If you don’t subscribe to Patrick McKenzie’s newsletter, you should. It’s loaded with ideas for running your business and is especially good at helping those running software companies or consulting practices.
As someone who charges for time, it’s really hard being comfortable asking for what your worth. Clients tend to try to negotiate a better rate and we quickly learn we have a desired target rate and a rate we are willing to settle on to satisfy the client.
Patrick’s most recent newsletter titled How I went from $100-an-hour programming to $X0,000-a-week consulting, is a really great look at pricing services and moving from an hourly consultant to selling time in blocks. The main point that hit home most for me was how clients are more willing to pay for value, rather than time. It sounds obvious but wasn’t for me:
I have an Internet buddy in Chicago named Thomas Ptacek. We met on Hacker News. He’s the #1 poster by karma and I’m #2. Since we apparently share the same mental disease characterized by being totally unable to resist comment boxes, I decided to invite Thomas out to coffee. My agenda, such that it was, was to gossip about HN threads.
Thomas runs a very successful webapp security consultancy, Matasano. (Brief plug: they’re hiring and if it weren’t for this business thing I’d work there in a heartbeat: some of the smartest folks I know doing very, very interesting work which actually matters. If you can program they’ll train you on the security stuff.)
Anyhow, after we got our coffee, Thomas invited me into their conference room. We talked shop for three hours: Thomas and his VP wanted to hear what I’d do to market their products and services offering. I had been writing about how I marketed Bingo Card Creator for a while, and started applying some of the lessons learned to their content creation strategy.
(The actual contents of the conversion are not 100% germane to the story, but I blogged a bit about it and Thomas posted his thoughts on HN. Long story short: programmers can do things which meaningfully affect marketing outcomes.)
At the end of the conversation, Thomas said something which, no exaggeration, changed my life.
Thomas: Some food for thought: If this hadn’t been a coffee date, but rather a consulting engagement, I’d be writing you a check right now.
Me: Three hours at $100 an hour or whatever an intermediate programmer is worth would only be $300. Why worry about that?
Thomas: I got at least $15,000 of value out of this conversation.
What an eye-opener this must have been, it would have been for me. I think I would have had the same epiphany:
This is, far and away, the most important lesson to learn as a consultant. People who are unsavvy about business, like me in 2009 or like most freelancers today, treat themselves like commodity providers of a well-understood service that is available in quantity and differentiated purely based on price. This is stunningly not the case for programming, due to how competitive the market for talent is right now, and it is even more acutely untrue for folks who can program but instead choose to offer the much-more-lucrative service “I solve business problems — occasionally a computer is involved.”
Thinking this way and selling yourself as such makes so much sense. Why didn’t I think of it? I think most consultants, contractors and freelancers are so trained by their peers and clients to think they are just a commodity that we don’t know to think differently until it’s explained so well.
The newsletter goes on to explain all the benefits of billing weekly; all reasons make sense. Time to make some changes.
So, go now and read the newsletter. Great stuff.