An unordered, ongoing list of tips and answers to questions about consulting, based on my experience as a startup marketing consultant since 2013. Updated regularly.
Assuming a value-based offering (either as project or retainer), what would you say is an approx median & ceiling effective $/hr to aim for in the SaaS consultant marketing space? Or put another way: what should I aspire to?
Value-based billing means not thinking about hourly rates, not even aspirationally.
Imagine a doctor measuring income-per-disposable-glove-used. I suppose they could keep track of every disposable glove they use, and then calculate $/glove, but it’s senseless. How sad if they actually worried about earning enough to cover the cost of gloves.
You should aspire to provide so much value, and to charge accordingly, that you care as little about expended hours as doctors care about used gloves.
Before I quit my job to start consulting, I read all of (every… single… one) Patrick McKenzie’s blog posts and podcasts. That gave me the knowledge that there is a market for results-oriented, BS-free consultants, and that clients in that market are willing to pay for results.
So when I quit and self-declared myself a consultant, I went straight to charging premium weekly and monthly rates, as Patrick and others have recommended.
It wasn’t $30k/week, and it still took many months to stop feeling like a fraud, but soon after I was earning a living by working with extremely interesting and successful clients. I altogether skipped the dreaded “cheap freelancer living week-to-week” stage, and I give a lot of credit to Patrick’s articles for that.
- Million Dollar Consulting by Alan Weiss
- Deep Work by Cal Newport
- Principles by Ray Dalio
It’s a lot harder to grow a consulting business beyond 30 to 40 hours a week because a human can only sell so much of his time.
Good consultants sells access to their knowledge, not their time. A consultant who’s selling their time is not going to go far, for two reasons:
- You can’t sell more time than you have (as you mentioned).
- Selling time means billing time (hourly or daily). That means the cost of your services will be compared against other hourly work, like design, data entry, and legal services. That comparison never works out in your favor.
Don’t bother with social media and business cards. Figure out where your potential clients get their information, and go there. “Fish where the fish are.”
A helpful thing to remember is that large companies spend thousands of dollars a day just on printer paper.
I quit my job and lived off savings until consulting picked up. I don’t know that I would’ve tried as hard or gotten those first few clients if I was treating it as a side-gig in the evenings.
How did you escape your safe 9-5 job? Did you have a strategy or was it a leap of faith?
It was more of a loose plan. I’d been reading Patrick McKenzie’s articles about consulting and knew I wanted to try it. When my 9-5 (more like 8-10) job pushed me to the edge, I decided to put in my notice and give consulting a shot.
I had about $30k saved up from four years of 9-5 work which helped A LOT because I made zero dollars for a few months. But that cushion was a result of good personal finance decisions, not because I knew I’d quit some day.
Did you regret it later on?
Are you happy with the decision you made?
Absolutely. I still have challenging moments but they’re the good kind of challenges; interesting and rewarding.
Where do you think you would be today if you had decided to stay in that job?
In short: I made the right decision for myself, but it wasn’t a rash decision. My savings cushion helped me survive for the first few months. Even if things didn’t work out as well as they did, I would have no regrets for trying.
As a consultant are you just expected to know your stuff completely? Or this there opportunity to learn from others more experienced in a subject matter?
Depends on the company. Larger consulting firms will have different levels of consultants–associate consultant, consultant, senior, manager, and principal–and will pair newer consultants with more experienced ones. You should ask the company.
Find a great accountant. I went through three accountants before finding someone who’s right for me. That has made a huge difference in how much I worry (or don’t) about that part of the business.
I tried out networking but it didn’t work for me. Instead what’s worked very well is writing educational content about the topic I’m an expert in. People often search for a solution to a problem before they decide to hire someone else to just do it for them. If they find your instructions for solving that problem, they might think “Why don’t I just pay this person to do it for me? They’ll probably do it better and faster.”
If you are charging by the hour then you’ve already lost. Contracting/consulting, like any business, is about exchanging value. You want to be fairly compensated for the value you’re providing to a client.
Start with the minimum wage you would like to take out of the business. How much do you want to earn a year? Remember, this is the minimum figure you could survive on. We will increase that number later.
Your lifestyle or annual expenses have little to do with the value you’re providing, so why in the world would you peg your rates (and cap your income) based on it? If you ever move from SF to Idaho are you going to halve your rates just because your living expenses did?
And why limit yourself to $240k/year (what the current top thread is suggesting)? That’s not even a crazy number and already you’re forced to defend the $240/hr rate. Is that an argument you want to have every time you pitch a project?
How did you escape the 9-5?
I was very interested in consulting after reading about it from Patrick McKenzie and others. I especially loved the idea of having a choice of when, how, on what, and with whom I work. When my 9-to-5 job became unbearable (long hours, bad management, high stress, etc), I finally decided to resign and give consulting a try. I didn’t have a specific plan, and I spent the next 3 months figuring things out while living off my savings.
My backup plan was to return to 9-to-5 if I ever depleted all my savings without getting any traction. Fortunately it never came to that (although it got very close). Three years later I’m earning a very comfortable living consulting and I get to work on super interesting projects with super interesting companies.
How do you find clients when you have no network and can only do remote?
Decide who is your ideal client. Identify their 1) common pain points and 2) which online communities they participate in (may or may not be Hacker News). Write advice that will help them with their pain points, and share it in those communities. This will in effect advertise that you know how to solve their problems. Don’t be too modest to say you’re available for consulting projects, and make it easy for people to contact you.
What mistakes did you make when starting as a consultant/freelancer?
Some things I learned through mistakes:
- Charge more.
- Travel like a professional and bill the client. For my first business trip I used airline points, stayed at an Airbnb on my own dime, and even refused the client’s offer to reimburse me. Stupid. (Full story here.)
- If I’m not enjoying the work, request a change or move on. Don’t just “tolerate” it and chug along. One of the greatest benefits of consulting is the freedom to chose whom you work with… Take advantage of it.
- Remember who the client is, and don’t get too involved with their subordinates.
- If you don’t feel “Hell yes!” about taking on a project or prospect, just skip it. It’s not going to get more interesting over time.
- Find a great accountant. Fire bad accountants fast (and lawyers, and other service providers).
- Tell the client the hard truth.
- Impostor syndrome is normal. Get over it.
- Stop trying to go above-and-beyond all the time. Do what you were brought in to do, and do it exceptionally well. If other opportunities come up, suggest them as follow-on projects instead of just doing extra stuff for free.
- If you’re clashing with an exec at the company, tell the client, instead of just backing away from the project.
- There are hundreds/thousands (depending on specialty) of potential clients out there, you just have to find them. So don’t worry if a deal falls through, don’t envy other consultants, and don’t take on bad projects out of desperation.
What’s the appeal of being an independent consultant? Why would you do this versus any other business or job?
- I get to work on something new every few months. New company, new people, new challenges, etc. This keeps things interesting.
- I get to do what I think is best for the client, rather than taking orders from someone.
- Pays much better than salaried positions (for me, at least).
- I get to define my own job. If next year I decide to switch from marketing consulting to, say, operations consulting or sales consulting or illustration work or some narrow marketing thing like site conversion optimization, I just update my website headline it’s done.
- Experience the joy of running a business. Project cash flow, close deals, scope out projects, deliver results, collect feedback, track invoices… Love it.
- Ultimate flexibility. Last year I took a month off to travel, and this year I took a month off for paternity leave. All it took is advance notice to my clients, and a return date so they know when we can pick back up.
How long is your average engagement, if you don’t mind asking. Also I suspect this requires a lot of travel (and time away from home), correct?
Starts with two months, usually, and on average goes for over a year. As the startup grows there are always new challenges that pop up.
Actually I barely travel even though most my clients are in the Bay Area and I’m on the east coast. Everything is done remotely with email, slack, and zoom. I go there once a quarter but even that is just for some face-to-face time and not out of necessity.
You can build a 100K car in an hour? Excellent.” Why wouldn’t your hourly rate be 100k then (vs $100)?
What if you found an even faster way and did it in 30 minutes, do you charge half that? What if it takes you a bit longer, 2 hours, is it fair to charge the client 2x?
The point is, the client wants a car, not an hour of car-making.
Also, the moment you provide an hourly rate you get compared to other hourly workers, whether it’s fair or not. “What?! $100k an hour? Even our lawyers cost less!”
Do you have any ideas around what hourly I should charge for messaging consulting?
Charge on a per-project or per-month basis, not hourly. Base the price on expected value, not time spent. Let’s say it takes you 40 hours and you charge $600/hr. That’s $24,000, if you could convince them to pay you what they pay their high-end lawyers, which will be difficult. And if you do a great job and finish it sooner then you’re “rewarded” by getting less money.
But let’s say they expect this product line to bring in $10 million in revenue in 2020 if they get the messaging right. Suddenly $24,000 is a no-brainer. Too little, actually. Even $50,000 should be a no-brainer, assuming you’re speaking with a person who’s used to writing large checks and trusts your capabilities. You won’t have to justify the rate because there’s nothing to compare to, and nobody cares how much or little time you spend on it. Not even mentioning the unquantifiable benefits you’d provide, like ability to start right away, domain expertise, your industry connections, etc.
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