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We’ll take your money, but…

I have used three marketing services so far, and I have lost all the $15,000 I’ve invested in those services.

Part of it it was my fault because I did not know what to ask for.

I would say I need help with marketing, and they would say: “sure, we’ll take your money, but there are no guarantees this will work!” And sure enough, it didn’t work.

This offering is such a common practice that we have accepted it as the cost of doing business. 

However, I have discovered this proposition from a marketing agency:

“You will only pay for the ad costs and 10% from each sale you make from our leads. If you don’t make any sales in the first 30 days, we will refund you all the ad spent.”

Crazy right?! Who would refuse such an offer? There is zero risk to you, and you can only make money from this investment.

So why do most agencies shy away from making such a bold offer? The answer is simple: they are not that good. Therefore they will put all the risk on your shoulders. If it works, great! If not, they still get paid. 

I love performance-based compensation. It immediately separates those who know what they are doing from the pretenders. It aligns all the incentives: all the parties win, not just the agency. 

If you read this and think “it can’t be done”, it might serve you better to change your thoughts to “I don’t know how to do this.” At least this new attitude opens the way to learning new skills. And if your crack this nut, you’ve hit the jackpot! 

Honest Marketing

Marketing is the science of tricking people into buying your products. 

The above is the marketing definition that I have used for a very long time. 

I would like to believe that I am an honest person, and I do not trick people into anything, so I stayed away from learning or using marketing. 

My customers, peers, and connections would appreciate and like my products simply because they are so good and relevant. Or so I thought.

Reality Check 

Even though I do excellent work and have good ideas, I have never made the impact that I imagined I could. I wondered why for a long time. For sure, people would appreciate that I am not a sleazy marketer. 

The data does not support my theory at all. 

I looked around at what others were doing, and the only difference I could see was “better marketing.” I did not know what that meant, so I set the intention to “master marketing” and use it in a way that is in line with my values. 

Shortly after stating this intent, I stumbled into people like Chris Do, Blair Enns, Jonathan Stark, and Seth Godin. And the way they talk about marketing blew my mind. 

Here is a different definition of marketing from Seth Godin:

Marketing is a way to create change.

This statement immediately shifts your focus from “getting more money” to what kind of change you want to create and for whom. And what is the best way to make that change?

You begin to think about effective ways to communicate with people and to build an audience. 

You think of ways in which your fans can contribute and support you on the journey to manifesting this change. 

You realize that the way you write copy, present your offer, and the kind of products you create can be a generous act if it results in an experience of transformation for those who choose to come on the journey with you. 

The tactics of marketing stay the same, but the intent and energy behind them are entirely different. 

Here is an example. 

You have created a workshop that allows people to transform and transcend their fears to live their lives with confidence and joy. 

How much should you charge for it? 

Let’s look at two scenarios:

1. You make it available for free, so it is accessible to everyone.

2. You charge $2,500 for each participant.

Which one is better? 

You might say that the free model is better because it has the most impact. After all, it has the highest reach, right? 

However, the data contradicts that. Human psychology is such that we value more things that are more expensive. Yes, more people will “get” the free workshop, but they will not be invested in it, so they will not be likely to do the hard work required to transform your fears. And information hoarded does not create any impact.

In the second scenario, maybe a few will buy, but they will work hard to get their money’s worth. The participants are very invested, and they will make sure they get the transformation they paid for. And in turn, you will get funding to further your creation of change. 

So which one is creating the bigger impact? Do you see how you are also helping the customers, not just yourself, by pricing your products correctly?

From this perspective, we can use marketing tools to create engagement, increase the likelihood of personal transformation, and not just be a ploy to make people part with their money only for your benefit. 

People pay for certainty

“Certainty” is another explanation of why people buy a solution instead of using the free one. 

In many cases, the paid solution comes with some guarantee. And that guarantee can be as simple as: 

“If you can’t figure it out, there is a human being here that will help.“

When you can guarantee an outcome, you can (and you should) charge a premium for that. 

There are lots of free meditation techniques you can find online. But anyone who has tried to silently observe their mind will know that it is not easy. 

If you have a methodology or a way to guide people that can guarantee it will make the process easy, you have a valuable service to offer for those who want to meditate. 

Certainty is also the promise of showing up. Of being there when I said I would. It is the power that consistency and persistence harness. 

For example, knowing that each Monday, a basket of fresh, chemically-free vegetables will wait for me at the door by 9 am is highly valuable to me. Knowing it will be there even if it’s raining, or even if it is a “holiday”, it is a kind of certainty that I value. 

How about making sure your project will succeed? 

Have you ever opened a website that is only half done? Have you ever heard of people starting to write a book and never finishing it? Have you ever started a project only to get stuck halfway? 

What if someone can guarantee that you will finish your project? That is why people hire consultants and coaches. They provide a level of certainty. They are the expert you can rely on or the cheerleader that is always in your corner. 

Paying for certainty is a way to lower your risk. And depending on how much risk your prospects can handle, certainty can be a very valuable proposition.

Fences and Websites

Building a fence and building a website

When you hire a team to build a fence around your property, what are your expectations around the process and the results? 

Do you expect to constantly monitor the work to make sure the lines are straight and that workers are not cutting any corners? Do you expect to provide the tools and replace them or do maintenance for those that get broken? Do you expect to manage each worker and tell them what to do, when they should do it and how? 

And for the end result, do you expect to have to do fixes after the work is finished and do lots of maintenance as time passes? 

On the flip side, do you expect to simply show them the property line and describe what the fence should do: keep out wild animals, large and small, and be sturdy enough to require very little maintenance in the future? 

Here is the thing: there is no correct answer to these questions. Different people have different expectations. Some love to get their hands dirty and get very involved in the process, while others need the results, and they would rather do something else while the fence is being built. The problems appear when these expectations are not discussed upfront and are assumed. 

We also need to consider risk and price

When you do get your hands dirty, provide all the tools, and give all the directions, you are taking on all the risk of making sure the result is a good fence. The people you hire just do as they are told and shoulder no risk. So the price they can command is not that great. You pay them less money, but give more of your own time. 

When you buy the results: a fence that meets the specifications, the construction team needs to shoulder all the risk. You don’t care how they do it, how many tools they break in the process, if they need to fire someone along the way, or if they use your fence to train a junior team member. This construction team can command a higher price, and you pay more with money but with much less of your own time. 

Both are valid options, but you need to make a conscious choice and get clarity: is the team who asks for a ton of money willing to take on all the risk? On the flip side, when the price is “too good to be true,” are you ready to pay with your time and with taking on the risk of failure because it turns out the price was way too low to allow for a good job? 

The same applies when building a website. When you want to do it as cheaply as possible, you need to understand that you are taking on the full risk of failure, full maintenance, and a big chunk of the building process. But if you want a hands-off approach where you’re just interested in the business results, expect to pay a premium price for that experience and peace of mind (aka insurance against risk.) 

A cautionary note about the premium price 

Pricing is a signal. And someone reading this may be tempted to think that all I have to do now is raise my prices to a premium level to bring in the clients who want the “hands-off experience.” That is exactly what you should do IF you can deliver! And the price needs to be a lot higher to account for all of your mistakes and all of the things that will go wrong with the project. If you just charge more but don’t deliver, you are running a scam, and you will be found out. 

From the customer side: if someone is offering a premium hands-off experience at a very low price, you need to be cautious. How can they deliver without cutting corners? How can they afford high-quality tools and qualified people? Are they just boasting off to get their foot in the door? 

You need to get crystal clear if you’re shopping for price or value and then make sure the hired team can deliver on their promise.

Are you buying work? Or are you buying results?

The answer to the question above is pretty obvious when we ask it like that. But in practice, almost everyone is busy buying work! That work may or may not get you the results you’re are after. 

Here is an example to illustrate this issue.

Say John hires Maria to code a website for him. 

After the initial discussion, Maria estimates that she will need 100 hours priced at $100/hour for a total of $10,000. 

As she thinks deeper and some research, Maria finds a ready-made plugin that costs $1,000 and takes care of half the project scope. 

What should Maria do next? 

1. Buy the plugin for $1,000 and charge for the rest of 50 hours. So Maria is left with $4,000 in her pocket and a plugin she now owns. The client will love her.

2. Have the client buy the plugin and charge for the rest of the work. She now has $5,000 in her pocket, and the customer owns the plugin. The client will love her.

3. Buy the plugin for $1,000, work 50 hours, and wait for another 40 to charge 90 hours. Maria puts $8,000 in her pocket. The client will be happy; he paid less and got it faster. 

4. Maria ignores the plugin, starts coding, hopefully, be done in 100 hours, and charge at least $10,000. The client will be satisfied if finished on time and angry for any extra hours over the estimate.

We can all agree that (3) is dis-ingenious. But in truth, all four options suck. 

With option (1) and (2), Maria feels cheated. She had agreed to do much more work than she would get paid for. She has no incentive to choose less work for her. Still, if she chooses option (1) or (2) out of moral obligation, in the back of her mind, she will resent ever having done any research! 

With option (3), she will have to live with the lie.

And if she ignores the plugin and does the work agreed for the money agreed, she is also cheating. 

She is cheating herself out of the growth opportunity. Why work better or faster when that means less billable “working hours.” Best be slow and friendly as you plow along. 

And she’s also cheating the client because you are not free to do your best job. She will do the regular “fast enough” kind.

It amazes me, especially in the IT industry, where performance metrics are easier to measure, that people are still buying work instead of results. 

Whenever discussing a new project, I almost always hear this question: “How long will this take?” because the next question is, “What is your hourly rate?”

And the answers to those questions are: “I don’t know how long it will take. This project is a collaboration, with lots of variables out of my and your control. It will take at least three months, but it could take 6 months or one year… nobody really knows.” And “I don’t have an hourly rate.”

My favorite alternative is to focus on results and not care about how long it will take. 

With the initial example, Maria would ask John why does he want a website. How will that generate value for him to justify the expense of creating one? And John might say, it would help him sell his handmade products to a larger audience, and it would make it much easier for customers to place an order. Maria continues to ask what is a realistic revenue goal for one year from the website sales. John thinks for a bit and says that based on his audience and some estimates, it should be around $80,000. Maria says she is confident she can help John reach his goal of $8,000. 

Now, if John has spent $8,000 to make $80,000, do you think he would care if Maria used a plugin or not, or how many hours she worked on the website? Of course not! He did not buy Maria’s time; he purchased a result.

And what about Maria? She is free from the moral dilemma from before. She can now employ her full experience and work as fast as possible, using any tools she sees fit to help John accomplish his goals. 

It does not matter if she can do it in a day because she has done the same thing before or takes her two months to put everything together. John will pay a fixed price. He will not be taxed for a “poor estimate,” and Mary is free to work as fast as she can and be rewarded for getting better at her craft and working less. All interests are aligned. 

I challenge you to buy results and not work. You will pay more upfront, yes! But you will get much better returns in the long run. If you still choose to buy work, there is no guarantee that “the work” will get you any closer to your goals. And the conflict of interests will make it almost sure that you will run over the initial estimate by a large factor, even if everyone is super honest and fair. 

The Buyer decides what is worth to them

“The price you’re charging for this is ridiculous!”

“Are you trying to rip me off?!”

“What?! Is this made out of gold or something!?”

“How can you live with yourself when you charge ten times it costs you to make this?!”

If you have ever been in a position to sell something, chances are you have heard some or all of the above. If you haven’t, you are on a race to the bottom, competing on who is the cheapest.

Who decides if the price is right for a product or a service? 

What is the correct value?

The answer is that a buyer and a seller decide.

If the buyer feels that she gets more value than the is paying, and the seller feels he is making a profit from the sale, then the price is right! And the price is right for that context only.

For a different buyer or another seller, the price may very well be “ridiculous!”

I have heard many times, and I also used to believe that it is a shady practice to price the client, not the solution, meaning: to change your price depending on the person sitting in front of you. 

Does this feel like a scam to you? Do you want to know the price upfront, and do you want to know how much the other person paid, so you get the same price or better?

If you feel that way, then you are shopping for price, and not for value. And that is OK. I believe everyone is doing that in some areas of their life.

But if you are shopping for value, then the price is not that important.

How can that be?

If the value you are getting out of the product or the service is greater than the price, it is always a good deal for you, regardless of what someone else paid for it. Of course, you can still negotiate and try to maximize the value over price ratio, but ultimately it is the value you are after. If you could spend 75 cents to make a dollar, you would go for it!

To understand this better, let us look at an example from photography.

You went into the jungle and captured some amazing bird photos. You had to pay for the trip, the insurance, the equipment and also pay yourself. So there was a cost incurred by those photos.

How much will you sell them for? How will you decide what the right price is?

Let’s say you decide $200 for each photo. That is your price for everyone.

Now a blogger comes along; they look at the photo and think: “My God! What a ridiculous price for a picture! I can get a free one from Unsplash. This guy is crazy trying to sell for this price!” Maybe you will think: that is OK! They don’t understand the costs of making these pictures. It is still a reasonable price for my work.

Next, National Geographic comes along and purchases one of the images and the right to print it for $2,000. It gets on their cover, and it becomes such a hit that it becomes a “National Geographic Classic.” Does the $2,000 still feel fair to you if sales increased by $200,000 for the magazine because of the cover?

How much would it cost you in time, tools, and resources to draw the Nike logo? Can you put a price on that? How much is the Nike logo worth today? Is that close to the price you came up with?

We all want to be good fellow humans. We want to help out. We want to be seen, appreciated, and valued. And we want to thrive.

When you allow someone else to judge you on your value and make you into a horrible person because of your price, you get into trouble simply because some of the people you will encounter will assign a different value to you and to your product in their eyes. 

So you may be horribly overpriced to them. And then, they are not your customer. There is no need for you to lower your price or to feel like a bad person, just because someone could not see the value in what you do.

In the same way, you will not be able to serve everyone. Some of the problems are too small for you to handle, and you need to refer those out, or just say “no.” And some of the problems may be too big for you right now, and you also need to say “no” instead of over-promising. But in between those, there is your range: a range that will grow with experience and personal development.

I still believe luxury goods are a scam, or that some people just gave in to the “marketing” and bought a useless product, but I am wrong. The truth is, none of the parties would have agreed to make that transaction if they did not feel the price was the right price. I may not see the value, but that does not mean that value was not there. I simply value other things.

Don’t allow others to push their value onto you. And mirroring that, accept that other people value other things. And all that is OK.

Credit: Thanks, “The Futur” for their inspiring videos.

How much cheaper is an expensive freelancer?

There are two types of readers that this article is for.

1) you are already considering hiring a freelancer, but you are still on the fence about it, and you hope this information will help you decide.

2) you are a freelancer looking for a way to position yourself in front of potential clients.

The short answer to the question in the title is that if you had the time and the skill, you would do it yourself. It would save you money, and you would not have to deal with communication issues. 

But here you are. And this means that either you lack the skill, or more likely, you lack the time. If you had enough time, you could acquire the skill and deliver before the deadline. 

The right freelancer will save you both time and money. 

You will save time in two ways: you don’t have to wait until you build the skills, and you can do other work while the freelancer does theirs. 

Saving money is not always that obvious. I can best illustrate it with a story. 

A couple of years ago, someone reached to me to help them with their site. After the initial discussion, I estimated that the project would cost them around $3k. 

They respectfully told me that it was too much for what they wanted to do, and we parted ways friends.

Fast forward four or so years, and I hear again from this person. They were desperate now. They had spent over $15k hiring help, and their site was still not working. 

Paying $3k to someone you trust looked like a bargain right now. 

Part of it was my mistake for not knowing at the time how to explain the value they were getting. 

And this brings me to another point: the price of hiring a freelancer is not the same as the cost of hiring them. A lousy experience means you need to hire someone new. That means more money spent and more time lost having your work redone. A good experience means you get it right from the start, and you recoup the money quickly from your working website. So which experience ends up costing you more? And what if you consider the cost that is not financial. Like a stressful relationship vs. smooth sales. 

And of course, this begs the question: how do I know if this freelancer is the right one for me? Is expensive, necessarily better or cheap, necessarily bad? 

Let’s deal with cheap/expensive first. Indeed there is no guarantee that expensive means better or even the right choice. But let’s look from the viewpoint of risk. Why would a freelancer charge you less money than another? It could be for a variety of reasons:

  • they desperately need the job;
  • they are new on the market, so they need to earn trust and build experience;
  • they self-evaluate their own ability to deliver as lower than other freelancers;
  • they have turn-key solution ready for you, so their cost is nearly zero;

It is a gamble. They could be outstanding but out of work and needing a job right now. (But this would beg the question, if they are so good why do they have trouble finding work). Or they have a turn-key solution ready to deliver. The catch here is to make sure that this “ready-made” solution actually fits your custom needs, or you would be left trying to fit a round peg into a high-quality and cheap square hole. Can you afford to take this risk?

With a more expensive freelancer, they could be bluffing, but they could also invest in themselves and have better training and a better experience. They could deliver the work with higher quality, faster, and with a lower risk for having to redo it again with someone else. 

Now back to: “how do I know if this freelancer is the right one for me?” 

It comes down to trust. What have they done that they can show you to prove their experience? What have they created and put out? Who is talking about them? How did you find them? Has anyone you know recommended them? 

My argument is that if you trust them, if they come with recommendations, and if you can see past work from them that is in line with what you want to build, then it makes sense to pay a premium now and have the peace of mind that comes with lower risk.

Choose wisely. 🙂

Can you run a business and not talk to anybody?

At my core, I am a computer nerd. I am excellent at talking to computers. Not so much when it comes to other human beings.

For a long time, this was the only thing I would do. I was the happiest when I got the project specs on paper, so I could read them and implement them, by myself.

But when I decided to become a freelancer, I realized that I had to talk to other people. I had to talk to the people I wanted to serve about their goals and their vision, but also about money. There were times when I knew had to say “no,” but I couldn’t. There were times where there was a conflict that had to be resolved through better communication.

I wish I could say there is an easy “how-to guide” to learn to communicate better, but there isn’t. I just had to practice — one awkward conversation after the other.  

And it is still hard at times. Especially when I need to make a change in how I price things, or in the terms of the engagement. 

So why go through all this trouble and stress of learning to be a better communicator?

Although it seems obvious now, here is the lesson I resisted the most: to find clients and to keep finding better clients, you need to learn to communicate. There is no way around this. 

You need to know how to tell your story compellingly; how to communicate your pricing and how to negotiate in your favor. You need to be able to use your conversation skills to determine how you can best create value for your clients. And, in some cases, you need to know how to let some clients go. 

By avoiding communication, I would frequently make wrong assumptions about what was valuable for my client, and that would jeopardize the relationship and the project. 

If you don’t learn to communicate better, you will have to let someone else do the talking, write the copy on your site, create the video, and tell your story. And even if they do a good job, they are not you :). You will continue to depend on someone else. It will be comfortable, but you will be limited to your view from the “back seat.”

If you are still not convinced then maybe this will shake you up a bit (as it did me): 

“The better communicator will determine the price.” 

A business-savvy website should consider money, and therefore price. And you can spend a lot of time and money optimizing the technical bits, but if your communication is off, your success will be limited.  

I will end this post with a book recommendation. It is the most expensive book I’ve ever bought, but it’s worth every dollar: Pricing Creativity by Blair Enns. Don’t think that if you don’t work in the creative business that this book does not apply to you. It does! And it is all about communication.

What is Value Based Pricing and Why should your business care?

If you hire me to do a website for you and it takes me 40 hours to do it, would you pay me $6,000 dollars? What if it takes me 20 hours? Should I charge only $3,000 because it takes less time and effort?

I used to think that indeed, if something takes less time to do, then I should charge less.

But there is a problem with this approach. Charging for time punishes me for being good!

As I have built many websites, I can work really fast, I have a lot of prebuilt components that I know how to integrate, and I can foresee and prevent a ton of problems. This means that I can produce a quality site much faster than a couple of years ago. But because I put less time into it I get less money for much better work. The better are more efficient I get, the less money I make.

Because of this conflict, there is always a counter pressure that says: “don’t work fast, don’t be efficient… because the slower you work the more you can charge the client”. When I charge for time-spent there is no incentive for me to deliver high-quality work fast, other than my personal integrity.

An alternative way is to do “value based pricing”.

This means that you should charge what is worth to the client, regardless of how much time or effort you put into it.

This may sound unfair to you. I know that was my first reaction! Just because I have more money to spend this means I should be charged more? That sounds like a rip off!

So let’s look at an example.

You have realized that you have more mobile users on your website than you used to. But your website is not mobile friendly! This means you are potentially losing a lot of customers.

After crunching the numbers you realize that if you got 10% of the mobile users to buy from you, you would double your annual revenue from say $200k per year to $400k. So that is an increase of $200k per year.

Do you think is fair to spend $20k to get that increase in revenue? That is 10%. I think it is fair. And there are people willing to spend 50% to get that increase because they will continue to generate the new revenue year after year.

So the question should not be how much does it cost, but rather how valuable is this to me and how much of that value am I willing to spend to get it? 10%, 50%, 80%?

Why would you spend 50% and not 10%? The answer is that spending more reduces the risk of failure. You know the saying “don’t spend a lot of effort to solve a small problem and don’t spend little effort to solve a big problem”.

Why is value based pricing important to your business?

The short answer is that it gets you to think on how you can add value, instead of how you can cut costs. There is no limit on how much value you can add, but you can only cut costs so much before there are no more ways to cut.

And when you think about value, instead of cost, you get clarity.

Here is what I mean. When a client wants to hire me to do something I try to work with them to determine the value of what it is they are trying to do. And in some cases, they realize that they were focusing on the wrong thing. They were willing to spend money on a change that did not actually add any value to their customers.

Thinking about value first made that clear and allowed them to make better decisions on how to serve their clients!

Credits

This post was inspired by Chris Do from TheFutur. Thank you, Chris!