more valuable. I know this is a extremely limiting mindset, but breaking free to a new viewpoint has proven difficult.

tocomment 14y ago

Ok, let's do a concrete example. All of this seems very hand-wavy to me. Scenario: A client asks me to do support and maintenance on an internal accounts receivables tracking app. How do I justify asking 300/hour or whatever you guys are suggesting? How do I give them substantial business value from that?

patio11 14y ago
How much time is wasted on accounts receivable every month? What's the average fully-loaded cost of their employees tasked with AR? What's the percentage of uncollected invoices? What happens if we cut the time wasted by 10% and bring in one or two extra invoices a month? Oh, we just made you several hundred thousand dollars in the first year? Interesting. What is that worth to you? "I'll write up a document explaining the plan, but in broad strokes, we're going to work on the user experience so the team spends less time fighting this tool and more time being effective in chasing receivables. Also, we'll build a new workflow which automates the early stage of receivables collection." (I would start thinking "Automated emails or Twilio replacing a human employee doing either is pure win in the early stages of collection" but you're the guy in the client's office, figure out what they'll except.)
- tocomment 14y ago
  Very interesting. So if their system is already highly optimized, or it's a small company so any gains wouldn't translate into large amounts of money, you'd suggest to pass on the opportunity? Also, what happens if you improve the UX and make new workflows but the profits don't materialize for some reason? Would you not get paid?
  - patio11 14y ago
    I prefer working with companies where I can create value versus in companies where I can't. If your small company thinks their internal one-off AR system is important enough to hire a dev for, that should be worth Serious Money (TM) to the company. If it isn't, tell them "Look, you trust me to deliver wins for the business. This engagement isn't a win for you. If you absolutely need that system worked on, I can recommend someone for it. But let's talk about somewhere where I can make you a couple hundred thousand dollars: ..." Would you not get paid? No, of course you get paid. The client bears all execution risk. That's why, when you make them 10 million, they get the vast majority of that 10 million. If clients expect you to shoulder downside risk then they should expect you to capture much of the upside. (Here's words I like: "Well, if you expect me to bear the risk for this project, I want to share equitably in the rewards, too. My sense of equitable is that if I'm responsible for doubling the company's sales I should end up owning half the company. Or, you know, you could just pay my rates.")

adrianhoward 14y ago

Your paycheck is, occasionally, a burnt-offering to the gods of Trusted Third Party Opinion, just like it is sometimes a magical talisman against Blowback If This Goes Sour. Worth it for that line alone. There's a special art in being the one who gets the idea through purely because you're a third party and not the internal person/team. Some of my happiest gigs are when I've ended up getting paid to teach management to listen to the team and implement their suggestions. Everybody wins ;-)

adrianhoward 14y ago

So if you’re dealing with, say hypothetically (not a client), Bank of America, you will not budge the Bank of America purchasing department, because they just don’t care ProTip: Make friends in the purchasing department and learn their rules. There are often ways to game the system... For example: Some may have a global rule that they must take advantage of any discount greater than N% on the invoice if it's just a case of moving the payment date. Offer an N+1% discount for payment up front to that department and you will automatically have payment up front. Suddenly your cashflow looks much happier ;-) (edit: Also - you never punish people for late payment. You reward people for early payment. Of course the numbers may look the same either way ;-)

pc86 14y ago
Why would you not punish people for late payment?
- adrianhoward 14y ago
  Because it's more effective not to (in my experience anyway). Instead use the same numbers and make it look like a great deal. So rather than. "Your bill is $10k, pay after Dec 15 and you get fined an additional $5k" say "Pay by Dec 15 and get our discount rate of $10k, otherwise get our standard rate of $15k" Numbers are the same. Very different reaction from people. Discounts are something people want. Having time-limited discounts is a classic sales technique. People don't want to lose out. Some departments are required to take discounts, but encouraged to fight late fees. Fines are annoying, but the effectively give you a structure and excuse for doing the bad thing. There is no logical difference - but people aren't logical.