[HN Gopher] What's wrong with billable hours
___________________________________________________________________
What's wrong with billable hours
Author : nickwritesit
Score : 110 points
Date : 2023-09-04 12:36 UTC (1 days ago)
(HTM) web link (daedtech.com)
(TXT) w3m dump (daedtech.com)
| ddkto wrote:
| Professional business people are familiar with different business
| models, and when to apply them.
|
| For instance, hourly billing makes a lot of sense if the scope is
| vague - the client carries the scope risk.
|
| Fixed price is amazing when the client has a specific, measurable
| problem that they don't know how to fix (but you do). You can
| solve it cheaply, get paid waaay more than hourly and have a
| happy client.
|
| Being a professional means having multiple tools in your toolbox
| and knowing how and when to use them. Drafting contracts is all
| about deciding how the risk will be shared - you need the right
| risk-sharing model for each situation.
|
| (edit: spelling)
| sanderjd wrote:
| On the flat rate model: I like to tell the story that the
| highest hourly rate I've ever earned to date was as a college
| student when I took on a fixed rate project to fix some
| department's "we have a web form that is critical to our work
| and backed by this perl cgi script that used to work but
| doesn't do anything anymore" problem.
|
| Turned out someone had uploaded the perl script to a Linux
| server using dreamweaver on a Mac, and the line endings were
| wrong. So I ran dos2unix on it and added a blurb to some
| documentation on what not to do and how to fix it again if
| necessary.
|
| Made $1000 for less than 15 minutes of work!
|
| But of course I also could have spent two weeks bashing my head
| against an awful perl script, never figured it out, and made
| nothing. It's a risk/reward trade-off.
| Aurornis wrote:
| > Fixed price is amazing when the client has a specific,
| measurable problem that they don't know how to fix (but you
| do). You can solve it cheaply, get paid waaay more than hourly
| and have a happy client.
|
| What about fixed price makes the client happy in this
| situation? It's definitely not the fact that the contractor
| billed "waaay more than hourly".
|
| The upside of fixed price is that it's more predictable and it
| aligns incentives. With hourly, the hidden incentive is to take
| as long as you can get away with because every additional hour
| you take is an additional hour you can bill.
|
| With fixed price, the contractor has an incentive to finish
| earlier.
|
| That's the part that I find many contractors miss: They treat
| fixed price as an opportunity to extract more money from the
| customer. As someone who has been on both sides of this (I've
| been a contractor and I've also hired a lot of contractors) I
| lose trust quickly when I spot contractors inflating fixed
| price bids because they think I won't be able to recognize what
| they're doing.
| SoftTalker wrote:
| The client is happy because you solved their problem. Now
| they can take that solution and earn money on it, or reduce
| their ongoing costs, etc.
|
| If your bid is more than the problem is costing them, they
| won't accept the bid.
|
| If your business model is "inflating fixed price bids" rather
| than "solving problems for clients" then sure, you won't do
| very well in the long term.
| ghaff wrote:
| They got their problem solved for an agreed-upon price.
| What's not to like?
|
| It's actually the parent that was taking the risk. As they
| said, it could have easily been some hairy problem that took
| forever to solve.
| gizmo686 wrote:
| Is it "inflating the bid" or "charging a premium for fixed
| cost".
|
| You are welcome to haggle on price or not hire them. As a
| freelancer or bussiness owner, not every prospective
| bussiness deal goes through. That is not a failure of their
| model, just the realities of commerce.
| fallat wrote:
| > when the client has a specific, measurable problem that they
| don't know how to fix (but you do)
|
| Then the client tells you that wasn't their problem in the
| first place.
|
| In the 10 years of contracting I've never done fixed rate for
| the reason the client never knows what they exactly want. It's
| not like installing a tiled floor or drop ceiling.
|
| Being a professional means a lot of things, but fixed rate
| contracting is amateur hour truly. Every software dev learns
| this eventually.
| r00fus wrote:
| Which is why you have clear boxes on that fixed-rate, and
| stepping over those bounds means you're back into T&M
| billable. The legalese on these contracts needs to be quite
| tight, but it's a one-time expense to set that up, and it's
| best done properly (and updated as new edge cases show up).
| disgruntledphd2 wrote:
| Yeah I'm honestly amazed at how many software people don't
| get that the optimal strategy is cheap fixed price and
| incredibly high margin change requests.
|
| That being said you need a good spec to do this, and that
| definitely isn't normally the case in software.
| r00fus wrote:
| There is so much work out there that is cut & dried. It's
| not what you'd call software engineering stuff - more the
| bread & butter of consultants. But you really need to
| know the domain space to ensure you have those cutoffs
| (some of which might sound very limiting). About 3-4
| times after you've deployed a specific solution for a
| specific vertical, you should be able to productize it
| (on 2nd and 3rd times through you're essentially spending
| extra effort to determine and test those boundaries for
| future implementations).
|
| Often the goal of a cheap fixed price is to show how
| limiting that is so they know why you can't productize a
| fully customized solution.
| mcguire wrote:
| In software, all problems are research and development
| problems. (If it wasn't, it would already be solved now.)
| tptacek wrote:
| What you mean to say here is that time & materials project
| structure makes sense when there's a lot of scope risk. Hourly
| billing never makes sense in our field, unless your bill rate
| is so high that all of your projects are denominated in small
| numbers of hours.
| tetha wrote:
| Game development adds another dimension. A musician I know
| helps small indie artists with music as a side business. His
| contract states a fixed number of hours producing the music and
| effects is free, until earning some 100k revenue / month, when
| it starts costing 0.1% of revenue royalties / month. He has fun
| with it, it's usually free, but if someone makes the new
| Minecraft with his music, he will get his share.
| user_named wrote:
| Good luck ever getting that share of revenue
| tough wrote:
| Can't you just change the music in a silent update if the
| thing took off?
| tetha wrote:
| Sure you can. At 100k / month revenue, you have 100
| currency / month or 1200 / year available for another
| artist, which may or may not include the risk of messing
| up the "feel of the SFX and music". Even at 10x that,
| that's a paltry sum, especially if identity is tied to
| it.
| nico wrote:
| Most legal firms do something in between, you pay a retainer or a
| minimum package, and then they bill you hourly
|
| They get the money upfront, before they do any work
|
| So, from the get go they know the minimum they are going to make,
| and they never get stiffed (also because most people don't want
| to get into legal issues with a lawyer)
| TuringNYC wrote:
| Some clients are absolute pains with flat costs. They argue over
| scope, then argue over the definition of done, then they argue
| over features that were not in scope and refuse to pay you until
| you do them (for free.)
|
| For these "special" clients, I found the best model to be a pre-
| paid declining balance retainer. Nothing gives more focus to
| clients than a slowly ticking meter. Further, i'd set the rate to
| be something that is worth even bothering with such clients.
| dalore wrote:
| This doesn't account that software is (relatively) easy to
| change, vs say building a house (to use a cliche). The client
| will want to see it as it progresses, and then change based on
| what they have learned is possible. This is the agile way.
|
| How would one account for a fixed cost then? Do you say ok it's a
| fixed cost, and you get 6months base on our estimate (but if the
| 6months has finished the contract ends, and isn't that just a
| time based project). Or do you tell the client no changes after
| the initial requirements (which doesn't sound flexible and you
| end up building something the client doesn't want)?
| tptacek wrote:
| Billing hourly is bad, but you don't have to give up time &
| materials billing altogether. Just charge a day rate, or a weekly
| rate.
| the_af wrote:
| I'm genuinely curious: what is the difference between hourly
| and daily/weekly rates?
| TuringNYC wrote:
| >> I'm genuinely curious: what is the difference between
| hourly and daily/weekly rates?
|
| Clients start haggling on a hour by hour basis sometimes.
| Some want to review tasks and how long each took and whether
| the hours add up. Sometimes, it takes so long to figure out
| the conclusion of the haggling, that you've already lost 2 or
| 3 hours of non-billable time on the haggling itself.
|
| With weekly billing, the haggling is reduced.
| Keyframe wrote:
| Discount
| MassiveBonk51 wrote:
| Less granular time tracking for both parties.
| ozim wrote:
| Mostly that you don't have to haggle over hours or 30mins
| here or there.
|
| If you do daily or weekly you don't register time in 15mins
| increments to later argue with the client.
| the_af wrote:
| So it's basically to avoid time micromanagement? A solid
| advantage, I'll admit, but I don't think that's the main
| thing TFA takes issue with.
| tptacek wrote:
| In one case, you bill for each hour you work; in another, you
| bill for any day in which you did work.
| the_af wrote:
| Yes, I understand that. What I mean is, how does it address
| the problems highlighted in the article?
|
| It seems to me there's no fundamental difference _for the
| context of this article_ ; it's still flat rate vs unit-of-
| time based work, isn't it?
| tptacek wrote:
| The longer the unit of time, the less pressure there is
| for either side to micromanage the work, or to avoid
| time-saving optimizations, or to invoice random
| conversations that could lead to new business, or to cram
| multiple clients into a single day when that's not what
| you want to be doing.
|
| I've written a lot about this on Hacker News over the
| years; like, a lot a lot. Here's a starting point:
|
| https://news.ycombinator.com/item?id=6105004
|
| I don't think anybody in our field should ever be billing
| hourly. Day/week/month/quarter vs. flat rate? We can go
| back and forth on. Just don't do hourly.
|
| This comment is I think too subtle to lead off with, but
| it's the essence of where I'm coming from on this:
|
| https://news.ycombinator.com/item?id=4103207
|
| (I have had some moderate success with this approach,
| which makes this a rare case in which my confidence in
| arguing something here has at least some colorable basis
| in reality.)
| swader999 wrote:
| This makes sense but I've never been taken to task for
| hours and many of my clients charge me out to their end
| clients for hours I submit.
|
| The other advantage is that hourly tracking gives me data
| to predict better what new features of similar complexity
| will cost. Certainly not an amateur capability.
| tptacek wrote:
| You're free to do your own internal projections about the
| number of hours your features will take. Simply round
| them up to the nearest whole number of days, and present
| that to your customer.
| swader999 wrote:
| Hourly estimating takes too much time and it never gives
| useful numbers even with various padding schemes when
| estimating innovative sw development. Cookie cutter web
| sites or repetitive work that you've done for multiple
| clients is easy to fix bid but I don't do that sort of
| work.
|
| I just say this has a complexity of 1,3,5,8 or 'too big
| to say'. Each feature is a 1-15 minute conversation to
| get this number. Then they ask well how much time is
| that? I then answer "We have three months of velocity
| data, x points per developer per week accepted into
| production over the last ten weeks so those five new
| points for that feature will take one developer 4.1 days
| to complete with a variance of plus or minus 1.8 days. If
| you need better precision, we can take a day or two to
| really break down the work and get the uncertainty to at
| best a ten percent variance.
| tptacek wrote:
| I don't know what we're arguing about. I don't like
| hourly estimating either, I'm just saying daily billing
| doesn't keep you from doing it.
| swader999 wrote:
| This is nonsense. The same assertions can be said for, I'm an
| engineer, level 2, so here's the yearly salary.
| alxmng wrote:
| It depends. I do plenty of billable hours augmenting software
| teams. I'm delivering user stories every week. There's simply too
| much communication overhead in preparing weekly estimates for the
| same client.
|
| I don't share the perspective on hourly making someone a
| commodity. Fixed outcomes can also be commodities. Clients can
| and do shop around estimates for the best price. The race to the
| bottom exists whether you're billing by hour or by outcome. You
| avoid the race to the bottom by what you sell, not how you bill.
| Wordpress themes are mostly a race to the bottom, regardless of
| how you're billing.
| swagasaurus-rex wrote:
| A large organization might prefer billable hours because they
| already have thousands of employees on a recurring accounting
| schedule
| m3kw9 wrote:
| Is this the equivalent of pointing out people eating alone at
| restaurants because he thinks it's weird? Contracting can be good
| and the downward pressure stuff is false because of trust issues
| and networking effects.
| leepowers wrote:
| _When you bill by the hour, what you're really saying is "I have
| no idea if what I'm doing will have any value, and I honestly
| don't care -- all that matters is that I am not exposed to risk
| for even a single minute of my time working for you. I get paid
| for every minute."_
|
| Yes, that's the point. As a software freelancer you have no
| responsibility to take on risk for a client company that you have
| no ownership in. You'd be a fool to do otherwise.
|
| Every hourly billable contract I've signed has included a
| detailed scope. Contracts that very clearly delineate
| responsibilities and compensation. Both parties are agreeing to
| the value the freelancer is providing. You'd be a fool to hire a
| freelancer without understanding the value they provide. And as a
| freelancer you'd be a fool to sign a contract without clearly
| defined responsibilities.
|
| The author seems to believe the method of compensation determines
| the value provided. But these things are orthogonal. I've worked
| with multi-million dollar agencies that bill by the hour. They
| provided a lot of value, they knew precisely the outcomes they
| were responsible for, and delivered those outcomes.
|
| Blog posts like this come along every so often, usually when a
| freelancer discovers that there are circumstances where they can
| make more money on a fixed cost contract. For instance "This
| project will take me 40 hours. If I charge $100/hr I'll gross
| $4000 total. Or I could quote a fixed cost of $5000 total, and
| net an additional $1000".
|
| The downside is estimating software is hard, mostly because the
| end product is almost always a moving target. Generally speaking,
| clients have a good idea of what they want. But "what they want"
| almost always changes as a project progresses.
|
| The upside for the freelancer is that if the scope can be nailed
| down, and a client is predictable, a fixed cost model allows the
| freelancer to capture any additional value/profit from their
| productivity.
|
| Which is why savvy businesses are fine with paying hourly rates.
| They want to fully capture the value of the freelancer's
| productivity.
|
| In my experience, from a freelance point of view, it tends to be
| a wash. There are many fixed cost projects where you will come
| out ahead. But there are always projects with tons of scope
| creep, and cost increases are almost always more difficult to
| negotiate on fixed cost contracts. But YMMV, and there's no
| single correct answer.
| ChristopherM wrote:
| I charge by the hour and will never change. It forces the
| customer to focus on getting the requirements right instead of
| hand waving it like "oh yeah, that's just what I want" and then
| come back later "I didn't want that, what I meant was" repeat ad
| infinitum. You see they are paying for my time, not results. If
| they choose to waste it... doesn't matter to me, it's all
| billable just the same. I will do my best to steer them in the
| right direction to save time and money, but you'd be amazed how
| often they need to learn the lesson the hard way.
|
| I also don't compete, I'm not on any "freelancing" websites, I
| don't apply or bid for work. My clients always come to me, I get
| an email, a phone call asking if I'm available. So this race to
| the bottom nonsense is utter crap. I'm a consultant NOT a
| freelancer.
|
| I've been doing this since 2011, that's the last time I had an
| employer. This year I'm on track to bill out between $360k and
| $400k. If that's "amateur" so bet it. Considering I have no debt,
| my house is paid for, my luxury SUV I paid cash for, my actual
| monthly bills are around $2,500 a month. I really couldn't care
| less what someone who writes an article like this thinks of me.
| The writer is advocating for the client, they aren't giving me
| advice that helps me. I also have no interest in scaling, on
| bringing on employees. I'm making bank, I left CA in 2013,
| currently live in Wyoming with a 40 minute drive to Park City UT
| and a 60 minute drive to Salt Lake City.
|
| To anyone reading this article and thinking they are offering you
| helpful advice, consider their motive. What are they trying to
| sell you? Are they trying to change the current consulting
| landscape to benefit themselves as a business owner?
| ryanjshaw wrote:
| > This year I'm on track to bill out between $360k and $400k
|
| > To anyone reading this [post] and thinking they are offering
| you helpful advice, consider their motive
|
| Honestly I'd be happy to sign up to your newsletter and be
| upsold into a private $20/mo high-end consulting community
| forum if I were to learn how to earn those kind of numbers and
| I was disappointed you didn't.
| ChristopherM wrote:
| I started "programming" in 1982 on a VIC-20, I taught myself
| C++ in 1991 and programmed as a hobby until I switched majors
| in University. Then I moved from Job to Job once I stopped
| learning/progressing. Along the way I made many contacts at a
| diverse group of companies.
|
| I started at a medical device company reverse engineering
| MRI/CAT scan data for a 3D device used in brain surgery. Then
| I worked for a company that specialized in Bug Tracking and
| Project Management. Then a company that engineered optical
| archival storage discs with a 100 year life span. Then I
| managed a team developing a video keno/poker gaming machine
| that was available to the Nevada/Montana market. Then I
| managed a team in reverse engineering cell phones for
| forensic analysis. Then a medical company that made a
| continuous glucose monitoring system for critical care
| environments. After 1 year working on their firmware, I was
| brought back as a consultant to rescue the Software
| department as a Director of Software Engineering over product
| and manufacturing.
|
| Through all these jobs I was well liked and since then have
| been contacted by people I used to work with for consulting
| work. And now I'm getting consulting work from other
| consulting job referrals.
|
| I currently charge $180 an hour plus expenses, but come
| January 1st will be raising it to $200 an hour because of the
| inflation and the fact it's not stopping. In terms of stating
| new increased prices; through the years I've informed clients
| to have them tell me it's too much. Then 30 days, 9 months
| come back and just sign a new contract at the new rate. You
| have to be willing to walk away, you have to have money in
| the bank so you don't "need" their work, but would be happy
| to if they pay your going rate. Just be professional, explain
| that you could be making more doing work for another client
| and it's "just business".
|
| I specialize in device drivers Windows and Linux, firmware,
| embedded RTOS and even desktop applications, mostly Windows
| but also can do some Qt on linux. My favorite language is C++
| but frequently use C as firmware and linux device drivers are
| written in C. I also have quite a bit of experience managing,
| hiring, extracting and documenting software reguirments,
| architecting and implementing as necessary.
|
| As for getting new clients, I tend to pick up a client for
| 3-6 months of work and still do work for them 6+ years later.
| In the beginning they get most of my time, later I end up
| sitting in on weekly meetings, reviewing their code/design,
| mentoring their junior level software engineers, and helping
| them to hire more as needed. I end up standing in as their
| CTO/director/senior manager as they usually don't have the
| funds to hire a full time one.
| ryanjshaw wrote:
| You've had some really interesting engagements, and it
| makes sense to see where you are specializing at those
| rates.
|
| I'm about 10yrs behind you, taught myself everything. I've
| been consulting for 15 years but I just don't understand
| how one would find these clients. I'm not sure if I'm the
| issue, or where I live (South Africa), or the niche I've
| ended up in (financial markets regulations) - hence the
| desire for the newsletter!
| tptacek wrote:
| Given what you're working on and how close it comes to
| intersecting with the consulting work I've done ('05-'20)
| and the likely client overlap, and given the top-line
| dollars you said upthread you're bringing in, I'm going to
| go out on a limb here, way, way out, and say: you could
| double that effective bill rate, denominate it in days or
| weeks, and significantly increase the amount of money you
| make while working significantly fewer days every year.
|
| I might be wrong about this, of course! But I'm not being
| casual about saying it.
| FredPret wrote:
| Consider a company that needs a programming job done. It's
| maybe a one-off, perhaps a 3 month to 3 year project. The
| company is not in tech and has no programmers.
|
| Now, in this scenario they could hire a programmer at say,
| 100-200k, for the sake of argument. But this person might
| want to stay on for years, want benefits, and would need a
| manager. The company has no management experience in
| programming, so they know they'll either do a shoddy job
| managing or have to hire a manager. This thing is already
| spiralling!
|
| So now a consultant comes along. This person is an expert and
| has a track record. They are self-starting and self-managing.
| They can be brought on to get the job done and then they go
| away.
|
| You can see that hiring such a consultant is not only far
| easier, faster, and likely to result in high quality, but
| very likely _cheaper_.
| tptacek wrote:
| Which makes it crazy to me that anybody thinks about
| delivering work metered in hours, as if they were a
| furniture mover. A contract developer is selling a (quite
| valuable) enterprise product. You don't need an MBA to know
| not to do cost-based pricing.
| csa wrote:
| > Honestly I'd be happy to sign up to your newsletter and be
| upsold into a private $20/mo high-end consulting community
| forum if I were to learn how to earn those kind of numbers
|
| Based on communities I am aware of that basically do this...:
|
| 1. $20 a month might get you a community that is working to
| get to $100k. The biggest hurdle will be simply taking
| action, with the second hurdle of having that action be
| reasonable.
|
| 2. A $50-$100 a month community might get you into the solid
| $100k-$500k range. I think this is your target. Biggest
| hurdles will be structuring work and addressing low self-
| esteem issues (e.g., imposter syndrome). Lesser issues will
| be finding reliable sub-contractors and/or communities
| thereof.
|
| 3. $500-$700 a month gets you into a community of folks
| running businesses with $1 million ARR and higher (usually as
| CEO rather than sole proprietor). Biggest issues will be
| things like hiring (especially key CXX-type slots), info on
| lesser known/documented processes (typically easier once it
| has been done once), and info on broader issues (e.g.,
| outsourcing to $COUNTRY, to-the-minute status of
| manufacturing in $COUNTRY, etc.).
|
| The numbers can go higher.
|
| All of the above will also have an element of sanity check
| ("is hiring _really_ this tough right now?") and
| commiseration ("omg, my sales guy has to have his emotional
| support emu next to him in every zoom call!").
| tomrod wrote:
| Can you provide some recommended ones to follow or how to
| find?
| tptacek wrote:
| "Amateur" isn't the word I would have used, and I think the
| author sabotaged his point by using it. What I would say is,
| you're leaving a lot of money on the table and donating a lot
| of cortisol to entities that don't need the money or the
| cortisol donations, because they're not spending their own
| money, and the high order bit of their success criteria is "I
| was able to plug money into this interface and make a business
| thing happen within the planned time period, without adding any
| headcount".
|
| The other place I disagree strongly with the author is about
| the utility of flat-rate projects. I've had good luck with flat
| rate, but it was never the project structure we'd have used by
| default. Rather: for any project we did, we'd have quoted a
| full project, broken out into billable weeks, with a final
| sticker price and a paragraph below the pricing table with
| "additional work needed will be billed at our pro rata day
| rate".
|
| I think the attitude that says "all the risk should be borne by
| the client, not the struggling independent consultant" is bad
| business (for high-end tech consulting, you should start seeing
| your practice as being in part in the risk mitigation
| business!), but that doesn't mean you need to take on extra
| risk just for the hell of it.
|
| That said, there are clients who are so valuable, because
| they're going to be repeat-business house accounts or because
| their reputation is so strong that they'll bring in word of
| mouth business automatically, that you should definitely
| consider just doing flat rate projects for (if that's what they
| want) and just eat the overages.
| [deleted]
| jedberg wrote:
| More power to you, but I stopped charging by the hour a long
| time ago. I charge minimum by the day, and offer a discount if
| you buy a week. I still bill for my time, but I avoid haggling
| over how many hours something took, and it also saves me the
| trouble of tracking my hours.
|
| You book me for a day, you get me for the whole (at least)
| eight hour day, however you want to spend that time. You book
| me for the week, you get me for at least eight hours each day
| for a week.
|
| I also do by the project billing, where I estimate how much
| work something will be, and pay on milestones. That requires a
| lot of up front work defining the deliverables in a way that
| avoids scope creep, but I also build in an overhead for scope
| creep so that I can "comp" them some deliverables that weren't
| covered, and everyone is happy.
|
| But the most important part is that the price is always agreed
| upon up front.
|
| The biggest issue with hourly billing is that neither of us
| knows how much the contract is worth until afterwards.
| swader999 wrote:
| How do you deal with clients that perceive and expect to have
| you available and working more than eight hours a day? What
| do you do about when your not immediately answering during
| lunch etc. What do you do about days where you detect l
| weren't fully engaged by the client for a full eight hours?
| swader999 wrote:
| "The biggest issue with hourly billing is that neither of
| us knows how much the contract is worth until afterwards."
| You still don't with daily billing.
| jedberg wrote:
| I know with daily billing because they can only book me
| for a set of days in advance. It's not ongoing. We agree
| ahead of time on the specific days I will be
| there/available.
| swader999 wrote:
| I would guess we do different types of work. Most of my
| engagements are at least a year long. I've been billing
| at my current company for four years this December.
| tptacek wrote:
| Don't set that expectation. Don't work with clients that
| expect you to track hours when you bill days. The threshold
| for productivity and exclusivity I've had has been "if I
| billed you for a day, I'm not going to bill work for
| anybody else in that day"; that's as far as I go. In 15
| years of doing this kind of work ('05-'20) I never had a
| problem --- but we did bail on RFPs where clients made it
| clear they'd be looking over our shoulders to make sure we
| were busy. That happened only a couple times, and, in
| retrospect, based on conversations with the people who
| ultimately won those bids, we were always glad to have had
| the early warning on those clients.
| swader999 wrote:
| I've never had to fix bid for work, always had hourly
| gigs in the wings. I hold the philosophy that sw dev is a
| product development, iterative exercise, not a
| construction metaphor that is predictable.
|
| Yeah, I expect you would be able to do the same if you
| billed hourly. If a client insisted I bill daily, I'd
| probably have no issue with it either. It's just so rare
| to bill daily in my circles that I've never considered
| it, I'm often rebilled by my client to their end
| customers for specific features so they need hourly
| tallies to pass on.
| tptacek wrote:
| When you bill hourly you are literally demanding that
| your clients account for your time on an hour-by-hour
| basis. So, no, it's not the same.
|
| If you're subcontracting in order to make ends meet, then
| you don't have any control over your project structure;
| you're a subcontractor. My advice is to plot a course to
| not subcontracting anymore as soon as you can. I doubt
| that the driver developer who kicked this thread off is
| subcontracting.
| swader999 wrote:
| I've been in full control of the architecture, team
| makeup, feature design, most of the technology choice,
| and often the feature priority. I put my foot down on
| clients that dictate how a feature is to be built and
| give them the 'why' talk. I've had enough control over
| all the projects I've ever worked on these last fifteen
| years I've worked hourly.
|
| I get your ideas about subcontracting, but I've always
| been treated higher than an employee and typically like a
| partner. The trick to this is to charge a ridiculously
| high rate. That instantly establishes the dynamic and
| relationship I want.
| tptacek wrote:
| But you don't have a direct relationship with the actual
| buyers of your work, so you don't control your project
| structure, and the middleman business reselling your work
| presumably needs to be taking a cut. It's no wonder they
| treat you well, right?
| swader999 wrote:
| Well for the case right now, I'm building a multi tenant
| system. Some tenants want features that no others want
| and they pay for my hours on those. I still have enough
| control in these cases.
|
| I come up with better lower costing solutions when the
| stakeholders express WHY the feature is needed, what
| problem it solves. Then we and I can creatively explore
| HOW to solve the problem. There's usually several ways to
| solve anything, many that vary by orders of magnitude in
| terms of cost or architectural complexity.
|
| If I am dictated always on the HOW, handed fully
| solutioned work to implement like a monkey I rebel and
| have a long talk about how this won't work. I never have
| had to quit over this stance but I would if it wasn't
| reconciled.
|
| So when I say control, that's really what I specifically
| mean by that word. The ability to negotiate and explore
| the HOW with the why being firmly in mind.
| jedberg wrote:
| > How do you deal with clients that perceive and expect to
| have you available and working more than eight hours a day?
|
| The contracts specifies which days I will be
| there/available, and the times (usually 9am to 4:30pm in
| their time zone). Sometimes if the work is interesting I'll
| give them extra hours on me.
|
| > What do you do about when your not immediately answering
| during lunch etc.
|
| I work through lunch. I always answer. I take care of my
| personal needs before and after the contract time. I build
| in 30 extra minutes to account for bathroom breaks and
| heating up food to eat.
|
| > What do you do about days where you detect l weren't
| fully engaged by the client for a full eight hours?
|
| That's a them problem. If they don't have enough work to
| fill my time, then that's on them. If they have enough
| work, then I do it. It's just my work ethic.
| the_lonely_road wrote:
| I clicked on you because I was curious and noticed your bio
| says you live in Nevada still if you care.
| rootusrootus wrote:
| And not just anywhere in Nevada, but Incline Village. Pulled
| that up on Redfin and I can see why someone would be tempted
| to brag.
| jedberg wrote:
| Incline Village is the closest you can be to the Bay Area
| and still live in Nevada. It's where a lot of tech folks go
| after they exit or if they get a remote gig because then
| they don't have to pay income tax, but are only a 3-4 hour
| drive to SF if they have to go in.
|
| It also has great schools.
|
| So you end up with a lot of moneyed California ex-pats
| there.
| dragonwriter wrote:
| > Incline Village is the closest you can be to the Bay
| Area and still live in Nevada.
|
| Factually, no, its not: Stateline, NV on the south shore
| of Lake Tahoe is 15 road miles closer than Incline
| Village on the north shore. About similar drive time,
| though.
|
| Incline Village is swankier though.
| jedberg wrote:
| Not in the winter. 50 can get closed for days, 80 is
| always plowed.
|
| Closest in terms of average time throughout the year.
| ChristopherM wrote:
| I haven't made a post in years, I'll update my bio. I didn't
| realize it still pointed to Incline Village.
| cushychicken wrote:
| Billing by the hour seems to focus your clients clearly in a
| way that being their salaried coworker just does not.
| pdonis wrote:
| _> It forces the customer to focus on getting the requirements
| right_
|
| This is an issue that the article does not address, and it
| should. Part of the business risk that the article is talking
| about is the risk of ill-specified requirements from the
| client. But that means that any flat-rate pricing has to price
| in the extra time and effort required to make sure the
| requirements are well specified (and that's true even if a fair
| amount of that time and effort happens before a contract is
| signed--you still need to recoup those costs somehow). Either
| that or you simply have to not take on clients who can't
| specify their requirements well enough up front.
|
| _> consider their motive_
|
| I agree, this is always a good thing to do.
| mmckelvy wrote:
| What kind of work do you do?
| poulsbohemian wrote:
| Here's the challenge I ran into, so I'm curious how you handle
| it...
|
| If you bill by the hour, first they fight you over the hourly
| rate. Then they want to argue over how many hours it will take
| to do the work. Then they want to argue over you billing them
| for all the project management and planning hours you are
| spending with them, they only want you to bill them for "the
| work." Then when they get the bill they want to argue over the
| hours you bill them.
|
| And before anyone says "find better clients" I found this in
| everything from Fortune 500 to mom and pop. And Fortune 500 is
| net-180 regardless of what's in the contract.
|
| I was spending so much time in this kind of BS that I went to a
| monthly retainer model. You get access to me, but you are doing
| so in a way that we can both set aside haggling over hours. For
| the smart clients it was a great deal and it saved me a whole
| lot of accounting overhead.
| ToucanLoucan wrote:
| I have a similar arrangement but I look at it much
| differently than you.
|
| The retainer allows a client the freedom to contact me over
| what they think is nothing, because it is nothing, but 9/10
| times that nothing will lead me to discover some issue that
| did need my attention, and I can give it that attention when
| it's still a nothing and not a barn-on-fire problem in their
| business. It also means I can log a trivial amount of hours
| doing the monthly maintenance that most clients gripe and
| piss and moan about you charging for: they already paid me.
| If a retainer hasn't been used up by the end of the month
| (and it usually hasn't) that's when I go do housekeeping for
| them.
|
| Client gets a consistent-ish expense in their books, I get
| paid, everyone's happy.
|
| > If you bill by the hour, first they fight you over the
| hourly rate. Then they want to argue over how many hours it
| will take to do the work. Then they want to argue over you
| billing them for all the project management and planning
| hours you are spending with them, they only want you to bill
| them for "the work." Then when they get the bill they want to
| argue over the hours you bill them.
|
| I mean this is just the game, dude. I personally just do not
| have these arguments, I'm not open to these discussions. This
| is the price of my time, this is how much time it took, this
| is the bill. If people don't pay then I don't perform
| services and anything I have access to goes down until I
| will, but I've only had to do that once so far, and they got
| the point very quickly.
|
| If you don't want to do this then yeah
| freelancing/contracting isn't going to be your bag. I don't
| judge you for it but like, that's just how it goes when
| you're in business for yourself.
|
| Also worth noting: I absolutely charge for time spent
| haggling. Any time I'm doing thinking work for you, that's
| time I will be compensated for. I outline this very clearly
| from the off, and if people drag it out over hours, then they
| pay for those hours. Simple as. I'll never inflate my hours
| or make something take longer than it does, but also, I
| _demand_ compensation for what 's spent on their whatever.
| chrisoconnell wrote:
| Have you considered a monthly retainer with an hour cap?
|
| This prevents you from being treated like a salaried
| employee, maintains your work life balance, and ensures the
| client is still providing solid requirements and thinking
| through their ideas.
|
| We have found a lot of great success with this model, and our
| clients respect it. It ensure we can have multiple clients,
| without one taking up all of our time, and taking it from
| others.
|
| If we spend under X hours, that's fine. But there's simply a
| cap. It essentially means that each client gives enough work
| for us to work for those total number of hours, and we still
| have MRR regardless. We can help our clients maximize usable
| time, and it makes our project management valuable to the
| client as well.
|
| To combat long Net Terms, you can kickoff a client with a
| project, which begins upon receipt of payment, and is
| continued with the retainer. This initial project should be
| able to support you until your retainer payments start (180
| days in length) but your retainer should start ASAP.
|
| It also allows the client to see your value, and you get to
| feel the client out.
| poulsbohemian wrote:
| At this point in life, I've moved on to a new field
| altogether, but some of the ideas you are sharing above are
| exactly the types of models I experimented with.
| LaundroMat wrote:
| What did you learn from these experiments?
| poulsbohemian wrote:
| A number of years ago, the term "F*ck you, pay me" was
| going around in popular vernacular. That jives with my
| own experiences - ask for deposits up front, make payment
| net-15, tack on a giant fee in the event of slow /
| failure to pay, and make sure your contracts are written
| so that the client pays legal bills in the event you have
| to sue. Create contract disincentives to encourage good
| behavior. Keep your rates high and don't give anyone a
| deal. Be willing to say no both to prospective clients as
| well as individual projects - even with good clients.
| swader999 wrote:
| In fifteen years of contracting, 20+ clients , I've never had
| issues or questions about my hours. All software project
| based work on projects that span months to at most two years.
|
| Up front, the hourly rate is agreed to, the expectation that
| I typically bill forty hours a week is set, we agree that
| overtime is only undertaken with written permission. I tell
| them I don't bill for lunch or breaks and that if they can't
| provide me with work to do, I still bill but that I inform
| them persistently when undertasked.
|
| I only estimate work by giving complexity numbers. They all
| ask well how long does that take??? I say over the last x
| months, my average complexity points accepted in production
| is y points per two week period. So expect this five pointer
| to be done in a week plus or minus two days.
|
| Do you need a better estimate? Then it will cost you two
| unproductive days for me to fully spec out the work and I'll
| need three hours of your time for this feature to give you an
| estimate that has a tighter variance.
|
| This is the way it's done folks. I know what I make, I can
| easily have a life, wife, family. Companies make sure they
| have me work on most important things first and they end my
| project when they feel it does enough of what they need it to
| do.
|
| I'm visible, I show real progress frequently and they get
| value out of released features early on and continuously
| throughout the engagement.
|
| Sometimes I lower my rate for equity, people I enjoy working
| with, working on tech or a business domain that interests me.
| I'll of course raise it for the opposite.
|
| In the fifteen years I've had three weeks in 2008 where I
| couldn't find work. I've billed between 95-155/hr CAD. Mostly
| enterprise custom applications. Billing systems, engineering
| process systems, banking apps, trading apps. Typically lead
| dev roles. Working in a Canadian city or remotely for USA
| companies. C#, ruby, scala, python. Not a great programmer,
| I'd get laughed out of the room on a leet code exercise but
| I've repeatedly delivered projects and systems where the
| previous teams have failed. There's only been a few of the
| 20+ projects that haven't been rescues.
| vitaflo wrote:
| I've been a contractor for 14 years now and have faced little
| of what you describe, but I've also attempted to insulate
| myself from it as much as possible. You learn pretty quickly
| which clients not to take, and haggling over rate is the
| first red flag. My rate is my rate, it's not negotiable.
|
| Other red flags are "we have a project starting in a week"
| type offers. Mom & Pop's are right out as they are the worst
| companies to deal with. Startups tend to be great since they
| have tons of money to throw around and don't care how it's
| spent as long as work gets done. And if it's not at least
| couple months worth of work it's not worth my time.
|
| Once you have a network many of these issues go away. If
| someone is coming to you because they know you or you know
| someone on the team, they are much less likely to dick you
| around. It's also easier if you promote yourself as a
| consultant as much as a contractor because then all the
| "planning" hours are part of your offering (and I never use
| the term "freelancer" cuz I don't work for free).
|
| The most powerful thing you can tell a client is "no". There
| will always be other clients, there's no reason to sell
| yourself short.
| neals wrote:
| I'm a lot like you, I started out that way. Over time I added 4
| good developers to my team and now have a steady flow of almost
| steady income.
| [deleted]
| hello_moto wrote:
| I see that your niche is in C/C++ world (with some Obj-C), low-
| level stuff.
|
| Mind if I ask how's the market and what kind of clients
| (companies?) that you worked with? If you don't feel
| comfortable sharing the list, would you be able to share some
| hints?
|
| Out of curiosity because my background in college is more
| towards System programming but life puts me as a full-stack and
| backend/cloud engineering. Gettin a bit tired with too many
| backend tech (too many different storage solutions, backend
| languages, etc)
| ChristopherM wrote:
| Most of my clients tend to be Medical Device startups, but I
| did have a really long relationship with a major food
| manufacturer. While it makes sense for them to hire full time
| software engineers for some of the work, they always have a
| hard time finding device driver experts. Also they tend to
| attract less experienced engineers, so having me on board
| helps to manage and mentor their team. And I'm generally the
| one laying out the architecture and breaking the project into
| smaller parts so their engineers can implement it.
|
| If you want to break into consulting, you have to figure out
| which field you want to be in. I'd avoid anything that has a
| boot-camp available for it, that's a race to the bottom. Then
| you need to get at least 10 years experience working in the
| field, preferably at a variety of companies, and make friends
| and business contacts at each place.
| gatinsama wrote:
| I have been a fan of Erik for 6 years now.
|
| If you are happy about where you are in life and are making close
| to half a million dollars a year, like some on this thread, feel
| free to ignore his advice.
|
| If you are stuck in the race to the bottom and wonder why, for
| example, the company's management doesn't pay attention to
| anything you say, then read his blog.
| addisonj wrote:
| Heh, it seems like this article could easy be called "hourly
| billing considered harmful" and I would basically have the same
| critiques of it as most "<popular tech> consider harmful" posts.
|
| I won't pretend I have years of experience in the freelancing
| world... I am fairly new to it myself. But I do know as engineer
| who also has done some stints in product, sales, and business
| side, that, just like in software, there is no one "right way"
| and that one of the most consistent challenges business face is
| choosing the best of many reasonable options, especially when one
| of those choices is viewed as a "best practice" but the team
| lacks the direct experience to answer the question of "best
| practice for who and when?"
|
| I fully agree with the author that there are some real market
| forces that can make hourly work not the ideal for many
| situations... but I also think it massively over simplifies the
| different types of work that are done as "freelancing".
|
| Whole new products, new features in existing products, taking
| over projects, rescuing projects, consulting with less
| experienced teams, embedding in teams, integrations of external
| tools, is probably only 25% of the type of engagements a single
| consultant may come across and probably only 1% of the type of
| engagements that exist. Combine that with the huge range of
| attitudes of companies and very quickly we are in a space where
| no single solution exists.
|
| It seems like the author's true point is in the conclusion, that
| you should focus on driving value and results for your customer
| and you should structure work to align with that, which is
| _absolutely_ true. The general take of "hey engineer guy who
| isn't as business savvy, that value might not be best delivered
| via hourly billing!" is not bad advice. If you do hourly billing
| because it is the most straight forward, you should probably
| think about it... but you also shouldn't move to project based
| billing because of some people calling it a best practice either.
|
| My advice to any engineer looking to freelance (but really to
| almost anyone everywhere in this industry) is to not take the
| easy way out when facing decisions outside your domain. I think
| so often work seen outside of code is seen as "lesser value", and
| because of that, shortcuts are made by just taking the easiest or
| "best practice" answer to a problem and running with it, and not
| gaining any understanding of the problem space. No one can be an
| expert in everything, but when you can't make this decision
| someone else's job, like when a business doesn't have some
| expertise (which in freelance is always the case) then you can't
| afford to not put in the time to learn enough to at least be
| informed. If you then do decide to do the easiest / best-practice
| thing, at least you know why you choose that option and can later
| evaluate how it is working for you.
|
| In summary, there is no simple answer, be thoughtful and keep
| trying new things. What works for one gig may not work for
| another.
| dusted wrote:
| Interesting read. My freelance work has never been by the hour,
| and for reasons that align with those mentioned in the article.
|
| Clients don't care about hours I spend, my hours bring no value
| to them. They desire a certain result, and they know how much
| that result is worth to them.
|
| For my freelance tasks, I've put forth a rather steep one-time
| price for the solution of the specific problem at hand. The
| condition: The price is paid when the problem is solved, if not,
| the service was not delivered, they don't pay.
|
| This works out beautifully for the client, they run no risk
| (except the delay in waiting for me to fail so they can try
| someone else), and they know exactly what they pay.
|
| It works out nice for me, since I have a reasonable idea whether
| I can solve the problem or not.
|
| Hourly rates for those tasks have been close to $1000, including
| failed tasks where I spent some days not solving the problem.
|
| In the end, it's also very fair to both parties.. It's reasonable
| to expect the agreed-upon result when paying someone to do
| something.
|
| It's also unreasonable to expect to get paid for not doing what
| was agreed upon.
|
| A concrete example I can talk about was a client whose database
| had started "acting up a lot" and they had no idea what was
| wrong, they were very friendly and told me they had contacted
| another company too who had quoted an hourly price around $200
| but were unwilling to estimate how much time they would need,
| since they didn't know what the problem was. So I said, "I'll try
| and fix it, if I succeed it'll be $4000", that's a fair amount of
| money, sure, but it was pretty good value to them to get their
| inventory database back up. It turned out to be an unhandled
| edge-case that only showed up years after when they introduced a
| new kind of item into the database. I had to learn a little bit
| of VBA(!) to fix it, but in the end, it took about 2 hours, and
| you might argue that price is too much for those two hours, but
| they didn't pay me to spend 2 hours, they paid me to get their
| database working again.
| louwrentius wrote:
| I have to scroll pages and pages to discover the answer: take
| risk and sell fixed price because that's what customers want and
| differentiate you from the rest of the freelancers.
|
| The whole article feels like asking GPT to add filler for the
| first 3 pages.
| ilamont wrote:
| Standard SEO playbook - 1,000 words frontloaded with keyword-
| laded filler.
|
| It's particularly banal when it comes to recipes. "What is a
| cheeseburger receipe? Why would you want to cook a
| cheeseburger? What's the best approach to planning the best
| cheeseburger recipe? What cheeseburger equipment is required
| for the best cheeseburger? Oh, and here's the best cheeseburger
| recipe you were searching for."
| teucris wrote:
| I think the opening sections were necessary to define terms and
| clarify why an extremely well established system (hourly
| billing) might not be a good thing. It's a nuanced argument and
| requires some verbiage. Maybe it could have been cut down a bit
| but I think it was important to include.
| PaulWaldman wrote:
| It's incredibly important to have a clearly defined scope prior
| to entertaining fixed pricing. If expectations are not
| established with the client, they will make assumptions and they
| won't be in your favor.
| jacoblambda wrote:
| Also have pre-established policy for revisions. Like 2 minor
| revisions included in the cost but then have further revisions
| priced by how complex they are.
| swader999 wrote:
| Then your interacting with your client in a rigid contractual
| way instead of a collaborative creative nature. Not nearly as
| fun and you spend a lot of time being very careful with your
| written words and your sign offs.
| PaulWaldman wrote:
| It's best to shy away from explicitly including things like
| "2 minor revisions". Who determines if the change is minor or
| not? The client will always assume minimal effort is
| required. If the change is in fact minor, then just implement
| it.
|
| If the change is significant, then provide a price for its
| implementation.
|
| Specifying that minor revisions are included in the agreement
| provides too much ambiguity.
| tonyedgecombe wrote:
| In my experience the more they push you to do fixed price work
| the more wary you should be.
| Goronmon wrote:
| _If expectations are not established with the client, they will
| make assumptions and they won 't be in your favor._
|
| I think you can shorten this statement even more.
|
| Clients will make assumptions and they won't be in your favor.
|
| The goal is to limit those as much as possible, but they'll
| still happen. "Fixed price" is largely not fixed anyways, as
| you should always account for change requests and other budget
| altering mechanisms. I don't think I've ever seen a non-trivial
| project not have some level of change once work has started.
| PaulWaldman wrote:
| >The goal is to limit those as much as possible, but they'll
| still happen. "Fixed price" is largely not fixed anyways, as
| you should always account for change requests and other
| budget altering mechanisms. I don't think I've ever seen a
| non-trivial project not have some level of change once work
| has started.
|
| These need to be handled as separate change orders. Following
| the model, price the scope changes appropriately based on
| clearly defined requirements. This part takes some finesse.
| Many clients may not realize how they can achieve their goals
| in the most cost-effective manner.
| jkaptur wrote:
| I tried this. A very large company reached out and asked for a
| custom version of diffdiff.net. They asked what my hourly rate
| was, and (thinking along the lines of this article) I offered to
| do it for a flat rate instead.
|
| They ghosted me!
|
| In retrospect, a "very large company" didn't reach out, a
| _relatively junior person_ at the company did. I should have
| worked within their constraints. (Or just not taken the job,
| which, I guess, is effectively what I did).
| d_sem wrote:
| To each their own I suppose. In my personal opinion, hourly
| billing is economically aligned to better product-stakeholder
| fit. Without economic cost, stakeholders seem to tend toward over
| requesting / flip flopping resulting in a worse product. I've
| experienced this in larger B2B projects where those customers who
| paid monthly where incentivized to filter out the things they
| don't need and focus on the high value functionality.
| the_af wrote:
| Well, I found this article insightful, even if I've no plans of
| going freelancer (though of course... "life, uh, finds a way", so
| who knows).
|
| I think my most immediate objection is one that is raised in the
| comments from TFA: customers don't know what they want. For a
| flat rate to apply, you have to work to an initial set of
| requirements set in stone, and we know these requirements are
| almost always wrong (except for very specific cases), so either
| your customers will try to do feature creep or they'll accept the
| initial specs and be disappointed, and probably blame this on
| you.
| Aurornis wrote:
| > customers don't know what they want.
|
| It's not always like this. I've used contractors to take on
| extra work that we were familiar with, but didn't have time
| for. We knew exactly what we want because we'd done it multiple
| times before and had already written a clear spec.
|
| The eye-opening thing was that this actually scared a lot of
| fixed-bid contractors away. As soon as they realized that we
| knew the task and had the option of doing it internally (on a
| longer timeframe) they became less interested in working with
| us.
|
| When I started playing dumb and pretending like we didn't have
| the experience in-house, I got some _wiiild_ bids for how long
| it would take. Some of the contract shops who had clearly done
| this before tried to pretend that we were doing something new
| and novel that would require a lot of R &D.
|
| It was a very disappointing experience. Once of the worst
| contract shops was even the recommended support partner from
| one of our vendors.
| swader999 wrote:
| Yeah fixed bid for most sw projects just seems dishonest and
| not a satisfying way to work with people. And yes, I could
| easily make a business out of overcharging for cookie cutter
| type work. Speaking in generalities, there's always
| exceptions.
| atoav wrote:
| As a freelancer I always told my customers how many hours I
| plan to work for them, including a rough overview of how much
| time we use at which phase of the project and what is expected
| of them.
|
| And I do that before I agree to work for them.
| the_af wrote:
| Interesting. Wouldn't that require a firm understanding of
| the project scope and a steady hand at rejecting any attempts
| at feature creep or redefining the scope (with the politeness
| required for not losing them as customers)?
|
| In other words, wouldn't this scoping and pre-planning go
| against the latest findings of _lowercase_ agile?
| atoav wrote:
| That depends entirely on the type of projects you are known
| for (read: are willing to take). Some software projects
| agreeably will be next to impossible to estimate, others
| not so much.
|
| That being said I always bill per day of work, rarely ever
| a fixed sum (in fact only for good friends that are poor
| artists). So if the scope changes and there are more days,
| they know my rate and it will be their decision if they
| want to pay for that. Also they will have the insecurity of
| me not having time because I work on other things -- risks
| that I clearly communicate before they agree to have me.
|
| I expect a certain amount of changes and feiction that is
| included in my original estimate, so this "extension"
| period is rarely ever needed and when I am faster the
| customer has to pay less than they expected which typically
| makes them happy.
|
| It doesn't always work that flawlessly, but it was never
| catastrophic and my customers value the up-front clarity.
| calvinmorrison wrote:
| Then you finally do all the research and they reject your
| quote.
|
| The most valuable part of my job is typically the engineering
| or architecting not writing the code.
|
| Depending on the client we do T&M or quotes but we never do
| free research. Well do a short proposal to quote you a big
| proposal
| ghaff wrote:
| >Well do a short proposal to quote you a big proposal
|
| Did that for a pretty large client project once. Basically
| brainstormed/did some research to pick out some technology
| areas they might be interested in and why. Then did a bigger
| project to dive deeper into areas, conduct interviews, etc.
| that resonated with them.
| calvinmorrison wrote:
| It works well. And if they don't want to use us as the
| programmers, no problem, we deliver a document at the end
| of the first with recommend designs etc they can tak else
| where. T
| sudhirj wrote:
| If someone's a pro, they'd charge a flat rate to tell the
| customers what they need, or for a given outcome. Like a flat
| rate to spec out an MVP. Or to get to $X in revenue.
| travisjungroth wrote:
| A flat rate to hit a revenue target? That seems incredibly
| unrealistic.
| Closi wrote:
| Entirely disagree with this post.
|
| I do a combination of fixed price and time and material work.
|
| Sometimes fixed price is a good model, sometimes time and
| material is a good model.
|
| Fixed price works when you know the scope, and are confident that
| there won't be roadblocks and rabbit holes. If a project takes
| longer than you think, you are eating the difference.
|
| There's nothing wrong with charging per hour if you know the
| value of your hours. Charging by hours gives you a level of
| certainty regardless of scope change.
|
| IMO the smart consultant/contractor will use both models, then
| pick the right one for the project and client.
| ghaff wrote:
| To give a specific example with respect to writing.
|
| Want an article, blog post, or somewhat longer customer-facing
| material. So long as I know _something_ about the topic and
| know where to go to get more information (maybe from you!) I 'm
| happy to quote a fixed rate (+/- word count requirements). I
| have a very well-calibrated sense for how long this sort of
| thing takes and I'll put in some language about review cycles,
| etc.
|
| If you're a law firm that needs an expert witness report, I'll
| almost certainly charge an hourly rate (which is what the law
| firm likely expects anyway).
| PeterStuer wrote:
| I hear what he is saying, but he stops half way where he says
| 'take responsibility for outcomes'. You see. In business this is
| translated into fixed price projects.
|
| But in contrast to the name there is nothing fixed price about
| it. As a provider of such project deliveries, unless you truly
| are an 'amateur', you still are acounting cost plus if the
| project goes into overruns. The way you do this through 'change
| requests'.
|
| You see, you can't nail down a contract taking into account every
| possible interpretation of details on a bespoke software project.
| So the customer will always need to clarify and adapt. This will
| be translated by your sales team into additional costs until a
| margin is met.
|
| The only way out is using of the shelf product, and even then you
| will probably have an 'integration project'.
| mdgrech23 wrote:
| I think the lesson here is bespoke software is probably a bad
| idea for a lot of companies and you're better off buying off
| the shelf shit. I think this is particularly hard for a fortune
| 500 company though, especially for something like a website.
| You're too big for a Wix site but employing a team of
| developers is going to cost you an arm and a leg and it's
| really not in your wheelhouse. We'll probably see more software
| outsourced going forward.
| [deleted]
| more_corn wrote:
| Don't feed the trolls
| exclusiv wrote:
| This is nonsense. If you bill fixed, then you're doing it wrong
| if you estimate so lean that you put yourself at risk. And it's a
| disservice to the client if you are really conservative and they
| pay a lot more than T&M would have been. And if you are spot on
| with your fixed estimate, then that's the same outcome as T&M
| lol.
|
| If you are an honest person and do business the right way, T&M is
| the way to go. If you want a higher effective hourly, then you
| would pad fixed. That doesn't make you professional though; it
| makes you dishonest if you purposely inflate.
|
| If the company needs it to be fixed to compare apples to apples
| or their finance dept requires it, then submit your fixed scopes
| and run your business. It's professional to be flexible. And to
| not fight client processes and procedures.
|
| You will not win a lot of great business if you have only 1 way
| to run your projects. Some larger companies will take a vendor
| that costs way more but offers better terms like net 45 or net
| 90.
|
| I'm a professional. I run a business with employees that's grown
| every year. We do both, but it's better T&M. All time is logged
| with descriptions of what was done. We bill based on seniority.
|
| We still do time estimates on items that are T&M so my team is
| accountable, thinks about their approach and time, and so the
| client can have an idea of what they are committing to. They
| don't care if it goes over, it just can't get out of control. And
| they need this information to triage and approve requests.
|
| T&M with time estimates is a professional way to go. Some of your
| estimates will be off, some will be under. Just make sure clients
| understand that and traffic your wins and losses. And if you find
| out your 24 hr task is going to take 60 hours, notify the client
| as soon as you discover that to avoid surprises.
|
| I'm experimenting with a more traditional contingency budget
| which is explicit in the estimate. In that manner, a fixed bid
| would be done but the client would be aware that there could be
| unknowns that result in tapping the contingency budget. And if
| it's not tapped - they don't pay it. So rather than try to bake
| the unknowns into the fixed which the client would pay
| regardless, I can have the contingency reserved if needed but be
| more palatable against a competing bid that wraps it into their
| fixed.
|
| So say, 100k fixed bid, separate 20% contingency for unknowns for
| my bid. Versus another company's 120k fixed bid, no contingency.
| Both possible 120k spend. One may not use contingency and thus be
| 20k cheaper. The other - 120k is paid no matter what.
|
| Anyone do that on their larger projects? How is that received?
| mk_stjames wrote:
| One thing I've noticed more now that I read HN more than other
| places...
|
| Software people sure like to talk/write a lot of about their
| business. Like, a lot.
|
| I'm a mechanical/aerospace engineer, and I've done some short
| term consulting for startups (but now mostly retired).
|
| There is verrry little online in the form of blog posts like this
| mulling over how people work in that type of engineering
| (especially in the higher-end of the field, like what happens in
| automotive and military/commercial aerospace- it's all very
| closed-doors). Especially less in the methods/metas of the field
| and the business surrounding it.
|
| But software people? HN is flooded everyday with long form
| exposition just like this blog post. And it's honestly been
| pretty eye opening reading how much people pontificate in this
| area. Like, goddamn. I'm starting to think people talk about
| their ways of work more hours of the day than they actually....
| you know... work.
|
| << Just an observation; don't kill me. >>
| leepowers wrote:
| In this particular case the author is using a controversial
| headline to drum up attention for his business, which he plugs
| about 2/3rds of a way through the article. I think web
| developers in particular are more familiar with SEO and web-
| based sales and are more likely to write about software in an
| attempt to funnel eyeballs towards their software business
| ventures.
| NoboruWataya wrote:
| I think it's startup people, rather than software people. You
| don't see as much of this kind of discussion in other software
| developer forums.
|
| Building and running a business is its own field of expertise.
| If you think software people talk a lot about it, you should
| hear your average MBA!
| xboxnolifes wrote:
| I think it has more to do with software engineers being more
| likely to have spent a significant amount of time with the
| internet, (some form of) internet culture, and then sharing on
| the internet. Outside of software engineers, there are so many
| people who run businesses whose internet exposure ends at
| writing emails. These people might be just as willing to talk
| about what they do, but it's going to happen in-person, not on
| a blog post.
| jzb wrote:
| Corollary: Take a generalist observation about any type of
| creative work, stick "developer" somewhere in there, and act as
| if developers are unique and/or the observation is new.
|
| Example: Not long ago I kept seeing some variation of articles
| about how meetings are bad for developers. Specifically
| developers.
|
| Guess what? This is true for pretty much any creative type work
| like writing, design, or any type of work that involves deep
| thinking. But it was treated like a revelation because it was
| about developers _and_ made no case for all the other workers
| in the same boat.
|
| This piece? I could've written this 20 years ago as a freelance
| writer. Generally I refused to stick an hourly rate when
| dealing with clients for lots of reasons, not least of which
| that when I know a topic and it's in my wheelhouse I write very
| fast. (And if I struggle with a topic, it isn't on the client
| to pay for extra time...)
|
| My dad could've written it 45 years ago as a sign painter and
| pinstriper. He charged by the job / value of the work
| delivered, _not_ by how long it took to do. (Insert Picasso
| anecdote about "but that only took you 30 seconds," "yes, but
| it took me a lifetime to learn...")
|
| At the time his craft was highly valued, hard to learn, and the
| difference between a good sign painter or pinstriper and a bad
| one was enormous. If there'd been a Hacker News for his field,
| maybe we'd have seen the same thing. Then came vinyl signs...
| dappermanneke wrote:
| [flagged]
| davedx wrote:
| Very long winded opinion piece with little substance.
|
| As an hourly billing freelancer, my only reply to this article
| can only be "so what?"
| shireboy wrote:
| I've been a consultant for 15+ years and have often come to this
| conclusion that hourly billing is not ideal for various reasons.
| I haven't found a great alternative, and the problem is I'd want
| a great alternative I could enthusiastically sell to my clients.
| "Always do fixed price" doesn't seem feasible when scope is not
| fixed, fixing it would necessitate time-consuming research and
| waterfall style project management, and clients often don't know
| scope until they have tangibles in hand. (ie "this looks great,
| but can you do this "little" thing we invision in scope, but you
| invision out-of-scope-but-not-worth-arguing-about"")
|
| I feel like a retainer of sorts may make sense, but that seems a
| hard sell for some projects. "Make us this 5 page app that does
| XYZ". "Ok, pay me X/mo forever". Both consultant and client would
| need an exit that I'm not clear on. Also, to be honest about it,
| the consultant should limit their clients to some reasonable
| number so that they can serve them in reasonable time.
| nico wrote:
| When first reading the title, I thought this was an article about
| consulting and legal firms
|
| About 90%+ of the work you get from these companies is done by
| their junior employees, even if the senior partner that sold you
| swears otherwise
|
| Especially if you are not one of their top clients
|
| For most companies, it's better to get a small firm or an
| individual. You'll get better communication, better work and
| sometimes even better price
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