The Freelancer's Guide to Recurring Revenue
planscope.io
planscope.io
There I said it.
I've got a hundred ideas of things I could do, and I know how to create every one of them - but no idea how to validate the market or go about finding custom.
It's also a good way to guage interest and road test the content.
How do I do that? Sorry if I sound pretty simple but having never done it before there's a barrier to break. I didn't use the word "terrified" lightly. Where are these groups of people that aren't just friends and family, that I can present products to?
I've always been amazed at how poor companies are at simple timesheet tracking. For example, the company I'm at now is a s/w dev company and we are still expected to fill in bloody Excel forms for managing time spent on specific projects/customers. We also have to fill in holiday forms in Excel, with the result that people (including my manager) never know when I'm on holiday until they are surprised by the Out of Office email reply.
So - a simple time tracking system, then. I would probably make a SaaS version online, and one which you could purchase and install locally yourself (or pay me to come and set up for you). And we can assume that it's going to be the awesome of awesomeness.
I'd probably write enough of it to make a minimally viable product that looks juicy and could take to customers. How would I go about finding these potential customers? Do I have to go door to door in my local area? Google Ad-words?
On the other hand, the market is very large and there's lots of room for different companies.
I haven't seen a variation so far that doesn't annoy me.
patio11 has more insight and practical advice on this sort of stuff than I can offer. A recent comment of his, for example: https://news.ycombinator.com/item?id=5657402 .. although I imagine jumping in head first to creating a local event is probably not what you want to do (yet).
Set some basic goals for yourself like meet a new person each week. Get some cards.
If you're really starting from zero in terms of networking, go to a meetup and start talking to people, then aim to spend a year practising networking. You'll find out what constitutes quality in terms of networking soon enough.
Also check out Ruben Gamez's course on mixergy.com/premium called "networking for introverts", and his interview is good too.
In fact, just go watch mixergy :)
If you'd like to have a longer discussion about networking feel free to email me iain@workingsoftware.com.au
I used to think networking was for losers, but done right it's surprisingly non-spammy, fulfilling and lucrative!
I did one in London and they made me get out on the street, stop people and talk to them.
Uncomfortable? yes. Eye opening? yes.
In 3 days we made an mvp, got out and sold product. Literally the MVP was some html page on some vps. Sales were meeting people in person for cash!
1. Cut a hole in a box.
1. Go to Central Park on a summer afternoon.
2. Ask 100 random strangers out on a date. No fancy approaches or bullshit
pick-up lines. Just start a conversation, and ask before a minute's
up. Oh, don't ask for a phone number (you might get a fake, or
non-returned calls, and that's worse than a flat-out rejection).
Ask for an actual date.
3. Your median outcome will be zero; some people get lucky
and get 1 or 2, but don't count on it ...
4. ... but you've now been rejected 98-100 times and you're still alive.
Maybe if it's a rare occurrence, but I think it would get irritating before long if a lot of people took the advice of asking out random strangers.
It also imposes an externality on any other potential ask-outers, in that it makes them less likely to be taken seriously.
When you pick an obscure tactic, the whole point is to trade on the fact that others aren't doing so. If by chance that particular tactic does get popular, you simply pivot and pick another obscure tactic, or move to a field where there are fewer players.
Every time your boss annoys you with a "How's it going?" status ping you are forced to sell yourself. Granted, there isn't immediate income on the line, but the status fluctuations have ultimate income-altering effects, sometimes with severe nonlinearity (i.e. your slight annoyance at a not-enough-to-do boss's fourth-in-a-day status ping ends up rippling into you getting fired).
That's not to say that consulting isn't harder, because it is. There's an established (if hilariously corrupt and inefficient) market for full-time employment. The consulting market is a broken word-of-mouth mess. And you constantly have to fend off the parasitic type of client that wants more leverage over you than he should, by rights, have. (That is, he wants to pay you on an as-needed basis, but have the reputation-impaling power of a boss.) That sucks, for sure, and it's one of the reason why medieval-style reputation economies deserve to die.
The fact is, though, that you're already constantly selling yourself as a corporate employee. If you have 27 good months and fall down in the 28th, you'll probably be fired, or at least harassed in some permanent way ("performance improvement plan") that makes it useless for you to keep coming into work; your career there is over. In that context, you're already a freelancer, even if an employee.
Sure, freelancing is terrifying but I've seen enough to look past the selling points of employment and realize that it's a form of freelancing that is (a) less selective and therefore easier to get, but (b) designed to pay you just enough to survive, so you can't save for lean times, in the way that a genuine freelancer does (and must).
https://adwords.google.com/o/KeywordTool
2) Build the product. Make a sales page. Offer a 30 day trial on all accounts.
3) If someone signs up, you have 30 days to figure out billing.
Couple of points:
- No, this is not a great method. Getting out of your house and talking to real people is always better.
- Any effort is better than nothing. And unless you have a product in the wild which someone could sign up for, you are doing nothing.
- If you have time to comment on HN, you have time to build an MVP
Also checkout Gumroad.com. Its about the easiest way possible to bill people. Once you've sold a few units, then you can worry about finding a better deal.
Do it!
One is that you are, like a lot of people, modestly averse to doing something novel that seems hard. (E.g., "I could never run a 5k." Actually you could; you just don't know how to get there from where you are.) That's a solvable problem. The main trick is to get started; oonlynce you are doing research on customers, the hacker part of your brain will have data and something to start optimizing, so you'll be fine.
If that's you, try something like Lean Startup Machine. I volunteer as a mentor for it, and the team context and short timelines force you to get out there and start bothering random strangers. Who it turns out are not bothered at all, and are happy to talk. Once you get good at it, it's even fun. From there, read a few of the Lean Startup books; they're full of techniques.
The other thing you could mean is that you are literally terrified of dealing with potential customers. That is also not unusual. Programmers skew shy. The main reason I spent most of my teenage years learning to code was that I was awkward and people were scary.
If that bothers you, go see somebody about it. Call up a few therapists and have a meeting with the ones you like. If you find somebody solid, dig into the social anxiety. I know it goes against the hacker ethos to spend 20 hours dealing with a professional when you could spend 200 or 2000 hours trying to solve the problem yourself. But in this case, I think it's worth trying to get quickly to the think you really want to do, which is make and sell some things that people are excited to buy.
Here's my experience: http://blog.leanstartupcircle.com/want-to-do-customer-discov...
Interesting sidenote: I don't think I would have thought to write this had it not been for an amazing chat over lunch with patio11 and a few others at MicroConf last week. So, thanks guys!
I've bought your last couple of book and got a lot of value out of them. One question:
Why the focus on selling to individuals (with the books etc). How to you feel about B2B and building products targetted at a small business niche - worth persuing? pros, cons etc?
For backgroung: I currently work in finance in London as a programmer, I'm competent in back to front webdev and I'm earning more than enough on my day rate to pay a good offshore developer. What would you do in my situation to begin to build a recurring income?
While a freelancer/consultant is theoretically one person, they're wearing their business owner hat when buying my products. This is why they'll pay a fair amount of money to get more clients, raise their rates, etc., but will later scoff at paying $0.99 for a game on the App Store.
I would ONLY ever sell to businesses. And I think targeting bigger businesses (> 1 person consulting shops) is a great move to make. They'll churn less (if you charge a subscription), and they'll potentially throw down thousands of dollars a month if it helps them eliminate a position or nudge up their profitability by a point or two.
Regarding your particular solution... You could start with what I'm advocating in my article: Why do people hire you today? I imagine it has something to do with programming + finance. What's the smallest, sellable product you could produce and sell at scale to the sort of people who are cutting your paycheck? Or to others who want to work as a developer in finance?
Your employer (reasonably) has an expectation that you will give them 100% during at least 9-5 hours and also be available for overtime periods on occasion.
If you are building a product or doing consulting on the side for something with real customers (especially if they are businesses) they also probably have a reasonable expectation of being able to reach you within business hours to resolve any serious problems.
You may be able to find customers who are happy with limited evenings and weekends only support, but these are probably only going to have a small intersection with "serious" customers who are happy to drop enough cash on your product/service to make it a viable full time thing one day.
What is the best way to balance this?
A lot of consultants could go beyond just selling their time and consider selling training workshops, short ebooks or video series, retainer packages (one of my student's offers a CEO-ready monthly report to his clients, which shows the effect of his monthly tweaks on their bottom line), and so on.
Not all of these scale — you can't have 1,000 retainer packages or 1,000 students in your live workshop. But doing these things (think: pricing, not billing) helps condition you to be better at sales & marketing and coming up with a value proposition... experience that will really pay off once you decide to build that SaaS :-)
If you're consulting you can set expectations on how much time you give to clients daily.
If I give clients a focused (no HN, twitter, coffee breaks etc, pure heads-down work) five hours of effort then they will likely be happy with the results. This gives me time to work on product, do chores, play with the baby and do whatever else is important to me.
This is obviously not feasible if you're a full time employee, where the usual expectation is that you're there in person whether you're productive or not.
I was thinking more in terms of "My server died and my business is burning because of something I could fix in 10 minutes with SSH" or "my main client had their server hacked by a 0 day RoR vulnerability" and I'm stuck here filling in TPS reports until 5.
I suppose some level of monitoring and a deposit + SLA left with someone you trust to resolve first line issues could go a long way.
* I'll be available to apply any security patches as they become available without the need to draft a Statement of Work.
* I'll make sure backups are happening as they should.
* [If your project is public facing] I'll run your split tests and continuously optimize based on the data we collect over time. I'll send you a PDF report at the end of each month that details where you were the month before, what's changed, and what the impact (uniques, engagement, financial, etc.) was to your business.
* ...
Now you're looking at a product that your non-active clients can subscribe to that delivers insurance (hosting, backup monitoring, smart-guy-with-root-access) and continuous refinement.
Throw a $XXX/$X,XXX price tag on it, set up automatic invoicing, and you now have recurring revenue.
A product has its own quirks, or so was my experience. You'll need to supports users, update the software/product, fix bugs, keep up with analytics, do marketing and SEO stuff, answer pre-sale questions...
I'm talking here about a product that makes around $2,500/month in sales. It's not enough to hire people and delegate stuff, so you'll have to handle it yourself.
A nice spot is when you can hire a software developer, an assistant (for answering emails), and a marketing package (from a SEO company or similar).
Costs:
- Running the business: $500/month (for the server, legal and other costs)
- Software developer: $5,000/month (outsourced, not the brightest but does the job)
- Assistant: $2,000/month (also outsourced)
- Marketing package: $1,000/month (I'd say it covers many things)
Total: $8,500/month -> $102,000/year
If you are aiming at making $100,000/year from this product (nice lifestyle), and considering an average of 20% in taxes, you'll need to make $240,000/year in sales.
If chargebacks represents 5% of total sales, then it's around $240,000/year before chargebacks.
It means on average, you make $650/day from sales. Now, this is possible, but probably something that will take many years of hard work to achieve.
This is HN after all, so I feel I should be more circumspect, but that group is one of the major reasons I am still pushing forward, and I get to be the old curmudgeon every so often so its even more fun.
Talented people sell call options on their time, on a freelance basis. The strike is the minimum value they'd accept to take a job over the next N years, and the option price (set by market, but with seller's right to set a floor) is the value of that call.
There has got to be some risk-neutral/wealthy person out there who'd buy the right to deploy a great programmer's time (possibly worth $500+/hour) for $150 per hour, any time in the next 5 years, up to K hours (the lot size).
This is, for a number of moral, emotional, and financial reasons, a lot better than the "N% of future income" gimmick that some people do to raise money for college. It could actually scale, which income-sharing won't (for a variety of reasons, related mostly to fungibility).
It also gives consultants a way to raise money (for living expenses) immediately while the allocation of their talent is outsourced to third-parties who buy these options and then deploy their time.
1. Minimum and maximum hours per week that can be called-in. A person who intends on working full-time might set 0-12. (People can work over the maximum; there just isn't an expectation of top priority.) A person who intends on being a full-time consultant might set 20-50.
2. Industries for which a person refuses to work.
3. Willingness and ability to travel.
4. How many of these contracts are outstanding. If someone wrote 5000 hours of options over the next year, that's patently ridiculous. There's no good definition of "too much", but buyers have the right to know.
5. Whether the person is working full time, and intends to continue doing so.
6. Priority resolution, as you mentioned.Further, how responsive does the freelancer have to be to their client? Do they have to drop everything at a moment's notice or risk liability for the investment?
You have a novel idea, but it is checkered with question marks.
Right. So if your time is worth $75/hour now (you douched it up a couple days ago with that "narcissistic shit" comment, so I'm pricing you conservatively) then your 5-year $75-struck option is worth at least $75 (higher, actually, due to volatility) and you'd get to collect that now.
You take the option premium, invest it in yourself now, and if you're called in, you get additional pay (the strike price of the option) for the work.
I also find "set by the market, with the seller's right to set a floor" extremely dubious. What market dictates this?
Well, that's the hard part. The reason we find "X-percent-of-future-income" deals to be tasteless and gimmicky is that there's still a stigma against publicly looking for work. It either means, to a lot of people, that you're either desperate, or sociopathic and looking for the highest bidder. That's why work and consulting especially often comes down to these medieval-era reputation economies.
Building the market would be a non-trivial undertaking, but it would improve the freelancer's life (income stability) substantially.
Further, how responsive does the freelancer have to be to their client? Do they have to drop everything at a moment's notice or risk liability for the investment?
I would say that the contract should specify a minimum and maximum hours per week, and that the initial price is repaid if the person can't meet that commitment.
This means that 5-year-window options might not be practical, because you're right that there's the priority problem. What if someone sells 2500 hours of time with a 5-year window and it's all called in in the last 4 months? I won't claim that these things are easy to structure, because they're not, but it can be done.
(you douched it up a couple days ago with that "narcissistic
shit" comment so I'm pricing you conservatively)
1. There would still have to be some right to back out (with payment of the original option premium, for sure, and penalties for people who do that often, like being blocked from the market, and being sued for breach if they did it in bad faith.)
2. People would be expected to disclose what kind of work they would and would not do. Obviously, nothing illegal can go down; but normal tech work (building websites) is, I think, fine for most people.
3. Indentured servitude is different because a servant's obligations are 24/7. This is a contract over a certain, limited amount of time. The only difference between it and a regular consulting contract is the transferability among buyers (or future buyers who'd exercise the option).
Regarding the moral hazard / ethics problem, I believe that if the market were well-structured, people would comply (i.e. work at the strike price, even if their market rates improved far beyond it) just to have continuing access to the market, and also for social networking purposes. You may have underpriced yourself 5 years ago at $100/hour when you're now worth $300, but you only obligated yourself for 200 hours and it might just be worth it to work at that rate. for a short amount of time and, possibly, get a client you can charge a higher rate in the future.
Ok, that changes things. I'm not quite sure why anyone would pay for the opportunity to offer someone a job, though.
I believe that if the market were well-structured, people would comply (i.e. work at the strike price, even if their market rates improved far beyond it) just to have continuing access to the market, and also for social networking purposes.
You're clearly far more optimistic than I am. :-)
Yes, people would have the right to refuse work, but if they abused it, they'd lose access to that market. As with any other contract, people who backed out would face penalties as agreed-upon (at the very minimum, repayment of what they earned in the original sale).
Pay me 500 bucks a month and I will keep one day aside just for you / scramble to find a day on the month you do actually call in the marker.
michaelochurch's approach is interesting - and reminiscent of a TED talk about auctioning piecemeal factory worker time which I cannot find right now, but both of these suffer one big, possibly insurmountable drawback - they are chicken and egg - when 30% of the workforce finds work this way, hooray! Everyone will trust it. Till then ... no-one
I care deeply who I work for, at least at the edges. My two worst experiences that nearly broke me were for business which I felt I was making a negative impact on society. That's not saying I won't work for a Fortune 500 -- I've done my fair share -- but I can't imagine giving up that kind of control.