Note: I’ve since decided that I’m not crazy about the terms I came up with in this post and I wrote a new, slightly modified version, which I think is better.
I spent most of 2014 working contracts that were 40 hours a week of billable client work, or some combination of hourly projects that added up to more than 40 hours a week. Most of 2015 was about the same.
I was technically freelancing but I often found myself asking: how is this really different from just having a job?
And I think the answer is that it’s not, at least not in a very meaningful way.
The story of most of my client engagements goes like this: I scan a job board for someone who’s looking for a Ruby on Rails developer. I send them an email, probably with my resume included. The prospect emails me back and set up a time to talk. We talk over Skype and they ask about my skills and experience. If they like me, we work out the details of our arrangement and they give me access to their codebase and issue tracker, and I get started.
This type of client is evaluating me as an individual. They more or less know what they want. I’m signing the contract they have all their contractors sign. I use their technology stack, their way. They communicate their desires to me and I carry out the work. Compensation is based on time and effort.
I call these engagements passenger engagements because they’re driving and I’m coming along for the ride. There’s of course nothing so wrong with this kind of arrangement.
There’s another type of engagement that goes like this: I attend a networking meeting, maybe a BNI group. I stand up when it’s my turn to talk and say that I convert tedious and time-consuming Excel-based systems into easy-to-use web applications. A prospect tells me that he uses a lot of Excel, and he’d be curious to hear my thoughts on his situation. We schedule a time to get together, at which point we dig into his situation and see if it matches up with what I do. If it looks like there will be an ROI there, we jointly identify a small initial project to tackle together. The client signs my agreement, gives me a deposit and I get started.
This type of client is evaluating the ROI of a project. They have a high-level business objective but the exact way we get there is not a big concern of theirs. They sign the agreement I have all my clients sign. I use my technology stack, my way. (Maybe I even have someone else do the programming work.) They share their pains with me and I alleviate their pains, my way. Compensation is based on results.
I call these engagements driver engagements because I’m driving and the client is coming along for the ride. Passenger engagements are okay. Driver engagements are awesome.
Driver engagements unlock higher rates
I believe driver engagements are the key, or at least a key, to charging really good rates. In 2014 I tried to raise my rate from $75/hr to $150/hr. I met so much resistance. Eventually I basically gave up on trying to charge $150/hr and did a number of (passenger) engagements at $100/hr. There seems to be some sort of hard psychological wall somewhere between $100/hr and $150/hr where $100/hr is acceptable but $150/hr is shockingly pricey. Frankly, I can understand this, and I don’t blame people for not wanting to pay $150/hr.
Table of differences
|Passenger Engagements||Driver Engagements|
|Acquisition method||Job boards, referrals||Networking events, referrals|
|Methods used||Dictated by client||Vendor’s discretion|
|Work arrangement||Usually 40 hours or close||Vendor’s discretion|
|Subcontractable?||Almost certainly not||Almost always so|
|Perception of vendor’s role||Technician, hired hand||Expert and trusted partner|
|Pricing method||Time and effort||Results|
|Pricing anchor||Client’s perception of market rates||Value of project outcome|