Freelance Reform

Unfortunately, we work in a business that is powered by the greed of investors and entrepreneurs to succeed at any cost. While skills are what you need to get ahead in the world, a small percentage choose success by any means, even if it entails forcing you to work for nominal pay. It is a sad situation, and something we have to consider when working with customers that we have never met before. Prior to communicating our principles and our open and fair business policies online, we had a series of customer that would dangle paychecks in front of us to get us to do more of the work for nothing. It was demeaning and unprofessional. The sad fact is this remains the status quo for freelance web designers. In a buyer’s market, they decide when you get paid, and how much. I believe this attitude held by a small percentage of customers created an industry-wide price hike to compensate for customers running out on the bill, or wasting the designer’s time. The freelancer was forced to opt for large, painfully expensive deposits to offset the costs of the customers bailing, or the relationship suddenly ending.

When Robert and I started New Leaders, we knew in our souls there was a better, fairer, more practical way business could be done; a zero speculation process. Web designers were just fabricating prices based on hours they had never accounted for, and sending vague invoices equaling tens of thousands of dollars for services rendered. I recommended some really good San Francisco firms to my customers, and this is how the best of the industry behaves. Customers were tired of getting mediocre, overly-presented ideas that were unbelievably expensive. To add insult to injury, the customer not only paid through the nose, but then had to do a lot of the project management. As for results – good luck. In an industry that is supposed to make things easy, accountable, and practical, this was the shittiest business strategy ever. No wonder a majority of projects fell apart, and most customers became skeptical of web designers. I, too, was at this point.

That is when we realized there was one old school metric that everyone based their prices on, but no one seemed to track. It was time. Time that was accurately accounted for would easily indicate the cost of performing a service. I am not talking about saying a project took longer than it did to increase the price, I am talking about accurately tracking time and billing the customer for it. The value would then be in the hourly wage, not the perceived work, unlike most people would charge for. Everything in our business became painfully obvious and clear when we simply based it on accurate time. Estimates were more accurate. Customers didn’t argue the costs because they are inline with their expectations. The designers and developers felt they were paid to complete the job, and the company makes a little money.

When we did the math, it was simple. When we accurately account for time and the customer paid for only the time they used, we were able to create a sustainable business model. Customers could come back at anytime, request a few hours, and pay their bill online a few days later. It is simple, clean, honest, and most of all: works. The math works because when you charge customer inaccurately, it creates fraudulent data in your accounting. You can’t get a truly clear indication of the cost of paying people to complete the work, and how much the customer is paying for it. Estimates, timelines, and project plans become fiction; a disconnection from reality. By not accounting for time, you have no idea of your available inventory to sell or how much you have already sold. One hand does not talk to the other, all projects begin to slip, and the business slowly glides into chaos.

Imagine if Google didn’t track how many people click their sponsor links, or Apple had no idea of how many iPods they could sell. Something tells me they wouldn’t be very successful in their endeavors. Designers and developers need to consider each hour of their time as a physical product with a tangible value. By completely ignoring this idea, I have seen people working for as little as $1 per hour on a fixed price project, or even losing money in completing a venture to satisfy the customer. Losing money on something you were hired to do – the thought of it makes me ill.

Since your time is essentially free, the worse case scenario is that you break even. This means you got paid for your time, it took more than required, and there wasn’t a huge profit margin. That is okay. Some products go on sale to recoup their production costs; it is common in retailing. You have to look at that extra time that you may not be able to charge for as the discount on your services in order to accomplish the goal.

You should never take fixed price projects based on a deliverable or milestone. You can be absolutely sure that you will end up working for nothing as the customer continually moves the project goalposts, or ends up paying late. They aren’t bad people, it is just in their best interest to get the most work for the least possible, because those are the rules of the game to which you agreed. From their perspective, you are trying to do the exact opposite; a zero sum outcome, for you to win they have to lose, and vice a versa. You have to change the rules to reward customers for getting the project completed as quickly and cost effectively as possible. This won’t make for the juiciest windfalls, but it does create loyal customers that will continually come back to you and recommend more people to you. That will help your business grow, and you will continue to launch one successful project after another. It is fair, accurate, and honest, which is why we think it is the only way to succeed in this business. No monthly retainers, subscriptions, or massive deposits. Just good old hard work, by a talented person, paid at an hourly cost frequently they feel good about. It’s not fancy, but it works.

This work is licensed through Creative Commons.

Posted on Jan 10, 2009 by Kevin Milden

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