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Every freelancer starts out undervaluing their work

kenwestgaard.com

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Re: Every freelancer starts out undervaluing their work

#61

Post by HeyLaughingBoy »

sanderjd wrote: post #48
mgkimsal wrote: post #42

Earlier quoted context omitted.

Arguably, you can invest some of your time in your own portfolio projects that demonstrate the particular skills and value you want to promote. It's not an exact science, and harder in some industries than others, but not impossible, and it's something that too many folks (me included) tend to gloss over or ignore. Keeping a relevant industry-related blog won't necessarily convince every single client, but it's one o…

Why is it better to do free work to build a portfolio of non-professional work, rather than building it by starting with lower-paying engagements?

It's not that it's better, but it can be done independently of anything else. i.e., the only thing stopping you from starting to build a "non-professional" portfolio this very minute is time availability.

But you need a history of engagements to build a client portfolio.

Re: Every freelancer starts out undervaluing their work

#62

Post by sanderjd »

imgabe wrote: post #56
sanderjd wrote: post #27

Earlier quoted context omitted.

This is why the word "underpriced" always seems wrong to me in this context. Your price at the beginning has to be lower because your profile is lower, which means you have a weaker negotiating position. "Underpriced" only becomes the right word if your rates aren't rising in conjunction with your profile, which does happen for sure, but isn't the case right at the beginning.

It has to be lower, but you don't know how much lower. It's probably not as much lower as you think. If they would have paid more, you didn't charge enough. Obviously it's hard to know that at the beginning.

Spot on. Perhaps best to try starting higher than you think and slowly lower until you start getting gigs.

Re: Every freelancer starts out undervaluing their work

#63

Post by leepowers »

lordnacho wrote: post #21

I don't get why people are so keen on the per-hour model. This puts a lot of pressure on you to be fully productive and count hours like a lawyer. It also makes you think you're losing money when you're not billing, and the customer likewise feels the time/money pressure. I've negotiated fixed-price deals where I'm quite certain I can get the job done in x number of weeks, based on having done something similar befor…

> I don't get why people are so keen on the per-hour model.

There's not going to be one correct answer to this question - per-hour rate or total project cost. And regardless of which one is best an hourly rate is still a useful productivity metric.

With the hourly model you're protected as a freelancer. Regardless of the number of revisions, if the project takes 10 hours or 100 hours, you will get paid. (Though if the hours required are going to increase 10-fold you'd better communicate that to the client.)

I have several clients who prefer the hourly rate model. Which is fine by me. It helps me hit my weekly/monthly/quarterly goals. Also, we both save on the administrative headaches of having to spec out, estimate and approve every single change. And as a freelancer anything that reduces my non-billable work is a big plus.

The downside for me: the client gains any increase in my productivity. If I increase my productivity per hour by 25% it takes me less time and I make less money. But the client still receives the same amount of value from my work, and pays less for it. And since most skilled workers become more skilled and more prolific over time this productivity transfer almost always occurs.

Fixed cost projects can be more lucrative since I pocket any productivity gains. Imagine I've secured a $2000 fixed-cost project. If I can knock it out in five hours, I've secured an effective rate of $400/hr. The downside, of course, is if my productivity lags - say I spend 100 hours on the project - then my effective rate plummets to $20/hr.

Every fixed-cost project should be measured hourly. Even a big-ticket project will suck if you work yourself into a minimum wage to complete it. I use the hourly metric to determine productivity. When this metric starts to drop during a fixed-cost project, that's when I reach out to the client to figure out a budget increase.

So - which one is better? Hourly or fixed-cost? Most of the time it doesn't really matter. If I'm working a fixed-cost project and my productivity metric falls, I ask for more money. If I'm working an hourly project and it's going to take more time implement revisions, I'll tell the client and get approval. Regardless of the project type if the scope changes you're going to need to ask for more money/hours.

BUT - if the project is in a domain I have deep knowledge in, and I can be relatively assured of a fixed scope (with only minor changes), I will go fixed-cost every time. I want to capture my productivity and maximize my profit from it.

Re: Every freelancer starts out undervaluing their work

#64

Post by joshvm »

jayshahtx wrote: post #5

> pass on the cheap, low-value projects. Hold out for the clients that have budgets and value your time. Every second you spend with clients that don’t have money and don’t value your time is another second you have wasted. I just finished my first 8 months of consulting work and while this is true, it is so difficult to actualize. When we had zero projects, I would take any meetings I could get. A part of me would h…

However, by pricing yourself high you opened the table to negotiation. Better that than enter low and they accept on the first try, in which case you know you've undersold yourself.

Re: Every freelancer starts out undervaluing their work

#65

Post by leepowers »

jayshahtx wrote: post #5

> pass on the cheap, low-value projects. Hold out for the clients that have budgets and value your time. Every second you spend with clients that don’t have money and don’t value your time is another second you have wasted. I just finished my first 8 months of consulting work and while this is true, it is so difficult to actualize. When we had zero projects, I would take any meetings I could get. A part of me would h…

Shopping malls have this thing called "anchor tenants" - usually a big-box retailer who pays for massive square footage, which in turn stabilizes the mall's cash flow.

Looking back, all freelancers should probably wait to start until they can secure an "anchor client". A company or individual with a solid business who can provide consistent cash flow to the freelancer. One anchor tenant won't pay for a whole shopping mall, and neither will one anchor client meet all the freelancer's needs and goals. But it definitely helps stabilize the situation, and empowers freelancers to be more selective about their other clientele.

Aside from that - having enough savings on hand to pay for 6-12 months of all expenses (business and personal) is also a necessity. Otherwise you'll start taking on poor clients (and I mean "poor" literally, as in they don't have additional budget to spend, even if they wanted to), which in turn will make you more desperate, taking increasingly shittier jobs. The freelancer death spiral is brutal but can be avoided with careful planning.

Re: Every freelancer starts out undervaluing their work

#66

Post by jmadsen »

There are so many tangents to go off on, but let me pick this one thing to comment on:

Read Justin Jackson's story about the Mayor vs. the Ad Agency

Whichever price model you chose, you must learn early which clients are just wasting your time. There are no hard and fast rules, often it's just a gut feeling, but here are the mistakes I used to make & how to try to avoid them:

1) People who want to discuss their site for an hour or more on skype are not proper businessmen.

Look for people who's time is money - they have some key questions for you, they don't just want to "chat" about their idea. People who just want to chat - get your hourly rate mentioned early. If you tell them "I charge X" and they still want to talk a bit, then go with your gut, but don't talk more than 15min. with anyone without giving some indication of the price.

2) Don't lower your price unless you are repeatedly being rejected at that price level BY THE TYPE OF CLIENT YOU WANT.

That second part is important - your price will screen out the little projects you aren't really after. Don't worry if it is doing that job. But others will reflexively ask for a better deal, and won't push back hard if you don't budge. $10/hr less at "full-time" costs you $20,000 year that you'll never earn back.

What always seemed to happen to me was, the moment I agreed to a lower rate, someone would come along who was willing to pay full rate, and now I'm massively stressed trying to do everything.

3) Ask to see any specs and/or designs early - offer to sign an NDA right up front

This is to let you see how prepared they are, how professional they are, and if the work is defined well enough to be able to offer a weekly rate. Weekly rates are great, but they can be a harder sell for certain types of work.

4) Weekly rates are NOT risky if you define the number of hours/amount of work you can reasonable expect in a week.

Project rates are dangerous. Weekly rates just mean, "Of course I can do that! You understand that will cost X, correct? Would you like to cut something else out, or just approve the overrun?"

Weekly rates DO mean you need to be professional - you are promising 40-50hrs of actual work. For that reason I often go hourly to keep my personal flexibility.

4) Don't run out an "prepare yourself" for the techs you'll need for this project before signing the contract.

This is for the younger folks starting out, mostly back-end developers. Create a career learning plan of technologies you want to improve at, and use down time to study those. Don't jump around to new languages/server tools/whatever that a potential client mentions & never get good at anything.

To a point that's ok, when you really ARE new and need to get familiar with what is out there & being used, but get away from that habit quickly. If it looks useful, schedule it in your Career learning plan & visit at the appropriate time.

I know there's plenty more, but I think those are solid enough that I feel comfortable offering them to people.

Good luck!

Re: Every freelancer starts out undervaluing their work

#67

Post by tertius »

sanderjd wrote: post #48
mgkimsal wrote: post #42

Earlier quoted context omitted.

Arguably, you can invest some of your time in your own portfolio projects that demonstrate the particular skills and value you want to promote. It's not an exact science, and harder in some industries than others, but not impossible, and it's something that too many folks (me included) tend to gloss over or ignore. Keeping a relevant industry-related blog won't necessarily convince every single client, but it's one o…

Why is it better to do free work to build a portfolio of non-professional work, rather than building it by starting with lower-paying engagements?

When you build your client base and you start off by charging a low price, any referral work you get (and it gets to be a large portion of your work as the base grows) will have a harder time with raised rates.

The underlying psychology shows us that we undervalue ourselves whereas other people tend not to since they view us as experts. They are generally willing to pay a lot more to have a solved problem than we would want to charge.

Start high and go higher until you meet resistance.

Re: Every freelancer starts out undervaluing their work

#68

Post by tertius »

sanderjd wrote: post #47
tertius wrote: post #28

Earlier quoted context omitted.

"Your price at the beginning has to be lower because your profile is lower" This is the sentiment that makes you justify charging too little.

So, to relate this back to the original article – all these people interviewed started with low prices at the beginning and built up their profile, raising their rates along the way. I look at that and think, well that's a good and clearly proven model, and it makes sense why it works that way. I don't look at it and think, well they should have started out with higher prices right from the start, since clearly they…

"I don't look at it and think, well they should have started out with higher prices right from the start, since clearly they were worth it all along!"

Emphasis on "too little" in my comment leading up to your reply.

And it's not about what they are worth it's about what the solution is worth to the person buying. Almost always more than the developer/worker thinks their time is worth.

Re: Every freelancer starts out undervaluing their work

#69

Post by manachar »

leepowers wrote: post #65
jayshahtx wrote: post #5

> pass on the cheap, low-value projects. Hold out for the clients that have budgets and value your time. Every second you spend with clients that don’t have money and don’t value your time is another second you have wasted. I just finished my first 8 months of consulting work and while this is true, it is so difficult to actualize. When we had zero projects, I would take any meetings I could get. A part of me would h…

Shopping malls have this thing called "anchor tenants" - usually a big-box retailer who pays for massive square footage, which in turn stabilizes the mall's cash flow. Looking back, all freelancers should probably wait to start until they can secure an "anchor client". A company or individual with a solid business who can provide consistent cash flow to the freelancer. One anchor tenant won't pay for a whole shopping…

It's not just freelancers, agencies need them too. Most agencies exist and die on a relatively small handful of anchor clients, if for no other reason than stable cash flow so they can make payroll.

By-the-way, these anchor clients usually aren't exciting or fun. In fact, they're usually creatively boring and predictable.

Re: Every freelancer starts out undervaluing their work

#70

Post by mgkimsal »

sanderjd wrote: post #48
mgkimsal wrote: post #42

Earlier quoted context omitted.

Arguably, you can invest some of your time in your own portfolio projects that demonstrate the particular skills and value you want to promote. It's not an exact science, and harder in some industries than others, but not impossible, and it's something that too many folks (me included) tend to gloss over or ignore. Keeping a relevant industry-related blog won't necessarily convince every single client, but it's one o…

Why is it better to do free work to build a portfolio of non-professional work, rather than building it by starting with lower-paying engagements?

HeyLaughingBoy nailed it, but there's another couple of points that got missed in the replies/discussion.

1. It's not "free work", it's just ... stuff you do. Maybe you release it out and other people benefit from it, maybe you just do it to demonstrate skills.

2. Per #1, you get to demonstrate whatever you want to learn. Do you want to learn how to use Twilio APIs? You could wait for a client engagement that might need Twilio, or you could try to force Twilio in to a client project where it's not needed, or you could... just play with Twilio, produce something demonstrable, and use that to show what you know about using Twilio. It's great when you can show your skills having real value to real past client projects, but absent that demonstration and experience, you'll be experimenting on your new clients to a degree. Learning on your own dime (and time) can also inspire a degree of confidence that you actually know XYZ before you're engaged to do XYZ.

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