Because my rate structure is simple. I can describe it easily: W per hour/day. X markup on expenses. Y per mile travel. Z as retainer applied against final invoice based on my non-binding estimate of the time it will take to do the project based on the client's description (often Z is from 25% to 50% of the initial non-binding estimate). Most projects take at least K hours/days.
I don't wait for a potential client to bring up rates. Once it is apparent that the person is soliciting services, I describe my rates. This avoids wasting both our time when there is a gap between a potential client's economic expectations and my rates. It avoids wasting my time with potential client's who balk at writing me a check to get started...willingness and ability to pay are features of a good potential client. Execution of payment is a better criterion than a signed contract for separating actual clients from potential clients. A reluctance to pay me is a good criterion for distinguishing bad clients.
To put it another way, the essence of consulting is the business of "nickeling and dimeing" clients. And in general, charging money is the essence of business. A reluctance to charge people money is not wrong but it is at odds with trying to run a business.
The flat rate up front replaced my previous system where I would tell the client that I would follow up with a proposal and then spend time researching and pondering and estimating and then putting together a document and then waiting for the client's response or non-response.
Good luck.
I see this in starting consultants all the time, though usually it is as a discounted rate rather than out and out not charging for somethings. These consultants don't realize that they are telling potential customers 'I value myself at X, less valuable than my competition'. They also don't realize that once you give a customer a rate it is difficult to raise the rate later and retain the customer (it can be done, but puts stress on the relationship).
My advice is to charge what you are worth. One way is to figure out how much you would be making in a corporate job, not as a self employed freelancer. Say $160k. Now, once you go self-employed you will need to pay an addition 6.2% (12.4% total) for social security on money up to $118k, 2.9% for medicare, and to be safe you should allocate 25% to health care costs (seems unreasonable, but it does add up - you can trim here to match your health, but it would be better to sock away any extra in a given year). Back of the napkin, and very roughly, that means you need to be making $261k to approach the same take home (261000-(.25 x 261000)-(.124 x 118000)(.029 x 261000)-(.05 x 261000)). Given that if you work 8 hour days (not likely), and allocated 25% to overhead, that gives 2000 hours * 75% = 1500 hours, and a rate of $174/hour. However, your overhead might be more, and there are other costs (such as liability insurance). Also, you will be better off if you charge by the week, rather than the hour, because your accounting will be much simpler. I am neither an accountant, nor a lawyer, so consider the above my personal opinion and do your own due diligence before starting down this road. It is a great road, and managed properly can be successful. Beware though, it is high stress, and will eat up your time with your family.
For comparison, I'm working as a contractor now and making between 2 and 3 times what I could make in a perm position. That's adjusted for expenses, sick days etc. It does not cover vacation though and it assumes that I am able to line up new contracts back-to-back, which may not always be the case.
If you don't mind me asking, what's the W/Y and W/Z ratios in your case?
Do you find it useful to charge it per day instead of hourly (if you've done so)?
In terms of retainer, the retainer at a minimum reflects the maximum amount of work I expect might happen between my invoices on a small project. On a larger project, it will cover several invoices. The intent of applying the retainer against final invoice is that I always owe work for what I have been paid rather than the client owing me money for work I have already done. If there is an unpaid invoice, I stop work without being in the hole, and my contract says that will happen.
The potential downside is owing work that won't produce a check (because it already has). On a larger contract, I may apply part of the retainer to invoices in the latter portion of the project so I am not holding onto as much of the client's money when there is a better basis for trust and the project is looking successful. This better aligns cashflow with work remaining which makes client's happier and removes some psychological overhead from my work.
Early in my freelancing I would spend a lot of time preparing proposals. I typically charge by the hour because it is straight forward in an early conversation. Coming up with a price quickly is valuable because it qualifies prospects and I can walk away from a meeting with a check. The sooner it clears the sooner I start. Days match up better with some projects than others. At one time I usually proposed in half days, and that was working for the kind of projects I was doing...most of the tasks were about a half day and near the beach it the business climate was more casual.
I have made the mistake of not charging in the past, and I don't technically charge to read or respond to emails, though I might factor in some of the work - at least - say something takes me a minimum of 25 minutes to do, I will charge an hour of labor because I've had to take some time out to understand their email and clarify that the work they want is accurate from the information I understood it to be.
In this fast-paced world, meetings can eat up a lot of [your] time. And sometimes you do get those clients who want to meet you in person or they always want to talk to you on the phone. I had one client who kept wanting to meet with me every single week, and I lived close to her business, about 15 minutes away, and the first two or three times, I did not charge her for it. I was naive and just happy to have her as a client, since her business was popular in town. It got old real quick. I decided to charge her her for those meetings, which usually lasted anywhere from an hour to two hours. Once those charges came, the meetings switched over to email or a very brief quick phone call real quick.
I have since trained my clients to send email. Paper trails are much more accurate than in-person meetings or phone calls. They protect me and my client so there are no misunderstandings of what was said vs. what was heard. Clients will usually send me an email with work they want or need. Before I start any work, I normally reply back and inform the client: "Please confirm by replying that it is okay for me to begin an invoice and work on what you want me to do. You will be billed at my normal rate of X per hour."
This confirmation they reply back with is an email of their recognition that I am doing work for them and my billing has begun. While I've never had issues, stating your business clearly of what you are doing, what you are charging, and them agreeing to you doing it, is for your own protection and theirs. An email can protect you as it can serve as a legal contract in the court of law.
I wouldn't charge separate rates. As soon as you do this, you open yourself up to needless bickering about how much of your time was spent on x vs y. It becomes complicated to separate sessions that are programming intertwined with technical discussion.
I freelance on the side, so I don't do this a whole lot, but this was the first client I've come across that didn't ask about rates at the very first meeting. I've come to suspect, though, he's already financially independent and this business is a "fun" thing for him, so maybe that has something to do with it.
After that, any significant time is billed, and labeled so they can see where the time (money) is going.
Or put another way. I know I can sell my time at X in the market, because I have done so before. Thus, it makes no sense for me to sell it at a rate lower than X, regardless of what I actually do.
