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Early Exit #2: Consulting
How I started consulting, what I charge, how I approach consulting relationships, useful resources to get you started.
You’re reading Early Exit Club — a newsletter by Nick Lafferty about leaving the 9-5 workforce to build a $20k/month solo business.
Consulting is a big part of my Early Exit Plan.
It’s the most direct path to putting new dollars in my bank account.
I get new clients → I work for them at a set rate → I get paid.
This is in contrast to my other projects which have their own time dependencies:
Posts on my website need time to rank in Google
To build my SaaS I need to learn how to code
None of those projects are as immediate as spend time → get paid.
But if I consult too much then I don’t have enough time to work on my longer term projects.
Eventually I want to stop consulting because it doesn’t serve my Ultimate Goal: stop trading my time for money.
This post outlines how I started consulting, what I charge, how I approach consulting relationships, and ends with useful resources for you to get started.
Nearly all of my consulting clients found me through content I wrote.
I started consulting in 2020 after one of my blog posts went viral.
Someone posted my article to Hacker News where it hit the front page.
Overnight my inbox was full of consulting requests.
Wow, great hack Nick. Just write a viral post.
What happened before the viral post is that I dedicated an entire month to writing new content on my blog.
I decided to publish a new post every single day for a month.
And I stuck to it. Every day I churned out a new blog post.
But we have to go back even further.
A month before that I decided to quit video games for an entire year.
I consumed more content than I created so I wanted to reverse that.
Now the timeline looks like this:
Quit video games
Write 30 blog posts
One of them goes viral
I’m not saying everyone needs to quit video games but one major decision led to many micro decisions:
I made a major life decision
I put in the work on top of my regular job
3% of my effort turned into something
You might wonder what happened to the other posts I wrote that month…
They fell flat.
I screamed into the void 97% of the time.
But once, just once, something struck a chord.
And even then I consider myself extremely lucky to have hit a home run in my first 30 attempts.
But if I never wrote any of those posts I was already going to fail.
So people want to pay me to help them. Now what?
At the time I only knew one person who was consulting and I texted him for advice.
His advice: don’t charge by the hour.
Charging by the hour robs you of any efficiency gains you make as a consultant.
Say at the beginning of your consulting engagement it takes you 2 hours to do a task.
Eventually you get that task down to one hour through practice, automation, or having ChatGPT do 50% of the work.
Congrats, now you can only bill for one hour.
Hourly consulting engagements are really just second jobs that you clock in and out of.
I’d recommend retainer or project based consulting instead.
I spoke with someone recently who pitches 3 separate packages for their clients to choose from.
Their packages are all a flat monthly rate with an estimate of how many hours they’ll dedicate to the project.
More hours means a higher monthly rate, in addition to things like:
Faster communication (joining their Slack channel isn’t in the cheapest option!)
Weekly calls instead of biweekly calls
That kind of pricing model works great on SaaS software pages, so why not implement it in your consulting practice?
But what if your only option is hourly consulting?
1 client is better than 0.
Even now I have one hourly consulting client.
But what about money — what’s the right amount to charge?
For hourly engagements I have successfully billed anywhere from $150 to $400/hr.
Take your salary, calculate your hourly rate based on 40 hours of work, and multiply it by 2-3x.
Plug your salary into Wolfram Alpha to determine your current hourly rate in this format: $150,000/yr.
It’ll tell you how much you make per working hour.
So if that’s your salary you could bill anywhere from $150 to $225 or more per hour.
As a consultant you’re responsible for all your costs and the inevitable taxes, depending where you live.
In the US I save 30% of my income for taxes so even if I bill $150 my effective rate is only $105/hr.
Every time I do that math it makes me raise my rates a little bit 🙂
Balancing consulting with other projects
Here’s my problem with consulting: it takes time away from building my own thing.
My Ultimate Goal is to stop trading my time for dollars.
I want to build something (or somethings!) that generate passive income for my family.
Every hour I spend consulting (and the prep time and the follow ups) takes time away from building.
It’s a necessary part of my plan right now but only in the right amounts.
Too much consulting will make me a lot of money, but I won’t have invested anything into my future.
Too little time consulting and I might not have enough money to cover my expenses.
It’s a balancing act and one that I’m still figuring out.
I am by no means a consulting expert.
This post is based on my experience of figuring all of this out for myself.
I’ve talked with other consultants and everyone is pretty much figuring it out as they go too.
Here’s another perspective on consulting from Elena Verna, the former CMO of Malwarebytes, Miro, and Amplitude.
That’s it! What’d you think?
Do you like the illustrated headings?
I’d love your feedback — hit reply or drop a comment and let me know how I’m doing.
See y’all in a week,