Never Negotiate Your Freelance Rate

“Everything is negotiable. Whether or not the negotiation is easy is another thing.”

The problem with selling time is that the buyer knows margins are high.

When I ran my consultancy, I was constantly pressured to negotiate down our rates. Our formula was pretty simple: We had a client rate, and then we had what I paid my staff. The difference is what paid me, our non-billable staff, outfitted our office, and whatever was left was profit.

So savvy clients, almost all of which were business owners, knew that it can’t hurt to ask for a discount. And I totally get it. Let’s say you’re hiring someone to work on a 3 month project (480 hours) at $100 an hour. A $10 an hour discount saves $4,800 — not a bad return for taking a minute or so to ask a question.

But what I’ve come to discover (which I’m guilty of myself) is that almost all of us cave and lower our rates when asked.

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Should SaaS Companies Require Credit Cards Upfront?

This morning’s episode of “Startups For The Rest Of Us” was all about one of my favorite subjects — should SaaS companies take credit card info when signing up for a trial?

If you aren’t familiar with how SaaS registration and billing typically works, here are the common paths:

  1. Require no credit card. A few days before a trial expires, email the user and tell them to key in their credit card. After their trial expires, lock their account until they pay.
  2. Require a credit card. A few days before a trial expires, email the user and let them know they’re about to be billed. After their trial expires, bill them.

I’ve toyed with both options, and I felt like I wanted to provide a bit of a followup to today’s episode with some of my thoughts around the CC / no-CC debate.

The Mistake Most SaaS Owners Make

Just about everyone who goes from capturing credit cards upfront one day to dropping that requirement the next day fails. Big time.

Paid conversion rates plummet. Revenue dips. And the knee jerk reaction is typically to REVERT ALLLL THE THINGS!

This is what I almost did, until I started thinking about why my growth charts were now “down and to the right”. What was really behind the plummet? Surely the same people who would have plugged in their credit card before were still signing up — right?

The issue is that we usually only change our signup form… we drop the credit card fields. Sure, there’s probably a lot of backend plumbing that needs to be done, and all of your unit tests around billing probably broke in the process. But from the perspective of the user, you haven’t really done that much.

It’s All About Onboarding

You must revisit the way you onboard new users if you drop card requirements. It’s not that you get crappier users when you drop the card requirement; you get less informed users.

When presented with a paywall, most people will do their homework. They’ll read over your tour page in-depth. They’ll checkout your FAQ. They might even Google around for reviews. You’ll get trials that already get the “why”, and they’re now more interested in the “how”.

I think this is why conversion rates are so much higher from trial -> paid when capturing cards upfront (not withstanding the people who miss the “You’re about to be charged” emails.) People are just more well-versed in what you’re doing when they sign up. That’s to be expected.

So if your onboarding is either non-existent or focused on how to use your product, the 10% of visitors who jump into your trial are going to often go in without knowing much about your product. They’ll be dumped in to your app and left to fend for themselves. If you teased them in with a very simple signup form and leave them left questioning why they’re even here in the first place, they’re never going to come back — and they’re not going to convert.

How I Stopped The Bleeding

I’m guilty as charged, and did very little after converting Planscope from capturing cards during the trial signup process to going cardless.

And as I stated earlier, it sucked for my business.

But then I started to rethink my onboarding. I had to get better at explaining why someone should care about Planscope, and not just how to use it. My trial lifecycle emails had to first focus on teaching the user about why good project management matters to their business, and then segue to tying Planscope into that picture after that’s been established.

 

(With my onboarding, I’m trying to marry the “why” with the “how”.)

My initial onboarding became almost like an interactive tour page, with the added benefit that I now had a new email address that I could influence over time.

Lastly, let me quickly touch on lead scoring. One perk of capturing credit cards upfront is that you get “more serious” and better informed customers. Well, with a little code you can separate the wheat from the chaff in your roster of active trials.

trial-dashboard

Right now I’m lead scoring based on how engaged someone is. Are they doing stuff that most people do that convert? If so, I’ll do a little higher touch work to seal the deal. (See my upcoming Microconf talk for an exhaustive overview of this.)

Soon I’ll also be introducing something I’m calling “lead value”. I’m capturing qualitative information upfront — Are they a team or solo? Are they designers or developers? A US-based team of developers is worth a little north of $1000 for me. A freelancer in India is worth substantially less. I plan on combining their lead score against their lead value to better optimize who I reach out to.

A Few Additional Pros and Cons

Finally, I want to close with a few quick thoughts on credit card upfront vs. no credit card upfront.

  1. If you’re taking credit cards upfront, people need to cancel to not get billed. You can setup an exit interview to figure out why they’re canceling, which gives you great insights into why they’re not paying you. If there’s no credit card captured on signup, unsatisfied users will just vanish into the aether.
  2. Beware of Gmail tabs. When tabs started appearing in inboxes, I quickly discovered that my “trial is expiring and you’re about to be charged” emails were landing in either the promotions or updates tabs of some inboxes. These tabs are, by definition, less important than the primary tab, and checked less. I noticed a spike in “hey, you billed me before I had a chance to see that you were about to bill me!” emails.
  3. If you calculate churn based on “number of paid accounts who cancel”, your rates will drop substantially. When capturing cards upfront, most cancellations happen a few hours to a few days after that first charge, which skews your numbers. I like how the Freckle team defines a paying customer as someone who pays at least twice, and calculates churn against that group.
  4. When in doubt, ask for cards. To reiterate point #1, you’ll get more cancellations, which gives you more qualitative data. You’ll also get better informed trial users, which can affect your support overhead. Once you’ve dialed in your onboarding, then you should look into dropping the card requirement.

How Important Is Your Portfolio?

Ben writes in from the Phillipines,

“My biggest problem in freelancing (mine is web development) is not having enough ”good“ portfolio to show prospective clients. Do i really need to have one? I want to start all over again as a freelancer. Do I need to have portfolio pieces before I can start making my freelancing as a real business?”

I remember when I first started out as a freelancer, I knew I had to have a portfolio on my site. Why? Well… everyone else had one — that’s why.

So I did what most of us end up doing: I grabbed screenshots of a few sites I had worked out, and laid them out in a nice little table and stuck it front and center on my shiny new sales website.

It can’t hurt to show that you’ve been hired and produced something in the past. But the way we do demonstrate the fact that we’re capable of Getting Stuff Done could be done a lot better. On top of this, it makes sense to try to figure out why clients might care about a portfolio, and to use that to our advantage.

So here’s a bit about why clients care about portfolios, and what that means to you.

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Retargeting Done Right

Many of us are shadowed around the web by our favorite (or not-so-favorite) companies and products.

You’ll flicking through Facebook photo albums, and there’s an ad for the time tracking service you checked out the other day.

Or you’re reading up on the best way to seed your own heirloom tomatoes, and a gardening blog has a flashy banner ad for your favorite email marketing service. (BTW: No marketer on the planet thinks it’s a good idea to advertise email software on gardening blogs — smile, you’re being retargeted!)

Retargeting is powerful. Somebody stumbles upon your site and they’re not ready to buy. But if you can your product in front of them later — like when they’re reading up on gardening — maybe then they’ll be ready to give your product a second look, or at least give you the opportunity to drill your name and your brand further into their psyche.

I think that retargeting with ads that point back to the root page of your marketing site is a silly idea. Read this for why I think that. But today I don’t want to write about how you should retargeting and what your ads should point to.

Instead, I want to rant.

A lot of the ads I see in my Facebook newsfeed or stalking me around the web are from services I already pay for. With Perfect Audience, and presumably other services, you can group people into lists. I have two lists for Planscope: random visitors, and people who have signed in. If you’re signing in to Planscope, you or someone you know is paying for your entry, therefore I’d be wasting money by asking you to… pay for Planscope.

Marketing budgets are being spent on customers seeing ads for products and services they pay for. These budgets could be better spent on people who aren’t customers. And, to put it frankly, I’m OK with seeing ads from people who want to convert, but I’m pretty annoyed when I see ads from sites I signed into a few hours ago.

So does this mean companies should disable ads for customers? Yes. For most companies, this is one of those things where a developer needs to implement one line of boiler-plate code into their sign in code to blacklist that person from being retargeted.

…But I do think there’s a time and a place for retargeting customers.

I’ll be covering this in a few weeks at MicroConf and will later write a more in-depth post on exactly what I’m doing with Planscope (and why it’s working), but for today I’d like to throw out a few basic suggestions.

The Drive-By

Let’s say someone has stumbled upon your site, but never left you with anything (a trial signup, an email opt-in, etc.) They are, in the words of Rob Walling, a “drive-by”. Retargeting lets you force yourself in front of them, and for most of us that’s by pushing people back to your marketing site.

As I mentioned in my other post on retargeting, I’ve gotten better results driving traffic to email course opt-ins or lower friction options besides “sign up for a trial / buy”. Remember: Most people who click on your ad will be idling around the Internet — they’re probably not in a “do anything serious like buy software” mood.

The Trialer

If someone’s in a trial, they’re highly interested in your software (they gave you their name and email address) and for the next few weeks you’re giving them some sort of access prior to buying.

These people are really, really valuable and it should be your primary concern to make sure they have the best possible experience with your software so they can buy it.

So obviously, you want to drive them back to your marketing site, right?

WRONG. Put information about how to best use your software in front of them. Showcase case studies that show how companies like theirs are wildly successful because of your product. Use retargeting as a sort of meta-service on top of whatever lifecycle email campaigns your running.

A few ideas: Opt-in to a weekly webinar / call with the founder. Recorded videos that show off how to do certain things in your software. Blog posts that recap what your software has been able to do for other people.

The Customer

You want your customers to be happy and to happily pay for your software. You also want them around longer so they have a higher lifetime value.

Make them badass. When I signed up for Infusionsoft, one of the first things I noticed was that I started to get invited to a weekly Mastermind put on by one of their employees. These Masterminds gave customers weekly opportunities to hear from someone at Infusionsoft on ways that the product could make their business better. These aren’t “how-tos” as much as they are “let’s talk about how you can use tagging to better segment your customers, and use this to drive a whole lot more revenue your way.”

You could retargeting product updates to people, so they’re able to see all the awesome new stuff you’re adding to your product. Or you could push blog content that’s focused on how they can grow their business, both with or without your product. Think of it as forced RSS.

Retargeting is really, really powerful. Unfortunately, it’s abused and just done awfully by most customers. I’ll be back in a few weeks with some more details on exactly what I’m doing with Planscope and the lifecycles a given prospect/customer might have, so hop onto my newsletter so I can let you know once it’s available.

How To Prepare Yourself To Quit Your Job And Go Freelance

Malcom writes,

“It gets harder to contemplate going full time when your day job has a very high salary, great benefits, room for advancement and is in a explosive growth industry. (That also usually comes with long hours, lots of stress, and lots of travel, which can be a strain on your family.)

Any advice for people in a situation like this, where making the move from part time to full time freelancing would ultimately make them happier, but the leap gets more difficult to make?”

Before I started my product company, I used to run a consultancy. And in this consultancy, I had ten people who received benefits, paychecks, and a semblence of security from me. A few of the people who worked for me were originally freelancers, but wanted to escape the “rat race” of finding and selling clients.

But Malcom makes a very good point: What if you know that you’d be much happier controlling your own destiny by running your own freelancing business, but doing so would sacrifice the years of hard work, advancement, and pay that you’ve accrued at your current gig?

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