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Comment by sarciszewski | Hacker News Reader

"you can actually specialize in charging more"

Okay, there was probably a post that explained what you mean here and I missed it. How does "I cost more?" become a specialty?

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It changes which projects you get, and alters the opportunity cost of the projects you end up spending time on.

This makes sense. Sort of, "If you charge more, you'll find yourself a specialist."

If you charge more, people don't bother you with nearly as much low-ROI scut work, which means you (assuming you can deliver) find yourself focusing on more interesting & more valuable work that has a stronger connection to attracting and keeping high-value clients.

Well, that, or you can't find work at all.

Yes, there's an Underpants Gnomes quality to this sort of career advice. It's not bad, but there's a giant "?" in the middle that nobody can really help you with, which seems to involve accumulating a huge base of clients beating down your door.

Personal and business relationships vary from person to person. I guess the assumption is that, if you are skilled enough at engineering and marketing, you will find yourself getting clients and make money hand over fist.

Unfortunately for me, I'm purely a technology guy, not a people person.

"Unfortunately for me, I'm purely a technology guy, not a people person."

This is bullshit. People can change. You can change yourself. 'I only do tech' is an excuse to not have to go outside your comfort zone. Of course it's a big change. Of course it's scary. Of course you don't know exactly how to get from A to B. But just giving up with a 'this is how I was born' is defeatism.

Serious question:

Patrick was about as well known on the Business of Software message boards as you are on HN when his consulting career started. Those boards no longer exist and were always smaller than HN. Prior to consulting he held what is probably the lowest- status job in software development. What do you think the secret ???'s were for him?

Well, if I knew what went there, it wouldn't be a question mark. My best guess is "luck," though I feel like that's kind of a facile answer. I don't have a better one, at any rate.

What do you think it is?

The most important two secrets to sales: know how to qualify a deal, and ask for the sale.

That's good advice, but the problem is that the ??? comes at the point where your only sources of prospects are morally equivalent to oDesk. No matter how good you are at qualifying and closing deals, it does no good if deals.filter(:is_qualified?) == []. Based on Patrick's account, it sounds like good consulting work mostly just came to him — he commented late in his consulting career how strange it was having to actually go out and hit people up for work lately. You do need to close the deal when you find a good prospect, but we're still jumping over the ???, which is where you get that steady stream of good prospects in the first place.

That's why my best guess is "luck" — because I've never heard anyone say anything about what they did beyond, "Eh, I found good clients and became a successful consultant" or "I did not find good clients and struggled in my consulting career."

Some people would argue that for the most part you make your own luck.

I suppose this is true, but also mostly irrelevant. If I am faced with two doors, behind one a car and the other a goat, I am technically making my own luck when I pick a door, but there's still nothing I can do to improve my chances of getting the car past 50%.

Getting the car means paying tax on your winnings. Getting the goat? You can make of that what you'd like.

Getting the car past 50% isn't always the desired goal. :)

You are looking at the single point of choosing the door as your definition of luck, rather than all the decisions that led you to be in a position where your only choices were between a car and a goat.

When I say you mostly make your own luck, I was referring to making decisions and choices so that you don't end up with only a car or a goat as your choices.

"I was referring to making decisions and choices so that you don't end up with only a car or a goat as your choices."

I think this is good life advice in general :)

The secret sauce is that he's a good developer, and really good at "engineered marketing" in a way few people are. In addition to communicating really well.

He also seems very good at marketing himself - as a proof, that so many people here know and talk about him - and at networking; he bought lots of coffees to strangers who asked to meet him in Tokyo - including me.

From everything I can tell, "marketing himself" is mostly just patio11 being genuinely kind and helpful.

And also participating a lot on forums and blogging. If he gives free advices to hundreds of freelancer/programmers and ten make it into a multi millions company, that's ten potential clients for Patrick.

You're making stuff up now, patio11 was a major celeb on here way before he quit.

Here's the 200+ point annual report he did with story of him quitting his day job:

https://news.ycombinator.com/item?id=2018816

I'm sure if you look the previous reports up they'd be similarly high ranked.

If you actually read that post, you'll see it talks about how he got started, and that it also contains a clue as to why I think I know a bit about that. In any case, I'm not sure what this has to do with Patrick's "underpants gnome" secret. Is the trick "have a high-karma HN account"?

Actually, that '??' part is only '??' for engineers, who generally don't know how to drum up work.

There is a process to getting business, it's called 'sales'. Take a reputable sales class (3 or 5 days or so). It'll set you back $5k-$10k, and it'll push you way outside your comfort zone, but it works.

Getting business isn't that hard: first, you identify your customers. Then you think of a way how to find those people/organizations. Then you contact them, and set up appointments. Lastly, you convince them (during the meeting) to buy your product (where 'product' can be software you've already written, software you'll write or man hours you'll spend working for them).

The above of course skips over many details. But the point is - selling stuff is not 'luck' or 'magic'. There is a process, although of course it has to be tweaked every time. All you have to do is learn it.

I think what he means is that with higher rates, you get the luxury of domain specialization.

That's also true but I literally mean "you can specialize in having higher rates"; I'm not just saying "if you have higher rates you'll have free time to find more lucrative specialties". You can change nothing else about your practice but your bill rate and have a good chance of succeeding.

What happens when you hit a bill rate that nobody wants to pay? (e.g. $50k/week or something ridiculous)

There has to be a limiting factor somewhere.

The limiting factor is how much value you add to their business. That can be a lot, eg. I could easily imagine patio11 adding $50K of value in a week's time by introducing a marketing campaign that sells $500K of product, or Matasano adding that much value by fixing a security hole that would cost more than $1M in lost goodwill.

One of my fiancee's B-school professors specializes in pricing theory. He can make several million dollars in one consulting engagement, because he tells companies where they should price their products to maximize revenue, and so he just needs to charge some fraction of ($new_revenue - $old_revenue), which is usually measured in millions.

While I accept this is likely true, I still have a hard time incorporating it into my thinking.

I think I spent too much time as an employee, a relationship in which every increase in salary needs elaborate over-justification. Consulting isn't like that.

(Disclaimer: I've been an employee and a product startup founder but never a consultant.)

I think the key idea here is that you can change who you hang with in consulting. The world is a really big place, and it's filled with some people who are willing to pay a lot for the particular services you offer, and a lot of people who are not willing to pay a lot. Raising your rates just means that you will self-select for engagements with the people who are willing to pay a lot.

When you're an employee, your pool of opportunities is significantly more limited, at least unless you're willing to change jobs. So it's a lot harder to convince people to pay you more.

The key mindset shift you need is the ability to a.) put yourself out there and let yourself be found by the folks who are willing to pay a lot and b.) say no to the people who are not willing to pay a lot. (Also c.) get laughed at by folks who think it's ridiculous how much you're charging.) This is uncomfortable for a lot of people; it's still uncomfortable to me, which is why I'm not a consultant at this point, although it's also a very necessary skill for a startup founder and so I'll probably have to learn it and make peace with it anyway on my current trajectory.

I think the key difference (having done both) is that when you are consulting, a company is paying you (usually out of a pretty large budget) for a business outcome that they really, really want. When you are selling something that somebody with a lot of money really, really wants, you have a much easier time convincing them to pay you a lot of money. So your rate is really a function of those two things- perceived value of what you are delivering and how much they have to spend. It has nothing to do with what they pay other people who work there, etc.

When you apply to a job, they see you as a permanent cost center and not as an immediate way to grow their bottom line. In this case the negotiation changes to a large degree. I suppose it's possible to transfer the conversation during a salary negotiation so that you are selling based on the points above, but I think that's much easier said than done.

I think this constantly recurring point about raising rates is based on people who sell consulting services having a larger-than-necessary gap between what a company would pay for the outcome and what they are charging.

Think of it as a machine, a big funnel. Narrow your skills and experience, pump more people into the top of the funnel, increase your ability to charge more. (But of course you only get what you ask for)

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