So you want to be a consultant, eh?

A friend of my brother’s emailed me yesterday asking if I could give him any advice / insight into pitching a client for some consulting work, his main interest was in how to price his services. This was to be his first paying client. I started off by writing a short paragraph just to put down some thoughts. That paragraph turned into a rather long and wordy email. I thought it might make for a good blog post. So here it is, a little more refined then original email I’ve sent. I would love to get some feedback on this (good or bad). I’m sure there’s plenty more I can write.

Before you can start thinking of your price, I think you need to consider a few questions. The answers you get will help you better figure out where you you should position yourself on the price scale. Whatever your result it, make sure you set a minimum threshold. This is a price below which you are just not willing to go. If you can’t get this, you should walk away. If you don’t, you’ll end up feeling resentful and will likely rush the work just so that you can be done with it. This often results poor quality, missed features and most importantly, an upset client. Here are some of the questions to ask.

1. Are you doing this full time or part time?

This is important. Full-time work, means day job, it has a beginning and an end. You get to go home in the evening and spend time with your family, friends or WOW clan. Part-time (evenings and weekends) means this client is literally buying your life, make sure you charge accordingly πŸ™‚

2. What kind of client is this? Small mom and dad shop or a larger established business?

This also affects your price. Small shops can’t afford to spend much, but they want the world. As a rule of thumb, I stay away from small businesses like this. Larger companies won’t take you seriously if you don’t charge enough, but on the other hand, they do expect you to bring some process in with you and they’re quite happy to pay to make sure you do things right.

3. Do you have a portfolio of stuff you’ve done already?

If not, expect to take a pay cut. The client is taking a risk by hiring you, the way to make them feel better about it is to give them a good price

4. Will you charge a flat fee or a per hour rate?

Doesn’t really matter what you go with, make sure the client knows your hourly rate. Because the scope of the project never stays still and when they blow the scope, you can remind them of your hourly rate by saying something like “well, that feature isn’t part of the scope of this project, but we think it’ll take about x hours and as you know, our rate is y per hour, so that would add x times y to the total project cost”

Now for some other notes. In no particular order but these are some things to keep in mind.

  • Don’t be afraid to walk away if you’re not getting what you think you should for this project. My first project was a simple site for 5k, I didn’t manage scope properly and when I did the math, I think I got paid less then $10 an hour for the work I did πŸ™‚
  • Define the scope as tightly as you can (if it’s a fixed price contract). You want to be able to easily point to the quote and both agree that the feature being requested now is not part of the original scope.
  • If it’s a really complex project, the estimate and quote might actually take you 2 to 4 solid days of work. You might want to consider charging for it (and letting them know you will) if they don’t sign on with you for the full project.
  • if you’re not doing a fixed contract. I highly recommend that you go agile and have frequent releases along with frequent client meetings (the scope will change often) – Here’s a great resource: Scrum and XP from the Trenches
  • Don’t get technical with the client (unless they are technical, if they are, charge more, because they’re not technical enough to do it themselves, but technical enough to become a real pain in the…). Talk to them about their customer’s experience and business advantages (they don’t usually care how you’re going to build it as long as it’s pretty and functional)
  • Don’t say yes all the time. If you’re not sure, take notes and let the client know you’ll take it back and get the answer, give your opinion, but don’t commit.
  • If you can avoid it, don’t use anything that implies certainty. Use words like, “should”, “could”, “might”. If there’s one thing I’ve learned it’s that nothing is certain in IT.
  • Watch out for set dates. If the only solid thing you have for this project is a due date, that should raise a red flag. You can only set a date once you have a well defined scope.
  • Trust your gut.

The most important thing is: Be honest, even if you think the client won’t like the answer. If you think you can’t deliver in time, tell them NOW. I always use the phrase “I would rather let you know now that this won’t happen, then sell you a dream and not be able to deliver when the due date shows up”. If this client has gotten other quotes, you might very well be the first one to not blow sunshine up their… πŸ™‚

One last note about your estimate. Think of what it will take you to do the work, then double it, that’s what you should give the client. You’ll be surprised how often that ends up being the real number πŸ™‚

Now for the rate… well… I don’t think I can actually put a number down since it changes with geography, experience, etc. If you’re just starting out (in Canada) you’re probably safe with a range of $30 to $60 per hour. If you’re experienced… you probably don’t need this article and you already know what your rate is πŸ™‚

Good luck out.

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2 Responses to So you want to be a consultant, eh?

  1. Great post. Only thing I disagree with is “Doesn’t really matter what you go with, make sure the client knows your hourly rate. Because the scope of the project never stays still and when they blow the scope, you”

    Instead I’d suggest that pricing by the project. It looks more, well, professional to the person buying your services.

    Personally, I run when someone asks me for my hourly rate. Well, I give them a wide cast. Like when someone asks me what coaching costs — I say anywhere between $250 and 10K. Let’s talk about what exactly you’re looking for and what your budget is. ….

    Sure, it’s helpful to first do the research and create an hourly rate that will attract your ideal client and repel those who aren’t … but that number should be just a guide and a first step.

    However, having said all that, the progression I see in pricing is:

    1) Do the research and set an hourly rate somewhere in the mid to upper end of the rate scale.
    2) Start pricing by the project, usually done at first by figuring the hourly rate times the amount of time you think you’ll spent. You’ll learn a lot.
    3) Price by the project using #2 but adding the value the client will receive from having what you’re selling.

    Someone recently gave me a good tip that I will be using. If a client says wow, that’s a lot of money, I’m to say, well, what were you thinking of. Then depending on that amount, negotiate including a bonus for the peformance of what you’re doing.

  2. @Maria. Thanks for the great comment! I like the approach you suggest, it’s been a really long time since I’ve done a fixed price project, so I tend to think in terms of hourly pay as opposed to per project price. Thanks again πŸ™‚

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