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23 Dec 2012

I have just finished reading a rather interesting book by Brennan Dunn, "Double Your Freelancing Rate" (you can get the  "Interviews" part of it from Amazon here.

Double Your Freelancing Rate Book Cover

Brennan is a "premium freelancer", who runs a custom software development business wearetitans.net. In this book Brennan shares his experience on how he managed to differentiate himself from a crowd of "tech web guys" by shifting the focus of value proposition from technical aspects, such as particular technologies to more of a business value creation, such as bringing more sales, customers and alike.

I have been taking short notes while reading the book and then distilling those into actionable items. It's too early to say whether doing so has helped me to achieve the proverbial "doubling of my rates", but it definitely made me think and question a lot of the assumptions I had.

I'd like to share those notes here, so you may get a better feeling of what the book is like. My goal is simply to help people in similar situation to be more efficient at what they are doing. Lastly, I am not affiliated with the author in any way.

  • Brennan starts with an example of a software developer who's trying to sell himself based on technical skills, such as frameworks, technologies, clean code etc. Brennan compares that with an example of 40+ man looking for a new sports car only to be told by saleslady about how awesome the car manufacturer's factories are and how great the manufacturing process is. None of that is of interest to a buyer.Point he's trying to make here is that company wants to hire you so you help them save or earn more money than they spend on you, and they don't care about your best technical practices.

  • Two types of clients: Pragmatic and Dreamer.Pragmatichas clear objectives in mind in terms of numbers - # of visitors, sales, conversion rate etc.Dreamer more of a "idea man" who wants to build something that's on his mind although he tends to ask for revisions and tweaks a lot as you go. Brennan says that communicational aspect is really important with this type of client - giving constant updates, keeping him in the loop, involving him in activities such as logo design.
  • Questions

    • List the clients that have been pragmatic, and why?
    • List the clients that've been dreamers, and why?
    • What problems have Pragmatic clients caused you?
    • What problems have Dreamer clients caused you?

  • Gives an example of a meeting with a client where competing consultant offered a solution in technical terms: SharePoint, # of pages, Gallery etc.Brennan used another approach, by asking the client:

    • "Bob, tell me more about your website"

      • Bob responded with description problems - namely website

    • "If your website was an employee, what his job description would be like"

      • Bob - to achieve certain business goal

    • And how does your current site achieves that?

      • Bob: It doesn't

I think it's interesting primarily because Brennan is driven by his desire to uncover the business objective, need or a problem, and he's not trying to come up with a solution straight away as the competitor did.

  • Cost driven approach VS Value-Driven approachCost Driven: People tend to stick to industry-standard rates when pricing themselves; They do get scared when their rates are compared to ones of the 3rd world countries. After all, you both sell programming services. So you take what it costs you to produce something and then add a margin (usually small one) on top.Value Driven: People hire you to help their business to be better off. We need to know how much better of the business is going to be after our work. Although clients are often not all that open about it, as well as simply not knowing how much cash your work is going to bring in.

  • Experiential factor

    Client's experience matter - it is most important component of the received value. The way you communicate with a client - how quickly and professionally you respond to his enquiries, having a clear plan of action also impresses.

  • Economic factor

    Importance of highlighting to the prospective client howyour implementation will allow them to achieve their business goals - revenue targets, for example, and how they are going to miss out on those - i.e. lose money - by not implementing them.Both experiential and economic factors should be included in conversations and discussions with client, not just in a form of some document such as estimate document or a project proposal.Those conversations around their business, their needs and your abilities to fulfil those needs as a solutions provider form basis for your premium rate.

  • Questions

    • What things about working with you have your clients loved?
    • What things about working with you have your clients hated?
    • What satisfies you the most about working on client projects?
    • What’s the most frustrating thing about working on client projects?
    • What could you change or remove that would improve the experience your clients have working with you?
    • What could you add that would improve the experience your clients have working with you?

  • Project Transaction Schedules

    • Hourly rates are becoming somewhat less relevant, replaced by daily/weekly rates
    • Fixed cost for project - carries certain risk for contractor due to:

      • subjective areas such as design
      • client being not always clear on what he wants in particular area/feature and requiring multiple revisions to it, thus cutting into your profits

    • Value based - client paying on perceived value to him - advised strongly against
    • Equity based / Partial equity - reliance on business owner to pull it off, as well as requiring an attorney to arrange things

  • Client's Budget

    • Based on how much they have in bank $X, how much is allocated to that project $Y and risk margin $Z
    • Arbitrary number based on their interaction with other freelancers, off the Internet etc
    • You need to quickly determine what their budget is and if they are reluctant to tell you at least what's the range and how they arrived at that budged

  • Quantifying Value

    Notion of "divorcing" the scope of the project from the budget and focusing on saving or making money for the client.To quantify value we need to understand why client's is looking for a vendor.Instead of focusing on technicalities such as colour, CMS, google maps etc you need to ask business questions and understand answers. This also help if the client is non-technical person - all the tech lingo can sound intimidating to him and may break the communication/understanding.They called you to solve their business problem, not a technical problem. They don't care about CMS, they care about reaching out to new customers, for example.

    • Experiential Value: Notion of capitalisation on the ego of a client - in the given example business owner is jealous of his competitor's website, and Brennan suggest the line of the discussion that promises client that "We’re in this together, and soon you’ll be bragging to your friend about the results you’re getting online." i.e. getting results better than those of competitor.

    • Economic Value you need to understand how your client measures his success for this given task - whether that's number of visitors, shares on Facebook, number of sales, number of physical clients per day/week, # of referrals, # of reviews posted on the external sites etc.Offering your client to improve his key metrics is offering them economic value for their money.

  • Your Offer

    • Segmentation - is your potential client a Pragmatic or a Dreamer? What sort of business are they in? Do you want to work with that sort of client?

    • Values - what does a client values most? What experiential factors will he be most responsive to? What Economic factors are of most interest to them?

    • Potential/Risk - can you deliver this premium project to a client, will you have enough motivation and technical capabilities? What are the possible obstacles? Is there a risk that project won't make any money to the client or won't bring him positive experience no matter what you do? How much control over the failing project do you have? Can you positively influence it?
    • How to:Be direct and ask questions:

      • Why do you want this built?
      • What are the economic implications to it not being built?
      • What is the economic potential of successful completion?
      • What research went into determining the necessity of this project?
      • Why aren't you able to do this either yourself or internally?
      • What, if any, are the time constraints of this project? And why?
      • How, and when, will you be able to determine the success of this project?

        These questions help you to figure out what's the business case for the project.Brennan says that being interested in their problems and the project outcome - ie. what this project should bring to the business, is not something clients expect from a vendor.

    • Next thing to do is to produce a roadmap - a list of things that need to be done, in certain order (if A depends on B it should go after it, not before).Goal here is to disconnect the relationship between a budget and scope of work, so you can figure out the business motivations behind original requirements that client supplied in the beginning of the discussion.Then, when roadmap is ready, estimate the complexity of it and put up your premium price agains items.Send it to the client with the following framing - "Here's what we can do for you. It's prioritised to get you the maximum return for your investment. Please have a look at how much each part of the project would cost so you could fit this within your budget and refine it further (if required) to align with your business goals."Brennan says that client will gladly work with you to get the results you've talked about, even if your rate is twice of everyone else's, since he is not comparing you to them anymore on the basis of technical abilities, but rather your involvement and understanding of their business problems.

  • Case studies

    • Steve Corona

      • First clients - found online on Craigslist, WebHostingTalk or just by networking with people
      • Prefers working with small companies - importance of working directly with decision makers
      • Importance of your positive online presence, so prospective clients can find information about you
      • Things clients value

        • Reliable, fast, constant communication
        • Delivering on time
        • Working FAST - blow them out of the water with by delivering in a day instead of next week that you originally quoted
        • Under promise, over deliver.
        • Always have a feature in the plan that you told them will be ready next week yet you know that you can and will deliver it earlier
        • High rate is high perceived value, vs low rate is viewed as a "desperate date" - nobody wants to go out with you

      • Started with $50 per hour, now $500 to $1000 - and clients are fine with that!

    • Eric Davis

      • First clients - through word of mouth and referrals via forums, mailing lists and blogs
      • Works with startups, local small businesses, large unis, government
      • Communicates value to the client via saved employee's time - Eric automates manual processes
      • started with $35 per hour, highest ever charged - $200
      • Instead of negotiating the rate down tries to negotiate the scope of the project

    • Tim Connor

      • Started as a contractor initially
      • Got a contract through recruitment company, then some additional projects through family and friends, then word of mouth and referrals
      • Prefers startups, investment banks, small businesses, non-profits, anyone really
      • Communicates value via confidence due to knowing what he's talking about, referrals, free advice about their field/project, sharing experience about other similar clients
      • Managing expectations is important - letting people know what they will be getting and delivering that.
      • Started with $18/hr, highest charged $1000/hr on an odd job, otherwise $350
      • If you let them negotiate your rate down they won't value your time properly; as well as whoever they refer to you.
      • Higher rates mean fewer projects, but those tend to be higher-end ones.

    • Ryan McGeary

      • Initially through family and friends, later landed a contract by approaching a potential client himself.
      • Works with small to medium companies, as well as startups
      • Also takes "rescue projects" - when shit hit the fan and they need somebody to get it fixed. In those ones it's easier to close the deal.
      • Value to the client - trie to communicate his business experience to clients, not only technical experience.
      • $95/hr in 2003, in $120/hr in 2009, now $180 and does not negotiate
      • Does not negotiate his rate
      • Increase your rates when you are overbooked - then you can be confident in your value. If you can project confidence regardless - do it as well.
      • Since 2010 stared to collect a "security deposit" for all new clients. Serves to offset the risk associated with unknown client but also serves to distract for hourly rate negotiation. People start negotiating the deposit instead.Also adds sense of responsibility for both parties. Apparently people take you more seriously when you do so.

    • Brook Riggio

      • Started with $30/hr for friend's project.
      • Got initial clients through relatives, then through recommendations.
      • Clients - independent non-technical people looking for help with side projects.
      • He's also providing consultation on how to launch and run web business
      • Runs training business, $135/hr
      • Consulting rate $150/hr
      • Communicates value to clients

        • for business clients via offering of complete technical services and deep understanding of business value.
        • to students expertise and quick problem solving

      • Interesting approach - when calculating final price for the project, he figures out number of hours it will take him to build that, and then doubles that as a contingency.
      • Started with $30/hr, increased to $75/hr over 5 years. Now charges min $150. Only takes new projects that pay more.
      • Hacks

        • state your price confidently - mumbling and uncertainty will be detected and client is more likely to push back
        • Always work for more - every new project should be at higher rate, even if it's just $5/hr more. Most important of all this boosts your confidence. See how far you can take it!

    • Stephen Ou

      • Stephen is a high-school student working for high-end clients
      • Worked on some projects that went viral - clients found him through those.
      • Communicates value via measurable increase in revenue for the businesses.
      • Sit with you client to figure out what the key metrics are and how your work contributes to those.
      • Started with $50/hr, peak was $125/hr, now charges $95/hr
      • Does not negotiate rate
      • Recommends:

        • choosing who are you going to be working for, don't race to the bottom.
        • try to get in touch with high-end clients, ask if they are looking for freelancers
        • keep good relationship with all your clients - they are sources of referrals for you
        • get in touch with old clients via email, ask how's things going - this is likely to fetch some new leads

    • Jim Gay

      • Always wanted to do his own thing, after some years of working, trying to do freelance on the side decided to save some money and take a plunge.
      • Got clients through friends/family
      • Started with $35/hr, now $150
      • Didn't negotiate the rate, lost projects because of it. Although some clients returned later to accept the rate.

        • Advice - never sell yourself on price, it's race to the bottom, there's always somebody cheaper. Focus on making your clients happy through fulfilling their needs.

  • Adopting your new outlookThe plan for this week is:

    • Figure out a new rate based on your desired lifestyle
    • Improve your sales site - focusing on quick wins - copy, headline, simple call to action
    • Determine sales strategy
    • Look into what you can do when client tries to negotiate lower rates
    • How to deliver more value and get a higher rate with your current clients
    • How to keep increasing the rates and value delivered
    • Create a personal 5-year plan

    • Rethinking your income

      • Charge much higher per hour if doing just few hours per month/week
      • Plan to have personal time - don't just replace 40hr/week of wage slavery with 40hr/week contract
      • Calculate how much income per week you need based on the lifestyle you want. Make sure to include time off work into this.

    • Rewriting your marketing website

      • Most people put things that don't really matter for the employer - schools you went to, hobbies, what sort of services you do provide.
      • Ask yourself - what is that your target client looking for? Most likely somebody who can solve his particular business problem.
      • They are often in a rush - looking at a number of potential candidates. And they don't care about all this geek speak, they just want their sales increased.
      • Provide call to action: site structure generally is

        • a headline
        • subheadline
        • supporting image
        • bulleted list or two
        • a call to action

Make it easy to contact you - don't hide the "contact me" link somewhere in the footer. Look at your favourite websites from web developers or designers - there's a chance that at the top they have contact links.

Make sure that:

  • phone number is prominently displayed
  • there's a large area on every page that encourages people to call/email you
  • reinforce the calls to action by testimonials and other trust symbols
  • Establish yourself as an expert voice in the industryDon't just drop technical terms - you know they are just tools,

    Provide free information on areas of your expertise - "10 ways to get more sales using Wordpress plugins"
  • To get more solid leads

    • Have a short, catchy headline, that promises something. Like "I build websites that increase sales" - Brennan says that's just a silly example, just to show what he means.
    • Avoid long paragraphs of text - people going to skip those. Use captivating headlines and highlight and italicise keywords to encourage visitors to read surrounding text.
    • Include catalog of problems you solved for businesses - and what sort of business value you delivered. Don't just link to pictures/client's websites.
    • Include your rate on the home page (in case of fixed price - average cost). This can be scary - but do it. This will rid you of cheap clients. Brennan lists http://thunderboltlabs.com/ as an example although I couldn't find a price specified on their page.
    • Make contacting you as easy as possible. Brennan advices that you can setup a http://grasshopper.com/ number if you don't like giving your mobile. I'd say people in Australia actually do prefer mobiles - even banks let you know on ads what's the mobile number of particular branch manager.
    • When writing your biography make it personable, although focus on the question clients are going to be asking themselves: what makes you someone they can trust?
    • Listing your skills on the homepage is fine, but also include explanation how and why those skills will help the client's business

 

  • Answer Questions

    • What aspects of your current website might be keeping it from being effective?
    • Write down a few of your favorite websites from other freelancers and agencies. What do you think is working for them? What isn’t?
    • What are a few business “wins” that you’ve helped bring about that you could highlight on your website?
    • What are a few headlines that you could use to help convince prospective clients to not click the back button?
    • What educational content could you provide as a free download?

Your New Sales Strategy

PROPOSAL

At this point in time he does not discuss any timelines, deal details or costs. He also says that confidence is important - acting like there's no doubt whether he'll get a contract or not.

During the first stages of the discussion he focuses on figuring out what's are the real motivations for client to start this project. Then he verbally offers some ideas and experiments that can get client closer to the goal.

In his conversations with a client Brennan puts an emphasis on the concept of open-ended roadmap that - something they are going to produce together. After they figure out together what the roadmap should look like, what are the particular steps in it, Brennan lets the client know that he needs to do the estimation process.

When estimating a particular piece of the roadmap using all the information collected from client, Brennan inflates the estimate based on the uncertainty of his his understanding of this item - higher the uncertainty, more the inflation.

CLOSING THE DEAL

When writing proposal, focus on the economic value to the client that you are going to deliver. This should be further reinforced by experiential benefits that working with you brings. In your proposal include a section on what it's like working with you, your rate, estimated time and total cost, and your requirements to the client - things like response time to your questions (say 24 hours).

Client is most likely to focus on the budget side of the proposal. You need to let the client know that if the budget is higher than he expected, it's up to them to limit the scope of the project to fit the budget.

Brennan plugs his SaaS product in here, planscope.io, that allows to manage the proposals and expose those to a prospective client. Client can prioritise and remove tasks to fit into the budget.

After client is happy with the proposal it's time to close the deal. Brennan requests a two week deposit so he can include client's project into his calendar.

Networking

Initially went to lots of meet ups and drink ups for small business owners, advertising himself as a person who did "web development" - something he compares with telling a future home owner that you cut wood and hammer nails.

Instead try to ask what sort of problems people are facing with their businesses - ask a lot of questions, such as what are they currently struggling with? Are they happy with their sales? What did they do to grow their business - and what has worked and what didn't?

When you take that position of proactive interest in their business problems people will be amazingly open and share a lot of intimate details about their businesses.

Contacts via your sales website

When getting contacted via website (either through organic traffic, or your business card, ads) - send a short reply ala "Thanks for getting in touch, just letting you know that I've got your email, I am out at the moment, sit will get back to you as soon as I can!".

According to his clients this is way better than getting a delayed response.

After receiving an enquiry, qualify the lead. You need to figure out the following

  • Can a client afford you?
  • When are they going to start this project?
  • Is this a direct client or some proxy? (Agency?)
  • Will this person be responsible for authorising payments?
  • Have they built custom software in the past?

Brennan lists an example email, that asks the client questions like:

  • why are they looking to start this project?
  • do they have a budget set aside? is it over $XXk?
  • Do they have a start date in mind?
  • Are they the project owner? Are any other members to their teams are required to be involved in the initial consultation?
  • Is this a new type of project for them or have they done anything like tha before?

Throughout the email he puts and emphasis on business benefits/value for the customer and ways he can help to achieve those, without mentioning any technologies or any other tech specifics.

Often contacts are "tyre kickers", do not spend too much time on those but make sure to leave great impression - they may come back to after few months with more concrete interest.

Consultation

Project your confidence in winning this contract - you are a seasoned business veteran, helping another business to achieve their goals - this will give you a leg up against the competition.

Your client has a goal of minimising his cost and maximising the returns.

Talk to them about what their business looks like today and why it suffers without this project. Then present them with a nice picture of how future will be better when this project is delivered.

Focus on the goals, not the roadmap to get there (software or designs) - this will differentiate you from the competition.

  • Research your client

    • what kind of business do they have?
    • have they just started or are they established?
    • what's the company culture/attitudes are like?
    • what kind of attire are you expected to wear?

  • After learning all you can about the project, what kind of roadmap ideas can you bring up that ail show the client you care about Return On Investment for this project?
  • Shift the conversation from being a technical resource towards you being a business consultant
  • Try to understand why are they starting this project, and build your discussion around that.
  • Ask them what are the steps they think need to be taken to achieve their business goals. Bring to their attention if a particular feature they are thinking of is not contributing to those goals - this will give you lots of respect versus just saying "yes" to everything. Work with them to put a roadmap that helps to achieve the results they are looking for.

Negotiation

  • 99% of us are not charging as much as we could have
  • new clients will try to push your rate down
  • existing clients will resist rate increases
  • don't be afraid to turn the client down - cheap clients are hard to work with
  • do not negotiate

    • smart clients realise that you don't have a lot of overhead to charge for
    • holding strong and not negotiating will rarely cost you a project
    • people are afraid to lose projects and happy to work for a little less
    • be confident - realise the value you are delivering to your client
    • when you let client to push down your rate, you prompt them to think that

      • you can be lax about payment terms and scope of the project or the amount it will cost

    • let clients know that they can fire you if they feel you are not worth the cost - this reassures even most stubborn clients
    • remember - you are a business, not just some technical web guy

Five Year Plan

You became a freelancer to be your own boss and control your own destiny. Ask yourself - what do you want to do in 5 years from now?

Earning money is just means to an end - to get you things you want - more free time for yourself and family, etc. Increasing your rates allows you to work less hours.

Answer questions:

  • What's important to you and how becoming a premium consultant will help you to focus more on these things?
  • What's holding you back from giving more attention to things that matter?
  • What do you want to be doing five years from now?


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