How I can charge so much 8
I recently commented on Hacker News that one advantage of being an older startup founder is that you can bill at a much higher rate on your side jobs—say, $100–$125/hr.—which goes a long way if you’re willing to live like a grad student; a 23-year-old recent college grad usually doesn’t have the same luxury. Someone asked what I do that I can charge so much, and this is my answer. (This started as a comment there, but got too long and mutated into a blog post.)
The misleading answer is to say that I mostly do web development and some consulting. But that doesn’t explain how I can charge probably ~2–3 times more than a 23-year-old doing basically the same work. Am I really that much better?
The answer (for Hacker News readers, at least) is no. How, then, can I charge so much more? For one, many people and organizations are willing to pay a premium to get things done right the first time. I get some gigs from personal referrals, which have a hight trust factor, and I also look great on paper (physics Ph.D., Rails book author), so people who hire me figure I can’t suck too much. Referrals often come from relationships that can take years to build, though, and building a strong resume also takes time. Advantage: oldster.
But that’s not all, and I can’t emphasize this enough: I get $100/hr. because I’m willing to ask for it. It takes time to build up the confidence to take a “reasonable” rate and double it, but I think the smart 23-year-old hackers out there would do well to give it a try. I have a friend who trades energy for D. E. Shaw (the largest hedge fund), and his girlfriend charges $180/hr. for IT consulting. (They live in London, which is unbelievably expensive, but still…) He spends all day trying to find the right price for things, so he knows what he’s talking about, and he thinks that she and I both charge too little. He says, “If, when you tell them your rate, half the people don’t say ‘Fuck you’, you aren’t charging enough.”
I’m not sure I want people telling me “Fuck you” half the time, but I can relate this anecdote in a similar vein. I last saw my friend when I visited London on a random physics consulting gig this past summer. The people who flew me there needed me for literally one day (though I stayed for four). When negotiating my fee, at first I thought I’d ask for maybe $3000, but I was trying to work on my psychology to be able to charge absurd rates. The ridiculous number that popped into my head was $5000 (plus expenses!). My friend told me to double it, but I just couldn’t bring myself to, so I asked for $7500 (plus expenses) instead.
Their response: “Your fee is fine.”
I should have asked for ten…
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Interesting comments on the psychology of asking for money. As a younger guy, that confidence thing is something I know I have to work on.
You can only get what you ask for … your story kinda proves that theory. In consulting especially, it’s more true. Most large companies think if you don’t charge high fees, you must not be as good. And the age/experience factor helps substantiate a high cost. Thats generally true with products as well - if something is expensive, people generally assume it must be good (at least for a first try). It also highly depends on who you’re selling it to (whatever the it might be - a product or a service).
Hope all’s good Michael…
As someone who has done various bits of consulting work from time to time, I can relate to your post.
Something else that I have seen factored in when you ask for a higher rate - the people/corp you’re consulting for will often times think “he MUST be good if he can demand that much, we better act on this before he gets on another project and we lose the opportunity”.
A lot of charging for consulting is like charging for artwork (I’m also a pro-hobbiest photog, selling prints for money occasionally). Ask $75 for a framed 5x7, and people will think you’re a hack who just spent too much on a digicam, and stumbled on a lucky shot. Ask $500 for the same print, and people want to buy your work before you get too famous and start charging “real money”.
Really good entry, Michael! Hopefully useful in my current situation too.
My path to charging 150 USD an hour was a bit different. As I have always been willing to live like a grad student, aside for the occasional Blue Label, I need very little money. Every time I got offered more consulting work than I needed to cover my bills I increased my hourly rate so as to reduce my workload while making the same amount of money. I have found that this approach has two distinct advantages: 1) I work a lot less. 2) And more importantly I usually only get called for jobs that are difficult or sensitive, which increases my job satisfaction.
Michael…some more evidence for your post. This 26 year old wedding photographer charges 15K a wedding:
http://www.davidjay.com/
Plus, when he’s not making bank on shooting weddings, he’s selling his own software and advice on ‘how to charge 15K a wedding’ in his forums/blogs:
http://www.showitfast.com/
http://www.opensourcephoto.net/forum/
Different type of consulting, but very amazing story. He’s LinkedIn with me if you want to learn more about him.
-Steve
Sheesh. Hope you don’t bill me!
Hm. So, & bear with me, I am not a Harvard grad :-) —- the President of theiqgroup.com would have hired me if I had offered to work a trial period for a job at which I “would fly” for $20/hr instead of $10?
Dude, where’s my car.