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How Good Brokers Raise Their Consulting Rates

Originally posted on December 04, 2010 1:56 pm
Updated on February 09, 2017 8:39 pm

For those who do consulting work, a once counter-intuitive secret is now common knowledge:  accepting a lower hourly rate often means having a more demanding, more obnoxiously clueless, and more frustrating client.  The theory is the lower paying clients don’t know the value of high quality work, or are generally on a lower budget and need to try and squeeze the most value out of their dollar.      We don’t blame them; these clients can be good career starting points, plus we appreciate life much more once we graduate to better opportunities.  An established freelancer has plenty of clients knocking at his door, so the easy filter is sticking to a higher rate and avoiding all the charity work in the lower rungs.

For anyone wondering about hard numbers, looking for coding work contracted for less than $60 an hour in the US is the equivalent to searching for a rent controlled apartment.  It will be tough to find and will certainly be full of deficiencies, but sometimes you have no choice.  As the client, you expect and accept the problems and look forward to upgrading when your situation improves.

Real estate professionals unfortunately don’t have as direct a way to raise their consulting rates.   I know there are skeptics, but it’s true; excellent brokers do exist and there is enormous variation in skill between the great ones, the average, and the terrible.  If you’ve never met a value-adding broker, then it’s because you are the client who wants a programmer at $10 an hour.  I’ll explain shortly.

Say I’ve got 5 clients who all want me to show apartments this weekend.  Three want studios under $1800 a month, one wants a 1BR in Brooklyn, and the last one wants a 2BR in Financial District, preferring a luxury high rise.   Well that’s obvious, right?  Unless one of the clients is a solid word-of-mouth referral, I need to guess that all 5 will convert at the same rate, but as a broker I get about $1800 on the studio guys, I probably can’t convert Brooklyn because I’ve never bothered to preview there, but I’ve got a slew of OP luxury highrises in FiDi that pay $4500 on conversion.  While I’m there, I learn more and more about the other luxury high rises so I’ll be more prepared for the next set of 2BR Wall Street roommates.  By corollary, I becoming more clueless about Brooklyn and the low-end studios relative to my luxury high rise knowledge.

Brokers ensure their deals close while keeping their clients happy and informed throughout the entire transaction process.  In my experience it’s pretty obvious by closing whether the co-broker was good or sucked.  Unfortunately for the good ones, real estate commissions cap out at 6% for sales and 15% for rentals.  How do they do the equivalent of raising their rates?  Easy, they just reject clients who seek lower priced transactions.

Hilariously, the public actually thinks the opposite.  “Why should a Realtor get $60K selling a $1M house for doing the same exact work as a Realtor who gets $12K selling a $200K house?”  Well, the answer is they are clearly two very different Realtors.  One is a veteran consultant charging $500 an hour, and the other is an entry-level player building credibility at $100 an hour.

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