This approach also has a beneficial side-effect. Cheap clients deny the bid. Usually these clients turn out to be the most demanding ones with little understanding of scope or appreciation of your work.
The first time I freelanced I was so paranoid about getting work I took on silly amounts of work for absurdly low amounts of money. I'd also add bits on to 'sweeten the deal' - "I'll also do X and X and X!" etc.
It just ended up depressing me. I'd be working harder than my friends (in their 'real' jobs) for far less cash, with far less respect from the clients.
Now I'll just set a fair price and stick to it. Decent clients seem to respect you for doing it (and understand you have your own overheads) and there's a much more business like approach to the job (unlike the cheaper clients, who I completely agree, end up the most demanding).
Also, feeling much happier and more valued doing the work makes me want to put in much more of an effort.
I think you might have stuck longer to the lower rate + spec work. The idea is to start low and ramp up very very quickly. Infact initially you should try to double your rates, and adjust(A/B test!) your rate according to response rate.
Also i think rate is not a static thing. It depends on how much work is on your plate, or how less. It also depends on the market. So when tomorrow a lot of these startups go belly up and billion dollar valuations runs dry, so might your work. You will have to adapt accordingly.
If you don't have enough work at a particular rate, there's no harm in claiming a lower rate as a few test data points. You can always bill some hours you might not bill on the higher rate. For eg. sometimes i leave off some of the research hours when i'm billing a higher rate, but i bill them when i bid a lower one for whatever reason.
I guess at the time I was worried about what people might say if I asked for too much - or what would happen if I didn't get any work. It's dreadfully hard to rid yourself of that mindset.
But once i had a couple of portfolio pieces, i bid around the top 5% percentile and now usually much higher on these marketplaces. It gets me the right client who're appreciative and i get to focus on them without worrying about the hours*rate all day long.
Edited the post above.
IMHO one's better off spending time building a few simple apps and communicating your worth to the client than go blackhat from the start.
You _never_ want to compete on price. Compete on quality. It's a good idea to eliminate the cheapskates ahead of time.
Good going, Sid. How long did it take you to reach this stage? I have recently started looking out for freelance work, and since I don't much else to show apart from my startup, it has been fairly tough to get high paying clients.
I still haven't signed up on the sites like Elance etc, but looks like might have to bite the bullet soon.
Great advice, especially those three main points Market, Market and Market!
Managing is hard when you're not doing the work, and the quality of the final product will differ. Especially when you're subcontracting, the person you dole out work to will for obvious reasons be cheaper than you are. Hence their quality of work would usually be lower, unless you found someone better than you for much cheaper. But then in that case they will realize that soon enough and leave.
You can minimize it by making sure the tickets etc. are atomic and unambiguous enough. I use mockups, screenshots a lot(especially since i work with english-as-a-foreign-language people). Initially i put in a lot of time QAing stuff. But i was proving to be a bottleneck where i would interact with the client, then divy up work to the devs and then QA it back. I just didn't have the hours to do all that. So i've been making clients become more involved in the process. So allowing them to help out on testing, project-management side and trying to make my presence minimal. Also all communication is kept on tickets, and linked to exact git commits for it. So i can catch up and see where we are, even drop right down to the code to see what changed.
To be honest, it's still a work-in-progress. It's been taking more and more of my time to manage stuff than code productively. So sooner i'll have to think of getting some help on that end.
* Sign up for all freelancer Marketplaces: Elance, Odesk, Guru, Freelancer, RentACoder.
* Sign up for RSS feeds for jobs(full time/freelance) in your domain.
* Start bidding, sending out emails to all of the above that apply.
* You're bidding against devs from 3rd world countries(so you will have to price somewhere in the median atleast until you get your first decent folio piece done)
* Also it doesn't matter if your request doesn't exactly apply. Don't be self-selective. Also even if you don't expect to get that job, apply still. Get your name out.
* Be very communicative, friendly and more open than a simple 'Here's my folio' etc. You're trying to sell yourself, so figure out what the client want, customize your pitch. This part will take a bit of hit and trial on your end to figure out how to get the first client reply. If your post looks like others, then you won't get one.
* Work on the side on your own project, something that's production worthy and you can showcase if the above steps haven't worked till then.
* Reply to posts on HN, Ask HN like Who's hiring + Who's hiring a freelancer. Even add yourself to HN contractor list and anything similar you see elswhere.
* Market, Market, Market every chance you get. I used to spend atleast 3-4 hrs initially just sifting through job posts, replying, emailing everyday.
* Remember to raise your prices sooner than you think.
* Recently i've been trying out Google adwords, which haven't really led to a lot of hits. But i've been getting like 1 really good query for like 100 clicks. For the average amount i make per invoice, that ad costs are very minor even at the ridiculous CPCs to hit the front page.
* A lot of people mention word-of-mouth here. This is really the best way. For every satisfied client you're essentially expanding your network exponentially and getting in touch with people you would never have come across. But initially since you might not have a portfolio, it will be difficult to get work this way. Also until you're able to price your work higher than average, you won't get the right kind of clients. And without the right clients you won't get paid higher. So it's a vicious cycle you need to get out of by piling up showcase work as soon as possible.
* With lower rates it will be difficult to sustain work, since you would have to take on more work before the current one is over. Hence your focus suffers and work quality too. So you're hampering your prices, word-of-mouth network further if you take on work and underdeliver. I've been guilty of doing this(probably still am).
* So as soon as you get too much work to handle, double your rates.
PS: I'm one of the third world dev that people on HN are very fond of :-)
PS2: Since i posted the link to my site http://www.cloudshuffle.com at the top of this post. So far i've gotten 51 visitors in 20 minutes. Cheeky i know! but it was on-purpose to prove my point about marketing yourself when you get a chance.
PS3: Also a weird point i noticed. Almost 95% of the traffic so far is European, and not American. That's completely different from Who's hiring/freelancer thread trend i've been seeing for the past 6+ months.