In the past two years of my life I’ve learned a lot about getting paid. It’s completely changed my perspective on marketing and sales, both in a freelance and corporate capacity.
The first time I sold a website my fee was $10 / hour. I remember it well, despite it being over fifteen years ago. The client was a local corn farmer and reseller. I built a very simple site in less than five hours, but that didn’t satisfy.
At first, it just wasn’t enough. It wasn’t exactly what he wanted. One little change here, another little change there. Then the big question came.
“How much to get an editable photo gallery with a slideshow and comments?”
I quoted him 20 hours @ $10 / hour. A mere $200 for what was, at the time, a relatively complex job. He refused, saying he knew someone else who could do it cheaper. I got paid for my first five hours and no more.
Two months ago when I was doing my last contract job (I’ve been working on Carburetor full time recently), I quoted $220 for 2 hours of work customizing a client’s Magento plugin. The reply?
“No problem. Can you get it done by next week?”
The work took me closer to four hours, if you include communication and setup time. That didn’t matter. I thought it might take longer. My 2 hour estimate was used to bump up the hourly rate without raising the price. Why would I do that?
People tend to treat me better with high rate, low hour estimates. Perhaps it gives the impression that I’m much better at my job, but it’s actually my marketing skills have which have improved. I think there’s another reason, too.
I’m no longer concerned with charging for every fifteen minutes of ancillary time spent on calls or emails. This pays off for both client and freelancer. The very act of recording such small intervals of time adds overhead. When I was charging the bare minimum per hour I couldn’t afford to give away “free time” like that. Now it’s easier to include as part of the main estimate.
Here’s the most interesting part I’ve discovered so far: When you are cheap, clients will argue with you about the price. When you are expensive, clients will argue with you about the features.
Trying to compete on price will only send you in one direction: Down. That’s a depressing direction to go. So depressing it actually made me quit professional programming during university to take up technical writing instead.
Our CRM voltageCRM has never felt the pressure of a thousand registered users. I don’t think we’ve passed 100 users logged in at a time. Most start-ups would fall down laughing at our pitiful “traction”. Yet I’ll let you in on a little secret: voltageCRM has been profitable since day one.
Ok, that doesn’t count our time at even minimum wage near the start. We have always had enough to cover company expenses, contribute to our personal expenses, and still bank a little for a rainy day. It was enough, combined with a little outside work, to keep us going until we found some real traction with our lead generation service (Carburetor).
Surely that was just luck, though, right? Everyone would be profitable from the start if they could.
Luck is great, and we take it where we can get it, but this profit was due to the careful planning of my partner Collin. He first found a client willing to pay for a custom CRM, then found open source software (Fat Free CRM) close enough to act as a “MVP”.
We started by customizing Fat Free CRM to meet their requirements. The next step was to recreate everything from scratch, aka “version 2.0” of our software. All the while, we were charging $50 per user per month to run modified open source software.
Customers care neither how the system works nor how much work it took you. It works. It fits their requirements. It is within their budget. That is enough. As a programmer, this lesson was shocking. I used to associate value directly with the technical challenge involved. Sorry younger me, but that point of view is wrong.
When we set out to build Carburetor, the first step was similar. Collin found five prospective customers willing to put down $500 each on a trial of the new service. He ran that trial manually while I worked on our CRM software. The trial was a success. We’ve continued down that road. So?
Carburetor has been profitable since day one. Even if the trial had been a failure we could have walked away slightly better off than we’d been before.
How does this help you? It won’t, unless you take action! Do you want to build something? Find your target customers. Hear their complaints. Find out what they want. Tell them how you’ll accomplish what they need. Then, ask for a cheque.
At my last “start-up”, I built CMS software based on what I thought small web design shops needed. I didn’t partner up with a business/sales guy because who wants to give away half their company, right? Besides, there was no business work to do yet. I wasn’t done the software, so we had nothing to sell.
If you found yourself nodding along at all to that last paragraph, find a cold glass of water and toss it in your face. Good. Now, rethink that situation. The reality is that there was no development work to do because I didn’t have any customers. That’s right, I said it. My precious work had no intrinsic value.
Our salesman CEO has been worth his weight in gold. I’m not a solo founder anymore. I no longer own 100% of nothing. Instead, I own a split share of something very significant. My own personal value is increased simply by learning to market and sell properly. I don’t think it’s a stretch to say that finding a non-technical partner was the best business decision I’ve ever made.
This has been a long post, but let me try for a quick summary: Get paid up front and don’t be afraid to charge a reasonable amount. If you can do that your chances of success are greatly increased. Plus, if you fail the landing is cushioned.