Re: Consulting Rates

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On 2007-09-21 17:28:14 -0700, d-42 <db.porsche@xxxxxxxxx> said:

hourly charges have to be based on a living wage earned
in no more than 20 hours per week.

Note for a consultant with multiple large renewable contracts that
forumla doesn't really apply, so its not a universal truth. For them,
40+ billable hours a week is achievable with minimal new business
development, and ones rates generally reflect that.

It just makes sense. Like anything... volume is cheaper...

This depends too. I discount long-term retainer agreements a *little* but not very much. I still have overhead that has to be covered, and personally, I can't do billable work that many hours. I choose to work less, so my hourly rate has to be higher to maintain the living I want to make. The key to making that work is delivering value beyond an hourly rate.

Daily rates can range from $500 to $1000+, depending on the consultant.
Yes, some people DO charge a pittance, but basically, consumers get
what they pay for. Hourly charges for the developers *I* know range
from about $55 - $250. And I know a *lot* of local developers.

I agree with what your saying, but I'd point out that you come off as
elitist trying to justify exessives rates by implying that only a
hobbyist/incompetent charges less.

The reality is that a $250/hr consultant in my experience is only
occasionally worth it. And you don't always get what you pay for.

Well, I suspect I may be a bit of an elitist, if by that you mean I think that a developer should deliver value for whatever rate they charge. Most developers I know come in in the middle of the $55-$250 range. The ones who *do* charge high generally specialize in esoteric areas, *and* they get the job done faster, smarter and better than I could, in those areas. I recently sub-contracted a job involving XML integration to a colleague who charges high. He saved me dozens of hours of thrashing about learning what he already knows. I could continue to work and earn my hourly rate while he did the heavy lifting, so in the end, he saved me and the client money.

Those who charge $35, in this market, are either undervaluing their skills, or will take much longer to accomplish something, (or never accomplish it at all) than someone who charges 2 or 3 times as much. It behooves me to either deliver the same or better product in half or a third of the time as a developer who charges the minimum. Either that, or I have to bring additional value to the party. I don't compete on cost for clients, as that way lies madness. If the primary determiner of a client acquisition is price, then I let them go to the lower-priced developer. I want a client who can recognize that I bring more value to a project than an hourly database-slave. We control costs, of course, but value becomes more important than cost. When I cease to provide more value than they are recovering in ROI, then I'm not their developer anymore.

You can take this to absurdity, of course. Anyone, now, can outsource their FM to India, for something around $12 an hour. From the anecdotal experience of developer friends who tried this, you get mediocre results, along with tons of communication problems, but you DO get FM work done. Nobody running their own business in LA, CA, can work for that amount of money and making a living. Can't be done between taxes, insurance, cost of living, etc.

I've stepped in many times after those low-cost developers who just couldn't finish a project, or deliver a product that satisfied the client. Most often, the client ended up losing all the money they'd paid the first (or second or third) low-priced developer. Poor data structure, unworkable nomenclature, using FM2.1 tricks in FM7, usually it all has to be discarded.

Often the best consultant is the one who built it in the first place.
And most $250 consultants I know are in -that- situation, mostly
booked up with work from lontime existing clients where for that
client the money is worth it, because that consultant really knows
their systems inside and out.

I agree with this. If a client can continue to work with the original developer of a satisfactory product, the savings in ramp-up time are substantial. Though sometimes, if it's a little tweak, anybody can step in and add a field or a report.

But if your looking at a new project. The $250/guy is usually just a
waste. You aren't paying for 'super hero competence', you are simply
paying him that much because his other clients will, and that's what
his time is worth to -THEM-.

Um, no, not completely. Like I said, on the higher end, clients have to evaluate value, not price. For instance, if I can put in place a system that saves a client $500,000 per year in purchasing costs, then it's worth it to them to pay me $50,000, even if it takes me less than 100 hours of development to do so. Another, cheaper developer *might* be able to do the same thing, no telling, but it *isn't worth any more to the client*. The client never recovers more than the $500,000, no matter what they pay the developer. The process becomes determining how much of the eventual ROI it makes sense for the client to invest. (BTW, the above example is real). If they go with a cheaper developer, it might take longer for them to deliver (or they might not deliver at all) and for larger clients, time to delivery is usually critical. My hourly rate, along with the fact that I have many other clients paying the same thing, plus my references, help assure the client that I CAN deliver what they need, while the lower-rate developer may not.

Clients always have the option to pursue lower cost...sufficient of them have decided to select me that I am fully booked for the foreseeable future.

One does NOT have to be the lowest bidder in order to win FM work.

Of course, If you hire someone incompetent, your hosed, at any price.
There's certainly no shortage of incompetence at the low end; but
since a lot of people set their prices based on what 'other people
charge' [hell, that's what started THIS conversation] there's no
shortage of incompetence at the top end either. Its not like you have
to earn the right to charge higher amounts. And sadly, if your
salesmanship is good, that can compensate for almost incompetent
coding skill.

To a certain extent, your last sentence is true. I know truly wretched FM developers who nevertheless manage to sell sell sell! However, these people rarely build long-term relationships with clients, and they tend to settle into the vertical market niche where they can get lots of one-off sales, rather than projects lasting years.

Which is why, if your developer has a lot of references, all of whom are HAPPY they paid the higher prices, the chances you're getting a competent developer are better. This is why I encourage my prospective clients to contact my references, who include the first client I ever had. Other factors go into it too, including mutual good feeling about being able to communicate and work together.

BTW, I may have started out (like the Original Poster) setting my rates by what "other people" who were beginners were charging, but I didn't stay there long. I had to start raising my rates almost immediately to cut back on my client base. I was getting TOO much work. Raising rates is one good mechanism to manage one's time-on-computer. One ceases raising rates when the new work starts to dry up. (It's call price elasticity) Hasn't happened to me yet.

There are no direct correlations between rates charged and competence, in my opinion. Rate determination has to take in a lot of practical factors, and there's very little "elitism" involved. We're not Hollywood hairdressers, after all. ;)

BTW, in Los Angeles, $35 per hour, when one is the business owner, is not a very good rate, period. There is overhead PER HOUR that never reduces no matter how many hours per week one works. The "I can charge less because I work more" is a fallacy carried over from being an employee, and getting a raise. To the employee, a raise puts more money in their pocket. To a business owner, not always. There are irreducible taxes, and costs that cannot be spread over more hours.

Which is why I characterized someone IN THIS MARKET who charges such a rate as a "hobbyist." Unless someone has an employer or another party paying for insurance, office costs, vacation time, taking care of withholding or subsidizing hardware and software costs, it's not a living wage, unless one lives in a yurt and eats brown rice exclusively. Not that there's anything wrong with that.

In places where it's cheaper to live, developers charge less, on average.

--
Lynn Allen
--
www.semiotics.com
Member Filemaker Business Alliance
Long Beach, CA

.

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