Archive for the ‘selling’ Category
Today’s final post is a letter which I dearly wish I could send back in time to myself in the past; a younger me from ten years ago when I first made the leap from permanent employment status to Freelancer. I think it will be useful to other freelancers who are either just starting out, or are struggling.
Without any further delay or waffle…
Dear younger and more inexperienced me,
As you read this, you will be just starting out freelancing. It’s a scary experience. There is nobody to hold your hand, or guide you, or give you advice. At least, I know it seems this way. But I wanted to drop you a quick line to reassure you about a few things. Plus I wanted to include some really good advice, which will stop you making some silly and expensive mistakes.
It may seem that you are own your own, but there are a lot of great resources out there. The web is full of freelancers who have gone through what you are going through, and some people have been kind enough to write those experiences down in books or web blogs (such as this one) – all it takes is for you to take the effort to read them, understand them, and follow the advice. But remember, if you don’t bother looking, or take that advice, and you make the mistakes other are trying to help you avoid – then there is nobody to blame than yourself.
I am sorry to say that there will be hard times, and tough times, times full of worry when you wont be able to sleep at night, times of self doubt, and times where things seem very unfair. All freelancers and small business owners go through this, but at the end of the day, you will do OK. Anybody who makes the effort to rise above the average, who has put in the hard work, and uses the resources that are out there will do OK – better than OK in fact. In the end, choosing a freelance life will be one of the best decisions you will ever make.
But there are things that will help you on your way. Dear younger me, please listen to these, because these are nuggets of wisdom from years of experience. These tips will save you time, money, effort, and will make the whole thing so much more enjoyable. They will also allow you to rise above the troubling times.
My advice to you as you start out freelancing is:
- When times seem tough, don’t sweat the small stuff. If things seem unfair – that’s because they are – nobody ever said life was going to be a fair game. Either accept those things as unfair and move on, or change them. But don’t lose sleep about the small or unfair things
- Build up your list of supporters from the start. Have a good bank manager who you can contact whenever you want, an accountant who will explain things to you in detail, and make sure your partner (wife/husband) is included in everything you do
- Do not let the accountant run your finances. Keep everything close. Don’t let the accountant charge you too much or have your accounts vanish in to a black hole. Instead, use online accounting from day one (the accountant should be there to sign off the accounts and save your money). Having a clear picture of your accounts and cash flow every moment is key not only in making decisions, but allowing you to sleep at night.
- Know what you are doing it all for. Have a set of goals, and review them regularly. Get hold of a copy of the success principles, and read it – twice a year. It’s the best book on the planet! Trust me on that
- Do not waste effort trying to keep everybody up to date on project progress – you will end up stressing about projects and being overworked. Instead, invest in a cloud based project management system – the moment you do, your business world will change in leaps and bounds. You will never look back
- Don’t chase the money. Customers will try to take you in directions you are not prepared to go. It’s ok to say no if the work does not interest you, is not inline with what you want to do, or how you picture your small company. Be strong with customers.
- Don’t be scared to take on work involving skills you don’t have. Whilst you will be reluctant to do this initially, eventually you will come to realise that this will lead to you growing in skills and confidence, which will make your time more valuable.
- Invest in time management tools. Your time is money, so use tools like Evernote to keep track of everything you do and create, and re-use it over and over again. When you start doing this, you will see your worth grow.
- Get everything down on paper – simple terms, agreements and contracts – and get them signed. This will get you out of more problems than you could possibly imagine.
- And get a mentor. Approach your old bosses, or a local mentoring group, and become accountable. It’s also a great way to make new friends and stay in touch with what is happening ion the business world.
Younger me, its important to remember to enjoy the ride. Yes, times will be tough, customers nasty, and sometimes money will be tight – but nether the less, enjoy the ride. Getting where ever you are going is half the fun.
A more experienced Me
And that’s It!!
At the start of 2012, I said that this blog would finished at the end of 2012 – and as I type this, it’s December 2012. So that’s it – the blog is done. There is no more.
Dear reader, whoever you are, I really hope that you have found this blog useful. I have found it fun to create, and get my thoughts, systems, and processes down on (electronic) paper. I hope that you have gained something from reading my advice.
My advice does work. I am not perfect, I do not run the perfect company, I make as many mistakes as any other person out there, but my company has grown year in and year out using the tips I have written down. Most of my advice comes from people who are far more experienced and successful than me – so if any of my advice, or systems I describe feel right to you – give them a try – see if they will help you grow your own company.
As I sign off from my blog, I wish you dear reader well. I hope your company grows as you want it to, and I hope to meet you in the real world at some point.
As for me, I will continue on with growing my business, heading towards my goals, but now without the need to document it here. This blog will remain on the net until the end of 2013, at which time it will then be consigned to the great internet dustbin.
Goodbye and good luck.
Author of this Web site , Freelancer, Small Business Owner and passionate goal setter/achiever
December 20th, 2012.
In the penultimate entry in my Freelancing and Small Business Blog, I would like to return to the subject of quotations (or proposals). Having spent the last week sending out a dozen or so quotations, I have been reviewing my quotation template to make sure it is up to speed.
Quotation or proposal templates are great; they provide a base format for providing your prospects with estimates for your work, whilst reducing the amount of effort needed to put them together, and at the same time ensuring that no important element is forgotten (easily done when churning out multiple quotations).
My own template is in the form of two word documents – one called “Quotation Template – Basic” and “Quotation Template – Full Proposal”. The two versions carry almost the same elements, it’s just that the Basic version wording is cut down to a minimum whilst the full proposal has more details, more examples and provides more information.
As an example of the differences between the two versions, the “basic” version has a section called “How we work” which says (in a nutshell), “here is the quote, you order, we confirm order and delivery, we do work, we deliver, you pay”. The proposal has multiple paragraphs about all of this, but includes breaking the project into stages, use of my on-line project management system, staged payments, etc. In both formats, the text is pretty set, and very rarely do I need to amend these sorts of text blocks for a new quotation.
Which brings me to the subject of todays (almost last) post….
10 Things that your quotations may be missing
So as part of my review of my templates, I checked that my quotation templates covered in some way these important but often forgotten pieces of information that a client may need before raising an order:
- Currency – Let’s start with an obvious one, the currency of the quotation. It doesn’t matter if you use a £, $ or € symbol in the prices or state explicitly “All prices are in British Pounds”. A lot of companies are multinational, so prices can get confused as they move around.
- When can you start the work – Rather than putting in a specific date (and so making the quote invalid once the date is reached), it’s better to put something generic like “Generally work can be started within 4 weeks of an order/payment being received. But the exact date will be specified upon order confirmation”
- When the job should be complete – This will vary from quotation to quotation (unless you provide the exact same service each and every time), so you just need to check you have a heading or note for this area – and cover it when you put the quotation together in the format “…and will take approximately 7 weeks to complete”
- How long is the quote valid for – Your prices will change (I hope) from time to time so it’s no good your prospects trying to order a 4 year old quote expecting the same prices. My own templates state that “This quotation is valid up to the first day of September following the quotation date at which time we perform an annual price review. After the 1st September, the prices in the quotation may need review before an order can be accepted”
- Does it affect any support arrangements including cost – I have some customers who pay me a support and maintenance payment each year. For these customers, I have a clause (which I remove for non S&M customers) which says if/how it effects this years or next year’s support.
- Does it need any up front actions by the client- payment, hardware, specs, etc – Be clear as part of the quotation what is needed in addition to the order for work to start.
- Who owns the changes, code, designs – It saves the customer having to ask or make assumptions – if making designs, have template text which says who owns the changes, designs, code, files both before and after payment.
- When will you expect payment – In my quotation templates, I include a summary of my terms and conditions, which includes my payment terms, ownership, late payment penalties and other information. Don’t wait till the time of invoice to tell them what your payment terms will be.
- You have the right to reject the order – This may sound odd, but I have a sentence which states in a fluffy way, that I have the right to reject the order. Just because I quote and they raise an order, does not mean I always want to do the work. I may have fallen out with the customer (lots of bad payments), have more important work to do, or am no longer capable of doing the work (2 broken arms?!?).
- What you need to start work – The final thing worth adding to the very last part of your quotation template is the call to action – or what is the next action that you need in order for work to start. Be explicit, even if you have said it earlier in the quotation. Such as “Thank you for the opportunity to bid for this work. In order for me to get started, please send me a bundle of cash as soon as possible” (or whatever your next action is).
There I was; with an email landing in my inbox saying that they wanted me to provide services, there was the purchase order number, there was the day rate we had agreed, lets get cracking. And I said no.
I thought it was worth sharing this story – in case you ever find yourself in the same position.
The history with the prospect is not complex. They had found my company via a Google web search, I had gone and visited them, we had talked terms, agreed rates, and then the emailed order arrived.
Trouble with my Gut
Now, I could say there was something wrong with the prospect. I could say that they tried to beat my rate down or demand too much bang for their buck. But no. The problem was with me – or to be more specific, it was my gut.
The logic of wanting to earn money and have a new customer was telling me to take the work, but my gut said… something was not right.
I could not put my finger on it. I have never had the bad feeling twinges about a prospect that I was getting about this one. Not ever!
I discussed the situation with my wife and some business friends, and when they asked me why I didn’t want to work with the prospect, all I could say was that it didn’t feel right.
I even tweeted my worries:
Jaffa Brown ?@JaffaBrown
Today, i am having a hard time deciding whether to take on a prospect as a new client. Something seems wrong, & my gut says No, run away.
And got a great reply from one of my twitter friends:
@idea15webdesign The measure of your business’s quality isn’t the projects you take on, but the projects you turn away.
Confirming and attempted work around
So for the next day or two, I worked with the prospect to try and work out what was wrong. But as soon as I started to talk about working practices (rather than the work to be done or the day rate), it threw up even more concerns.
They started talking about being available for out of hours phone calls, free consultations, multiple levels of approval for work, and paying by the day with full record keeping. The worries started to crystallize. My gut feelings maybe were making me more weary than I should have been, or see problems which were not really there, but every moment the sense not to work with them grew.
In the end, I sent them a very polite email in reply to their order of work saying “Sorry to disappoint, but…..” with a few reasons why I could not work for them. At the end of the email, I said “For these reasons, I feel that it would not be prudent for us to form a working relationship at this time. However, if you are still looking for assistance, I would be happy to suggest some alternative freelancers who could assist you”.
Once I pressed send on the email, I honestly felt so much better.
The take away
Let me be straight; I may have got this very wrong. It may be that the prospect would have been a great customer, caused me no problems, would have paid their bills, and everything would have been great. But, my gut said something was wrong. Call it gut instinct, sixth sense, sub-conscious decision making or a guardian angel, but whatever it was, it was shouting to get out of there, and out of there I got.
As business owners, it is far too easy to say yes when trying to win new business or earn money, only to find that we have taken on the customer from hell which will cause us sleepiness nights, grief and lost money.
My advice for fellow freelancers, contractors and small business owners is: If in doubt, try and work the doubts out. But if at the end of the day, your gut or heart has concerns, just say no. Saying No is not just a decision which is exclusive to the customers, we freelancers have the right to say No as well if it’s the right decision.
Once an initial project has been completed for a customer, the project invoice raised and the hand over done, it does not necessarily mean that your relationship with a customer is over. In addition to staying in touch in the hope of future sales and new projects, one thing well worth considering is arranging a Support and Maintenance contract with the customer.
There is no right or wrong way of selling Support and Maintenance. Sometimes, I will mention it during the prospecting stage (“of course, once the project is over, happy to discuss the support of the system”) or sometimes I will mention it on project completion (“So, that’s all done. Now are you happy to support the system in the future, or will you need support going forward?”)
Charging Support and Maintenance can be the icing on the cake of a project. Once the project is complete, the customer pays you an annual support payment upfront, and in return, you agree to fix any problems that come, up, answer questions etc, without further charge for the year.
Think of support and maintenance (S&M) as an insurance policy taken out by your customer for the year ahead.
What to charge for Support
Within an IT industry (other industries will vary), the going rate of support charges can range from anything from 10% to 20% of the original delivery cost. Typically, 15% is viewed as ‘fair’ – so this is the amount I generally try to aim for – charging 15% of the original project development cost per year. Sometimes, it is easier to work out how much time I am likely to spend supporting a customer (based on the help needed during initial development and handover), add a ‘fudge’ factor for the unexpected and then multiply this up by my typical day rate to find the annual cost for a customer.
And don’t forget that support charges also need to go up in line with your annual price increases on the anniversary.
Some customers prefer a call off support arrangement, where they pre-book a number of days of support in advance and use (and pay for) them as required. This may seem like an attractive option for a support and maintenance agreement, but unless they are paying up front, all the advantage is with the customer. It is a much better option to organise a proper and full support agreement.
Be specific about support dates and times
In addition to the cost the customer will pay for support and maintenance, the other major factor which can influence the price will be the dates and times of support.
Will you provide support from Monday to Friday? What about weekends? And will support be from 9am to 5pm, 8am to 6pm or will you provide support 24 hours a day? Also bear in mind that if your customer is in a different time zone to you, their 5pm may be your 2am.
Whilst there are again no hard and fast rules for how support charges change for different days of the week or times of the day, my general rule of thumb is that any weekend day is TWICE the cost of a week day (so 7 day support is actually charged as 180% cost of a standard working 5 day support contract – ((2 days * 2) + 5 days)). Then, for the extended hours (beyond 9am to 5pm), I add 12.5% per hour (so 8am to 6pm adds 25% again).
Companies who demand 24hour support will be used to paying through the nose for this constant level of support. Again, in an IT industry, typically a 24hour 7 day support contract will cost between THREE and FOUR times the cost of a standard Monday to Friday 9am to 5pm support arrangement (although I do know some BIG IT companies who charge upto 20 times a standard support cost for 24-7 support – and their customers pay it!!!).
Bear in mind that for extended hours or 24 hour support, you need to work out how they will contact you. In needs to be using a method that will wake you (if you yourself are providing the support and they decide to call at 3am) and that you can respond to.
Finally, when working out the costs, factor in the response times. You need to provide details of a) How quickly you will email/call them back, b) provide a solution or at least a get-around and c) A full solution if it’s a major issue. These times will vary from project to project, and industry to industry. My starting position for support agreements is 1 hour for call back, 4 hours for a get around and 48 hours if it’s a major issue or requires a fix.
What to Include and Exclude
Which leads us onto the big issue of what is and is not included. This list should be stated up front, and be in all discussions, all emails and in the final support agreements – as it is pivotal. Once agreed, if you leave holes, it is possible the customer could use the support agreement for all new future work or you may end up supporting things you never initially supplied.
Again, this will will be vary from project to project, and industry to industry. However as a starting point, here is my standard inclusion and excluded list:
- Support is provided only in terms of the project (name the project)
- Support is provided only in terms of hardware and software provided for the project by your company (name your company)
- Support is provided only for errors or questions relating to the existing functionality of the project
- Support is provided for any questions or software errors within the project, including data generated or stored by the project
- Support is provided in scope of the current functionality of the project or additional functionality added to the project by (your company) on a paid for enhancement basis in the future
- Support is provided on all functionality explicit to the project, including GUI front end functionality, back end database, supplied interfaces and data held in the database
- Support is not provided for errors resulting from 3rd party software, 3rd party hardware, interfaces or data (including database software, operating systems and the like)
- Support is not provided for additional features, additional data to be held, new entry prompts, changes to interface definitions or data entry changes – these would be provided under a separate enhancement quotation
- Support is not provided for additional reports or enquiries, either from within the software, or using 3rd party tools – these would be provided under a separate enhancement quotation
- Support does not include any additional training of staff. This can be provided separately as an additional service
- We reserve the right to charge separately for corrections or time required resulting from your staff errors (such as invalid entries)
- Support if provided on the basis on standard working days, excluding bank holidays, Monday to Friday, from 9am to 5pm… (etc)
If you want to see what my standard support agreement looks like (the wording), I offer you a copy to download for free.
However, if you are a one-man band type of freelancer or contractor, generating extra income is always going to be an issue. Being a lone-gun may give you the freedom and control you demand, but the only commodity you have is time – and time does not scale well.
So what are the 9 options a lone-gun freelancer has for increasing their income?
- Work more hours (the Treadmill of doom) – Lets get this option out of the way. This is called the treadmill of doom, because if you work too many hours, you will earn more money, but your health and personal relationships will suffer. Also, if you end up working too many hours, your productivity will tail off and you will end up working harder just to produce the same quality/quantity as working a normal day. Working more hours for money over an extended period of time is just a treadmill to failure.
- Work smarter hours – Whilst I said time doesn’t scale well, there is the option of making better use of your time. If you have to commute to a customers site, can you reduce the commute time, work from your house, or work (on other projects) whilst commuting? If you can fit more work hours into the same time period, you should have both a productivity boost and therefore an income boost.
- Double your rates – Maybe doubling is a little extreme, but raising your rates will generate more income. Yes, you may lose customers, but as long as you are not relying on just one customer, this may be for the better. Lets assume you have 4 customers, you double your rates and as an effect you lose 2 customers. You will be doing half the work, for double the money, thus earning the same for half the effort. You then have half of your working time free to fill with new and better customers, thus doubling your income. Test an income rise on 1 or 2 selective customers before committing to an all out price rise.
- Expand your team – Another option is to take another person on and expand your team. The trick is, the costs and associated risks must outweigh the extra income they could generate. Whilst the majority of the cost will be in salaries and tax, some associated costs (accounting, finding work, etc) will already be factored into your existing costs. However, your main concern will be making sure that there is always enough work now AND in the future to pay for them, otherwise they become a burden on your business and will cost you more in the long term.
- Cut the costs – I have talked before about cutting freelancer business costs. Whilst the effect will be minimal in the great scheme of things, cutting back on business spending will make some slight impact to your bottom line. Its always worth doing a regular cost review exercise.
- Do the same work faster – My second favorite way of increasing income is to work faster. The vast majority of my projects are performed on a fixed project price basis (rather than quoting day rates and number of days). Therefore when I am able to quote for work to take 20 days, but in fact able to complete it in 10, the extra time means I can do more chargeable work (and therefore get paid twice for the same time). My method for working faster is to reuse existing work wherever possible.
- Move from service to product – A logical leap that many freelancers try is the move from providing a service to providing some sort of product – normally some form of software; either mobile, PC or cloud based. This can make sense if you can find something very unique that people want. However, I have yet to see somebody who has pulled this off and is actually making enough money to support them fully and allowed them to move away from selling solutions or services. Clearly it can be done, as there are plenty of software product companies out there – but these are the exception rather than the norm.
- Passive Income from existing customers –What we are talking about with this option is providing either a product or service to a customer, and then negotiating to retain the customer through a Support and Maintenance contract. The customers pay you a passive income amount to support the item that you have already provided. Support and Maintenance charges is how big software companies are built.
- Get a passive income – The final option is to generate an additional stream of money via some form of passive income. Many people suggest sell-able things like eBooks, on-line courses, WordPress templates, Mobile phone apps and the like. However, in a word when we are so used to getting things for free, the effort in creating such items to sell may never recoup the investment. That said, there are other ways of generating passive income, which I will talking about later this year.
So, will any of these options allow you to generate additional income?
I recently had a dinner with my business mentor.
I have great respect for my mentor. He has been in business for over fifty years, and worked his way up from a 1 man band business, to his current position of owning and running three major IT companies with a joint turnover of over £50million a year. When he gives advice and thoughts, I listen.
During the course of the meal, we started talking about social networks media. After all, every other blog post, tweet and conversation seems to be about one form of social media or other.
His thoughts on social media were as follows:
It’s great – for what it is, but think of it this way….
In Africa, wildebeest, zebras and antelopes travel in packs. During the big migrations, these packs can number several million animals. The reason they travel in packs is protection. By traveling in a pack of so many animals, all the same, all in the same direction, the chance of being picked off by a lion or hyena is a lot slimmer. The lesson for such African ‘cattle’ is- do what others do to blend in.
BUT, in business, you don’t want to blend in. Being another zebra amongst the other 10,000 zebras is bad. How are customers supposed to tell one zebra from another? And shouting how different you are, when there are 9,999 voices raised in the same pack, all shouting there own message – well, your message just gets lost in the noise.
And social networking is just like zebras in a pack – yes it’s useful for some situations and it serves a purpose (and should not be ignored), but you will never stand out from the crowd if you are doing the exact same thing as everybody else
So whilst all the social media advice is to create blogs, create twitter streams, facebook pages and the like, maybe the best way of gaining attention is standing away from the crowd.
Again using my business mentors words, when everybody else Zigs, its time for you to Zag. In other words, time to revisit those ‘old school’ marketing techniques that everybody else is now ignoring.
When negotiating with prospects, you will sometimes come across the ‘Day Rate Apprehensive’ customer.
Generally, such customers will demand to know your day rate (even if you intend to quote a fixed price project), and will make all kinds of ‘ohhhhh’ or ‘hmmmmm’ noises, and will try to get you to drop your day rate down.
How should a freelancer, contractor or small business owner deal with those demanding a reduction in your day rate?
I have found the best way to keep the rate the same whilst still winning the business is to make them realise that negation on day rate has absolutely nothing to do with the price they will end up paying.
My two suggestions are:
Option 1 – The Duration Equation. In this discussion, yes, the day rate is indeed one side of the equation. BUT, so is the duration – how long the project will take to complete. Talking about a day rate without considering the effect on duration is a zero-net equation. As the day rate drops, so the duration will increase to balance out the work cost (even if you actually spend the same real time doing the work, and the slack time working on other projects).
Option 2 – The Quality Equation. In this discussion, you may be asked to talk about the day rate but also talk about the duration – in which case the final part of the equation is the quality. This is like haggling over the cost of apples; you may get the same quantity of apples for 4p each rather than the premium 20p apples, but they will be bruised or rotten. If just getting a cheaper apple is the ONLY goal, then a cheaper cost per item is a quick win for the customer – but will either of you be happy in the end? No!!! This is the negotiation to be having with your prospect – a cheaper day rate for the same duration may involve a less skilled (outsourced to a lower skill level) freelancer or overseas development house, which in the end may mean a lower quality delivery, which will then cost more with fixes and problems.
Remember, when you offer a service, you can offer it delivered quickly, cheaply and for the delivery to work – but your prospect can only pick two out of the three.
When your prospect demands all three (and a low day rate), they are really asking for a sub-standard delivery which will cost somebody (either you, or your prospect) more in the longer term. Unless you are really desperate for work, it could end up being you who pays the additional cost, so this is a prospect you should be walking away from.
Even for the most busy of freelancers or small business, running a business can be a roller coaster of moving between famine and feast. Bank balances will of course reflect this – with an ever changing cycle of too much money (which leads to higher taxes) to almost being broke.
But when times get tough, customers dry up, work is just not there, or you are forced to take work which frankly does not cover the costs, what is a responsible freelancer or small business owner to do?
Last year, I attended a small business workshop with a hundred or so other freelancers, and this subject was discussed as part of a finance round table. I thought it would be worth me sharing the collective thoughts for anybody who is currently struggling in these difficult times:
Things to do Before you run out of cash
The following advice is worth all companies considering before you start to run out of money and get desperate:
- Keep an Eye On Cash Flow – The number one task is to keep an eye on cash flow. Have a clear picture of your incomes, outgoings and what this means to your bank balances over time. Do this for both your personal and business accounts. It doesn’t matter if you do it on paper, use excel or better still, use a cash flow projection system. Know what your cash situation will be at all times.
- Be proactive – Keep an eye on your work load, and recognise when you have less work than you want or can handle. When you have free time, send out feelers for additional work to your business contacts, old customers, friends, family and social network. Don’t leave it until you reach the period of inactivity, send out the requests for work as soon as you realise there is a work gap.
- Offer incentives to fill the cash gaps – When you have been working hard but cash flow is becoming a problem because of other reasons, offer incentives to fill the gap. Offer discounts for customers who pay early or before a project starts. However, recognise that by discounting, you may be actually be making the situation better today, by creating a bigger problem in the future due to less (discounted) income.
- Other Work – When looking for additional work to fills the famine cycles, don’t forget that there are additional sources of work. You could be looking for agency based work, contract based work, sub-contracting to another freelancer, or even doing work outside your normal scope if it means the difference between making it to the next feast cycle, or going bust.
Things to do when you are running out of money
The above list is great for day to day running of your business, but what do you do when you’re a freelancer who is running out of money? Here are some suggestions:
- Pick up the phone – When the future of your business is on the line, don’t be too proud to pick up the phone. Forget social networks and online adverts, desperate times call for desperate measures. Find local companies who may need your service and start calling them. It doesn’t matter if you get 1,000 rejections, as long as you get 1 yes which will bring in money to help pay those bills.
- Don’t Skip the Tax – Whatever you do, do not try and skip on your tax obligations or attempt to borrow from your tax pot to ease you over the lean times. Tax income (from sales tax or VAT) is not your money. If you borrow from this pot and then cant pay your taxes as they are due, the interest and fines will become massive very quickly. By all means, contact your local tax office and see if they can arrange staged payments, but don’t be tempted to skip the tax.
- Defer Payments – If you have business and personal bills due, defer making payments (if possible). Make a list of payments and sort them in priority. Only pay those which could have an impact on yourself personally or could effect your business. But remember, this is a short term solution and those suppliers will eventually want paying.
- Cut those costs – By the time you reach the point of panic, it may be too late, but it still may be worth cutting costs – both personal and business. If you can cut personal costs, you can afford to pay yourself less, which in term helps your business cash flow.
- Asset/Stock Strip – If things get desperate, look for assets you can strip. Stock and technology (computers, printers, etc) that are no longer in use – generally these can be converted quickly into cash via E-Bay or Amazon. But be warned, this not only hits your future profit margins (as they will have to be heavily discounted from their actual value), but there are tax implications so speak to a financial adviser before heading down this path.
- Business Loans – Of course, the most sensible route would be to arrange a business bridging loan from your business bank. It is well worth trying this route, but it is a general rule that banks are now only lending money to businesses that don’t actually need it. Therefore, don’t use this as your only route of escape, and pursue other options at the same time.
- Short Term Loans/Credit Cards – Where business loans fail, there are short term ‘pay day’ loan organizations springing up which will now help business, or bills can be paid by credit card. This is generally a very VERY bad idea – with loan terms having interest payments of between 30% (credit cards) and 2000% (for payday short term loans). This option is almost guaranteed to make any short term cash situation much worse.
- Family, Friends and other businesses – A better source of short term funding may be from family, friends or other businesses you may know. Of course, this could then not only effect your business, but the relationship you have with the people you borrow from. And of course, they will expect some form of return for their risk, and any agreements should best be put down on paper.
- Peer to Peer Lending – The final option for short term lending is business peer to peer lending such as Funding Circle. They work almost the same as a bank, but seem to be offering better interest rates, and are more willing to lend than the big banks to businesses with cash flow problems. Again, remember that with interest payments, this will cost you more longer term, so make sure there is a feast cycle planned in the future to pay off the loan.
- Mothball the business – The final option is to close the business. This does not need to be a permanent closure, it can be a temporary mothball of the business whilst the economy recovers and you earn money in a permanent job. This may be a much smarter route than sitting with no work, burning through money. Sometimes, walking away for a short while is the smart and brave thing to do.
So these are the suggestions that came out of the freelance finance discussion. Do you have any other options you can add?
I’m a freelancer, and this is crazy, but here’s my number, so buy from me maybe.
~ Altered version of Carly Rae Jepsen – Call Me Maybe
I have wanted to write about this subject for a while – and could not work out the way to phrase it. Then, whilst on holiday, I watched a poor lad propose to a girl in front of everybody in a bar, and she said a massive big fat NO!!!
He was devastated. But at least it gave me my hook into this subject.
Entering marriage is very much like the relationship between a freelancer and their prospective customer. It’s true that some customers may just want to grab an item, pay for it and be done with the transaction (such as when using Amazon), but for most time, customers want to be romanced.
Freelancers are brought into companies to carry out important work. But before they will raise an order for the work, the prospect needs to feel special, they need to feel a bond is there, they need to feel important, and they need to feel respected. Above all, they need to feel they can trust you.
Responding to an initial enquiry with a proposal and price is like walking up to a girl in the street and saying “Hi, we have only just met, but will you marry me??”. Good luck with that approach.
Seasoned salesmen always sales say that people don’t buy products, they buy people and relationships.
Also, they need to feel like they are the ones making the decision. Yes, you can persuade them, talk them round, and generally ‘sell’ to them, but if you put them into a corner to force their decision, more likely than not their answer will be NO. That girl in the bar may have said yes if he had asked her on a beach, with just the two of them (its how I asked my wife with no pressure of other people watching.
And just like getting a partner to say yes to marriage, there has to be a demand and desire; a sense of ‘everybody else wants it’. If the poor chap in the bar had proposed marriage when no other woman had shown interest in years, there may be a feeling of desperation – such as “he is asking me because nobody else will have him” – which is never a strong sales position.
But, if other girls were always hitting on him (and of course he was politely turning them down), then he would be in demand which raises interest and he may have had more luck. Put it another way, nobody wants to commit to rejections or the out of date products on the shelf.
It’s why we have panic buying at Christmas time for the latest children’s toy. Everybody wants it because… everybody wants it. Even if they are not sure why.
Of course, being a small freelancer or small business, it’s almost impossible to create this demand (where everybody wants you and everybody knows it). But it is possible to create a cloud of pseudo demand by:
- Not being too demanding or pestering for the work (but that does not mean don’t chase, just do it in a casual way)
- Never say you can start immediately (or at least say you will have to reorganise other projects if the customer prospect demands a quick start)
- You can even use reverse demand by saying “of course, we are selective on the companies we work with, so just need to make sure you meet that criteria” (which puts them into a pseudo exclusive club)
So when you bring it all together, don’t be the chap in the bar. Get to know your prospect, take your time, make the setting right, and then create the demand so that when you propose doing business, they will be happy to say yes.
Over the past few months I have experienced many examples of people running scared (or being too busy).
I received an invoice for services (which I considered were delivered very badly), which I rejected (with an explanation letter), and never heard another thing again. I have been sent various quotations for various bits of work – and not one of the companies or individuals has followed up the quotation with a phone call or email. A company I was working with made a small mistake, and actually sent me an email saying they assumed (with no communication from me) that I would no longer want to work with them and that they would not be invoicing me for the work done thus far.
I am seeing the same similar situations with some of the companies I am working for. I was asked to consult about recruiting and interviewing technical staff for a company. A lot of interviews were arranged, but so few people actually bothered to turn up for the interviews. No phone calls, no explanations, and no reasons – they just didn’t bother to turn up.
And the same is true for demos from companies bidding for a rather large Business Intelligence software sale to one of my customers – four companies booked for demonstrations; two didn’t bother to turn up.
The point of this is – for whatever reason, it should be getting easier out there to find customers, win business and make money.
After all, all you need to turn is turn up, make contact, and follow up.
No body else seems to be bothering to do this.