00:57 - Do you find it hard to work 40 billable hours in a week? If so, how do you explain it to an outsider?

08:59 - How do you set aside time for admin work? Billing, blogging, etc.

15:41 - How can someone measure when they are "ready" in their skills to break into freelance from a full-time job? Is it better to just dive in and see what happens?

26:26 - Is it still important to niche down right away? Might it be more helpful to wait a little longer until I have more experience to choose a niche from?

32:55 - When do you suggest is an appropriate time to start billing when you’re ramping up a project?

Picks

Proposal Template PDF (Jonathan)
Existential Comics (Reuven)

 

Hello everyone. And this is our monthly Q & A – live Q & A show – so we are broadcasting live and in color to the internet, and we’re going to try and answer lots of questions from lots of people or something approximating lots of them.

We already have a question, and he wrote, ‘Do you find it hard to work 40 billable hours in a week? If so, how do you explain it to an outsider?’ Jonathan, you seem to be especially been used by this, go for it.

I would argue that you shouldn’t be billing for your time, of course, but I know that that’s a complicated thing for people to get their heads around. But when I did bill by the hour for my time, that was very hard to bill 40 hours – to do 40 hours billable because you have all sorts of other overhead even if you're working for a full time employer for some firm or something like that because you still have to log your hours, you still have to answer email, administrative stuff. And forget about it if you're running your own firm because you’ve got to deal with all the accounting and all of the marketing, everything you have to do to run a business, so if you're dependent on paying your mortgage based on a 40-hour billable work week, you're going to be working 80 hours or at least 60 doing all of the additional administrative overhead stuff.

So what ends up happening is billing by the hour, you, setting this artificial limit for the amount of money you can make because you can’t just infinitely raise your hourly rate to a thousand dollars an hour – no one would ever agree to that – so it wasn’t really the question, but I would urge you to consider thinking about billing in a different unit other than time,

Well, let me take that in a slightly different direction then. So you're saying ‘don’t bill by the hour’ and then you won’t have to work 40 hours a week and instead bill 40 hours a week. But would you say that you work 40 hours a week? How do you divide your time percentage-wise? Assuming you work 40 a week, how much of that is client work, and how much of that is administrative work?

Me, personally, I do a lot of – yeah, I’d say 20% of my time is marketing, maybe another 10% is administrative, roughly – not quite half of non-billable work. But the billable work I do, [inaudible] once again, and the billable work I do is mostly stand-by type stuff. So people pay to get access to my expertise about something. They’re not paying me to do labor. So it’s not like just – it’s not like they're saying ‘ok, you sweep out floor for 2 hours, and we’ll give you 10 bucks an hour’, They're saying, ‘we might have important questions for you that we need to get answers to ASAP. Can you stand by?’ And so you get paid for sitting there, doing other stuff or even potentially researching the subject matter area of your retainer clients, for example. So it’s not the same thing is being – showing up, punching in, doing your thing, and then leaving.

Eric, how about you?

It’s the same thing for me. For full time employees, they're not getting 40 hours of productive work. I can’t remember – there’s some studies that did stuff, but who knows valid it is – but I think you're lucky if you get 50%, so 20 hours of actual work out of 40 hour week.

I was a consultant, I tell my clients – because I bill by the week, I say ‘you're going to get 30 hours plus or minus 5’ depending on if they're having a bunch of meetings; meetings drain me more than writing code, so they're going to be on the lower amount of hours, but I try to focus on what I’m committing to, like Jonathan got to tell me about –the outcomes I’m giving them, what they're going to get result-wise, and I think that's the more important thing.

When I was doing hourly but I was blocking it out in a week, I think 25 hours was – I was easy to hit, and then, I think a couple weeks at 35 hours, but then I would have to push administrative marketing stuff into another week. I couldn’t get it all done because I wasn’t willing to do 60 hours, 80 hour work week just to get half of that as billable.

So I think, roughly 20 hours, so 50% of a 40 hour week – so 20 hours maybe up to 30 hours kind of what you can expect to bill depending on your energy levels and how you can rearrange commitments.

Right. So I’m going to basically agree with you guys, and be the poster child for the person who did it wrong because for years now, for many years now, I have basically been assuming that I’ll bill roughly 40 hours a week, give or take a little bit, and so what do i do to make up for that? Well, I spend evenings and parts of weekends catching up on email and billing and administrative stuff, and basically, it’s impossible.

And so a number of months ago, one of the motivations that I had for going into training and specifying that is first of all, then I can raise my billing rate, and second of all, then I get to control my time much more easily. And so I say I teach – the work week in Israel is Sunday through Thursday. So I tell my clients that I work Sunday, Monday, Tuesday, Wednesday – that’s when I teach. Maybe on rare occasions I’ll teach on a Thursday also, but probably not. And so I basically set myself up for a 40 – a 4 day, I’m sorry – which is like 32 hours more or less of billable work week when it’s really very productized. I’m used to teaching these courses, and then I try to use Thursdays for catching up with marketing, billing, and so forth, and just relaxing a little bit. I do some of that on Fridays, as well, but not nearly as much. And I definitely have seen – I’m still not at the point that I want to be in terms of number of hours at work versus number of hours of actual real person time, but it’s been a dramatic improvement already. I definitely feel like I’m getting more bank to the buck, and I feel like I’m having time now also to work on these administrative and marketing things.

So in theory, I guess I’m going to say you could bill 40 hours a week, but then you're going to be working a lot of time, and I think more importantly, I've learned that you're going to be stunting to growth and the potential for your consulting business because you really won’t be putting the effort you need to in the marketing and in the business development.

Yeah. I pretty got stuck in that treading water phase where you can’t grow the business without working an 80 hour week. And if you're going to work that hard, why do you even create this job for yourself? That’s working you to death. It’s like if you want to work to death, you could do that for anybody.

Yeah. That’s actually the spot I’m in right now. I want to say I’m going up on – I think it’s going to be 10 weeks next week, but basically 10 weeks billed straight. It’s between – it’s going to between 3 different clients, but just I schedule people back to back to back, and I’m completely drained. I have – I’m basically doing client work and I have, I think, Wednesdays and Fridays to have half an hour, maybe an hour, or extra time to get stuff done, but the big effect on me is I’m just so tired. My productivity is all going towards the client, so I feel like I can barely get anything else done.

And so what's going to happen is a few weeks from now, once this is done, I’m taking a whole week off for myself and basically going to recover, catch up on administrative, catch up on email; I might even hit up taking 2 weeks or 3 just because it was such an intense effort. And it’s sucks because I’ve been – I think since April, I’ve been – it’s end of June right now, so 2 or 3 months, I've been wanting to do a bunch of repositioning my business, start marketing on this angle, do this, build this type of product, and I haven’t been able to. So it’s all been stuck in my head just waiting until I get this pair of cycles.

And so that’s the – that’s a hard thing to do. I've tried some other things; I've had some ideas to work around it, but you need to be very careful if you’ve tried to bill on a higher of the range. You're going to burn out of energy and you're going to run out of time and you have to actually go off the clock to recover.

Yeah, absolutely. I spent today – so this week, it’s a relatively light week, and that – I got two conferences yesterday and spoke with them, and then tomorrow I’m teaching a full day. On Thursday, I’m meeting with a client for 4 hours or something. But that meant that I had today, especially today, to sit and go through email and work on some project proposals and answer the questions that my accountant had for me. And I took the whole day; I’m still not through all the email that’s accumulated. And you need to factor that in because I don’t want to tick off clients or potential clients. They need to realize that my business is running for them and it’s not going to get totally stuck just because I’m tired I’m running myself into a ditch.

Yeah. I know I’m pushing it too far when I can’t even find time to write proposals that people have asked for.

Yeah.

That’s a bad [crosstalk]

I got one I’m going to hopefully do tonight.

Yeah. I've got two there on my To Do list for weeks. I’m going to start them off by saying ‘if you're still interested in this, it’s been busy’.

Right. Ok. We have – there was one other question someone has set in the chat. ‘How do you set aside time for admin work? Billing and blogging?’

So I guess this is a related question, but slightly different. And also what proportions do you give those sorts of things?

Take them one by one. Billing, I bill people in advance to when send out a proposal, it just takes care of itself; it’s like one thing. Blogging, I've never been able to stick to a schedule. I did for a little while, do every Monday, I’d post a new blog post and it was great to have it done, but every Sunday, I’d be up late scrambling to get it written. So I haven’t had a good luck with that with blogging, so what I do generally, is I take – when something happens, like in my coaching slack room or another slack room that I’ll really get excited about it like ‘oh, this would make a great blog post’, I’ll just stop whatever I’m doing and just get it out as fast as possible, and then perhaps iterate on it.

Podcasting actually is a one exception to my inability to schedule content marketing types of activities. And I think I've been successful with both being in Freelancers’ Show and also my other podcast, which is Terrifying Robot Dog. I think those are scheduled weekly, and it was scheduled weekly, and I think I stick to it because I’m not the only one doing it. So perhaps, for someone who’s doing a content marketing type of thing and they want to be doing blogging on a regular basis, maybe – I don’t know how you do partner with blogging, but some kind of accountability partner or some kind of – at least put it in your calendar scheduled so that it’s in there.

And for accounting type stuff, I think we talked about last week. I fell off the wagon, but for the longest time, I had that was like my half-day Friday morning was just accounting stuff. So that’s – I guess put it in the calendar is the best thing you can do, but I know how it goes. It’s hard. You have to be diligent.

Right. Eric, how about you?

It fluctuates a lot. Right now, like I said, it’s – I’m basically slammed for time, and so I've basically cut stuff as far back as I can. I have a – for the freelancer blog I have a newsletter that goes out Tuesday, so I usually spend Monday writing it; so maybe an hour, an hour and a half slotted for that just to barely get it out the door in time. My blog, I've been putting a lot of my newsletter content on my blog for that, so I haven’t had to do much blogging. It’s mostly just taking existing content, getting it a good image, and uploading it, and for that – it’s I’m not on a schedule for, so I can just do 4 or 5 at once and just trickle them out or just let it be; it doesn’t matter.

Tuesdays, we have this show; it’s when we record, so that’s basically of my free time for there. Wednesdays, I usually have open. Thursdays, sometimes there's usually a meeting or my Mastermind thing on Thursdays. And then Fridays, the last open day of my week, and I've been trying to do my weekly review then, and try to do a bit of sales work then just so I’m not waiting until I ran out of projects before I start doing sales.

When I’m not as slammed, I typically do at least an hour trying to do 2 hours a day of these kind of things, and I like to batch it up, so maybe one week, all of the free time, I’ll spend writing in a bunch of white papers articles for my consulting site. And then I’ll have those all come out over the next 23 months. And then the next week, I’ll do some stuff for my freelancing blog or that sort of idea just – it’s easier to batch stuff up and stay in that.

So billing, I have lots of similar stuff as Jonathan. I send an invoice up-front. My invoice is it’s all pretty automated so it might take 5 minutes to create one. So that’s not a big deal. I do bookkeeping on the weekend, so it’s not really a business time, and it takes maybe 15 minutes at the most of that. Sales stuff, I try to do at least twice a week, maybe 3 times a week, and it’s most of times follow up. Sometimes, it’s sales calls; sometimes, it’s going through a bunch of leads that I have, but I have a system for that so it’s just mostly just cranking through and doing the work. I can flex that if I’m really busy; I don’t do a lot of sales if I’m not as busy and I have more time, I can do more sales.

That’s most of my admin work. I don’t have a lot of paper that I deal with; although you might see behind me of stacks of paper behind me that I need to scan in some year. And then, podcasting, stuff like that, marketing, having an accountability partner or a group that I’m committed to and having a schedule for that makes it so – it’s not even a question if I’m going to do it this week. It’s going to happen. It’s automatic. I think that’s it really.

Yeah. I’ll actually second that notion I said earlier. I don’t know how you have an accountability partner for blogging, but being in a Mastermind with a bunch of people who are really creative can crank out a lot of great content all the time is very inspiring and would probably be beneficial for people who were trying to get into the habit of, let’s say, blogging regularly or doing a white paper, maybe putting out an ebook. If you're hanging around with other people who are doing that all the time, you're just going to automatically start doing it.

Right. That makes a lot of sense. Yeah, in terms of I am – I guess it was about a year ago, a little more than a year ago, when I was in Chicago for 6 weeks – 4 weeks, 6 weeks – working on my dissertation. That was, of course, when I decided that I was going to blog every day. And [inaudible] tell my advisors this is the time, he thought I was enough of a slacker, and it’s partly true, but basically I found to be a very nice escape, but also it forces me to write something short.

And I actually really enjoyed that for – I don’t know – a month. Yeah, a month or 6 weeks, I was blogging every single day and it felt fantastic, but it required that I not be going to clients and working on clients – and not have a family. I was totally on my own at the time. And so, in coming back to reality, my blogging has been, I would say, probably 2 or 3 weeks. And it’s definitely not on the official schedule, and moreover, it’s like – often what will happen is someone will ask me a question in one of my courses and I’m going to be like ‘wow, that’s a really great question’, and I’ll dig in to it and do research probably for them, probably for me, and then I turn it into a blog post. And if I’m in the zone of researching it, then I can just sit and write and write and write. Two hours later, bam! I've got something, and I post it. And sometimes it’s great, and sometimes it’s terrible, but that’s just the nature of blogging.

My newsletter, I think, has been the thing that I've been bad about finding time for. But I’m trying to get a little better at that. I think I've been on that once every 2 weeks or so, and with that also, like today, I send out some of my newsletter because I said ‘well you know, I’m not getting this big article done that I wanted for them yet, so let me just do something small’. Someone asked me about this, send it out.

In accounting, so my calendar’s most of my paperwork, I send out invoices, I do need to check the bank account and make sure that things have been deposited and send out the receipts for those. But that’s less than an hour a month. It’s really not that much, and because I've got it all electronic now, I just go to my bank’s website and one way they’ll go to my invoices and receipt program the other window, click click click, and it’s basically done. So it’s really not that much of a pain as much as it was once when I was – it was in the carbon less paper and the 3 copies and the pink copy and the white copy – oh my god, that was bad – bad for everyone, in fact.

Ok. We got some next few questions. So you guys have talked about in the past in different areas, but how can someone measure when they are ready in their skills to break into freelance from a full time job? Or is it better to just dive in and see what happens? Any thoughts?

Yeah. I know a lot of people who come across like they're never going to be ready to jump. They talk and talk and talk about ‘I just need one more degree, I just need one more certification, I just need one more thing, and then I can finally start my own business’. So on the one hand, I don’t think everyone’s ready to just go off and hang out a shingle and start freelancing or consulting, but in general, I feel like people are a lot readier than they think.

So I would tend to air on the side of it’s better to just dive in and see what happens, but I’m a stage type of person; I’m not like a real risk – huge risk taker. I like to take calculated risks, so I would at least get some mentor or maybe there's a friend in the family who works for themselves that can help with stuff that is – that stuff’s that’s so shocking when you're going from a full time job to working for yourself and it’s mostly the – your work will probably not be that different assuming that you're doing the same thing; assuming you're going from, say, doing web design for a company to doing web design for yourself or directly with clients.

The stuff that’s going to take you by surprise is all of the taxes and the paperwork and the legal stuff – all that sort of thing. And you outsource all of it, but you need to be aware of it first, so talking to someone in your family or some kind of mentor that you can get easy access to probably be a big help. But in terms of the skills that you had at your job, if someone’s already paying you to do it, you're probably going to have to do it.

Yes. That sounds reasonable. Eric, any thoughts on these lines too?

Yeah. There's the idea of the just one more thing person which I see a lot, and those kind of people that kind of be a little bit, it’s – they're going to need a lot to push them to actually jump in, and then there's the other [inaudible] people who just jump in and jump out and jump in, jump out.

I think – it’s somewhat I've seen – unless you have a big circumstance that’s forcing you into it, I think it’s good to try something on the side or try something at night and see if you like it because, like what Jonathan was saying, it’s the business aspect is the hardest part, and that’s going to be the part where you're going to struggle the most. If you're a developer, a designer, copywriter, just a writer, all of those, the technical thing, the actual working in your business stuff, that’s the stuff that you know; it’s going to be easy for you. It’s the client management, billing, finding clients, marketing – that’s the stuff that’s going to trip you up. And you can procrastinate and try to find some training, try to read books on it, all that, but really, it’s the kind of thing that you have to get in and do it. There's so many different ways to market, so many different ways to sell, all that, I think you have to try it and figure out what way is going to work for you.

And if you have a mentor, like Jonathan was saying, that can guide you, like ‘hey don’t even go looking at. That’s just a tarp, and you're going to get stuck in there and it’s not going to work for you’ – that could cut a lot of time off of it.

And I think the other thing is like for me, we moved out of state, and so basically, I made myself unemployed; I left my job. So that was actually a good situation for me to do it. If you have that similar one, or if you are switching jobs or switching careers or any of that stuff, it might be worth making a little bet. I actually did the same thing. ‘I’m going to try to do freelancing or consulting for 3 months’. If I can’t get it to work in 3 months, I’ll go get a job or I’ll figure out what's going on and maybe get a part-time job just to keep enough money coming in while you figure out how to run the ropes.

are you questioning because you're scared, like it’s just a fear thing, or you're questioning because there's actually real things blocking you and in either case, what can you actually do to remove it? Could you experiment and get rid of the fear because you make a list of all the things you have to – you feel like you have to do, and actually – someone who’s doing a business like ‘do I need to learn double-entry bookkeeping before I start my business?’ No, you don’t.

It’s also a temperament and personality. Some people are a bit – some people are better at diving in and some people aren’t.

Yeah. I come from a level with a risk is a big one. It comes off often at family stuff or parties, people say ‘oh wow, I could never work for myself’. And they're interested in what's involved with that, and it’s definitely not for everyone especially if you're working from home. That’s also not for everyone.

But if you're thinking about it, you could do, at least, do a side hustle. Eric alluded to it. Set up some kind of productized service of some kind of product in your free time, or write an ebook; try and sell an ebook on your subject. It’s going to be a huge head start if you do end up going solo; it would probably give you a big boost of confidence that people are willing to spend 19 bucks for this book of mine or whatever, WatchKit

OS, like developing for Apple Watch, whatever your thing is, and if you can make that happen or it can at least pay for itself, the time you put into it, that should do you a lot of confidence in the education that you're on the right track.

Right, as long as in lines of what you guys said, but because they need someone is ready with their skills to break into freelance from full time job, so someone is already paying you a salary to solve their problems and do new things for them, so obviously, you have skills that are valuable. You have skills that are helping to advance business. And you might not be god’s grace gift to, let’s say, programming, but that’s okay because that’s actually less important than identifying and communicating and working with people.

In many ways, I think we said in many times in the show, it’s in many ways better to be a mediocre programmer and a great business person to succeed in consulting than the other way around because the brilliant programmers were terrible at business. They will be terrible in business. And I think I might have mentioned this story in the past where when the recession hit a number of years ago, I remember saying to my client that I was really worried because all these computer people were being laid off, and clearly, they were all going to become consultants and compete with me. And my client thought was this, and he was right, he just completely laughable. It’s like ‘no no no. most people want to have a steady paycheck. Most people want to know how much money they're going to get on the every first week each month or whatever it is, and so they're not going to take that risk’.

Now, I do think that it is a bit risky to say ‘well, I had a full time job for the last 2 years, I [inaudible] quit, and I’m going to start consulting’. You definitely want to ease into it somehow. Talk to people. Find out what they're paying for. Find out what people are interested in. If you're in a programming niche, if you're using a particular language or technology, find out if people are looking for consulting help there, and if you can do it in weekends and evenings, that’s definitely the best.

And someone has to know – DJ Shaver said ‘it also helps if you're definitely have some money in the bank’. That’s definitely true, definitely, definitely true, but if you ease into it in the nights and weekends thing, which doesn’t it’s easy especially if you have a family, but if you do that, then you can measure how much you’ll be able to make just to some degree and you won’t necessarily need to hit the ground with an insurance policy.

We’ve talked about it before, but the savings is just a cushion to make it so whatever risk you're taking isn't as risky. So yeah, you might be jumping from a job into freelancing full time, but if you have a 6-months cushion, and you have 6 months bringing in any kind of income, that’s what happened to us. I think we have like 2 or 3 months because we just moved – there's a lot of moving stuff, but if I couldn’t get it work in this 3 months that I made the bet with my wife, we had that savings account so our lifestyle wasn’t going to be affected. And then at the last month, I would jump in, find a job if it came to that, and it didn’t.

Yeah. When I went solo, my wife had a 6-figure job as an account executive, and so we had – and we had no kids at the time, so we had the cushion help a lot. Looking back then, I don’t think we ended up really needing it that much. I was able to get things started pretty quickly, but it helped a lot emotionally.

If we were in the same situation we are now wherein she’s a stay-at-home mom and we’ve got 2 kids and a mortgage, and I had a full time job that was paying me big money, it would be more daunting to just throw that up in the air if I had – if I didn’t have the experience that I have. If I was 25 year old me in a 45 year old situation, then it would be a lot scarier because we got all these responsibilities and you're affecting other people’s lives directly. So for somebody in that situation, I would definitely go at the side hustle type of thing where – I look back in my less corporate job which was 2002; it was the last time I had a work for a corporation, and I remember thinking that they worked us like dogs [chuckles] I look back and it was like a country club [laughter]. And I could’ve done so much stuff to build a business in my free time; not necessarily on the clock, but even – I commuted over an hour to work every day. I could’ve been doing a million things like planning, dictating, podcast, blog post into a recorder – there's a million things I could’ve been doing to get myself set up to go solo back then. What I ended up doing was I went and work for a small – botique firm, and then went solo after that. But if I was back in the corporate land, oh men, it’d be a no-brainer.

Right. And it definitely seems like after working on your own, going back to a regular job, you see – it’s also just like the experience when you’ve gotten older. So you see – it’s like being a kid versus being a parent. I look at my kids and I’m like ‘oh my god, they have so much time to do whatever they want and they feel no pressure, but yeah yeah yeah, for sure.

There's another common one that people say. I think it’s a Gary Vaynerchuk aphorism which is like ‘oh you're thinking that I’m going to have time to start the hustle on the side? Turn your TV out.

Shut off the TV and never watch it again’. That’s like all that time is just wasted.

Yeah. My first job both when I was in college during the summers and then afterwards was at HP in a medical products group outside of Boston, and there was a guy who’s a contractor. And I remember at some point – I knew nothing, I was 18, I was 19 – and everyone off to a meeting, and the only people who did not work were him and me; me because I was the student intern, and him because he was a contractor. I was like ‘oh, why didn’t you go?’ and he told me it was like ‘you [inaudible],’ and he was like ‘this is the best thing ever, and you make tons of money and you take vacations when you want’. I was like ‘uh huh, uh huh’. I had no idea what he was saying.

And now, it’s finally like bits and pieces of that conversation come back to me and I totally understand now what he was saying, but without a perspective of having worked a real job before, it was impossible to get it. And it was definitely through just - I didn’t know what consulting was when I started. I was 25, I was moving to Israel, and only I think didn’t have a family, I’ll give it a try.

I’m noticing in this question that it’s at the end. Is it still important to niche down right away? Might it be more helpful to wait a little longer until I have more experience to choose and niche from?

That’s an interesting question. The thing with niching down is that I think – I can’t think of a reason not to do it. It’s a great thing to do. It’s like ‘do you want to be in competition with a million web developers, or do you want to be in competition with zero web developers? [Chuckles] Niche down.

But to his or her point, it’s picking one is very hard. Thinking about it though, with people I coach, I coach some people who are working full time jobs and planning to go solo, and I coach other people who have been running long firms for a long time. And none of them have an easy time picking a niche. Some of them probably respect it – respect that it’s a good idea more so than others, but they still all have a really hard time picking one for a variety of reasons. As Philip Morgan says, the fear.

So I guess my feeling on that is that you should be trying to niche down immediately as soon as you are thinking about going solo. As soon as you're thinking about doing any kind of marketing, you’d be crazy not to position yourself in a very laser-focused way that you solve a particular expensive problem for a particular target market, and I can think of no reason not to do it, so I

guess my answer would be don’t wait. Be thinking about ‘I put out this fire for these people’.

And remember, this is an important point that, I think, both you Jonathan and Philip said when we had him on 2 weeks ago that the niching is a marketing thing. And so you can choose your niche. Choose something that’s both interesting to you that’s in demand. That’s not going to change the skills that you necessarily need. So you want to be a better Ruby, JavaScript, Python, database, C#, you name it – developer, but the niching is going to be ‘ok, what is the community a business is that’s really going to benefit from what I’m doing that I can say ‘I’m the guy to help you do X, Y, Z’.

Right. There's definite separation there, so hopefully, knowing that will make people feel like it’s less of a wrenching identity shift from going from, say, being a web developer to – we always use the same example – being a web developer for dentists. Or better yet, we solve all these problems for dentists and we happen to use our web development skills to do that, but that’s not how we market it. So knowing that that’s two separate things – how you market yourself and what you actually do can be early said, it’s not completely disconnected, but your daily work isn't going to change that much even if you niche your positioning way, way down.

Actually, I worked at HP. I didn’t work at Time Warner for about 8 months in New York. And I was helping all these different magazines – they're a part of Time Inc. to go online and do their websites. And I remember one particular meeting, and again, I was 25; I knew nothing; I certainly knew nothing of how to talk to various companies or corporate people. We were in a meeting with some magazine – I can’t remember which, and they said ‘well, can you do X, or Y, or Z?’ and I actually said the line in timing ‘oh yeah. The content is irrelevant [laughter]’. This multi-billion dollar corporation which basically was established because content is the thing that makes the money. People were pretty horrified by this statement.

And it’s true, I guess, as a developer you're like ‘who cares’, but the perception as the marketing and the niching that you're doing is say ‘I know you and I understand your needs, and so I can communicate directly with you’, that says a lot. And I did precisely the opposite thing that those folks in the room.

Yeah. That’s a great example. That’s a great example. It’s like so much about this kind of a job is 100% communication skills. I don’t think you could overstate it. Call it your bedside manner. It’s critical. And I think if you are aware of that, and you leverage that in your marketing or you take the same approach in your marketing to speak the language of your perspective customers instead of speaking the language of your colleagues that also do Ruby on Rails or whatever, then you're going to automatically be much more attractive to folks who were probably delving in to – or could be delving in to an area of their business that they're very uncomfortable with, don’t know what they're talking about, feel stupid talking about it, frankly, and every other aspect of their job, they are like the dude and then all of a sudden they have to talk to the web developer in front of their employees and they basically don’t know an API for an XML. And if you can hold their hand through that, it’s wildly valuable.

Another thing that’s helping me a little bit just the idea of you don’t actually have to pick the final niche you're going to live in forever. You can switch and what I've actually done recently or I’m going to do once I get not as busy, I decided ‘ok, I’m going to focus on a new niche’. And I first started ‘I’m going to work with e-commerce companies, and so did some research, I looked out a lot of the past clients I worked with before, what results I've got for them, the industries there and found like ‘ok, in the e-commerce stuff, I’m actually have a decent amount of experience with Shopify, and so define my niche one more step from e-commerce to e-commerce with Shopify.

And so you can do that especially if you're afraid of jumping in to something really, really deep. You can take one step at a time and work your way down based on experience, based on research you found, and even just based on the clients you get. And I think that’s a lower risk, lower commitment way of doing it. you might get little less results because you're not as focused, but it’s a nice thing especially if you're new to business, new to freelancing, and it’s like there's so many new things you're trying to learn that might be a way to constraint it a little bit.

Yeah. Philip gives the same advice and I agree that it’s a good way to transition is to just go down to one step. Don’t go down 4 steps all at once.

So at this point, we don’t have any questions from the chatroom, so do you guys have any – have you encountered any things lately that would be interesting to discuss, or maybe from – Jonathan, your mentees or – Eric, you just wrote that you have a question from your list?

Yeah. I got a bunch. I’m kind of – I think you were talking about earilier, Reuven, like it’s people email you questions, you slot that as blog post. I have this huge one I even have a couple surveys that go out all the time, and I got a lot of questions, but this one pretty specific, so it’s good. Basically, the question is ‘when do you suggest is an appropriate time to start billing when you're ramping up a project?’

So it’s basically along the lines of the project’s starting, but it’s like that early phase when stuff’s getting started up. If you're a developer maybe, or getting setup or setting up a server; if you're a writer, maybe you're getting some briefs and interviews and they're asking when do you start actually billing on the clock for that.

Oh, that was what I was going to ask. Does the person mean how much set up stuff should you charge for, or is he saying when should you send the invoice?

Yeah. I’m pretty sure they're like when does the clock start.

I basically give one free meeting with people where we set up a meeting where we talk and to introduce each other, introduce the problem, and then I send them a proposal, and then they call me on the phone and tell me that I’m expensive and we negotiate a little bit, and we are done. And then - we’re either done in a good sense and we continue and I go and the next time I bill them, or they say ‘forget about it’, and we’re done in that sense. But very rarely I’ll give them a second meeting, but only if they see incredible potential and some people who should’ve been in the first meeting were not and I’m in the neighborhood and on and on.

And by the way, I also – if it’s not obvious and not ambiguous at all, then I make it clear. I had a meeting with a company where I thought it was going to be an introductory meeting for lots of additional work, and I met with their database group, and we end up going to a lot of detail and I end up giving a lot of value, and then [inaudible] that was the end. So I emailed the boss and I said I want to bill for this, and he said ‘oh, that’s fine. Sure’. And that was that.

It sounds like the person that Eric’s – asking Eric the question is almost worried about billing for setting up their dev environment. Is it, Eric?

Yeah. And I've actually – I've seen the variance of this of like not actually writing code for the client. They were talking about features. ‘Should I bill for that?’

Oh, so my mistake. Yeah, you should bill for that [chuckles].

So there's a gray area, though – I agree that you should bill for it, but there is a gray area, and I think everyone who bills by the hour has been in this situation where they do an estimate, the project starts, they get in to up to their elbows in the code and they find something out that was not obvious before. There’s a surprise. They pull up in the drywall and the wiring is all from 1922 and the entire wiring in the house has to be replaced and ooops, we didn’t estimate that. We probably shouldn’t have turned down the wall because you can’t afford to do the whole job blah blah blah.

So there's this uncomfortable situation that stems from the fact that the whole project started based0 on an estimate, not a quote, and now work has been started, money has been spent, hours have been burned, and turns out that the estimate was way wrong, so you end up in the situation where you eat hours and it could be, to the point of the questions, it could be that you need to educate yourself about this thing that you stumbled across. You get into the middle of this Rails project and somebody’s got – there's got like a C library that somebody linked directly into that now you have to learn how to edit the C code to solve the problem. So do you charge for educating yourself about how to do that?

I feel like I’m not answering or I’m avoiding the question, but the whole thing is fundamentally flawed. You shouldn’t be billing for any of it. you should be saying ‘here’s how much it’s going to cost for this project to be complete, for these goals to be reached’, and it takes away all those questions about ‘should I bill for this, should I bill for that?’

Currently, not everybody’s just going to jump into fixed bids and they probably shouldn’t so I think, to Reuven’s point, you should explicitly say in your quote, ‘these are the types of things I’m going to bill you for’. If you're going to bill by the hour, you should be exposed about the kinds of things you're going to bill for, and that includes setting up your dev environment, then so be it. They probably don’t want to pay for that, they probably think your stuff should be setup. The question’s going to get answered one way or another; it’s better to ask the question before check starts getting written than after that check’s getting written because frankly, if you're billing by the hour, you probably should be getting paid to set up you dev environment because it’s for this client, otherwise, you’d have it set up. So in general, you need to make it clear ahead of time the kinds of things you're going to charge for and that would include that.

I don’t know. Eric probably has a totally different take on it.

Not totally different. I have one rule of thumb and it’s – like Reuven said, I have a – if we’re going to do one, maybe two sales calls, and it’s purely about sales and maybe an overview of the project like ‘oh, we’re going to do this feature by doing it this way, but we need this feature, we need that feature’, that’s for free. That’s part of the sales process. If it starts taking too long, then I push them ‘what do we need to have a scoping project to talk about this in more detail’.

But basically, for the project is if the work I’m doing delivers value, it’s basically billed. And so that could be I have to set up my dev environment for you because this is your project, it’s not like – I can’t just grab a Rails generator and use my editor and start on it. You have this other services you integrate with, I need this keys, this or that, and so by me setting it up makes me work efficiently. I

actually do different things with that now, so it’s actually – I set it up and I can share with other developers so the rest of the team actually gets value from it too. The big thing I see is if there's meeting or discussions about features, those are billed for because they actually adding value to the project. They might not be directly writing code, but it’s clarifying with the team what it’s doing, what the project supposed to be doing, how stuff should work. It’s basically education and training type thing.

And so, in the past, when I do hourly, I would start billing right away. The contract’s signed, ok we’re going to get started. There might be a few cases where I would comp them time if it’s like setup the [inaudible] but my laptop just screwed up. Like earlier, my sound was just all messed up – I wouldn’t bill for that. That’s on me. You would expect that I would have a laptop with functioning sound; that’s a baseline setup, I would say. But one thing is now that I do weekly billing, a lot of that’s gone out the window. They're billing for access to me during this time, and so whether I need to set it up or not, that’s the inconsequential to ‘I committed to these features. I’m going to get them done. There might be some additions or subtractions, but Monday through Friday, I’m working on your project, and if that is getting stuff set up, getting the test environment set up because it’s complex, so be it. You’ll know that on the Monday morning meeting’.

Yeah. The interesting dynamic there is that it’s on you to become more efficient, so if you can finish those weekly features in 2 days because you have a killer dev environment set up, or you invested a couple weeks last year creating a plugin that does exactly what they need, boom! all of a sudden, you're increasing your profit margin delivering exact same value faster and for the same amount of money where if you selling your hours, selling your labor, then you just never – you constantly have these questions. They used to come up all the time. Do we charge – when I billed by the hour, I did a lot of database programming, so it was one of those things where people be like ‘oh, you're going to charge us to do the data import from the old database to the new database?’ like ‘well, yeah’. ‘Isn't that just like a 5-minute operation?’ ‘No, it’s probably going to take a week to validate that it imported properly, we’re going from two different database types, different schemas, different underlying database engines, we need to validate that the data came across properly. There's a million things you have to do, and if that stuff’s not discussed early on, then it’s like ‘oh, well, we weren’t expecting that. We thought we were on track, but turns out we’re not’.

Or the other classic one is ‘we’ve got this 40 hours of work in front of you. Let’s say # database import migration of data from one database to a completely different database. You could do it like you could do some XML export from the first database, try and convert it to XML – sorry – to sequel queries and import it in the new database, or you could write a script that does it for you and then it really does only take 5 minutes. It validates things as it goes, and you just turn it on and it runs maybe for an hour, but it will only take you 5 minutes to do it, but it took you 10 hours to write the script.

Do you charge them for the script? What if you are going to open source the script or what if it’s an open source script that you found? In the end of the day, their data is migrated, but every single one of those examples takes a different amount of time. But my feeling is that you should charge the same amount of money because the result is the same and it’s on you to come up with a way to do it more quickly, more accurately, and with less – the least amount of risk, and if you're a great developer and you’ve got built this huge library of tools or you know where to find dependable tools, then that benefit accrues to you. But at the end of the day, the client still gets the data migration done, so I don’t feel like you should even be thinking about how long it takes you to do that kind of stuff.

Yeah. and that – the reverse fashion that bit me especially with Redmine stuff where I had several dozen of options to a hundred at the end different plugins like a client can come to me and I would depending on what they wanted, I might have had 20, sometimes even 80 or 90% of the code already written and tested just sitting in another plugin that I can take. And so I was billing hourly at the time, so a plugin might have been – might have been $5,000. If it was an hourly project might only be $500 because I have all that code, I just got to glue it together in a different configuration.

And so because of that, I would actually stress that in my sales process of ‘I already have this, therefore you should work with me’. So I’d win the project, but I’d actually # as much revenue out of it as if I would’ve # did it all from scratch. And it’s a balance.

Yeah. Billing by the hour incentivizes you to not get more efficient. There's no incentive to become more efficient, so you'll always be the same.

I’ll take – I don’t know – a third exception to that to some degree. I quoted a [inaudible] after that I feel like and it could be that subconsciously, it’s not the case at all. It could be like supposedly not the case. But in my billing by the hour for years, I've always felt ‘ok, I want to do this the fastest best way possible for my clients’ because they’ll give me new, better, more interesting problems that I’d rather work on as a classic engineer. I’d rather work on new problems than continue working an old one. But the majority of me realizes that under the surface, clearly, if something takes 10 hours instead of 5 hours, I’ll see it as ‘well, great, I fill more billable hours for the week, so that’s fantastic’. [Crosstalk]

You can charge more if you deliver it in 5 hours instead of 10. That should be more. That’s rush service. It’s like virtually, in all of these cases where we’re working for businesses who are – these aren’t just like fun side projects for people. These are businesses and time to market an opportunity cost or major factors.

So if somebody comes to me and says ‘we need this website ASAP’, and I said ‘ok, it’ll be 6 months, it’ll be $50,000. If you want it in 6 days, it’ll be $150,000’. Probably pick the 150,000 dollar one if I could snap my fingers and actually do that, if it was a credible claim that I could actually deliver that quickly with the equal level of quality, if they have the money, of course – maybe the numbers are exaggerated, but the concept is that if I had a tool that could do that for them and I only get to charge by the hour, I would be getting a tenth of what a hack developer could deliver in 6 months. Doesn’t make any sense whatsoever. It’s nuts. [Crosstalk]

My point is – you’ve mentioned earlier, you're incentivized to not get better and I think, for me, yeah they're incentive was to knock it faster and say creating a code for Redmine, but I still wanted to, and so I was actually giving up the extra income. I wasn’t taking that incentive. And I think if you're going to do that, if you're going to do hourly and continuously improve and all that, I think you really need to, like you said, either do fixed stuff or you need to be bumping your rates up a lot because it’s – if it takes you a tenth of the amount of time, in theory, you can charge almost the tenth of the price and the client should still be happy. The problem with hourly is when you start giving into the higher numbers, it’s a sticker shock of the rate and not actually of the total price.

Well, it’s not like – I mean, I was just speaking to a company and giving them, basically, an hourly quote as well. I said, “Look, I’m going to work on these days” and I probably should have thought of how to – well, they came to me and said ‘what would it be on an hourly basis for you to be tech support for us?’

So we figure something out, and they came to me and they said ‘well, you know, our budget is X’. So fine, fine, for now I’m actually pretty happy with what they're paying me so that’s ok, but I do realize that because my billability is working a lot to them and my knowledge and ability to help them out on a product that's probably making them millions is worth a lot to them. So yeah. But there was definitely the sticker shock of ‘oh my god, you charge that much per hour?’

Yeah. there's a certain – it’s weird psychology – I’m glad you guys brought up the hourly rate because sometimes I get pushed back when I say to people that you're not incentivized to actually get better and people say ‘well, yeah, but if I’m better I can raise my rates’, but there's this weird psychological thing where people are conditioned to expect a certain range of fairness in prices for particular things.

So if you said to somebody that I charge $2,000 an hour, that would be the most they’ve ever heard of any professional services person charging per hour probably in their entire lives and they would be offended that you had the gall to set your rates at $2,000 an hour. But people pay me $2,000 per hour to do a talk, a 60-minute talk, but they're not paying for my hour, they're paying for the talk. So the concept of what they're paying for and what a reasonable price is for, say, a book. A book doesn’t cost a thousand dollars. A mass market paperback doesn’t cost a thousand dollars. It doesn’t even cost $50.

People have this conditioned expectation for how much a thing should cost. And an hour of someone’s labor that comes in over $300 starts to put them in this realm of jerk [chuckles].

You can even divide that up because if you were to say to someone ‘I need a really great lawyer’ and someone says ‘I have a great lawyer for you should just know it’s expensive, it’s going to be $500 an hour. And everyone is going to start to roll their eyes, but they're like ‘well, that’s a really amazing lawyer’s cost’. But if you say to someone ‘I really need a great software engineer’, and someone recommends a software engineer who’s $500 an hour, they're going to be like ‘get out of here. I'm not going to talk to you. That’s not going to happen’.

Right. But no one goes and takes a one step further to say ‘then how long it’s going to take me to do this’, and if the answer is 2 hours, all of a sudden, they're like ‘oh’.

But the reason I brought it up is because in my experience, you can’t raise your rates, hourly rates, to a level that is commensurate with your increased efficiency and also acceptable to any buyer. It can’t happen because your rates would be like 5, $600 in an hour for web design. No one will do it. You’ll never make a sale.

And the moment that effectively – the moment is effectively productized fixed bid and people say ‘ok, I’m paying X and getting Y’, then psychologically at least, they don’t think it through the hours and that’s not – basically, they were willing to accept it more; is that what you're saying?

Yeah because having a fixed bid forces them to release their pre-conceived notion about how this type of work is billed out and actually focus on the important thing, which is results that they're hoping to gain. And usually, they have a really poor, fuzzy idea of that. Someone just said ‘we need a new website’, and so they said they called me or whatever, and they don’t even know what the goals are. So you have to figure out what those things are, get a sense of what it’s worth, and it could be after you do that that you say ‘I can’t deliver. For the amount of money I’m going to charge you, you shouldn’t hire me because you guys are going to get nothing out of this’.

But hopefully, which happens more often, is that you say ‘oh yeah, you guys are going to benefit drastically from this. You got this e-commerce website that doesn’t work on mobile at all. I can see your bounce rate at mobile is over 80%. You're getting zero sales on mobile, and I can have this thing fixed in under a week so that that bounce rate drops like crazy, and all of sudden, you're getting sales on mobile’. They're never going to ask me how many hours – obviously, it’s going to take me less than probably 40 or 80 hours – they never get into that math of like ‘who cares. I don’t care how much work it’s going to take me really. I care that it’s done well and quickly and it’s effective’.

And once you push into that zone of ‘forget about my hours, let’s talk about you. Let’s talk about your project. let’s talk about what you're trying to get out of this’, and all of a sudden, the prices – maybe when you divide it out, I end up making a hundred dollars an hour. But no one cares.

We should definitely do a show about how you take a fuzzy idea and turn it into something that you can then come up with a fixed bid for because I think that’s something that I’m still missing. I want to get to that point where I say to people ‘ok, here's the fixed price and I know that’s going to bring me in much more money, but I – so many people come to me and say, as you said, ‘I want a website’, and getting from ‘I want a website’ to ‘I want this A, B, and C, and I know how much time it will take me’ and that’s I can charge them and not lose my shirt in the process. That would be simple to discuss.

One word question. Why? Any website. Why? ‘Well, because my boss told me to’. You had better reason than that why your boss tells you to do it. I don’t want to get into a situation where you guys are going to be disappointed that you hired me so I need to know that what I’m going to do for you is going to actually make your business better, so we need to understand why we’re doing it. And you just talk them out of hiring you. And eventually, you'll either get to some kind of metric that you can attach a rough dollar amount to, or you won’t. And if you don’t, then don’t take the gig because you're just setting yourself up for failure because you can’t succeed if you don’t know where the finish line is.

So you have to find out what it is. That’s another thing I don’t want about hourly billing is it allows everyone to get to work. ‘Get to work. We just need to start immediately. What’s your hourly? Ok. Just start and we’ll just start billing this every week’, and nobody’s ever had the conversation about why you're doing it or what the goal is and everybody ends up focusing on these picking detail of the design or some bits of the architecture that’s potentially irrelevant because nobody knows where the finish line is. There is just running around in circles really fast.

Anyway, I don’t have this turn into me ranting about hourly billing, but I [crosstalk]

No no no. It’s fine. It’s fine. [Crosstalk]

Yeah. Pretty much my mouth opens and turns into a rant on hourly billing.

Alright. So I think we’ll do – do you guys have any picks this week? Eric, any picks? No?

My pick is I've been working with my client. That’s about it.

Huh. Excuses, excuses. Jonathan?

Yeah. I have one to send people to that so – we talked earlier about how something will happen and somebody asks you a question or whatever posted in a blog post pops out. So that happened to me today. last week, I sent out a retainer quote, a quote for a retainer for client that was like a monthly retainer type of thing, and today they gave me a yes, verbally yesterday, so – I turned around and took the quote and I anonymized it, and took all of the customer stuff out of it to post to my chatroom and a couple of other groups on Facebook, so that people can see an example how you would do a kind of quote where you're focusing on higher level things and outcomes more so than ‘I’m going to do this and charge $150 an hour for it’.

So if you want to go to expensiveproblem.com and sign up for the mailing list there, you’ll get a link to the PDF download and you can check it out. It’s a 5-page proposal template for a retainer type of gigs.

That would be nice. So I have a pick also, but it’s a – it’s actually a frivolous one. I've just discovered, just recently I've rediscovered it: existentialcomics.com. if you cover a philosophy comic about the inevitable anguish of living a brief life in an absurd world also jokes. And you don’t have to know very much about philosophy too, I think, enjoy this and I would say it’s mindless bond, but it’s actually somewhat my mindful fun.

Alright, well I think we are done for this month’s Q & A. thanks to everyone who participated in the chat asking questions sending to us. Thanks to Eric and Jonathan, and we will be back next week with a non-live show.