Why Your Customers Would Be Happier If You Charged More
kalzumeus.com
kalzumeus.com
You have to charge more. Aside from all of the arguments in terms of value and avoiding pathological customers and so on, there's one more really good reason to charge more: you need the money if you want to be awesome.
I've been running a small business for a while now that helps a lot of people that need help but can't afford it. That's all fulfilling, heart-warming work, but it's also put me into a very difficult position. Right now, I need to hire more people, but I can't afford anyone that's good. That's directly hurting my customers. Our turnaround times are really hurting as a result. I've got an opportunity to hire on a brilliant old friend of mine, but I'm not sure yet if I can swing it, because the bank account really doesn't have enough in it to afford him, and I don't know if I can work long enough hours to get that kind of money in there.
I've resisted every other justification for charging more. Vacations? I don't need more than just a few days off once in a while. Toys? Don't need those either. Avoiding pathological customers? But those people need help too, and I want to help them.
But not being able to build a strong business with lots of talent under my current model? That's pretty hard to ignore.
You can now commit to help 10% of all your customers for free, for now into the future, and charge a sensible rate to everybody else. Your business will do better and it will grow more quickly. The 10% portion you help for free will soon be much larger than your total customer base now.
(I'm not saying this to nosetweak: despite this being one of the most important ideas of the last several hundred years -- a reproducible technique for ameliorating scarcity, holy cow -- it's either buried under the mechanics of demand/supply curves or presented as a political statement alongside others which sound like "scarcity: kinda groovy, particularly when you can steal scarce stuff.")
As you surely know, you're using "returns" in a technical sense. I'm awfully fond of free enterprise as well, but it is important to note that there are a lot of kinds of scarcity it doesn't fix, and many sorts of returns that it ignores or can't handle well.
Infant mortality, for example, isn't well served by market mechanisms; babies have no money. So we solve it through other mechanisms. I don't know what particular sort of good this fellow is doing, but I feel for him.
I disagree more with this statement than any other statement ever made in good faith on Hacker News. Kids not dying is an outcome we urgently desire, right? There are a variety of products which support this outcome. One is "soap." Soap scarcity is a real phenomenon: some rooms that children are born in have no soap. Those rooms kill lots of children. Soap scarcity was a quite common phenomenon until very recently, historically speaking. The reason that I keep having to mention that soap scarcity is a thing at all is that market mechanisms are so effective at allocating resources to production and distribution of soap that educated Westerners could be forgiven for not knowing that it doesn't come from the same magical fountains supplying the infinite, free, clean drinking water often found co-located with infinite, free, effective soap.
In the real world, some kids will die this year for want of soap. Some people believe this is because the market has taken the soap from their rooms. These people are fools, because the natural state of nature is "no soap." Children die because, almost universally, someone has strangled the market that would otherwise be allocating soap towards their rooms.
There are more complicated reasons for child morality than lack of soap, but to the extent that they involve scarcity of resources, they largely reduce to the soap case.
There are definitely things markets don't allocate efficiently - but those are "public goods," and they rarely look like infant mortality.
Along these lines, I'd love to hear what you make of John Robb's argument that the concentration of wealth and influence in the hands of Goldman Sachs and their ilk amounts to a shift to central planning, with the predictably disastrous consequences.
The most important one being a lack of information. Except in the poorest slums, where people can't afford soap.
If fact, they may be wasting their money on stuff which increases infant mortality. Infant formula may be marketed as being healthier than mother's milk, but without proper sanitation it's much worse.
> Children die because, almost universally, someone has strangled the market that would otherwise be allocating soap towards their rooms.
It's ridiculous to say that, unless you know of some place in the world where soap is insanely expensive. They'll die because their families were poor. The ultimate causes of poverty are complex, and probably relate to dysfunctional states which (among other things) don't create functional markets. But to say that the ultimate problem is "not enough markets" is silly. Would public education help? Does their government need to enforce anti-corruption laws?
You can't look at a government which does everything wrong, and say "the big problem is, they don't allow markets to flourish".
But some things (like immunization) can be done cheaply (if somewhat inefficiently) by something that's not a market.
A related problem, possibly just as big, was that there was very bad information available, especially again in rural areas; people just were not educated on best practices, and were wasting their money on snake oil while failing to take basic steps that actually work. The Canadian government started combatting that as early as the 1920s, by sending out public health nurses to give vaccines and help educate people in rural areas, and printing up pamphlets and books with information: http://www.archives.gov.on.ca/english/on-line-exhibits/healt...
A problem directly caused by earlier government intervention. Starting around 1910, the AMA managed to push through legislation in most states that solidified their cartel and gave them sole authority to license medical schools. As a result, half of existing medical schools were pushed out of business, and the supply of doctors contracted significantly.
A similar push forced most poorer (and predominantly black) hospitals to close, because regs were written so that only the wealthier hospitals could satisfy the requirements.
The motivation for all this was clear: it substantially increased the rates that doctors and hospitals could charge by restricting the supply. Naturally it was all done in the name of patient safety.
Stop and think about why this sentence is extremely silly.
Who is really the customer?
Parents can be the customer. Often they are, sometimes they aren't. Sometimes government is the customer. For some interventions, like public health education or vaccination campaigns, government is the only customer. Or perhaps a volunteer clinic. Or a concerned neighbor. Or...
In none of these cases is the baby the customer, which is my point: market mechanisms alone don't solve all problems. Which is why we have things like "parental love" and "public service". Markets are tools, not magic unicorns.
Correct. But parents have money and are very protective of babies.
But that's a non-market mechanism, and when that mechanism fails, the market still doesn't help.
With all this extra time, I've been able to do more higher value consulting. It's a virtuous circle.
"I think you're trying to do both business and charity at the same time, and that doesn't really work I think."
You need to charge a certain set of clients more to afford to do the rest for free. Business and charity can exist side-by-side but they can't really be combined. Charge more for 75% of who you help, then be really picky about the remaining 25%. You'll have the same warm heart and be a lot more sane. Happy workers work better and that helps everyone.
You're exactly right about subsidizing a set of customers, but there are all kinds of technical and psychological details that make it a tough problem to solve. I've really only just started thinking about it, so I don't have anything smart to say yet.
I'm happy to answer questions, as always.
P.S. I normally try to space out publishing things, to avoid a) reader fatigue on my favorite topics and b) imposing on HN goodwill by showing up on the front page too often. That said, the next two weeks are going to see a few more posts on the blog than usual. Several independently managed processes, with varying numbers of steps, people in the loop, and pipelines, all decided to terminate roughly simultaneously. I apologize in advance if it's mildly irksome -- believe it or not, it is the exact opposite of a planned media blitz.
Some google-fu and http://bit.ly/OJALPO It seems to be a word he likes and uses well.
I'm occasionally downright embarrassed by HNSearch. Easy example searches to demonstrate include [ROFLstomp], [pathological customer], [patio11 "charge more"], etc. Or, if you want things that take a little effort to spot, you can see that I really, really like parenthetical statements (one English teacher of mine estimated that I used them 20x more than her reference sets... oh, there I go again) and extended surprise expectation inversion as a device, particularly in introductions.
A related issue is that these two interviews were recorded with a 30 second break in between and, since the topics are spiritually adjacent and our memories were fresh, we both recycled good turns of phrase and ideas from the previous interview.
Pet example: "They paid me motivational sums of money".
(Oh, and yes Patrick, you're starting to develop a serious cult following).
And I thought I was the only one (I have the same habit). It does make Lisp seem more familiar, though (rather than "ack, too many parentheses!").
P.S. Was surprised you didn't give out your summoner name on the last article. You probably could've gotten enough free RP for Midnight Ahri or whatever.
Teen pregnancy. School stabbings. Teacher abuse scandals. Classroom mayhem. Flat test scores. Declining graduation rates. It's enough to make Japanese parents wish their kids went to school in America.
(That is pretty much verbatim from an essay I wrote in college. I use this trick a lot.)
I hadn't really thought about it but it's interesting to me that I find myself more or less fatigued based on the writing style.
In any case ... thanks for sharing! (and yes, I'm an old BoSer)
By the way, I'm subscribed to your new mailing list. I don't think it includes updates about new articles that appear on your blog. Is there a separate (non RSS) way to subscribe to your blog? If it is I'm missing it (admittedly, didn't have much time to look since I'm on vacation).
1. If the value of what you contribute can be measured, people are happy to pay you ridiculously more on a pay for performance model than they are with hourly consulting rates.
2. A/B testing can provide a way for them to measure the value of your contribution.
Why is this? Well in pay for performance, the company takes no risk. Furthermore it lines the incentives up correctly from everyone's perspective. Suppose that compensation model inspired you to spend 2x the effort that you otherwise would for 1/3 better performance. Odds are that they've just covered the amount they have agreed to pay you and are laughing all of the way to the bank. But if you are compensated hourly, and they are not sure it will work, there is no way that they want you to spend 2x the effort up front, even if there might be a slightly better return.
I am not at liberty to share specific numbers. But keep this fact in mind in the future. It may prove valuable to you.
(I should think about writing this up in a blog post, along with lesson #3. That lawyers systemically fail to place a value on your opportunity cost...)
The hardest part of this "charge more" philosophy is finding the clients. For example, I went to see a client yesterday, who knew my daily rate. We had a very positive meeting and I was told "they were glad they'd found the right man for the job". Yet today they stated they could get two developers for the price I was charging and would have to think about hiring me unless I was prepared to negotiate.
I do wonder if maybe the world of freelance developing does have a payment cap, and that to reach the next level we need to sell ourselves as something other than just developers.
Or does making the charge more philosophy work to its full extent in the development game, mean joining big company x, or selling my soul to big company y.
The question I'm asking myself right now is. Would Patio11 be able to charge the same rate as a freelance developer as he does as a "I will help you sell more software" freelance consultant?
I charge the same rate for software development as I do for making graphite etchings on paper in aesthetically pleasing patterns. Consulting clients buy both of these things from me, in isolation or combination, on a regular basis. So if that's the way you're asking the question, "Yes, I could."
If the question is "If you brought nothing to the table other than the ability to write Ruby code, would you be able to charge $YOUR_RATE for writing Ruby code?", I think I'll go with "I can guarantee you that someone gets that much for writing Ruby, and probably more besides, but it probably wouldn't be me" and "Wait wait wait, you seem to want to sell yourself as a commodity coder, don't sell yourself as a commodity coder, down that path lines madness."
The "we found someone else cheaper than you" line is used all the time. It doesn't matter if it is true or not. Procurement's job definition is to convince you, Joe Freelance, that you are a commodity that competes solely on price for them. If you let them manipulate you into that mindset, then it is time to re-evaluate your unique value proposition and your negotiation process. This approach is also why you always see the business "hand off" to procurement once you have convinced the business they need you. They are trying to use the process to negotiate piecemeal and divorce the value props you just used from price, and the failure of procurement to realize why you are different and a better value is not a bug, it is a feature of their process. There is a lot more to be said, but I find a lot of technical consultants who look down on sales people are unaware of these basics of negotiation.
Often, procurement is actually at odds with the real buyer. All you have to say is "sorry, I cannot offer you a discount" (or "cannot without a 6-month commitment" or whatever value you might want to extract here). The buyer will yell at procurement, and procurement will back down. Walk away, and the client will often come back to you. Happens all the time. Be nice and don't raise your rates on them out of spite when they do.
But if you're getting this constantly on potential gigs, I would worry that you haven't done enough to position the work you're doing. If you're a (say) "Rails developer", then despite the fact that Rails developers are in high demand, a savvy client probably does have someone who will do your job cheaper. Don't be a "Rails developer". Be a world expert in solving XXX business problem who, lucky you!, just happens to use Rails as their tool.
There's more nuts and bolts to know about handling procurements people; there are rituals you'll have to do with some of them to close deals. But basically it's all a game of chicken, except when you lose you don't die, you just learn something important about your business.
Procurement will shoot back with all sorts of lines, but basically they will try to intimidate you by saying something along the gist of "we're going to have to reconsider this/shop this around since you can't offer us a discount", or "we're disappointed in you/to hear that". The trick here is to have a good enough pipeline that you feel comfortable to stand your ground and not take it personally when procurement finds someone else; learning how to shrug off losses as long as we were pulling in on target was one of the harder skills for me to pick up when I started.
Most hackers trying to freelance need to hear the kind of talk they will run into out there, and not just what to respond, but how to respond. When hackers hear about "don't sell on price, sell on value and positioning", many don't know how to translate that into the nuts and bolts of what happens in the trenches and thus even if they themselves do not sell, a key toolkit for evaluating non-technical co-founders is underutilized.
There is lots of talk here on HN about how rare great non-technical co-founders are, but there is precious little on actual pragmatic ways to detect them or adopt their principles and methods.
From what I can tell from dealing with this problem (not nearly as directly as my business partners, but enough), there are basically just a few things you can productively do:
* Walk. A lot of times, the company will come back, and procurements is bluffing.
* Cave. You need the money enough to permanently sacrifice your rate at the client. You should really avoid doing this, because it is extraordinarily difficult to recover a concession on your rate.
* Convert to budget discussion. Try to get procurements to talk about a "number" they want to hit across the project (you can't do this with hourly billing HEY WAIT MAYBE THAT HOURLY BILLING STUFF ISN'T SUCH A GOOD IDEA AFTE--- anyways). Now take that number back to the real buyers and massage the scope of the project.
* Trade. Procurements wants a discount, you want a committed pipeline of work, a customer reference, or whatever. Again: if you're negotiating, make sure it's on the project rate, not the hourly.
You do not need a nontechnical cofounder to understand this stuff. You just need to know the role of procurements and you need to truly grok positioning.
And that, in of itself, is a negotiation tactic. It might be true - but it's much more likely to be a method of getting you to drop your rates. You set the top level at $dayrate. They've now set the bottom at $dayrate/2. They're now hoping for something less than $dayrate as the end result.
If it were me I'd be saying something like "Well - that's great. We obviously don't want you to waste money, and I can be working on some stuff for some of my other clients. Would you like me to brief the new developers when you get them on board at my $higher_short_term_consulting_dayrate? Or are you happy managing the brief and project management for the guys you're getting in?"
(translation: No. I don't come cheap and can afford to leave this work. Also - you've already worked with me and know I can be trusted. How much extra effort is it going to be to manage the new folk - assuming that they exist?)
A better solution would be to respond: "Well, my rate is based on my experience with XYZ and because I've been in this industry a while. A lot of developers out there aren't interested in this kind of thing and don't understand what you're going through. Honestly, I hired a couple myself last year and it took more effort than I saved just trying to get them ramped up."
Then just smile and leave it at that. Sometimes the best response is to make your point and not get into a conversation about it.
Possibly I'm getting less mellow with age :-) My responses used to be more like yours, now I tend to be a bit more direct.
The ones who are approaching it purely as a negotiation tactic don't care or mind - they understand what the issues are and appreciate cutting to the chase.
The ones who really don't value my time I don't actually really want as clients...
However you approach it - and your approach is completely reasonable - the key realisation is that this isn't a question of the client not having the money to pay $dayrate. This is most likely a pure negotiation tactic to get a drop in the quoted rate.
The thing is, companies don't want to write software, they want to fix business problems. Writing software is just a path to that. So yes, you may charge more but you also have experience with their business and you've been there, helping them solve their problems (at least I hope you have).
It's a hard pill to swallow, but a client that won't consider the quality/history versus cost argument isn't worth having. They will continuously second guess you and you will spend more time managing them than getting work done.
The dozen or so responses that make up this upcoming video and the corresponding shifts in worldview are directly inline with everything Patrick and Ramit have to say in this interview. Here are my takeaways from these testimonials:
* Most people price themselves in the same way commodity markets price corn, oil, and hogs.
* Fear keeps us from breaking away from market/cost-plus pricing to a pricing strategy that's focused on the value we deliver to our customers.
* When you focus on why people hire us (to increase revenue or cut costs) and approach everything with that end goal in mind, you can dramatically increase the value you produce and the cost for that value. Commodity pricing is thinking "I write Ruby for my clients" or "I setup Wordpress sites". Pricing based on the value you deliver is "I help businesses increase profits by minimizing the amount of clicks the sales team needs to make in order to process a new transaction."
The problem is that I shudder inside a little every time I hear the word 'info product'. The whole industry is beset by frauds and hucksters, and I think that generally people are a little skeptical when they see yet another person making claims such as "I will teach you to be rich".
Ramit provides great, actionable advice in his content. The problem is that he sells himself the same way as everybody in his industry does. It's things like the way he speak to his sales site that puts a small part of me off and puts me on the defense.
I've recently been trying to pick up some part time freelance work to supplement my income and pick up a wider range of experience.
So first stop was elance.com/Guru.com and similar sites. Looking at the jobs it seems like around 90% of the bids were from individuals in India or the far east happy to work for $7 per hour. So I figured I could "compete on quality" , however a lot of the individuals I would be competing against had CS or design degrees (often from western universities) , 5+ years experience and portfolios full of slick looking corporate websites. Besides, at the rates on offer I figured I'd have to complete at least one fairly large project a week to match my current salary and I'm not confident about producing quality on those kind of deadlines.
Most of the project descriptions were also either extremely vague (I want a website), impossible (I want a website, must be #1 on google for <competitive search term>) or possibly illegal (I want a keylogger, must not show up on AVG).
It also seemed like a lot of the bids came from various outsourcing companies who had a bunch of different skills in house and providing 24 hour coverage which would kill my timezone advantage (besides a lot of buyers were in the US when I'm in the UK or were in India/Far East themselves).
Looking at the profiles of freelancers from the US/UK etc , most of them appeared to have never won a project despite being on the site for over a year often.
So I gave up on that and figured, "It's all about networking right?" so I attended a local business networking event for "entrepreneurs". First bad sign was after sitting down and introducing myself to the lady next to me, "what do you do?" , "I build websites , computer software and mobile apps" , "wow, you TOO".
Everyone there who wasn't a freelancer of some description desperate for business was either a recent university grad full of enthusiasm, bright ideas but no funds at all or some small mom and pop operation who were stressed out about meeting their mortgage payments that month and absolutely not looking to drop a chunk of change on any kind of bespoke software.
Now I'm sure there are people out there with money to spend, but they are probably hiding behind an army of secretaries etc. Besides even people with money are looking to save it, and there are plenty of monied businesses like investment banks etc who are still offshoring all of their dev work.
Any bright ideas on how to break through this firewall?
2) There are a variety of networking mechanisms besides networking events. Anything pitched as a "networking event", explicitly, is going to self-select for people who have nothing better to do than go to networking events. Successful businessmen largely don't go to that sort of place because they have networks. They go to places which promise value to them.
One specific example is e.g. focused presentations or conferences on a topic of immediate need to their business. For example, the Business of Software conference charges something like $2k a ticket, and is pretty much totally attended by people who own or work at software companies that can justify $2k a ticket and a half-week at a luxury hotel if it sells more software. That might be a good place to meet well-heeled software companies if you're in a mind to do that. (How to avoid paying an arm and a leg for conference tickets? One way is to get invited as a speaker. How to do that? a) Get really good at something. b) Reach out to conference organizers. c) Tell them that if you speak about your thing at their event it will receive high ratings and people will talk about it after the conference.)
Another hack: can't get invited to a party? Throw a party. Invite yourself. You must be a desirable person to meet at the party, after all, you're throwing it. Ryan Carson talks about this all the time. It takes absolutely nobody's permission and a budget in like the two to three figure range to say "October 22nd: SEO For Law Firms seminar, Community Center Conference Room A, 2:00 PM to 5:00 PM with reception to follow. Register now to reserve your ticket."
3) they are probably hiding behind an army of secretaries
Is this an obstacle that the world is presenting to jiggy2011 or an obstacle that jiggy2011 is presenting to jiggy2011?
I know at least 30 people who can greenlight 5 to 6 figure engagements. 25 of them have publicly routable telephone numbers... I assume, anyhow, because calling people scares the heck out of me. Every last one reads their own email. None has a bodyguard separating them from the hoi polloi at e.g. industry events.
You don't need to get the CEO of Bank of America on the phone to charge $1X0 an hour. A company the size of a BoA bank branch can be a great, great client to have -- one or two people in the decisionmaking loop, monthly payroll of $X00,000 to $Y million so your invoices won't threaten the ability of anyone to make their mortgages.
I guess there are a few things at the crux of this.
Having worked on mainly typical "line of business" type software and CMS type systems I've tended to find myself on projects where the number of voices has meant that everything tends towards mediocrity and anything approaching an innovative idea gets shot down immediately.
In other words it's difficult to produce something that you feel proud of and would be happy to show people as an example of your skill.
Also as very much a generalist (everything from server admin to dev to SEO) it's difficult to find an area where I would feel confident speaking as an "expert" on any particular subject.
Perhaps, I would be better off using the time to develop things of my own that people might find useful/interesting and would give me something that I could talk about?
This is a common worry in our field, even for people who are absolutely drop-dead world-class experts in things! You do not have to be absolutely drop-dead world-class expert in things to teach hugely valuable things to people, because the overwhelming majority of people are not experts at $FILL_IN_SUBJECT.
You do server admin? Hypothetical example: Have you ever administered a MySQL server? Have you written a backup strategy for one? Once? Jiggy2011, you know more than I do about a subject which very nearly cost me $$$$ and a heart attack last Thursday. Would I be listening to hear you talk about MySQL backup strategies? Heck yes. I burn with need for that right now. Are there other people who know it better than you? Yes. Do I know who they are? No. I know almost nothing about this field, which includes not knowing the straightforward paths to learning more about this field. You know this subject better than I do, maybe you could tell me who they are, but you can probably also tell me that they're busy building Facebook and since you aren't you're the one actually talking about this stuff.
Of course, one never feels like an expert, because part of being an expert is that one knows the names of some real experts, who are better than you. In this case, some real experts in MySQL backup work at Percona. Hire them. Alternatively, buy the O'Reilly book High Performance MySQL, which is partly the work of Percona's founders and has chapters about backups.
(If you are the foremost expert in a field, of course, you probably don't feel like an expert either, because you're at the frontier, where everything is confused and all the other experts are most lost than you. I don't understand this field! The references are irrelevant and confused and make no sense! I don't know how to make progress and I can't find anyone else who does! I must be really stupid!)
Ghetto solution is to find a service that will allow you to rsync files to them and take care of offsite backups etc themselves. Once you have done that it's a simple case of setting up mysqldump to create timestamped .sql files and setting that up on a cron job to rsync to the remote server via SSH (you need to generate a key pair and copy the public key to the other end).
If you are using characters from weird character sets you definitely want to make sure all of your unicode settings are correct which may take some trial and error and I've never entirely trusted mysql in this regard.
If you are paranoid you should have a separate job that automatically downloads and restores your backups after a period of time and runs a few test queries on the data. Of course the hard part is knowing what the results of these queries should be.
Of course the problem here is that this will chew up increasing amounts of your remote storage over time, so it depends if you can afford to delete backups of over a certain age.
You can also enable binary logging in mysqld and do incremental backups by writing the binary log to the remote host at certain intervals (I think this only works properly with InnoDB databases), though I have no practical experience doing this because frankly I've never needed to. Nightly dumps were always good enough so my boss wouldn't want me spending any more time on it.
That's the crux of the problem with working for a non tech company, most of the time once the solution is "ok" it's time to move onto something else so you never get a chance to really kick ass which is what you need to do to justify a high rate.
These are really commodity skills though, you could have figured all of this out yourself by reading a few blogs (that's basically all I did). Alternatively if you had posted "Mysql backup solution needed" on eLance you would have probably had at least 20 offers to do the whole thing for $20 or so.
Could have. Didn't. Was too busy building my businesses to care to do the research. Many people are like me. Would listening to Jiggy teach me about MySQL in a nice, packaged, Jiggy-does-the-work-so-I-don't-have to format provide value? Yes, clearly. You already quintupled what I know about the subject with an HN post, think of how entertaining talking for an hour would be.
These are really commodity skills though... do the whole thing for $20 or so.
You are no longer a commodity after you've successfully convinced me that you are the expert who can e.g. listen to my particularized needs and tell me a solution which will work for them. In fact, even if I were non-technical and stark-raving insane and thought that $20 was a reasonable price to pay for this, the fact of having read the above would convince me that eLancelot wouldn't have his uni-codes sorted on the cronSyncServer or whatever that was, so I should entrust the future of my business to the guy who seems to know what he's talking about who is quoting numbers closer to what I pay for e.g. insurance than what I pay for toilet paper.
http://www.youtube.com/watch?v=kO2R_DDZPCM
Well, Reverend Morrison, in your policy… [pause to remove wadded-up document from the inside pocket of an old tweed jacket] …in your policy it states quite clearly that no claim you make will be paid. You see, you unfortunately plumped for our "never-pay" policy, which if you never claim is very worthwhile!
(Incidentally, it's fun how well this sketch holds up today if you imagine that Michael Palin's character is playing the role of the Internet.)
Anyway, the point is that it's not buying the insurance that's hard: It's ensuring that you can collect when the emergency happens. The same is true for backups. When you try to restore the backup, and you can't find the guy who set it up in the first place, and the second guy you hire for $20 from eLance tells you that the first guy messed up the Unicorn settings or whatever, or that his script broke four months ago and nobody noticed, now you're screwed, and you don't even know which of your two $20 minions made the mistake.
How much will someone pay, as a monthly retainer, to avoid that nightmare? Well, how much is their data worth? How quickly will they want to restore it when disaster strikes, and do they already have a full-time employee with a pager who knows how to perform the restore?
My entire online presence is pretty much built on this - being knowledgeable about storytelling and the birth of the 3D gaming world at the same time led to me leaping in whole-heartedly at the inception of "Machinima", the technique of using 3D gaming technology to make films. There are a lot of people who are better at making films than I am - but very few of them were also competent at editing Quake levels.
But more trivially, there are dozens of times when you can cross over your skills to achieve results a specialist couldn't. Patrick has referred to one of his in the past - if you're knowledgeable about both advertising best practise and Web programming, you can create landing pages which are generated programatically to appeal to the inbound traffic from your PPC ads.
That's a nice bit of synergy which I believe has netted him a non-trivial amount of money in the past. If you're a programmer and an ad guy, it probably seems like an obvious thing to do - but if you're just one or the other, I can assure you it's not.
Look at two fields you know, preferably both valuable ones, and see if you can figure out things you can teach from your knowledge of both that most people wouldn't be able to.
(Another more trivial example: I've recently done some consulting work on PPC ads for a Pilates instructor friend of mine, considerably assisted by actually knowing a reasonable amount about Pilates. There are a lot of PPC ad people out there. There are a lot of people who know Pilates out there. The number of people in the intersection of the two sets, however, is small enough that I'm considering spinning the area out as a specialised consultancy.)
IIRC I mentioned a price of $5000, and the eyes nearly bugged out of one guy's head. Clear sticker shock. They wanted to spend about $500.
As the podcast is saying now, it was a very very good thing that I did not end up doing anything for them. People who want cheap are to be avoided.
To date I have yet to successfully get a contract gig, but I have succeeded tremendously in not getting bad clients, and that's something good.
1) Communicate a lot, before even thinking about bidding. Many project descriptions are extremely vague, but by asking questions, you can often get the detail you need to put in a sensible bid that will actually meet the client's needs. This has two side effects:
- it weeds out toxic clients. Those who have unrealistic expectations, or simply don't know what they want, will make that obvious during this phase.
- it sets you apart from other bidders. Many of them will simply read the (vague) project description and then put in a bid, without sending so much as a "hello". Whereas, by asking questions and seeking feedback, you've convinced the client that you're capable and focused on getting them the product they want.
2) When you're just starting out and therefore have no ratings/history, it's hard to win a big project. Consider offering to do a small sub-project with quick turnaround, as a proof of ability. My wife's first client had a fairly large project; she offered to do a small bugfix with a quick turnaround for $50, which allowed her to win the larger contract with minimal risk to either her or the client. Once she had one large contract under her belt, other contracts came much more easily, including lots of repeat business.
3) Look for other things you can do to minimize perceived risk. If the site has built in certification tests, take them. If you have your own profile pieces, post them. This both sets you apart from the $7/hour firms, and puts you at least not too far behind the slick looking portfolio guys.
4) Pick up skills to fill in your biggest weaknesses (for example, learn rudimentary design if you haven't yet), and pick up skills to compete with others' big weaknesses (how many freelancers know how to write an in-app billing module on Android? My wife gets a ton of work because she knows how to do that, and seemingly nobody else does.)
...
There are definitely people out there with money to spend, who are willing to spend it on you if you can convince them you're the best option. This is the approach that worked for us, though I realize it's unpopular among part of the HN crowd.
A word of caution: this strategy has paid the bills, but we live a fairly low-key lifestyle. We're still one rate hike behind the previous BigCo salary.
too.... do what?
My top tip would be to stop talking about building web sites or mobile apps.
Instead talk about what those web sites and mobile apps are doing for the businesses you built them for.
When you have that mom and pop operation who are stressed out about meeting their mortgage payments you need to sell them something that will reduce their stress.
You're 100% correct they're not looking to "drop a chunk of change on any kind of bespoke software".
They might be looking for something that's going to regularly remind their existing customers of the great service they had last time, with almost no effort on their part, bringing old customers back into the store so they can focus on new sales. How much did that run of paper leaflets cost them to print and deliver? How many of them do they do a year? How much time and money would they save by trying an electronic newsletter / customer reminder service?
People don't want software. They want solutions to their problems. Sell those.
(This does involve doing lots of "talking to and understanding customers". This is not writing software. However - if you want to have a business writing software you, or somebody else, needs to do it.)
The issue really is that you can't charge high rates to these people simply because they probably don't have that kind of money sitting in the bank.
In reality most of the gains you could give to these people by improving their online marketing through various means are going to provide more benefits in the long term than the short term.
That's a difficult sell to businesses that are worried about short term survival.
You may be surprised if you dig a bit.
One of the problems with selling software solutions is that so many companies don't understand that they need software solutions - because they don't understand what software can do.
To pick some examples from when I was dealing with that sort of client I've seen folk: * spending days every week manually copy/pasting email addresses into spreadsheets * manually adding name/address info to a 1k+ paper mail out campaigns * spending a monthly four digit amount to a print shop to do layout work that a basic template in Pages/Word could do.
... and none of those people understood that the addition of a piece of software - even an off the shelf piece of kit that just needs configuring - could take that pain away. It could save them hundreds, sometime thousands, of dollars a week - every week.
That's a difficult sell to businesses that are worried about short term survival.
Those clients really understand the value of their time. The tedious stuff that you can automate away is usually the stuff that is stopping them doing what they want to do. If you can show them ways for them to stop wasting time on things they are not making them money, and back that up with case studies / references, they will happily find ways to pay you.
But you have to show them the value first.
Back in 1999 when I started my first business my idea of sales was something like "I do X. I need to get really good at X. I need to find people who want X. Ideally rich people who can afford to pay more for X". Much like you this ended up with me wandering around various places going "Hi - I do X".
Having gone through.... some learning experiences... since then - and having seen some excellent sales folk do their thang I finally figured out that this is totally arse-backwards way of going about finding work.
You start by looking for people who have problems that you can solve. Ideally big problems that cost them lots of money/pain. Then you figure out how to get yourself to the same place as the people with that problem. Then you then sell them their life without that problem (and incidentally that you do X that can make that problem go away).
You don't network to let folk know that you're a developer looking for work. You network to understand other peoples problems, and to help them understand that they're solvable.
The number one thing you have to understand is that your first few clients will be hard to get. There's no way around this. The good news is that once you start to have a history of successful projects, more and more people will start to come to you. This will happen, trust me.
Secondly, unless you're patio11, don't expect to be immune from the normal sales cycle. As engineers, we understand code and servers but not always business side of things. Business moves at its own pace: some companies move extremely quickly, some slower. The key is to manage your pipeline by continuously talking to potential clients and following up with them regularly and often. These companies have their own budgets and timelines to worry about.
"1/3 of projects you bid on you will never get, 1/3 you may get, and 1/3 you will always get." This is a saying that has kept me motivated through rough patches. The important thing is not to get discouraged and quit.
You will talk to a ton of people in your work. Don't be discouraged if you talk to 10 people and only 1 shows interest in potentially hiring you. You want to find the right clients, not land every client.
Don't work without a contract or MSA and SOW. This looks amateurish and can throw some potential clients off. Clients that don't want to hire you because of this are clients you really don't want.
Speaking of the above statement, never estimate "off the cuff". Always take the time to provide a thorough estimate with plenty of examples of what the client can expect. This reduces the amount of "sticker shock" a client can experience when you quote something off the top of your head. This is true in both email and phone/in-person conversations. I always redirect the conversation to what I can do for the company, rather than what I think something would cost if a client asks:
Client: '...so, how much do you think that'll cost?'
Me: 'Well, the Foobaz piece is a pretty good chunk of functionality and having that work fast and reliably is really important to keep your XYZ going. I'll also have to do some research on ABC so that we're both clear on exactly how this can help you out. Did you have any ideas on that?'
Finally, actionable advice: get out there and hustle. Pick an industry that regularly hires freelancers/consultants (creative agencies are huge in this space) and contact them directly. Email is usually fine, just make sure that you're brief, don't sound like you're mass emailing, and never ever email a bunch of people the same messages (ie send out individual emails). I use a combination of Rapportive (helps me guess email addresses for important individuals at a company) and Boomerang (lets me schedule outgoing messages).
Never ever email info@company.com or use their 'contact us' email form, always try to find a decision maker at the company to contact. LinkedIn is great for this.
Remember that you're not begging for work. You offer solutions to business problems and you're reaching to see if you can form a business relationship with them. Present what you do and how you can help what they're dealing with -right now-.
A huge amount of people who want what you have to offer aren't actively looking for "X Developers". I'm working on a $200/hr, 6 month contract now for a client that wasn't even looking for custom software.
I'm really against the marketplace / elance / odesk model. Go into the world, talk to business owners, discover their problems, and then see if there's any overlap between your abilities to solve their problems and their pains.
Check out the bottom of this post (http://planscope.io/blog/my-most-effective-newsletter-to-dat...) for a real life conversation I had at a networking mixer that landed me the contract I described above.
One trick that worked for me.
I created a description of my ideal client. In fact I created a few descriptions of different ideal clients.
(If you've a UX background - I basically researched and created personas for my clients http://en.wikipedia.org/wiki/Persona_(marketing) )
I then figured out where those clients hung out.
Then I hung out there and listened to their problems.
(For example - there are reasons I am now very happy to spend multiple thousands of pounds attending some conferences - outside of the personal development stuff I get from attending :-)
My original plan was to sell ads at rock bottom prices - thinking that because they were inexpensive, they would sell out quickly. What I found was that the advertisements didn't sell out, and I was making rock bottom wages. I recently upped the price by 10x and have already sold an advertisement at the price, effectively making in 1 sale what would have previously taken 10 sales.
I have also thought that advertisements at such low prices signaled low quality to potential advertisers, making them less inclined to purchase from me.
"If you got into this business to make peoples’ lives better, and you have produced something which will succeed with that, and you are aware of truth about reality such as “better marketed products beat better engineered products every single bloody time”, then you have an obligation to get better at marketing yourself."
By the way, thanks for this podcast, Patrick, I'm about to listen to both parts.
As a Canadian, much of the investment advice was irrelevant to me. But I switched to ING direct as a result, which simplified my banking (big time saver) and eliminated a lot of fees.
He also has very good scripts for dealing with customer service reps. Various other small tips have been useful, such as better tracking of recurring expenses.
Conservatively, I've probably saved at least $1,000 since reading that book two years ago.
This (novella-sized) article definitely resonated with me, will try applying some of their advice soon...
And for cheap consumer software, it's just that you need to be really big to win money being cheap. You can't do it as a one man company.