Earlier this week, I wrote about pricing professional services. A slippery topic, full of ifs and buts (just like geoscience!). And it was only half the story, because before commencing on a piece of work, you and your client have to agree on a lot of things besides price. To avoid confusion later, it's worth getting those things straight before you start.

Here are most of the things we try to cover in every agreement:

Don't include expenses in your professional fees. Extras like travel expenses should always be separate. Be clear about your policies (for example, if I'm traveling more than 8 hours, I'm booking business class tickets). Do your client a favour by estimating the expenses for them, but pad everything a bit so you don't surprise them later with more than the estimate. Promise to provide receipts for everything.
You should charge for your travel time. I usually charge this at my full day rate, but sometimes less if I know I can be somewhat productive on the journey. I've read of consultants not charging if they're traveling at the weekend, because it's not a normal work day... To me this is backwards: if I'm traveling for work at the weekend, someone better be paying for my time!
Know your sales tax situation. I recommend getting professional help from a chartered accountant on this. Do not assume the client will know: they won't, and it's not their responsibility to, it's yours. I'm afraid you will be reading tax treaties and filling out some pretty gross forms.
Charge more for travel outside your 'comfort zone'. For example, I add at least 20% outside the US & Canada or Western Europe, depending on the place. Travel is exhausting, you're away from home, you need vaccinations, you need visas, everything is unfamiliar. All good fun when you're on holiday, but stressful, expensive, and time-consuming when you're trying to be an awesome professional.
Get paid as soon as possible. I've never done it, but I know people who charge a percentage up front. For longer jobs, specify that you wish to charge partial invoices, perhaps monthly. Ask for Net 15 terms (i.e. they'll have 15 days to pay your invoices), but settle for Net 30. Longer than this seems unfair to me. Add late fees and interest to overdue accounts, and reissue the invoice at every due date.
Make it easy for people to pay you. Be specific about how to pay, and give people options. It's safe to give them your bank account details (I put them on my invoices, along with foreign banking details like SWIFT and IBAN codes), and electronic funds transfer is the best way to get paid. Put your tax number on your invoices, some clients need it. I use Stripe for accepting credit cards, but bear in mind that you probably don't want to accept credit cards over about $10k.
Get good at currencies. Remember to be very specific about currencies whenever you talk money. Use ISO4217. If you can, make things simple for people; I charge USD to US customers. I have a USD account and use a foreign exchange service (Firma) for FX. I spend a lot of money in the US too, so I also have a USD credit card, paid in USD.
Do the work you want to do, the way you want to do it. This is kind of the point of 'being your own boss', right? Of course, you have to be reasonable, and compromise when necessary (OK, if every contract is a compromise, maybe you are too particular!). Talk to your client! It's OK to negotiate, ask questions, and so on. Every time I've asked for contracts or terms to be changed, it has at least been entertained, and it usually works out.

It can be awkward raising all this; you probably don't want to dump it all on someone at your first meeting. We usually put all the gory details into as short and informal a document as we can (usually part of the project description or 'scope of work', or in a 'letter of understanding'), show it to the client, answer their questions about it, and eventually reference it in the contract. Most contracts allow for some document that describes the specific conditions of the contract, but it's worth checking that those conditions don't contradict the contract. If they do, ask for the contract to be changed to reflect whatever you agree with the client.

If you're just starting out on the professional services road, I hope this is all of some help to you. And I hope it's not too daunting.

“Fine Print” by Damian Gadal is licensed under CC BY 2.0

I have written about this before, but in my other life as an owner of a coworking space. It's come up in Software Underground a couple of times recently, so I thought it might be time to revisit the crucial question for anyone offering services: what do I charge?

Unfortunately, it's not a simple answer. And before you read any further, you also need to understand that I am no business mastermind. So you should probably ignore everything I write. (And please feel free to set me straight!)

Here's a bit of the note I got recently from a blog reader:

I'm planning to start doing consulting and projects of seismic interpretation and prospect generations but I don't know what's a fair price to charge for services. I sure there're many of factors. I was wondering if you can share some tips on how to calculate/determine the cost of a seismic interpreter project? Is it by sq mi of data interpreted, maps of different formations, presentations, etc.?

Let's break the reply down into a few aspects:

Know the price you're aiming for and don't go below it. I've let myself get beaten down once or twice, and it's not a recipe for success: you may end up resenting the entire job. One opinion on Software Underground was to start with a high price, then concede to the client during negotiations. I tend to keep a fair price fixed from the start, and negotiate on other things (scope and deliverables). Do try not to get sucked into too much itemization though: it will squeeze your margins.

But what is the price you're aiming for? It depends on your fixed costs (how much do you need to get the work done and pay yourself what you need to live on?), time, complexity, your experience, how simple you want your pricing to be, and so on. All these things are difficult. I tend to go for simplicity, because I don't want the administrative overhead of many line items, keeping track of time, etc. Sometimes this bites me, sometimes (maybe) I come out ahead.

Come on, be specific. If you've recently had a 'normal' job, then a good starting point is to know your "fully loaded cost" (i.e. what you really cost, with benefits, bonuses, cubicle, coffee, computer, and so on). This is typically about 2 to 2.5 times your salary(!). That's what you would like to make in about 200 days of work. You will quickly realize why consultants are apparently so expensive: people are expensive, especially people who are good at things.

If I ever feel embarrassed to ask for my fee, I remind myself that when I worked at Halliburton, my list price as a young consultant was USD 2400 per day. Clients would sign year-long contracts for me at that rate.

It's definitely a good idea to know what you're competing with. However, it can be very hard to find others' pricing information. If you have a good relationship with the client, they may even tell you what they are used to paying. Maybe you give them a better price, or maybe you're more expensive, because you're more awesome.

Remember your other bottom lines. Money is not everything. If we get paid for work on an open source project (open code or open content), we always discount the price, often by 50%. If we care deeply about the work, we ask for less than usual. Conversely, if the work comes with added stress or administration, we charge a bit more.

One thing's for sure: sometimes (often) you're leaving money on the table. Someone out there is charging (way) more for (much) lower quality. Conversely, someone is probably charging less and doing a better job. The lack of transparency around pricing and salaries in the industry doubtless contributes to this. In the end, I tend to be as open as possible with the client. Often, prices change for the next piece of work for the same client, because I have more information the second time.

Opinions wanted

There's no doubt, it's a difficult subject. The range of plausible prices is huge: $50 to $500 per hour, as someone on Software Underground put it. Nearer $50 to $100 for a routine programming job, $200 for professional input, $400 for more awesomeness than you can handle. But if there's a formula, I've yet to discover it. And maybe a fair formula is impossible, because providing critical insight isn't really something you can pay for on a 'per hour' kind of basis — or shouldn't be.

I'm very open to more opinions on this topic. I don't think I've heard the same advice yet from any two people. When I asked one friend about it he said: "Keep increasing your prices until someone says No."

Then again, he doesn't drive a Porsche either.

If you found this post useful, you might like the follow-up post too: Beyond pricing: the fine print.

“just shut up and give me all the money!” by torbakhopper is licensed under CC BY 2.0