Know and learn the difference between these three words:
Freelancer, Contractor, Consultant.
Each has it's own mindset. I wish I knew it when I started 12 years ago full time. When a customer asks something, they're asking for one of these three relationships.
When we get upset customers aren't listening, it's often a disconnect of which relationship the customer wants, and what you are offering. It's helpful to know which role you're being asked to play (and be paid for).
FREELANCER - Someone who you use from time to time to do a part of what you need. Directions provided. Generally freelancers work more part time than full time.
Typcially with freelancers you have to give notice on the order of 1-2 weeks.
CONTRACTOR - A regular expert who you provide detailed work instructions to. Customer cares more about your opinion but the strategy is still set by them.
If I'm asked for a design that leads to work, it's a quote. Typically the customer knows what they want, how they want it, or why, I'm just a hired gun.
Typically with freelancers you have to give notice for work from 0-7 days based on your arrangement.
CONSULTANT - A dedicated expert who is asked for their opinion of the best strategy to take, as well as delivering on it. Consultants can be part time, but most are full time. If all I'm being asked for is my professional opinion (and no ensuing work) I bill for that time.
Consultants are needed when you need expertise around at the drop of a hat to tend to things, or an ongoing basis to develop/manage/direct/drive internal business processes and hand them back in-house once management would like so you can focus on the next thing for them.
Customers who use consultants properly know it's not what it costs them, but what consultants save, or make them. Sadly, this type of relationship can often be perverted by consultants as well and I inherit people who have been burnt.
Me: I spent my 20's getting 20 years of experience in 10. That makes me about 40+ work wise, in my 30's. Consulting is heroin once you become capable at delivering value.
I am moving out of hourly/daily based consulting and moving to value based consulting, and entirely out of consulting as reasonably possible. If I do something that saves a customer $3,000/3 years forever, I ask for 20-30% of it regardless of whether it takes 5 minutes or hours.
I spent 15-20 man years working to learn how to do something in 5 minutes that will take someone 5 hours, if the customer is willing to pay for my 5 years to learn to do it in 5 minutes, I will bill them for 5 years, and then for 5 minutes.
I love learning and seeing this from different perspectives, let me know what you think too!
I'd like to mention that even as an employee, focusing on and emphasizing value makes it a lot easier to get paid more than focusing on cost/hours.
Example: a company I worked at spent about 2 years trying to get a project off the ground. It would involve hiring a bunch of consultants for $1.2MM, not to mention all the senior management time that was involved in approvals, spec interviews, etc.
6 months after I got there, they still hadn't managed to even get the project started. I spent a few days asking around to find out what the company actually wanted to achieve with this project. I then spent 2 hours implementing something that gave them the exact result they were looking for.
When negotiating a raise, do you think I mentioned how I spent a week building an Excel Pivot Table? Or do you think I talked about how I saved the company at least 2 million dollars and successfully completed a project that they'd been trying to start for nearly 2 years in under 3 months? (In reality, under a week-but I didn't want to make it sound too easy).
And that's how I became the youngest Sr. Analyst at the company before I left :)
We're working on a value based model for our consulting firm (hint - it only works for people who are actually good at what they do). The problem is how you calculate the savings/benefit. In many cases what you deliver isn't driving savings, but is a necessity for the business to operate. In the past my company has done a few contracts where they were awarded bonuses if our consultants adhered to the values of the company they were contracted to. But then again, you're trying to quantify a qualitative aspect of delivery.
Not easy to do, and Finance/Procurement doesn't like it.
The benefit with the value based model is you need to know your stuff to price it right for everyone. It's easy to consult a client once, hard to do it over and over. You're only as good as your last few projects and the best you can do in business is win some favor, loyalty rarely exists. Most of my clients have been with me for 4-10 years. They do my intros and referrals.
Pricing wise, sometimes when I'm asked to do something, I find out how long the task is taking an employee right now. Other times I come across a waste myself. Employees are quick to tell you their biggest mundane pains.
I estimate how many hours per week/year it takes, estimate their percentage of yearly salary towards, cut it down by 20% and use that as my value estimate on what to base it off.
It's realy compelling when you can walk in with a conservative cost of $X,000 a year for a particular task in a department and offer to get rid of it forever for 20-30% of it. It takes writing up a business case, having managers and employees sign off on it, and the trust and a track record to get it done. The customers that I've earned the trust of typically just tell me now to make sure I have a business case signed off on file and quit wasting the management's time with approval, and just report what I got done.
Screw that up once, and I'm toast. Keep it right, and it's good for everyone. Kind of like hiring a Lawyer and Accountant to get the details right. Would you lose your mind if your lawyer or accountant forgot a detail on your mortgage or accounting? Probably not. I just try to remember that's how much I'm being counted on and it definitely can have it's ups and downs.
I have worked Small up to medium enterprise (low billions) and nothing makes them happier when you can talk their language -- getting more done with the same staff.
My heart, though, is in SMB, there's nothing quite like it.
You sound like someone who others may want to follow up with off-line. Please put some contact info in your profile. (Hint: the "email" field in your Hacker News profile is invisible. You also have to put it (in some form) in the "about".)
I recently discovered the collection of your posts and find myself nodding like a bobble-head. The like-mindedness on HN is a great feeling to be a part of and contributing to after lurking for far too long.
I have added publicly viewable contact info to my profile. Slowly but surely learning how things work around here. :)
I'm not sure if I agree with your terminology; I call myself a consultant, and have been doing it full-time for more than 15 years.
However, I'm mostly intrigued by the idea of value-based consulting. I've spoken with colleagues about it in the past, and the concept makes sense to me, and is much more attractive than billing out by the hour or day. But it's not at all obvious to me how I would price, in a value-based way, the work that I do for my clients.
It seems to me that some jobs are more appropriate for value-based pricing than others, but if people could give some examples of how it works, that would be really helpful.
This is a large topic, but I can recommend the book Million Dollar Consulting by Alan Weiss as a good starting point.
More immediately, you might ask whoever is buying your services for some insight into how your tasks fit into their business goals and the ROI they expect to get from the $ they spend on you. Someone at their org should have this. If not, you get to help them develop such a model which will likely be favorable to you.
Note that you will have to work with the business side to make value-based pricing work at all.
A few books that helped me keep my soul and be productive in consulting:
Crack my head open for re-flashing
- An open heart - Dalai Lama
- Love is the Killer App - Tim Sanders
- The Man who mistook his Job for a life
Consulting:
- High Impact Consulting - This book taught me to only do tiny but really painful items for new customers to build momentum. By getting short term, high impact/pain point items out of the way, it clears the table to say "This consultant has learnt my business and why we do things the way we do". Big projects land themselves. I call it dating before I get married.
If we're wanting to call the categories something else I can respect and probably agree with that.
All I know is most people start as freelancers, become contractors (more focused in an area), lead into consultants (enough focused experience to give advice and oversee it).
I've included one way I value based price above. It's simple, makes sense for everyone, and is measurable.
Thank you counteracting the notion that "ideas are worthless, execution is all that matters"
.. it takes a lot of time and experience to know the ideas that should be executed (and how), and if you can be rewarded for that, then all the better.
To run is easy, but to run and obtain health and not illness is the key.
Knowledge isn't power, acting on that knowledge is.
Similarily, Ideas are worthless without education.
There's a funny email I saw once about a consultant finding a faulty gauge amongst hundreds in a nuclear plant or something. He charged $10,000 for finding the bad gauge. Customer got outraged. So he modified the invoice. Fixing the gauge - $1, Knowing which gauge to fix, $9,999.
The flip side of this is when knowledgeable consultants don't get things done quickly. If you're going to hire someone at $5 overseas for 1000 hours, why not just pay someone more capable $5000 locally to get it done in a month (160 hours)?
I started entirely where you were. It was the only skill I really had that people were willing to pay for. I could diagnose, fix and permanently repair/prevent future issues, whether it was software, hardware, networking, IT support/consulting, fixing viruses. Back then the tools weren't so good, though.
One of the big 'aha' moments I had was when I didn't have to bill my customer minimum 1 hour to drive to their site if they were in town. I offered to bill in quarter hour increments if I could try addressing it remotely, and if it didn't work, I'd come in. Having the keys to everyones offices is something I didn't enjoy, remote access made it a bit easier.
The other key 'ahas' that helped me transition from IT work to more software work were:
- Work to always replace myself. Most IT / developer types are of two categories. The ones that make you dependant on them, and the ones that make you independent. The consultants that charge you to do windows patches every month on purpose do it because that's often the ceiling of their talent. The consultants that are bored to tears by doing windows patches but do it to get other work with the customer often automate it to a point that they can say "spend the money you would on patching on other projects with me instead and I will always automate IT as much as possible".
- Solid Email based Case manager - This is the only piece of software that changed my life. One item per case number, tie it to a billing system. If you do go this route, make sure you use a solid email based case manager like Fogbugz (or anything) that is well suited to keeping your work visible in their inbox since they don't see your face much. For me, Fogbugz found me when I juggled too many things manually and I've been loyal since. There are several other capable tools too, find which one speaks to you the best.
The toolsets for managing things centrally (remote access, antivirus, firewalls) are so much more polished and integrated, if you can get your business doing remote IT support/maintenance, there is a good business there.
If this is a field you enjoy and want to continue growing, feel free to hit me up, I'll totally give you everything I've ever learnt or known about this so you can scale up to a .5-1 million/year revenue business pretty easily.
I don't have just one because I was all over the place until the last few years.
Long of it:
I've worked in tech sales, hardware, networking, repair, warranty, manufacturing, and software development, spending at least a few very focused years in each since the mid 90's. Some things, like web apps, I've been doing since the mid/late 90's.
My niche/expertise is learning why someone does something a certain way and make sure the software amplifies that competitive advantage. Otherwise I go about learning the business/need to find "how it should be."
Being able to understand and connect the dots from top to bottom is my drug.
The only title/position I've found some lasting comfort with is System Architect/Integrator.
I'm now in custom software development and transitioning into my own products.
I'm converting my consulting practice into into an automated business that lets my team be well paid for self-managing, and only uses me where I add value (customers hire our attention to detail, rarely our talents beyond that).
I want to be free to find the next great startup adventure I'll be a part of, but don't want to dishonor the customers that have supported me to learn what I have about myself and where I want to go in my life.
Freelancer, Contractor, Consultant.
Each has it's own mindset. I wish I knew it when I started 12 years ago full time. When a customer asks something, they're asking for one of these three relationships.
When we get upset customers aren't listening, it's often a disconnect of which relationship the customer wants, and what you are offering. It's helpful to know which role you're being asked to play (and be paid for).
FREELANCER - Someone who you use from time to time to do a part of what you need. Directions provided. Generally freelancers work more part time than full time.
Typcially with freelancers you have to give notice on the order of 1-2 weeks.
CONTRACTOR - A regular expert who you provide detailed work instructions to. Customer cares more about your opinion but the strategy is still set by them.
If I'm asked for a design that leads to work, it's a quote. Typically the customer knows what they want, how they want it, or why, I'm just a hired gun.
Typically with freelancers you have to give notice for work from 0-7 days based on your arrangement.
CONSULTANT - A dedicated expert who is asked for their opinion of the best strategy to take, as well as delivering on it. Consultants can be part time, but most are full time. If all I'm being asked for is my professional opinion (and no ensuing work) I bill for that time.
Consultants are needed when you need expertise around at the drop of a hat to tend to things, or an ongoing basis to develop/manage/direct/drive internal business processes and hand them back in-house once management would like so you can focus on the next thing for them.
Customers who use consultants properly know it's not what it costs them, but what consultants save, or make them. Sadly, this type of relationship can often be perverted by consultants as well and I inherit people who have been burnt.
Me: I spent my 20's getting 20 years of experience in 10. That makes me about 40+ work wise, in my 30's. Consulting is heroin once you become capable at delivering value.
I am moving out of hourly/daily based consulting and moving to value based consulting, and entirely out of consulting as reasonably possible. If I do something that saves a customer $3,000/3 years forever, I ask for 20-30% of it regardless of whether it takes 5 minutes or hours.
I spent 15-20 man years working to learn how to do something in 5 minutes that will take someone 5 hours, if the customer is willing to pay for my 5 years to learn to do it in 5 minutes, I will bill them for 5 years, and then for 5 minutes.
I love learning and seeing this from different perspectives, let me know what you think too!