For some reason, a greater than average number of my friends, acquaintances, comrades and cohorts in the creative fields have a problem with money.
Specifically, they seem to have problems justifying the value of their services, establishing a fair price and finally, collecting the money when the work is done.
Years of being bamboozled, lied to, taken advantage of and generally screwed by clients and contractors alike taught me some valuable lessons.
Whether you are a distinguished veteran of the client wars or just launching a career in the creative arena, perhaps you will find a hint, tip or suggestion here to help improve your cash flow.
Do any of the following sound familiar?
- Let’s get Uncle Ernie to photograph Suzie’s wedding. He’s got that fancy camera outfit and his pictures from Peru were pretty good.
- Can we get Ted’s kid to build the Website? I heard he did one for his Boy Scout™ troop.
- That TV ad said anyone can build a Website with their easy to use templates. George at the front desk doesn’t have much to do, get him to make us a Website!
- I was gonna have my kid do it, but she’s got exams coming up.
- A Hundred Dollars an hour? How can you charge that much? My wife has a copy of Photo Shop,
- I know I owe you the money, but … [our client hasn’t paid us yet] … [we’ve had a bad month] … [our accountant has been sick] … [the project got cancelled] … [my dog ate your invoice] … [We’re sorry, the number you have dialed has been disconnected] … [insert excuse of the day here].
Have you ever had a prospect refuse your bid, and then use your proposal documents as a foundation for building their Website “on the cheap?”
If you answered yes to one or more of the above, you might find a helpful tip or two here.
If none of the above sound familiar, they will as soon as you start dealing with people in the real world.
Can You Identify?
Prospect: “I’ve looked over your suggestions for the logo and website designs, but I’m afraid we can’t spend this amount of money right now. If you’ll do this one for peanuts we’ll have a real carrot for you next time.”
Designer: “Well Mr. Anderson, I’m afraid I can’t trim it any more than I have, I’m already giving you a special new-client discount.”
Prospect: Well, that’s OK, I didn’t like your ideas very much anyway.
[Three Months Pass]
Designer: [to self] “Hmmm, I wonder if Anderson Pickle Packing ever found a designer? Let.s see … http:// ….”
Designer: [out-loud, outraged, bangs fist on keyboard] “That’s My %#*!@^$ Design!”
[ALTERNATE ENDING 1]
(Designer accepts offer to do the work at a deep discount, hoping for better paying work in the future.)
Prospect: (now Client) “That’s great, I really like your ideas!”
Designer: Completes Work, Submits Invoice.
[Three Months Pass]
Client: (was Prospect) “I know I owe you the money, but … [our client hasn’t paid us yet] … [we’ve had a bad month] … [our accountant has been sick] … [the project got cancelled] … [I’ve meant to call you, we’re not really pleased with] … [I’ll have to speak to the committee] … [my dog ate your invoice] … [insert excuse of the day here] and we really need this update right away.
Recording: “We’re sorry, the number you have dialed has been disconnected…”
Designer: [out-loud, outraged, bangs fist on keyboard] “That’s My %#*!@^$ Money!”
It’s Business, Don’t Take it Personally!
The “creative mind” and “logical or business mind” are stereotypically at odds with one another. My experiences show that this stereotype has some basis in fact.
I’ve heard a number of friends and associates complain that they can create, or they can tend to the dirty underbelly of their business, but they can’t do both, or at least not well.
“Business people,” generally want to keep their processes and methods to themselves. “Technical and creative people,” however, often delight in sharing their experience, expertise and knowledge with their clients and peers alike. Online communities are merely one example in which valuable advice and counsel is freely shared.
While most [decent] people would never think of calling a plumber friend aside at a dinner party to look at their pipes, they seldom seem to mind asking, “could you take a look at my son’s computer, he’s having trouble updating my company’s Website.”
If their intent is not to get “something for nothing” I’m usually willing to help out. “Could you tell me why my ski vacation pictures are so dark?” is perfectly acceptable at a dinner party, “Could you help me fix the pictures Uncle Ernie took at Suzie’s wedding, they’re too dark?” however, gets: “Bring the original files by my office. We charge $5-10 each for simple corrections, but I’d want my artist to look at them before I make any promises about what can be done.”
You will only gain the respect of your clients and/or prospects by presenting yourself as a professional. It’s business for them, it should be for you.
Beware the Dreaded “Free” Word!
When you are starting out and need real-world experience, portfolio pieces and the all-important “contacts” it’s tempting to offer free services in return for the experience and exposure.
In a “formal” internship program, a person is often not paid for their services in money. They will, however, be compensated in the form of scholastic credits, on-the-job training, mentorship and the opportunity to make those all-important contacts.
Legitimate internship programs aside, however, free is a very bad idea. You have to, “start out as you intend to continue.”
Unless you are a complete newbie to the business you must banish the concept of “free” from your universe, however, to paraphrase a past President, “That depends on what ‘free’ means.”
We’ve all had to do the occasional “shoot the boss’ daughter’s wedding because you spent a week on his boat,” or something similar “freebie.”
I photographed the maiden voyage of a new airliner for a Spanish airline at no charge. I was, however, handed a fist full of first class ticket vouchers anywhere on their route. As a bonus, I met informally, on a first name basis, with some very powerful people who opened a number of doors.
The point is, this was not free work, it was barter. I gave something of value in return for something of equal or greater value.
But If You Must Give It Away or Do It Cheap …
Make certain that there is a clear reason for providing a discount or doing ‘pro-bono’ work, i.e. “I did the Rotary Club’s website, and now I have access to all of their members.” (Although in this example case, I’d prefer to charge the Rotary Club, and then offer them a ‘spiff’ for any members who become clients.)
I have found that trade associations can be a source of bread and butter, and often offer them real “added value” when I receive work from their member companies. Trade associations are an excellent source of leads, but do your research first. Some trade associations may already be offering the services that you are trying to sell to their members. (Websites, printing, etc.)
Choose your “free or discounted” client from among a carefully culled list of deserving charities, civic associations and local groups. Keep in mind that many national charities and non-profits have huge marketing budgets, and giving them free work is cutting your own throat.
Even when working free or at a discount you should invoice everything at your full rate. While [for this one “internship”] you may show a 100% discount [free] as the amount actually due, you are still conveying the value of your work.
Depending on the job and client I might offer discounts or credits for:
- Billing against a retainer
- Prompt payment
- New client referrals
- Barter of valuable goods or services
In other words, there should be no “free” work. Any product or service provided to a client must result in a concrete benefit to you.
“Free” work should always be done under contract. Since we can assume that the only reason to do free work is to gain exposure and experience, you might as well get the concept of a contract under your belt in the process.
WIFM – What’s In it For Me?
Whenever you think about ‘cutting a deal’ or otherwise compromising your base rate, ask the all-important question, “what’s in it for me?” If it’s a true barter situation in which you receive value, then the question is answered.
Does this sound selfish and mercenary? Yes, it does, and it is. mercenary is what will put food on your table and give your children a better life
Only Drug Dealers Offer the First One Free
I hear “but if you do this one job, there will be a million others coming that will pay,” far too often.
In the case of the aforementioned “Do the first job cheap or free and we’ll give you a lot more,” it would be far better to offer them a discount on their second and subsequent work than show that you don’t value your work by giving it away.
It’s better to offer them a money back guarantee than work free. If they are not satisfied, give them back their money and take back all of your work. Do not allow them to continue using it if they have said it isn’t satisfactory. Remember, you own the copyrights!
It’s A Business, Treat It As Such.
You Do have a Budget Don’t You?
Any value that you give to clients and/or prospects that is not billed to them must be billed to someone. In this case, that “someone” is your marketing and/or support budget.
If you can’t tell me what your marketing and support budget is, invest in a copy of Quick Books or something similar and come back when you are set up to run a real business.
Yes, that was harsh, but tough love is occasionally necessary.
Put It In Writing and Get it In Writing
“Verbal agreements are only worth the paper upon which they are written.”
A contract and statement of work are essential elements in any professional endeavor.
The Statement of Work
“If you don’t know where you are going, you’ll never know when you get there.”
This is the first, and most important document you will need. The Statement of Work (SOW) is developed in two stages, preliminary and final.
The preliminary statement of work is what a lot of designers and artists scribble some on the back of a file folder and use to make a “guestimate” to float by the client. “One Website = $7,500”
Your “worksheet” for the preliminary SOW should be a neat, understandable document that you can share with the client or prospect. It doesn’t have to be very detailed or “granular” at this point, just sufficient to make sure everyone’s on the same page.
Scope of Work and Estimated Milestone List for Typical Website
If you’ve carefully and accurately researched and prepared the preliminary estimate, your final price should be at or below that estimate. Remember, the only surprises should be pleasant ones.
The SOW for a wedding shoot could be similar in scope, if not detail
|200 Ea||Invitations – #5400VE With Inner & Outer Envelopes and Tissue Insert||By Aug 11|
|1 Ea||Wedding Program layout and production with 100 copies||By Nov 4|
|2 Hrs||At Church – Photographer and Assistant||Nov 11 – 11:30am-1:30pm|
|3 Hrs||At Reception – Photographer Only||Nov 11 – 1:30pm-4:30pm|
|65 Mi||Travel (est)||Nov 11|
|1 Ea||Digital Photo Album on CD (See Brochure)||By Nov 18|
|1 Ea||Digital Photo Album Online (See Brochure)||By Nov 14|
|3 Ea||20 x 24 Prints on Canvas – customer’s choice of image(s)||By Dec 11|
The preliminary statement of work should include estimated milestones for the completion of key phases of the project. It should be understood that this is a preliminary estimate only, but as long as there is no significant deviation from it, that their cost should not exceed the estimated amount.
In the case of portraits, a wedding shoot, commercial, straight photo and similar “package deals,” the initial SOW may be sufficiently detailed to serve as a final.
Once the client agrees on the record to the preliminary scope of work and price, you are justified in taking the time to prepare a more detailed, itemized Final Scope of Work. This is a more finely detailed list of what you are going to do, and how you intend to do it. This will eventually morph into your “to do” list for the project, so make certain that it is as complete and detailed as possible.
“Cost Not To Exceed” Works for Me
Everybody likes pleasant surprises, and your project arriving under budget or ahead of schedule can be one of them.
One reason I spend so much time on my detailed statement of work is to arrive at an accurate estimate. Depending on the client and situation I do usually add some “contingency time” to the estimate for the little things we all know will pop up in any mission of any size.
Having an accurate estimate, based on research and experience also allows me to guarantee that the project cost will not exceed the estimate. When possible, I attempt to invoice all work below the estimate. Even if it is just a few dollars under, it’s still a pleasant surprise for the client.
When my actual billing has, on occasion, been slightly above or even exactly on the original estimate I’ll take off a few dollars, just to make sure it comes in under budget. Later I can do an analysis of why the billing was above the estimate and adjust my procedures accordingly.
Have them Put Their Money Where Their Mouth Is.
Present the prospect/client with a contract incorporating the final scope of work along with an invoice for the deposit / retainer.
NOTE: It is important that your proposal documents include a copyright notice, and a clear indication that all submitted materials remain your exclusive property. I learned that the hard way when a would-be client loved my mission statement and site outline so much that he gave them to a local “Websites R Us” discount template mill.
Never Work On Your Own Dime
– Collect a Retainer
I’ve taken a lot of cues from doctors, lawyers, accountants and other professionals. When you walk into their offices one of the first things that you are likely to hear is “How do you intend to settle your account?”
WalMart™ won’t let you walk out with merchandise if you “forgot your credit card,” are “a little short this month,” or even if “you haven’t been paid yet.”
Depending on the size of the job and my experience with the client, I collect from 25% to 50% of the quoted price along with the notice to proceed. Periodically I send the client an invoice against their retainer for billable work performed.
When the amount in the retainer begins to dwindle, I send an invoice for the next payment, and so on. The last payment is due on completion.
Periodic reviews help keep large projects on-track.
Billing against a retainer also provides a good incentive and a logical opportunity to collect client feedback. These “Interim Invoices” are an excellent time to check and discuss work performed to date, and make sure that the mission is still on-track.
I Don’t Mind Being a Pain in the Ass
My success depends on the success of my clients. I always emphasize the “partnership” aspect of the relationship. As such I let the client or prospect know up-front that I will not hesitate to pester the crap out of them for what I need to get our mission done. I will call them on the golf course, in a hotel room or airport if need be.
Actual conversation: “Let me know your tee-time and I’ll meet you in the club room with a laptop. I’ll buy you a beer while you approve the changes to the logo. There’s a penalty if the printer doesn’t get it by Monday!”
BTW: The time and miles spent prying information from the client are billed against the retainer. The cost of the beer is a legitimate, deductible business entertainment expense.
Give the client an incentive to pay.
You don’t need an expensive lawyer or a guy named Guido with a baseball bat to get clients to pay – you merely need to make it worth their while.
Some airlines have published fares of $1,500 for a coach seat. Depending on certain conditions being met, however, very few passengers actually pay the full published fare.
Depending on the job and client I may offer discounts for:
- Bill against retainer
- Net 10 Day payment
- Net 5 Day payment
- Direct Deposit or PayPal Payment
Some companies have policies requiring that all prompt payment discounts be taken if offered. Raise your base rate 10% and offer a 10% discount for Ten day payment.
I do not offer a “new client” discount. I don’t want to convey that new clients are any more or less important than long-time customers.
New clients do, however, receive a number of “value added,” but unbilled services such as help with their mission statement, domain name choices, general hand-holding, education and so on. The cost for these “gratis” services, however, is no more than that spent on our customary customer support services offered all clients.
Educate Your Clients and Prospects in What You Do
Make sure that your client or prospect knows and understands the value that you are adding to their process, service or product.
Also, make certain that your client knows what you will be needing from them. I provide new Web development clients with a couple of URLs for “suggested” and “required” reading.
- Strategic Web Design: http://www.theegglestongroup.com/writing/strat_design.php
Guidelines for a Successful, Not Sucky Website:http://www.theegglestongroup.com/writing/webtips.php
- Writing for the Web and Presentations: http://tseggleston.com/business/writing-for-the-web-and-presentations
These short articles emphasize that there is more to the design process than drawing pretty pictures. They also point out a few the intimidating number of technical and procedural standards, guidelines pitfalls and ‘gotchas’ that must be taken into consideration to ensure success. Many of these are the subtle design and marketing considerations that an amateur is unlikely to consider.
Toxic Client Warning Signs Include:
- A Hundred Dollars an hour? How can you charge that much? My wife has Photo Shop,
- You: “The grammar and spelling are wrong!” … Client Contact: “That’s the way the boss wants it!
- I don’t know what I want, but I know that’s not it?
- But the president of the company likes Red text on a Green background!
- The committee hasn’t been able to decide on an exact shade of grey for the title.
- Anything else with the word “committee” in it.
Remember, You Are a Professional (Aren’t You?)
When you present and/or represent yourself as a “professional” you assume many responsibilities. These assumed duties are one of the features distinguishing the professional from “Uncle Ernie with the fancy camera,” and Bettie Sue who built a website for the church choir.
A professional will have backup equipment, staff and contingency plans. When Uncle Ernie’s batteries die, or he drops his fancy camera into the punchbowl, is there a spare? If he gets the flu at the last minute does he have a qualified and reliable stand-in ready to do the job?
When Bettie Sue’s computer blows up [from the same virus that she just sent to the cheap skate client] the day before the job is supposed to go online or to print, the only accountability and serious consequences are to the cheap skate client. Little Bettie Sue was just “doing a favor for her BFF’s father.
Unlike a working professional, Bettie Sue probably doesn’t have the backup computers, printers, network connections, software and a regular system backup schedule required when you earn your living using them. When a client hires you as a professional, they should expect dependability.
Uncle Ernie may take beautiful photos, and Bettie Sue might be an extremely talented designer, but how well do they understand the complexities of their “client’s” business processes, mission statement and target market?
Grubbing for Food at $100 an Hour
“A hundred bucks an hour … that’s like $4,000 a week (think … think…)
WOW, that’s over Two Hundred Grand a Year!”
Reality Check – (For this I quit flipping burgers?)
|Federal, State and Local Taxes, Medicare and Licenses @ 35% =||$35.00|
|Social Security @ 14%||$14.00|
|$100 – $14 – $35||$51/Hr|
|With the above in mind, consider that approximately 50% of your time may be spent in non-billable work, marketing, continuing education, etc. For a freelancer or contractor billing $100/hour, their annual personal income could be …|
|2,080 Hours Per Year at 40 Hours Per Week
Less 50% non-billable time = 2,080 – 1,040 = 1,040 hours billable time * $51/Hr
|Less another 7,500 per year for hardware and software updates||$45,540/year|
|Less $7,500 per year for transportation, subscriptions, memberships, continuing education, accountants, lawyers and other costs of doing business||$38,040/year|
|Less $4,800 per year for business and health insurance||$33,240/year|
That’s hardly obscene!
Give More Than You Promise
If you aren’t doing more than you are getting paid for, why should you get paid any more than you are?
Go the Extra Mile. OK, so it’s cliché, but that doesn’t mean that it has no merit.
When you ring your own bell, it chimes somewhere between ego and marketing. When a client or associate slaps your clapper, however, it resonates into opportunity. Word of mouth, coupled with a ruthless exploitation of your contacts is often worth far more than a slick, expensive ad campaign.