My name is Jonathan Stark and I’m on a mission to rid the earth of hourly billing. I hope that Ditching Hourly will help achieve this, one listener at a time 🙂
Similar Podcasts
The Rabbit Hole: The Definitive Developer's Podcast
Welcome to The Rabbit Hole, the definitive developers podcast. If you are a software developer or technology leader looking to stay on top of the latest news in the software development world, or just want to learn actionable tactics to improve your day-to-day job performance, this podcast is for you.
El Podcast DEV
Oscar Swanros habla con personas de la industria para conocer qué es lo que sucede detrás del teclado. Nuevos episodios todas las semanas.
The Business of Authority
How to make a living while you’re making a difference.
A weekly show for independent professionals who want to go from six-figures to seven while increasing their impact on the world.
Productized Consulting with guest Jane Portman
Jane Portman joins me to talk about her new book, Your Productized Consulting Guide. Links Jane's book - Your Productized Consulting Guide Jane's SaaS - UserList.io Jane's home site 20% Off Ditching Hourly listeners can use coupon code DH20 for 20% any package of Jane's book. Thanks Jane!
Pricing Creativity with special guest Blair Enns
Blair Enns delivers an impromptu master class on the strategies and tactics of value pricing creative work. Blair's Bio Blair Enns is a 25-year veteran of the business side of the creative professions. In 2002, he launched Win Without Pitching, which has worked with thousands of creative professionals in numerous countries through direct engagements, seminars, workshops & webcasts. Blair is the author of "The Win Without Pitching Manifesto" and the forthcoming "Pricing Creativity: A Guide to Profit Beyond the Billable Hour" Links Pricing Creativity Win Without Pitching 2Bobs Podcast Blair on Twitter Blair on LinkedIn Implementing Value Pricing: A Radical Business Model for Professional Firms Jonathan's notes on "Pricing With Confidence" by Reed Holden "The Big Lie of Strategic Planning" in HBR Transcript Jonathan: Hello and welcome to Ditching Hourly. I'm Jonathan Stark. On today's show I'm joined by Blair Enns. Blair is a 25 year veteran of the business side of the creative professions. In 2002, he launched Win Without Pitching which has worked with thousands of creative professionals in numerous countries through direct engagements, seminars, workshops and webcasts. Blair's the author of the Win Without Pitching Manifesto and the forthcoming Pricing Creativity: A Guide to Profit Beyond the Billable Hour. Without further ado, here's my interview with Blair [00:00:30] Enns, enjoy. Blair, welcome to the show. Blair: Thank you Jonathan, my pleasure to be here. Jonathan: I am super excited to talk with you today especially about your new book Pricing Creativity. Could you start off by giving listeners a little bit of context about what the book is meant to do for its readers, who's targeted at, what led you to write it just sort of the big picture. Blair: Yeah so my businesses is Win Without Pitching, it's a sales training for creative professionals. We work with [00:01:00] independent, typically owners of independent creative firms of various types usually design or advertising based but often going into the kind of adjacent markets and their teams and we help them get better at selling what it is that they do and you know there's some right there in the name Win Without Pitching there are some ideas around the conventions that we help to challenge. Pricing Creativity is meant to be a [00:01:30] desk reference ... an enjoyable readable reference manual for anybody in the creative professions who sets, negotiates or delivers price. Jonathan: Excellent. Well that's right up our alley here. We have had similar paths over the years, we've read a lot of the same people, I know Alan Watts is big on your list, Ron Baker, many many others [00:02:00] I think we probably have the same set of 20 pricing books on our bookshelves. Blair: Yeah, probably. Jonathan: And also we both have spent at least a decade I think you probably have at least two decades of actually implementing this stuff or experience in a field that you're now implementing these theories in, actually converting them into practice so it's going to be ... it sort of comes as no surprise to me that we have lots and lots and lots of kind of like shared ... I don't want to say revelations [00:02:30] but it just like, wow this stuff does work, it is tricky to implement and it takes some doing, there's a perhaps more art than science at some points but it definitely works and largely in my case I'm super anti hourly billing in case you couldn't tell by the [inaudible 00:02:51] portal, but I know that you do talk about some types of hourly and [00:03:00] for your target market, for people who are making payroll and they've got a bunch of bodies that they have a lot of capacity I should say, it does make sense to perhaps sell blocks of time. Kind of want to talk about that at some point. Maybe we don't have to dwell into that now but you have this great framework called the four phases of client engagement that talks about this sort of decreasing value curve as you come down [00:03:30] from the discovery phase or I think you call a diagnostic phase and the and that moves into recommendations. Maybe you could talk about the four phases just briefly because people, listeners are familiar with this concept I've talked about you before. Blair: The four phases in any engagement of any expertise space business would be diagnose, where you come to understand the client situation, prescribe, where you prescribe a therapy if we wanted to use continue with the medical analogy, [00:04:00] the deliverables of the diagnose phase would be diagnostic findings, the deliverables at the prescribe phase would be a strategy and then you have what I call the apply phase or the initial application of therapy. Then you have ongoing reapplication of therapy so diagnose, prescribe, apply, reapply, and the highest value offering that you have is first and foremost your ability to accurately diagnose the client's challenges, [00:04:30] assess the scene as it were and from there if you're not able to diagnose properly then it doesn't matter how good your prescription is if it's not targeted to the challenge that's really there. Then when you get into reapplication, excuse me you get into the fourth phase reapplication, that's the highly commoditized stuff of redoing things over and over again where you're adding very little value. It's mostly you're getting paid for things that you do with your hands and your [00:05:00] feet mostly your hands a little bit of your brain still but I do like to break those four phases of the engagement into two separate categories. I refer to the first two diagnose and prescribe as the thinking stages or phases and then the latter to apply and reapply are the doing phases so your point is the highest value offering that you have is in the ... I call them stages, the thinking stages and then once you get into doing that tends to [00:05:30] be more commoditized. I think from time to time it makes sense to package up a whole lot of that doing. Sometimes it does make sense to sell that as units of time. It really depends on the business, it really depends on how you sold the previous stages of the engagement, it depends on how your business is set up, how your clients businesses are set up, so I really do like the idealism of value based pricing. Ron Baker who I'm sure we're going to talk about [00:06:00] has been a tremendous influence on my thinking on value based pricing and he read an advance copy of the book as did you and he had some really good feedback for me and one of his points of feedback where I had to say, "Well I think we're just going to have to disagree on this one," is he's just adamant that at no point should you ever sell time. I like the idealism of that I think practically there are times when it makes sense to sell time and one of those times might be when [00:06:30] you're selling that fourth phase, the ongoing reapplication work and it's just a whole bunch of busywork. It might make sense to sell that in units of time. Jonathan: I think you ... I see this as well, I tend to tackle it in a little bit different a way but again I think this is because of different audiences. There are people who listen to this show who are not just developers and there are firm owners, developer and other types, [00:07:00] and I see ... the thing with the implementation phase specifically, I call it implementation phase with the build phase. Usually the first time you build a new piece of software it's like a build phase and that's what most software developers sell is the build phase and they give away the first two phases for free to try to win the deal or as a first step in it before they start building but they just sort of build themselves out of the normal build hourly rate [00:07:30] because they would never even occur to them to charge for those most valuable pieces. I suppose the way to look at it is if you already have a lot of capacity in your firm and you just have a lot of employees, you've got like 10, 200 column junior devs or whatever you want to call them, you need to have a sufficient cash flow to cover their payroll or if they are contractors their expectations, [00:08:00] you know financial expectations of the relationship. I do, from a pragmatic standpoint say look if you have to ... if you've got these people and you've made these promises, then fine sell implementation and if you have to sell it by the hour then sell by the hour if that's what you need to keep the lights on. I see it as something ... my general advice is to be moving away from that kind of work and to grow your firm instead of by increasing the number of hands on deck to do that kind [00:08:30] of busy work in those later phases to instead not hire, not grow by hiring but grow by increasing your profits and trying to always be moving this I call it increasing the altitude engagement so trying to move farther up the chain of command at the client, working with people who are farther up the chain of command in order to do more strategic types of engagements that are higher value. Blair: I agree with that and I think I can see the point opposite to mine. [00:09:00] I can see you and Ron making the point that as soon as you put this on the table Bair you kind of give people the invitation to go back to hourly because hourly is the easy thing to do that's why we do it. We can rationalize and we can cover it up tell ourselves other stories about other reasons why we do it, it's just easier to price based on inputs. It's easier ... The conversations are so much easier, [00:09:30] you have something you can point to and I think of the few different places where it would make sense to sell time. The idea ... I'm not suggesting that all of your engagements of the kind of the more role implementation or what I call the reapplication work should be packaged up and bundled as time. I think there are better examples of ... and it's interesting you know one of the perspectives I hoped to bring to the subject matter is I'm a sales trainer first. I run a sales training organization for creative professionals. [00:10:00] It's occurred to me that I've met a lot of career professionals who are familiar with the theory of value based pricing but very few of them who actually do it and the reason that if all sure is the conversations are hard, the sales part of it, the interactions with the human beings. That's the hard part. I recognize that as soon as I open the door and say well okay, value based pricing is the way to go but you know from time to time it does make sense to sell time. I'm going to enable a whole bunch [00:10:30] of bad behavior but there are better times. An example of selling excess capacity. When you're out there selling actively looking for new clients for your organization, you're looking for a small number of clients at a certain size and so many firms forget about the at a certain size and there's some math that most firms should be able to do on this so you know that it doesn't make sense to take a client under the size of X. Let's say you're out there hunting for clients the size of X [00:11:00] or greater and along comes something that's maybe like an L or whatever. It's point three X. X should be ... your starting point for figuring out what X should be is 10% of your fee income target for the year. That's your starting point for figuring it out so if you're a million dollar shop, you should be looking for clients who spend about a hundred thousand dollars with you over the course of the year. If you're a ten million dollar shop you're [00:11:30] looking for million dollar clients. Let's say you're a million dollar shop and you're looking for a hundred thousand dollar clients and you uncover somebody who says well I have a twenty five thousand dollar project. You should not pursue project work in a customized services firm where you have capacity constraints there are only so many clients you can work with. Invariably you're going to uncover project work from time to time and when it makes sense to take on project work like 25,000 when you're pursuing hundred thousand [00:12:00] dollar or longer engagements is when you have excess capacity. When it makes sense to sell time in this case is when you have a price buyer, somebody who's really price sensitive, somebody you wouldn't normally do business with, you're looking for more value buyers right so you can price based on value so it's not somebody you wouldn't normally do business with but it's a one off project. You can price it in a way that it can be profitable for you and so you're essentially [00:12:30] using excess capacity and then you just have to make sure you do a couple of things. Number one is you price in, you sell blocks of time and it might be a ten thousand dollar block of time, it might be 20,000, it might be all twenty five thousand dollar block time in this example and you don't open yourself up to an hourly billing engagement. So, number one you sell a block of time and that block doesn't even necessarily have to measure up with exactly what the client's budget is so we can get into [00:13:00] some nuance there and number two you want to make sure you strip all of the excess value out. Things like access to senior people, reporting et cetera, et cetera, maybe even project management like full on project management. You might be able to strip that out. The ideal scenario where I think it makes sense to think about selling time is when you have excess capacity and you're dealing with a price buyer who has a project and [00:13:30] if you think you can frame an engagement or I'll sell this block of time there's no guarantee on deliverables when that unit of time is up, it's up. If we're not finished you need to buy another block of time in this case blocks might be 10,000, 20,000, 25,000 and you don't get to buy an extra five hours you've got to buy an extra $10,000 worth of time, it makes sense to consider situations like that. Jonathan: I do not disagree with that, it's very very pragmatic. This is the kind of [00:14:00] application of value theory. It's not even, it's not even really ... we're not even talking about value pricing here but it's a pricing approach that's super pragmatic based in the real world. Sometimes you need to take on clients who maybe you would rather not or are not a good fit or maybe have some red flags but hey you've got to make payroll, you need the money, how are you going to price it, and there are a couple of things you pointed out there that I think are nontrivial. First, not selling 1Z 2Z [00:14:30] hours you're selling blocks in advance not in arrears. You're not saying like, "Okay here's the invoice for all the hours." It's like "You buy $10,000 block and we'll get going." I think that's super important. The other thing is to recognize that it's for the doing work and it's not for the thinking work and the thinking work would be something that you would price separately outside of the hourly [00:15:00] block model. Blair: Absolutely, nothing commoditizes thinking work faster than selling it in units of doing. Jonathan: Exactly. Another thing that is important to recognize is that moving from what you and probably the rest of the world dear listener are used to doing, billing for your time by the hour is a slow process. It's not the kind of thing you can do overnight and the approach [00:15:30] that you've just described is a perfectly reasonable transition step to keep you from going out of business while you're learning how to work this nuclear bomb of value pricing. It's very powerful and this rocket can take you to the moon but it's really really easy to get wrong the first 10 or 20 times. It's almost a strategic use of trading time for money that I think makes good sense [00:16:00] as a transition step at least. Blair: Yeah, and in this case we're probably talking about one person keeping one time sheet for a week or two. That's probably an area where maybe we differ a little bit but yeah I don't know, I wouldn't call it- Jonathan: I just think there's some nuances there that are important. You mentioned a word that I would love to loop back to which is commoditized and the first thing in your book that blew [00:16:30] my head open was a passage that I'd actually like to read if that's okay. Blair: Yeah. Jonathan: The section is called, "Producer or marketer which are you?" And this is sort of the concluding paragraph so I'll let you expound on it but the concluding paragraph is, "And now we arrive at a fundamental issue of pricing creativity. You can have a culture of efficiency or one of customer innovation aka value creation but not both. You have to decide, are you [00:17:00] going to be a producer focused on efficiencies or are you going to be a marketer focused on value creation." I've never seen this articulated so clearly and I'd love it if you could kind of pull that apart for people. Blair: I'm not going to take credit for it, first time I read something like that was Ron Baker in his book Pricing on Purpose and then again in his second book Implementing Value Pricing and he himself is quoting Peter Drucker the great author [00:17:30] and father of management consulting but I don't quite identify with the words that Drucker used. He used the words effectiveness and efficiency so he has them at the opposite end of the spectrum and I think effectiveness is kind of a nice ... it's a literation it's a nice play on the word efficiencies but when you think about it, it's pretty clear you don't have to spend too much time thinking about. It's [00:18:00] pretty clear that all firms exist on this continuum of efficiencies on one end. Usually efficiency driven firms are firms that are working towards optimizing all of the available hours, so billable efficiency right, so the number of billable hours available, what percentage of those across the firm are your billing, and there's billable efficiency targets that are put up by consultants like my friend David C. Baker ReCourses and others. All firms exist on the spectrum with efficiency, [00:18:30] the pursuit of efficiency at one end of the scale and at the other end of the scale is innovation or delivering client value and you think well if you're a firm that's focus on efficiencies right now you're probably bristling at that. You think well we're not, come on we're not giving up innovation when we pursue efficiencies but absolutely you are because innovation the creation of customer value, these are essentially the same things not ... they're [00:19:00] close enough for our conversation. They require waste, they're hugely inefficient. Innovation is hugely inefficient and it requires time and space to be able to think, try things on, discard things, try something radical. Not just time and space requires money so you need to charge enough that you've got all kinds of time and space to put your feet up on the desk or and think or to experiment and iterate et cetera. [00:19:30] When you are estimating how many hours it's going to take you to do something, you're really confining your people and putting them in that hour box and you're removing ... by removing waste, you remove the opportunity for innovation and it's cut and dried. If you still don't get it just think about it a few minutes longer and you'll see how true this statement is. I've said this from many stages and often in the audience there is kind of a CFO or an operations' [00:20:00] person or maybe even an accountant or some sort of consultant around efficiencies and they just kind of bristle at this and there are whole movements out there about getting your firm more efficient and you can ... through efficiencies you can get to a certain place profitability wise and you can get to a certain place based on other variables innovation wise and value creation wise for your client but the closer you get to ... the more efficient you [00:20:30] become the more you give up on those other fronts. Jonathan: I could not agree with this more. It just changes the culture of what's important and it's ... I agree that I don't see how you can have both. In fact, I'm reminded of an article I just read, it's not a new article but I just read it on Harvard Business Review essentially that strategic planning is an oxymoron and [00:21:00] it's the same kind of concept because planning is around cutting costs and getting efficiencies and strategy is about value creation, how are we going to leap to the next mountain. First of all, where is the next mountain top? Which one are we going to leap to and then figure out how we're going to get there it's top ... and he uses almost ... maybe I'm conflating the two but I believe he uses almost identical terms about it's going to be messy, it's not going to be efficient and that's the way it's supposed to be. It's never not [00:21:30] going to be risky, the strategy part, the value creation part, the innovation part, it's always going to be risky. If it's not risky you're doing it wrong so [crosstalk 00:21:38] Blair: Yeah, you're describing entrepreneurship. You're describing what it means to build a business and then at the same time when we look, hone in zero in on it, you're actually describing the nature of your relationships with your clients. That's how it should be. It should be messy, it should have all of this room for figuring stuff out, it's [00:22:00] organic. You can try to break it down and understand it to a certain extent but the more you do it's like dissecting a frog. Well, it's boring and ultimately the frog dies of it. Jonathan: Let's talk about ... there's a big area in the book where you talk about the sort of stages of a value conversation. I'm probably using the wrong terminology but there's a four step process, four conversations I don't think they're necessarily one after the other. Blair: [00:22:30] Think of it this way, I think of any sale in particular a consultative B2B sale you think of it as an arch of four conversations. It's a little trick that actors use when they're playing Hamlet which is over 4,000 words. It's like four hours to play it and they're told you view the role of Hamlet as you break it down it's just seven soliloquies so you just learn those soliloquies and that's essentially how you break the play down. I've [00:23:00] just chosen to view the sale as four conversations and the value conversation is the third in four conversations. It sounds a little bit ... maybe it sounds a little complex but I'll break it down for you a bit. The idea is if you see the sale is four conversations and then all of a sudden you're dropped into a sale, a prospect reaches out to you, reach out to them, you're introduced, whatever it is where you find yourself about to present a proposal, you just stop and ask yourself, "Which of the four conversations is this?" [00:23:30] Once you identify the conversation then you ask, "What is the objective of this conversation. Where am I trying to go in this conversation?" Once you know the answer that question then you ask, "Well what was the framework that I'm supposed to be using?" So what conversation and my in, what's the objective of this conversation, what's the framework I use. I describe them as four linear discrete conversations but they're not necessarily that way. It might all happen in one conversation, it might happen in six conversations. [00:24:00] Some of the conversations might happen out of order. You might have one call or meeting where you get one and a half way through two conversation ... through one conversation half of the next one you pick it up in the next one after but it's really helpful to think of it as four discrete conversations. The first conversation is the probative conversation, that's where you prove your expertise and you go in the mind of the client you flip and we actually call it the flip. You flip from the vendor to the expert [00:24:30] practitioner so ideally the probative conversation happens without you present. It happens through your referrals or your agents of thought leadership. A prospective client is reading something or saw a video you did or saw a speech or was referred by one of your best clients, they already see you as the expert so you're allowed to take some sort of control in the sale. The second one is the qualifying conversation. It's where you as the vet the lead to determine if an opportunity exists and what the next steps are so a lead is just [00:25:00] a clue to possible sale maybe somebody filled out a form on your website or somebody is active on your website or somebody reaches out to you or you call them. It's the typical sales conversation. You're typically ... when you're qualifying by voting against fairly standard sales criteria of need decision maker time frame and budget. The third conversation is the value conversation we'll come back to that. The fourth one is the closing conversation. I like to call it the transition conversation because when you handle the first three [00:25:30] conversations well, the closing conversation is really is simple as putting three or four options in front of the client and facilitating a choice and it's this seamless transition. When the previous conversations haven't gone well, you haven't done what you were supposed to do navigated to the place where you're supposed to navigate, then you're putting all of your chips on the closing conversation so closing becomes this big stressful thing and it really should [00:26:00] just be kind of a natural extension of the previous conversations. My framework with the value conversation is essentially ... it's the same as all of the frameworks I've seen out there with one step added so the standard three step framework for a value conversation is mission, sorry I got that wrong, objectives, measures value. I just came back from vacation. Objective, what are the business objectives we're trying to uncover? I [00:26:30] call it the desired future state. What is your desired future state Mr or Ms client? What's the place that you want us to help you get to? The second is measurement. How will we know when we've arrived there? What are the metrics? What will be true, what will we measure to know that this has happened? Then the third one is what's the value to you and your organization of doing this? Then the four step that I add is before you move [00:27:00] from the value conversation to the closing conversation is you offer pricing guidance so you give them a sense you've got the information on them about their desired future state, around how you measure success, around the value that might be created for the organization and the individual, and then you say essentially "Okay, now I'm going to go away, I'm going to put some options together for you and we'll reconvene and I'll walk you through those options but I want you to know that those options are going to be [00:27:30] in a range of X to Y." So, you offer some pricing guidance and one of the reasons you offer pricing guidance is I say X to Y it's really Y to X because you want to anchor high, I'm sure you've talked about this before but you want to anchor with the big number so Y to X and I have some frameworks for doing that. If there's a price objection, if there's something ... if you're talking so far beyond what the client is capable of bringing to bear resource wise then you want to know now [00:28:00] before you retreat and actually start thinking about what the solutions might be, the prices might be and the solutions you might deliver. That's it, that's four conversations. The value conversation is the third conversation in there and I have four steps for that value conversation. Jonathan: I love that last step you said it's ... you call it pricing guidance? Blair: Yeah. Jonathan: Like you said that sort of objectives metrics and value [00:28:30] are standard stuff, I've talked about it a lot before, the pricing guidance thing in the anchoring is really good. I've never done that but I can easily see how to slot that into the process, it would be completely natural and it would perhaps increase my close rate or decrease our proposals after rate but those numbers I'm already pretty happy of where they are but it's probably a good technique for people who aren't particularly happy with those numbers. How many proposals they're closing [00:29:00] based on how many they're writing. It's funny because I do a lot of the things that that does, I do elsewhere in the conversation. I'll do it earlier in the conversation. I'll hammer on what is a home run look like and how would that affect the organization so if I do some back of the net calculations we're talking about an extra million dollars a year to the bottom line something like that. I think that that's actually kind of hard to teach people so like when I'm trying to teach people how to do this that's pretty hard so [00:29:30] you really have to be thinking on your feet and asking all the right questions. It's cutting off like a black belt move. To just know that at the end of the conversation you're just going to like have a spot where you say "Look, this is going to be somewhere between a hundred fifty thousand on the high end and probably like 35,000 on the low end." That's just so much easier. Blair: Yeah, followed by a pause because silence is and I don't talk about this too much in the book but [00:30:00] if you can ... I think mastering silence is the single easiest most effective thing you can do to become a better sales person. If you can deliver a price or in this case pricing guidance and then say nothing, win the battle to not speak then because whatever the client says after you deliver the price range it's so valuable to you. There's so much information in there. If they say, " [00:30:30] Okay that sounds fine," you think oh wow all right, all my prices just moved to the right. They're all just right and if you get resistance even over the low number, then that might be a sign that you're trying to have a value conversation with somebody who just is not charged with future value creation or it might be a price buyer or they just don't see you as meaningfully different whatever the case is. So, that pricing guidance we have that built into the step, one [00:31:00] of the rules in the book and it's broken down into four sections. There's principles where I think everybody should just learn and understand and I have taken all the basic value based pricing and basic principles of economics that support pricing and delivered them in what I hope is a readable enjoyable way so you understand the principles. Then there are six rules and these rules are things that you do all of the time and then the largest section of the book is tips. It's actually guidance for specific situation and guidance for putting your proposals together, getting [00:31:30] into retainers, alternative pricing models, how do you come up with your high priced options, your middle price options, your low price options, all kinds of stuff. Then there's a fourth tool section that I want people to use ... actually write on when they're crafting their proposals but one of the rules I think it's the last one is, "Your client should always hear a price before they see a price." From your point of view it's you say a price [00:32:00] before you show a price and you don't find that guidance in the standard pricing literature because that's really something that comes out of the world of sales. If there's a price objection, you want to hear it before you go away and start crafting your proposal. Just think of all of the times maybe you've been in the situation by I know hundreds of people who have been in the situation dozens of times in their lives. It's plagued some sales people their [00:32:30] entire careers where they get into a closing meeting, they pull out the deck, they go through pages pages pages, they get to the last slide the last page, it's the price, there hasn't been a meaningful price conversation or value conversation, the client looks at the price and says, " We don't have that, we can't afford that," and then the sales person is just dejected. That's the moment where you say, "Well, how much do you have?" And you're willing to do it for whatever because you're so [00:33:00] over invested in the sale. Before you get to that situation, before you do any meaningful amount of work to dive into start to create the solutions and understand what the price would be, get some pricing guidance first. If the client can't afford you, you know you've got this target of X which is somewhere around 10% of your total income for the year, that you want each client to be spending at or above that amount, if they can't afford that you want to find that out early. You want to find that out early in the qualifying [00:33:30] conversation. That's the second of our four conversations is the first one where humans are actually speaking to each other. Remember the first conversation the probative conversation Ideally it's had through your thought leadership or your refers. In that first human to human conversation, it's your job to uncover that you know any kind of budget information and then you go through the value conversation and then you deliver what ... the client might say well I've got a hundred thousand dollars and you might be thinking, you're going to need a million but you go through the value conversation and [00:34:00] you uncover the fact that you expect to create $5 million a year in recurring value from this project then you could say ... so let's just say on the high end you say I'm going to come back with a range of ways that we can help you on the high end probably in the one to two million mark like 20 to 30% of the annual value that we would hope to create. On the low end if you really need me to come in with something at a hundred thousand dollars [00:34:30] I'll tell you what we can do for a hundred thousand dollars but I think this is an engagement of hundreds of thousands of dollars or more. Jonathan: Absolutely. That's a perfect segue into the ... well I guess the closing conversation so in the way that you do your proposals because I thought my proposals were short maybe five pages. You talk about running the sort of closing conversation with a single sheet with three options on it like it's a [00:35:00] Salesforce sales page or something. Let's talk about that a little bit so moving into the ... and also I'm sure you'll bring it up but just in case, the prices that you're throwing out there in your guidance, you don't know what you're going to do yet. Blair: You haven't even thought about solutions and that's one of the things that it's really hard when you're moving from hourly based billing, time materials, inputs, whatever you want to call it, it's really hard to get your head around because you're going to end every conversation already thinking about what you might [00:35:30] do and you really want to learn to move off of the solution and just think about the value ... focus on the client, focus on the value you might create for the client. Then from there you set prices and then at least price ranges, and then you start thinking about well what could we do in these ranges. So, yeah you think about solutions later and really, it's really that simple it really is. That's one of the rules is unpaid written proposals do not exceed one page. Jonathan: [00:36:00] Let's go again at this, I love this because I hate writing proposals so the- Blair: Hands up who loves writing proposals? (laughs) It's a promise that we've been making to our client for years. We will get you out of the proposal writing business and in exchange you take all of that free time and you devote it to writing thought leadership or creating other forms of thought leadership. The idea that written the unpaid written proposal needs to exist is just ... it's one of the biggest fallacies and I'm sure people are listening to this thinking, "Wow, nice theory Blair but [00:36:30] that's just not ever going to." I guarantee you there are hundreds of firms out there who limit unpaid written proposals to one page or even no pages just the ... because I've said for years the proposal is the words that come out of your mouth. Here's what we're going to do, here's what we propose to do, here's how long it would take, here's how much it would cost, if you're in agreement in principle we'll write up the details in the contract for your signature. That's how it should work and that changed for me when I started [00:37:00] to read Ron Baker's work on pricing and others and saw the importance of offering options. Always offer options and that's the second rule so your requirement to put, sorry, you have a requirement to put multiple options in front of the client and so when I saw the value of that, I realized okay, well we're going to have to write ... proposal is going to have to go on paper but no more than one page. As I say in the introduction [00:37:30] to the book, my first experience with this I was an ignoramus when it came to value based pricing and I was almost ... I was getting close to a decade into my consulting career and I was working with a very well known firm, design development firm has really set the tone for a lot of what other firms do today. I was working with them and I asked to see their proposals and they were one page with three columns and I think the one that I saw was column one was [00:38:00] 250 grand, column two was 400, column three was six or 650 and I couldn't believe what I was looking at and the owner said "Yeah we always do this." and I said "Well the clients don't ask like where did you get these numbers?" "No." Jonathan: I get students all the time that people do ask them that question and I just say tell them, you know the answer is this, past experience. You cannot let them try to dissect [00:38:30] the number it just turns into disaster. Blair: Yeah if you're really value based, if you're pricing based on value then they ask where did the numbers come from, well it's based in assessment of the value that we might create for you. So, you're in the value conversation which is the hardest part of all of this is having a good value conversations. One of the rules is master the value conversation but to master it you have to have a framework and you have to have lots of practice and if you can master it man you will go to the next level. If you're pricing based on value, you would [00:39:00] justify it not by anything other than saying, "I think that's compensation we would be comfortable taking based on the value that we have created for you with this option." Let's say you decide that it's a million dollars a year of recurring value if you do all of these things well. You offer pricing guidance and you've got to do some thinking on your feet but you come back and whatever options you come back with you are selling essentially the same thing. You are selling to the client their desired [00:39:30] future state that you uncovered in the qualifying conversation and you confirmed again in the value conversation so what's a place you want to get to? Discounted for uncertainty. Your most expensive option has the smallest uncertainty discount and your least expensive option has the greatest uncertainty discount but yours ... if you're selling based on value you're selling the same thing. You are selling to the client their desired future state discounted for uncertainty. Jonathan: Yeah, let's drill [00:40:00] into that. That's further down my list to talk about but now is a great time so a couple of ... I know from talking to perhaps thousands of developers that this is just another one of those things that's a tough mind shift to make when you're used to selling your hand, selling your inputs because all they think about is, "Well, how long is it going to take me?" and by extension they think that their price should be the same for absolutely every client. [00:40:30] It's like well it wouldn't be fair for me to price myself differently from quite a client because they're only thinking about the work that they do and then the thing they're not thinking about which is the only thing that matters to the client really is the results. The outcome that they're going to receive, the business outcome. One of the things I talk about a lot is when people are like oh jeez I just can't bring myself to put this you know we will be working together on a proposal that they're getting ready to present and I'll give them a number [00:41:00] for the top option and they're getting sticker shock. They're like I can't even ... I could not deliver this with a straight face because it's only going to taking me this long to do it and I'm like "Yeah but you're forgetting about risk, you're forgetting about stress, you're forgetting about capacity, you're forgetting about urgency, you're forgetting about all these other things that are super important to the client." You hammer hard on the uncertainty one so let's drill into that. Maybe you could ... you've already started talking about it but could you kind of define that and then maybe help people a little [00:41:30] bit with the black magic that you would use to kind of try to calculate that. Blair: Yes so there's a chapter in the book on selling risk and sometimes uncertainty is risk or risk mitigation and sometimes in the sale it makes sense to have that bit this very kind of overt on the table discussion. You might say I've got three options here for you Mr Client three different ways you can hire us, price tied a low I've [00:42:00] got kind of like the low risk option to you is the most expensive one and then I've got the higher risk it's more affordable ... it's the cheaper one, I wouldn't say more affordable, it's the cheaper one but you're taking on more risk and then the one in the middle is kind of a more balancing of the risk between you and me. You phrase it that way to the client and just think when you're constructing your options for your proposal, just think of it what's the most that we could do to take [00:42:30] the most risk away from the client and the risk free pricing, the ultimate risk free pricing would be contingency based pricing where it's you don't pay until we deliver on the desired future state. We hit, we deliver the objectives, we hit the measurements that we've identified and we create the value that we said we would help you to create. That's an example of that's the low that ... that's no risk [00:43:00] to the client, you take all the risk. So, if you chose to price an engagement that way and a lot of people are cringing thinking well we'd never do that, harden off, never say never. I'm not trying to make the case that developers should price this way but I am trying to make the case that you should be open minded about all of these engagements when you're pricing them and you might decide this thing is a sure thing on your end for whatever reason and I want to make a whole bunch of money and I want [00:43:30] to make all the client's risk go away and I know they're willing to pay to make that risk go away. You might consider taking an engagement like that from time to time. I don't think it should be a habit, I don't think you should have more than one client like that generally speaking at any one time, but everybody's risk profile is different. That's one way to think about the ... that's the lowest risk option to the client, the highest risk to you therefore the highest price to you. Jonathan: Yeah, and it should [00:44:00] be a very high price. Blair: Yeah very high, way beyond if you priced it at hourly, multiples it's really about the ... it has nothing to do with your input, zero. At the other end of the spectrum, if the highest risk offering you have to the client which is the lowest risk option to you is to sell time. Sometimes I think I favor selling time where you strip out all other forms of value and put it in front of the client. When [00:44:30] you're what Reid Holden author of Pricing with Confidence and Negotiating with Backbone, what he would call negotiating with a poker player. We all know what a value buyer is, a value buyer somebody who really is interested in the return on the investment. We know what a price buyer is, a price buyer someone who just wants the lowest price and they'll do whatever they can and they'll forego all kinds of other forms of value just to get the lowest price. A poker player according to Holden is a value buyer [00:45:00] disguised as a price buyer so when you suspect that's the case you might put this ... the client might be bluffing, might be just playing poker with you saying, "No, all I have is $50,000." And you might say, "Okay, heres option number one the expensive option, and it's $200,000," and he reacts "I told you I only have 50." "Yeah, I'm getting to that. Here's option number two, it's $85,000," so it looks a lot more affordable next to the first option, "Here's what we can do for $50,000, [00:45:30] I can sell you one block of time, X number of hours of one developer and it's $50,000. Am I going to get to project completion? I've no idea, I'm just selling you a block of time." It's paid in advance, so you communicate all of the things that the client doesn't get in that option by including them in the others. One would be terms, so there's no terms, one might be project management the involvement of a project manager, access [00:46:00] to principles, some sort of reporting, knowledge transfer, you name it. There's just all these other things you would do in the more expensive options, you just make sure that they do not ... they show up in the expensive options and they do not show up in the cheap option. You put it forward and you say to the client, "Well here's what we can do for $50,000, it's the riskiest option to you because frankly I don't think we can get it all done in $50,000 worth of hours. I think [00:46:30] at the least you should take the eighty five thousand dollar option." Jonathan: That actually might be a good segue into driving people to option two. Blair: Yeah, which is usually your goal so anchor high is one of the rules. You lead with the high price and the science behind anchoring is the first piece of information that you get on a subject matter skews your thinking about it as you make adjustments through kind of a second way of thinking. You never adjust fully to compensate for the first piece of information [00:47:00] so you make sure the first number they hear is a high price. It also makes the second price, the middle price seem far more palatable so you anchor high that's one of the rules, deliver the high price first. If you think of the low prices maybe where the client thought the budget was going to be, the high price is the anchor, most of the time clients will choose the middle one it's called extremist avoidance. They stay away from the extremes and they choose the safer [00:47:30] middle comfortable option so you want that comfortable middle option to the client to be in general I'm making generalizations here but more than they anticipated spending but it's less then the really high anchor and you have to remember the anchor is not there to be bought. It will get purchased from time to time, it's there to make the second option the middle option where you want them to buy look more palatable. Jonathan: Excellent, we are getting to time, man this went by fast. Can [00:48:00] we just do one last question, could you describe a little bit ... because I do not do this. I know a lot of people that do this I do not do it but I do believe it's a good idea just more out of ... just to sort of optimize my sales process to the point where I don't feel the need to do this but the presenting the proposal life. I write it up and I send it and if they want to buy they buy if they don't I don't care. Perhaps in there's sort [00:48:30] of a luxury position there where I can just not care that much but now let's say that I did care and I really wanted to maximize my odds of closing a deal and someone has their three options on one piece of paper as you described, how would you actually execute that conversation in the real world? Would you go there, is this over the phone, is it a screen share, what do you talk about, how long is the meeting, could you just give me and the listeners a picture of what that looks [00:49:00] like? Blair: Yeah, it really doesn't matter the format of the meeting whether it's a face to face meeting a web meeting or a phone call as long as if it's a phone call somebody has got access to email if they're on the phone unless they're on a landline phone and those don't exist anymore. You can send the one page proposal over once everybody has convened so proposals, we used to think of them as most people still do as these big rambling things that you stay up all night creating. You [00:49:30] kind of lob them in over the fence via email and then you sit and wait back to hear a response and that's like your clients putting you in the proposal writing business. How many firms out there whether they're creative firms or they're developer shops, how many firms out there just crank out, take on all of this extra work that's largely unnecessary to create these proposals then they lob them over the fence and now they have no power they're just sitting there waiting? It's really ... you should deal with it [00:50:00] this way, I will create, you the sales person, I will create a proposal for you Mr client. In exchange, you will assemble all of the people who need to be ... all of the what we would call on the sale side decision makers, you would assemble all of the key decision makers on your team for a brief phone call, web meeting, face to face meeting, whatever it is for us to review it and I'll share it with you once we all get together. That's the trade, [00:50:30] there's no inherent reason why the client should expect that they can put you to work creating a proposal and then disappear on you. If you just stop and think about it for a couple minutes you realize that's absurd. You wouldn't let other people treat you this way. You're putting together a proposal in exchange for them getting together to consider the proposal and then agree at the end of the meeting what the appropriate next steps are and you've got everybody you say all right so you recap [00:51:00] the value conversation, these are the objectives you're trying to hit, what we call the desired future state, these are the measurements that we talked about that we'll use to know that we've succeeded, this is the value we hope to create for the organization, I said I would come back with prices in this range of X to Y, I have three options here. I want to start with, actually it's Y to X, I want to start with Y the most expensive one, and you might say we first began by asking ourselves, "What would we [00:51:30] do if money was no object?" What would we do, what's the most we can do to take away is much uncertainty from the outcome is possible? Jonathan: That's great. Blair: Here's the solution we came up with and here's the price. Then you can go to the middle one or you can go ... I really fill it out from situation to situation but you can go to the cheap one and say at the low end of the spectrum, here's the ... you said you wanted us to come with a proposal that was at the seventy five thousand dollar mark so we ask ourselves what could we do for 75,000. We're not [00:52:00] huge fans of this one, we think you take on a whole bunch of risk there but maybe if that's a trade you're willing to make then you know maybe that's the option for you. In the middle we've got something that's somewhere in between and it's 125,000 or whatever it is. That's just an example of how you would frame that conversation. Jonathan: I absolutely love the if money were no object line. It's just so good. We could probably talk all day so let's wrap it up there. Thanks so [00:52:30] much for coming on the show Blair, where can people find out more about you? Blair: Thanks Jonathan, my pleasure to be here so I'm on winwithoutpitching.com and they can buy the book Pricing Creativity: A Guide to Profit Beyond the Billable Hour at pricingcreativity.com. It's available only on the website and then after you buy it and read it I'd like you to go back to that page and see how many of the principles in the book were used in the pricing of the book. Jonathan: Awesome and when is it available [00:53:00] for purchase? Blair: January 10th. Jonathan: January 10th ladies and gentlemen, pricingcreativity.com. Thanks again Blair. Blair: Thanks Jonathan my pleasure bye bye.
Monetizing Technical Expertise By Selling Sponsorships with guest Corey Quinn
Corey Quinn is a consultant who helps companies fix their horrifying AWS bills. In this episode, Corey explains how he monetized his technical expertise by selling sponsorships for his weekly mailing list. Links Last Week in AWS Quinn Advisory Group Corey's Twitter Corey's sponsorship page
Donations As A Revenue Stream with guest Brian Dunning
Former software consultant Brian Dunning talks about transitioning from hourly billing for dev work to donation supported content production. Description My guest today is Brian Dunning. Brian is an old friend who I met back when we were both building FileMaker solutions for clients who we billed on an hourly basis. Over the years, Brian has transitioned away from trading time for money to the most purely value-based model I've ever encountered: he now runs a donation supported non-profit called Skeptoid Media. As a former dev, I wanted to have Brian to hopefully inspire you to consider packaging up and selling your expertise in an novel way. Enjoy... Links Skeptoid podcast Brian's personal site Brian on Twitter Closing The next time someone asks you for your hourly rate, this is what you should say: "I don't have one." To learn what to say next, visit http://valuepricingbootcamp.com to signup for my free email course. Again, that url is: http://valuepricingbootcamp.com
Monetizing Technical Expertise By Selling Sponsorships with guest Kurt Elster
Shopify guru and former Wordpress developer Kurt Elster explains how he monetized his technical expertise by selling sponsorships for his podcast. Links Kurt's press page Kurt's Twitter Kurt's sponsorship page
Conquering Anxieties with guest Sherry Walling
How to recognize and handle the anxieties of running your own business with guest Dr. Sherry Walling Guest Bio Dr. Sherry Walling is a licensed clinical psychologist who helps high-performing professionals meet their potential to enjoy personal well-being, life satisfaction, and a sense of meaning. She has a PhD in clinical psychology and two master’s degrees. In addition, she completed research fellowships at Yale University School of Medicine and the National Center for Posttraumatic Stress Disorder. Through her podcast (zenfounder), her speaking engagements, and her consulting work, Sherry helps entrepreneurs, freelancers, and executives with burnout, anxiety, existential angst, conflicts, major transitions, and personal balance. Links Sherry's site ZenFounder.com Jonathan's Mentoring and Slack community MastermindJam
Making Change
Money is worthless if you can't exchange it for something you want.
Stated Goals Vs Actual Goals
Push past your clients self-diagnosis to unlock more valuable outcomes.
Why I Would Happily Pay Ten Bucks For A Dollar
A real world example of the subjective value of money.
Lessons Learned with guest Jason Swett
Jason Swett shares lessons he’s learned in the process of ditching hourly. Guest Bio Jason Swett is a web developer from Sand Lake, Michigan, who has been freelancing since 2011. Jason has historically billed by the hour but in the last couple years he has figured out how to start transitioning into value-based pricing." Links Million Dollar Consulting by Alan Weiss Better Training Exercises by Reuven Lerner Jason’s Book Jason’s Consultancy Transcript Jonathan Stark: Hello and welcome to Ditching Hourly. I'm Jonathan Stark. Today I'm joined by a guest Jason Swett. Jason is a web developer from Sand Lake Michigan, who's been freelancing since 2011. He has historically billed by the hour but in the last couple of years he has figured out how to start transitioning into value-based pricing. Jason welcome to show. Jason Swett: Thank you. Jonathan Stark: Can you tell folks a little about yourself, what you do? Jason Swett: Sure. I'm a software developer, I have been for most of the last 15 years. I got started writing code for money in about 2000. My first job was actually working for my dad. We did that for a little bit and then got my serious start in 2005, doing PHP stuff, did that for a while and switched to Rails and been doing that ever since. The vast majority of that time has been either regular employment or hourly contracting but then in recent months, recent years, I've been transitioning into other better types of billing, which I think is what we're going to talk a little bit today. Jonathan Stark: That would be great. We've exchanged a few emails leading up to this and you sound like a really big win that you had this year in the training space, which I'd love to talk about. But in the pre show you also mentioned something about ... We were talking about how people will tend to call themselves consultants when really they are just freelancers or contractors and that there is a distinction there. It's not like you can just say, "I'm a consultant now." Even though I think it's good to push in that direction, to move yourself to be perceived or fulfill the role of a consultant because it's higher value. Can you talk a little bit about what you see as the distinction between contracting and consulting. Jason Swett: It's a great question. Freelancing 101 is like don't call yourself a freelancer because when you use that word and then prospects or clients hear that, there's something about it that conveys low value. Like you are a tool that's to be used. They tell you what to do, they make the plans and they tell you to implement the plans. So it's much better if you're perceived as a consultant. And the differences there to me is that rather than being an implementer, you're somebody who helps formulate the plans and then somebody else does the implementation. So that's a much better term to use. Consulting is way better than freelancer. But I think a lot of people who call themselves a consultant would really, 100% of their work is contracting. So the difference between consulting and contracting is again, with contracting you're an implementer. Somebody else is coming up with the plans, they have an understanding of what the reasons are behind what they're doing and they made all the decisions and now it's your job to just do what you're told. Whereas when you're a consultant, you're more being paid ... Let me put it this way. A contractor, they pay you so they can tell you what to do. When you're consulting, they pay you so you can tell them what to do. Jonathan Stark: Absolutely and it's not just as simple as labeling yourself that, one or the other because in my experience people who are used to being a freelancer, or a contractor whatever you want to call it, have their entire business and mentality organized in a way that optimizes for being told what to do and for doing things like nailing down really specific scope of work so that they can turn around and blame the client if it goes over budget, while I just did what you told me to do. It's not as simple as just saying, "I'm going to call myself a consultant." You actually have to make that shift. A big difference for me I think, when you start to feel yourself or if you're a freelancer now or you call yourself a freelancer or a contractor now, on a relatively, regular basis, you push back on clients and say, "Now I can't let you do that. That is a major mistake." The way a doctor would if you said, "Hey, take out my appendix." And they're like, "Your appendix isn't the problem." The doctor is not going to take out your appendix just 'cause you told them to. When you start behaving like that, then it's safe to start calling yourself a consultant, because you're right. The client is looking for someone who has expertise in the space, that they respect, they trust the consultant, they value that honesty and expertise. Jason Swett: I don't think it's a binary thing like you kind of alluded to. Just because you're a contractor, doesn't mean you're not going to be doing consulting type stuff some of the time, hopefully you are. Just because they're paying you to tell you what to do doesn't mean that you can't offer opinions and advice and stuff like that. Jonathan Stark: It's a good sign when you find yourself doing more of that. Some people listening to this will recognize that they do a lot of that at the beginning of an implementation, they don't charge for it, or they just charge for the hour by it or it's perhaps even part of the scoping of the work and may not even be paid to get the proposal together for the estimate. So if you recognize that you're doing that kind of stuff, then you're a candidate for perhaps orienting your business a little bit more around that, more high value, those more high value activities and less around the labor. Jason Swett: And just this is kind of a quick side note. I've found that it can be very difficult to start a relationship in a contracting kind of arrangement and try to move it more toward a consulting type arrangement 'cause you've already sent them the signal that you're a pair of hands. So it's very hard to shake that off once you've sent them that signal. It's much easier to start the relationship off under the understanding that they're paying you for advice and guidance and stuff like that, rather than try to retroactively become that person. Jonathan Stark: It's like trying to get out of the friend zone. Jason Swett: Exactly. Jonathan Stark: It's hard. I see it often that it's probably no more difficult to attract new fresh clients for this new fresh position or maybe a new product or service that you're going to orient around, a more prescriptive or diagnostic offering than it is to try and change the way past clients view you. It can be very tricky. I've seen people do it, but they're usually people who are more mature business wise and have really been sort of straddling the consulting/contractor world with their clients. Jason Swett: Here's another really significant thing about that, is there's one thing, which I mentioned which is the perception thing. At the beginning of the relationship, they have a certain perception of who you are and what they're paying you for. The other thing is that, at least I have found, the kinds of buyers who buy contracting work and the kinds of buyers who buy consulting work, don't have a heck of a lot of overlap. Like for example I'm thinking back to my client who I'm just wrapping up a month's long engagement with. This engagement was a total contracting engagement. And I was one of like seven developers, all with the same kind of role, just being paid to write code by the hour. The idea of having a consultant, it just doesn't fit into their picture at all. Like if somebody tried to pitch that to them, it just wouldn't compute because that's not part of their world, that's not part of their organization at all. But then there's other people, like for example this contracting gig right now, this is for a software company. But I'm talking with somebody later today about a different project where it's not a software company. The people there, they know about their domain. I guess I can say that it's a grocery store. This prospect is a grocery store. They know about grocery store stuff, they don't know about software stuff and so what they need is totally different and we're starting from a different place. The thing I'm trying to convey I guess is those buyers are like two different groups of people. Jonathan Stark: Big time. And that can make this shift very difficult. So I'm going to go on a short run really quick about Valley startups because have a lot of students who start off doing stuff augmentation, hourly typing semicolons for valley startups. I've gotten in trouble because Uber is a startup technically. I wouldn't say Uber would be potentially a bad client, they're probably a very mature startup. I'm talking about people who would want to pay you in passion and pizza and equity and expect you work 80-hour weeks typing code for some phantom customer that maybe will appear someday. They maybe looking for their angel round or first round of funding, they don't really have any kind of product market fit yet, there's just basically an idea and they're rolling the dice to strike at it. "We're going to be the next Facebook." The tricky thing there is to, just to give an example of exactly what you're saying is that a Valley startup, the CTO of a Valley startup is not impressed with your Rails skills, they would probably rather do it but they just don't have time to do it. So it's a situation where it's like cobbler's kids type of situation. Cobbler's who got no shoes, they do not want to hire another cobbler to make those shoes for their kids. But if they have to they will, but they're going to be the worst kind of client. They're going to be super picky about exactly how those shoes get made and they're going to be critical of every little detail because there's this pride issue. To convert that customer into a consulting arrangement to view you differently. Is exactly like you said, it's just wrong kind of client and to convert them over is virtually impossible. Jason Swett: It's a different problem. You've mentioned the cobbler analogy, it's a bandwidth problem whereas with a non technical problem it's an, I have no idea what to do problem and I need you to help me figure out what I need to do kind of problem. Two totally different kinds of problems. Jonathan Stark: I love that, that's perfect. Just shift gears a little bit. You mentioned earlier that you've moved into a little bit different space where you find it much easier to provide a price and not be doing hourly estimate. Can you talk about that a little bit, the training stuff? Jason Swett: Sure. And let me give a little bit of background to like I want to give an example of when I tried value pricing and it went horribly and contrast that with this more recent value pricing and it went quite well. Jonathan Stark: Perfect. Jason Swett: I started freelancing in 2011 and pretty soon after I started freelancing I read the book Million Dollar Consulting by Alan Weiss, which Jonathan I know you're an Alan Weiss fan and I am too. But when I read that book the first time, I completely misunderstood it. I took the value based pricing part of the book and I'm like, "Okay this makes sense, I'm going to start doing value based pricing now." So I went and worked for a startup that was local to me and it was a total ... From their end it was intended to be a staff aug type thing. But from my end, even though it really was a staff aug type thing, I tried to value price it. But the way it ended up working out in practice is every couple of weeks or every week or whatever we would talk about what we want to accomplish over the next little bit and I would take all the separate features that we were going to do in that sprint or whatever you want to call it. And I would come up with an individual price for all those and then I would submit those prices and they would say, "Okay." And then I would work on those things and deliver the features. It might sound okay but it was a total nightmare because just imagine all the overhead involved in like estimating all that stuff and coming up with the prices. On a weekly basis and then like having and individual mini negotiation on each individual feature. It was just exhausting for me and for them and it was like awkward and weird and stuff. Then there the issue of bugs. How do you charge for bug fixes and stuff like that. My policy back then was that if I give you a feature, it should work. And so bug fixes are free. But I was applying these features on top of like a horrible legacy code base that was extremely unstable in the first place. And so it's like, how can I guarantee that things are going to be bug free, it was just complete insanity. By the way, I made a huge mistake with that project that had like rippling effects over the next 18 months that I worked on that project, which was there as an existing product in place and I was hired to basically reverse engineer it and build a new version of it in a different framework. The spec our agreement was the existing app, just build the other one that does what this does. But the problem with that, you know Jonathan and as I know now is, you don't know everything that that original app does. Jonathan Stark: And parts of the original one are broken. So are you supposed to reproduce that? Jason Swett: Exactly. And there are all these like external communications that I didn't know about and all the stuff. And it was a total disaster. So it was just a number of mistakes like compounded there but my point is I tried to apply value based pricing to a situation where value based pricing did not apply. Jonathan Stark: That is fascinating to me because it would never occur to me to ... There are probably lots of people listening that have kind of followed that are kind of following the same thought process that you went through at that time, which had never even occurred to me that somebody would try and apply that at micro level like that. I value price pretty much exclusively for an entire project with a defined outcome. It's much more macro than that, it's very much like ... Three months would be a first one. It's usually 6 to 12 months. Jason Swett: I think the key word is outcome. You're pricing an outcome as opposed to pricing individual features like [inaudible 00:15:19] week. Jonathan Stark: It's like pricing a sprint. Men that's brutal. I'm surprised they even put up with it. Jason Swett: I know. Well it wasn't the greatest relationship in the world believe it or not. Jonathan Stark: Somehow I believe it. So that's the oops, that's the before picture. Jason Swett: Right. Jonathan Stark: So what's the after picture? Jason Swett: So that was like 2011, 2012 and then fast forward to today. So like 2016 and 2017 is when these projects are surfacing. Om 2016 in the Summer time, I got an email from a guy I knew just from the local Grand Rapids Michigan Development Community and I want to mention something that's kind of relevant and important. I give talks at local user groups kind of a lot and I have for like the last five years. So I knew this guy just from doing all these talks and stuff like that. Just even from participating I would have met him anyway. But he sent me an email and he said, "Hey, these guys need an instructor for this bootcamp, they had somebody back out at the last minute." So I had a conversation with these people and things went well and we were talking about having me jump in and it was a very last minute thing, it was like a five-week bootcamp. And the guy like a week or two before, I don't know why but he just was no longer available so they're in a really tight spot. And we walked about doing something together, ultimately we did not. They ended up getting somebody else for whatever reason. But then a couple of months later, those same people reached back out to me, the people who ran the bootcamp and they said, "Hey do you want to lead a bootcamp next year?" So we talked about that. I'm trying to think back to what questions I asked and like just how I generally approached that conversation. But the first thing I asked them was like, "Why do you want to have me do it? Obviously you've been doing something before. Why not just keep doing that." And what I'm talking about of course is the why conversation, which is just why this, why now, why me, why in this manner etc. I pick another way, you put that Jonathan it's like try to talk them out of hiring you. Jonathan Stark: Raise all the objections immediately because you're going to have to face him at some point so you might as well do it before you have to break the proposal. Jason Swett: Right because if there's any good reason that they shouldn't hire you, they shouldn't hire you. Try to get that reason out and you've vigorously tried to find that reason and you can't find it, then you have a pretty good case that they should hire you. Jonathan Stark: You made the sale. Let me just do a quick aside people because I know that probably 99% of the people listening to this, feel like they hate doing sales because they think sales is a particular used cars, slimy thing. But that doesn't have to be the way it is. I'm almost hesitant to even bring this up because what you're doing with that, they why conversation and talking about working with you. You're closing the sale, like that is the sale. By the time I read a proposal I can only think of one proposal in the last like five years that I have rejected and I know exactly why got rejected. I totally screwed up the conversation. Like I didn't make the sale on the phone call and I just blew the call then I wrote a proposal anyway 'cause it was a huge client, I really wanted them and that was why I screwed up the call 'cause I wasn't in the right place mentally. I wanted the client too bad, I would have pretty much done anything to get this client. Of course that me come across like a sort of in a servile way, which is not what they were looking for. Huge mistake. What I'm trying to call out though is that, if you do ... I love that word vigorously. If you vigorously try to talk them out of working with you and you cannot do it, you just close the sale because they now believe, they have just told you why they can't choose any option except for you and you are now convinced that they are going to benefit from the engagement and as a side effect you'll get a sense of how much it's worth to them, like the value of the engagement. Then you can say in your mind, "I get the sense the value of this is X so I'm going to charge them a 10th of X. I could price it at a 10th of X or half of X, less than X. Is that a profitable price for me is that higher than my costs? And if it is, it's going to happen. The pros are not going to get rejected. It's a way of doing sales in a way that isn't tricking the other person, it's a way of making sure, really confirming that you're a good fit in every way, personality, ROI everything. I think if more people recognized that sales doesn't have a to be [inaudible 00:20:38] then they could embrace it a little bit more and actually be running a business instead of being told what to do all the time. Jason Swett: I totally agree and something that took me a long time to realize that sales is not mostly about persuasion, I don't think it is. I agree. It's more about connecting somebody who needs something with somebody who can give them that thing. And there's kind of two steps. The first step is matching up the person who needs something with the person who can provide that to them. But there still exists a barrier which is a lack of trust. And so to me the sales process is taking that barrier and removing the reasons they have to maybe not trust you. That's all it is, it's not about arguing them into hiring you, it's more identifying first of all ... Perry Marshall said sales is a disqualification process. I thought that was a really interesting quote because again like I said before, if there's any good reason for them not to hire you, then they really shouldn't hire you. If there's any legitimate reason why you should not work together either for reasons on their end or for reasons on your end, get those reasons out there in the beginning because not talking about those reasons, doesn't make those reasons not exist, it just make it so those reasons get surfaced further downstream after more time and money or whatever has been invested and it's just more painful further downstream. So get that stuff out there at the very beginning. And I say to prospects, the very first thing I like to do when we start talking is ask the question, "Is there any reason why we shouldn't work together? And if so let's get those out there right now at the very beginning." And people really appreciate that, they appreciate that frankness and they appreciate the fact that I'm respecting their time in that way. So I think that's a really great way to start those conversations. Jonathan Stark: This is turning into a fun, potentially a very long conversation. Because this is opening up all sorts of ... Thinking of a video I just watched with Gary Vaynerchuk who is totally random in this conversation but he gives startup conversation by saying, I'm just going to try and quote him. But it's something like, he said, "No matter what the negotiation is whether it's an employee asking for a raise or me trying to close a deal with Nike to do their marketing. The first thing I try and do is say, look let's cut to the chase. I want you trust me as first as possible. So let's just get everything on the table. If you don't trust me for any reason, what is it?" He's very iconoclastic, very bombastic type of guy if you don't know who he is. And he just goes straight to the trust issue, which is really the cracks of the problem in many cases. Jason Swett: I don't think I would quite so bold as to phrase it that way, but here's the only reason you don't trust me, what is it? But you can bring up the same thing in different ways. Jonathan Stark: Yes I agree. I mean it's a personality thing with him, he's just a crazy person. Let's switch to- Jason Swett: Back to the story. Jonathan Stark: Sorry I totally took us down the rabbit hole. Jason Swett: Those are good things to talk about. So at this point in the story, I was having my initial contact with this prospect asking them why me. Well, it turns out that before they had used the training company to deliver to this bootcamp. There were some cost reasons and there was some like flexibility reasons why they wanted to go directly with an individual, somebody like me. So we talked about that and there wasn't a heck of a lot to the possible reasons not to work together. The biggest reasons are usually like, is this not the kind of work that I really do? Or is the kind of money you're expecting to pay not the kind of money that I typically charge? Or just timing, I'm I not available when you need the help? We were talking about this in Fall of 2016 when the bootcamp happens in the Summer of 2017. My Summer 2017 was looking pretty free at that point in time so the availability thing wasn't an issue and the qualification thing was fine because the technological part of it was pretty open ended, they were going to kind of look to my expertise to help guide that stuff. Jonathan Stark: Good sign. Jason Swett: That takes care of those possible reasons not to work together, so that just leaves money. They asked me to send them a proposal and I said, "Sure absolutely, I'll do it by the end of the day, Friday or whatever." Jonathan Stark: Is the bootcamp a public thing that they're like selling seeds or is it an internal thing that they do for companies? Jason Swett: Great question. This is like a government funded thing in my understanding. I'm a little bit shaky I'm like this part of it but the idea is that they want to help the Michigan economy. So it's funded by a grant and they take these recent computer science graduates. They're kind of filling the gap between, I just graduated from college and now I'm going to be an entry level programmer somewhere. They don't really teach all the skills in school that employers would like to see in an entry level person, so they kind of fill in that gap. The class size is 15 students, people apply and get accepted. I don't think it actually costs anything for the students, it's all funded by this grant. Jonathan Stark: Fascinating. Jason Swett: That was an interesting factor in coming up with the price. 'Cause there's not really a monetary ROI that can clearly be calculated there. If I save you a million bucks and I charge you $20,000 for that, that's a no brainer for you. But in this case it's a little bit mushier. Basically I thought about that, and I'm like, I don't know what their ROI is, I don't think they know and I don't think they can know exactly what their ROI is. So all I can do is come at it from the other direction, which is, what would be enough for me. So I started with my costs and people might not associate that word the way that I associate it. And I got this from you Jonathan, which is, you cost is your time. You can't really do anything for free. If I spend the day working on something and you pay me X for it, I'm not a head X. If you walk up to me and you give me a thousand dollars, then that's a thousand dollars of free money. But if you give me a thousand dollars to do a day's worth of work, it's not really a thousand dollars worth of free money. It cost me a day of my time to do that. Jonathan Stark: That a thousand is the revenue not the profit. Jason Swett: Exactly. And if there's a job, let's say that I generally work for a thousand bucks a day and I'm comfortable with that fee but then somebody comes along and they offer to pay me $10,000 for a day of work, the way I think about that and I think different people could think about this differently. But the way I think about that is if my normal rate is a thousand dollars a day but I get something that's $10,000 for a day of work, then my profit for that is $9,000. It could be argued that that's not really like the perfect way to think about that, but that's kind of how I think about that. Jonathan Stark: Let me just explore that a little bit because it's utterly subjective. The scenario you just described is actually valid in my opinion because if you're used to a particular level of income then a dramatic shift, like all of a sudden somebody is willing to pay you 10X for basically the thing that you've been selling for a 10th of that. It's going to feel like profit. But if that keeps happening, all of a sudden 10,000 per day is going to be your cost and it's going to take somebody to give you a hundred thousand to turn your head like that again. This feels very squishy to people but I honestly believe that when you're talking about knowledge work which is really what we're doing, the only way to calculate your cost is to ask yourself what amount of money would I not even get out of bed for this? I would not accept X for this work. It doesn't matter what the reasons are, it could be that you just inherited a million dollars from your great aunt. It doesn't matter, the reasons would be different for every single person. It could be that you just paid off your house and now you don't have that $5,000 a month payment. So it doesn't matter what the reasons are but your cost is the least amount of money that you would accept for a particular gig which is completely subjective, it can change on a daily basis depending on what else is going on in your life and your business. But I can come up with no better way to calculate a cost. The screwed up thing is that that is what people will typically set as their price because they want to deliver the lowest possible price to increase the likelihood of lending the gig which means they're making no profit. That little scenario right there is super scary to me because that's one of the things that keeps people locked in this kind of fees famine cycle. Because they're constantly working for what they consider to be cost, they're working for no profit which gives you no days in the week to work on your business instead of in your business. Which it's just depressing to think about. So dear listener, next time you figure out, well what's the least amount of money I would take for this, put some profit on top of that number before you send the proposal or you're just breaking even. Jason Swett: I would add to that as a click aside, people price things lower with the assumption that a lower price is better, that's not necessarily true. I think Alan Weiss's the Mercedes example and my example might be a little different but if I go to the dealership and I want buy a $150,000 Mercedes, that's because I consider myself the kind of person who deserves a $150,000. And if you offer me a $40,000 used Mercedes, that wouldn't be more attractive to me even if the product is identical, I consider myself the kind of person who buys $150,000 cars, and so I want $150,000 car. I don't want a $40,000 or an $80,000 car. I want to pay a lot for it, because that is consistent with my self concept. Jonathan Stark: I heard a quote the other day that crystallized that beautifully, I think it was the CEO of Porsche who said the second Porsche on the street is a catastrophe because you want to be the only guy on the street that owns the Porsche. If they were 40,000 bucks, that can happen. If you're that kind of person, and those people exist that's the key point. Those people exist that want the Mercedes, that want the Porsche. Those people are out there and they want to be in this exclusive club. People like us do things like this, to quote Seth Godin. Jason Swett: Yeah, people like us do stuff like this. That makes sense. Jonathan Stark: They want to be people like us, they want to be in that crowd. This is why when you go to something like an agency like Blind or IDEO, they've got this client list, their position is horrible. IDEO's position is horrible but if you go there on their website. You see this client list that basically does the marketing job for them because any kind of company that wants to be in the club with Nike and Coca-Cola and Apple is immediately going to consider IDEO because they're like. "That's the club I want to be in, the price is not the main issue." And the price actually prevents the rabble air quotes from getting access to the same level of, let's call it luxury. So it's a very anti-Marxist kind of way to think about it. Jason Swett: It's an important thing to understand though, I think people make the assumption that cheaper is better, not true. Jonathan Stark: And sure if you have nothing to differentiate yourself from your competitors then the only thing you can compete on is price. So you should be constantly striving to come up with a way to differentiate yourself from your competitors, perhaps make yourself the only one in the category so that price becomes a non-issue. Jason Swett: Even if you have noted differentiation, even if you're providing the same exact service, the kind of client that's going to pay me a hundred bucks an hour for development isn't going to pay me 10 bucks an hour for development. There's a few reasons for that, one is because they think, how good can you be, but also they're not the kind of place that only pays $10 an hour for development. Anyway I think we got way off track with that, so I'll get back to the story. Jonathan Stark: It's good stuff though. Jason Swett: Yeah, I wanted to touch on that 'cause it's super, super important to understand that. But where we were at with the conversation with what the prospect was, it was almost time to give them a proposal. Now before I agreed to send them a proposal, I wanted to get an agreement on what we're going to do. I wanted to get what Alan Weiss calls conceptual agreement. 'Cause if that proposal gets rejected, I want it to get rejected because the price is too high, not because the stuff in it is wrong. So I make sure to get really on the same page, took notes on what we talked about, repeated that back to them and said, okay, here's what we've talked about, here's my understanding based on what we've talked about. Is this consistent with your understanding? If not how blah, blah, blah. I got that all straightened out. About a half a page worth of stuff to summarize what we talked about. Then I did my calculation. Like I said, I could only calculate, I had been charging a hundred bucks an hour for quite some time for development. So I said, "Okay a hundred bucks an hour times 40 hours a week, times five weeks is a certain numbers." I don't know what that is. But that was like my minimum price, that was like my, I wouldn't even get out of bed to do this. Then I considered other factors like, if I were to do this project that takes five weeks, I'm going to have to move to where this bootcamp happens, 'cause it doesn't happen where I live. So that's a cost. I'm going to not be working for anybody else during that time and I'm going to have to wrap up any projects that I have going on before that and then afterwards it's going to take some time again probably to get another project lined up. So that's another cost. Those are fuzzy things that aren't like super concretely quantifiable but I kind of figured out some numbers and put those numbers on there. I came up with a certain number. I guess I'll talk about the numbers. My original fee that I was going to put on the proposal was 50,000. Jonathan Stark: For five week training. Jason Swett: Right. Then I had a call with the mentor type person and he said, "You should really charge him more like 100,000." And I thought, "Men." He had reasons and I could see that his reasoning made sense, it's like they were probably paying the guys before me something or close to a $100,000. But there's a certain limit to how big of a check you can ask for. It's like, there's a certain size of jump that's really hard to make psychologically. So I bumped it up from 50,000 to 65,000. I put that number in the proposal, I wanted to provide options but frankly I couldn't think of any, and we'll talk about that a little bit if you want to but I put that 65,000 price in there, submitted the proposal and here's something that's really important. I didn't email them the proposal and ask, "What do you think?" I said, "Let's get on a phone call and go over this proposal. I didn't send them the proposal until the time of the phone call. Here's the reason for that, if they had any objections, I wanted to have the ability to address those, right then and there. Rather than have them go think about it and get back to me. Jonathan Stark: Interesting. I'd never do that. But I've talked to enough people that do that to make me think that my way is not necessarily the only way. 'Cause a lot of people do this. The thing that feels a little off about that to me and I'm not saying this is incorrect. But the thing that seems strange about it to me is that's an extra sales call. And if I was going to change the way that I do proposal and switch it to that, that would take a lot of pressure off me in the first phone call, which I want. I want the pressure in the first phone call to make the sale. Jason Swett: Interesting. Jonathan Stark: How does it go, when you do that? When you have that followup phone call, was there a negotiation? Like what we thought since I literally never done this. Jason Swett: There was no negotiation because we had gotten a conceptual agreement before. We had taken the disagreement on the scope, we pretty much eliminated that possibility. The only thing that leaves is the price. So we got on the phone, went over what the proposal said and it was like, "Is this an agreement worth what we talked about?" Still and he was like, "Yeah." Jonathan Stark: Let me just pause there. That feels awkwardly. Did you read it to them? Or did you guys sit there silently reading it? Jason Swett: So what I usually do with that, is I kind of go over the high points. I don't read it out word for word. But it's usually brief enough. Like I said, this one was half a page, it's usually brief enough that there's not that much to talk about. So we just kind of go over the high level points and then in this particular case he said, "Okay I need to get back to you regarding the price. So let me do that." And then we got off the call. Jonathan Stark: Were the payment terms in there as well? Jason Swett: The payment terms were in there. So I said, it could either be paid 100% up front with a 10% discount if it was paid 100% upfront. Or the other option was if they could pay 50% of it upfront and then 50% at some later date. And those terms probably sound very familiar to you. Jonathan Stark: Yes. Jason Swett: 'Cause that's the way you kind of do something similar right? Jonathan Stark: Exactly. Jason Swett: In this case, the person I was talking to was not the ultimate decision maker, which is the sales rules is talk to the ultimate decision maker, i just didn't have access to that person, couldn't figure out how to get to that person. So we ended up having one final call between myself, the person I just mentioned who I had to had the call with about the proposal and the actual decision maker. What they wanted to talk about which is kind of funny is a plan for what would happen if I died. Jonathan Stark: This happened to me once. Jason Swett: So if I died before this bootcamp happened, what happens? So we figured out like a backup person, stuff like that. But after that call, they came back and they said, "Yes, we'll do it." And they said, "We'll take you up on the 10% discount for upfront payment and what I didn't expect was that they interpreted that to me and like they could pay me any time before the bootcamp happened and still get the discount. So it was like a number of months before I got the first check. Next time I do that, I'm definitely going to include it like, it has to be within 30 days of when you say yes or whatever. Jonathan Stark: I'm not putting it on my calendar until the first payment is made. And because you had to make preparations that you described earlier, extensive preparations. Good move. Jason Swett: They did try to poke at my price a little bit. After we had an agreement, they came back and they said like, I don't remember how they worded it but they basically said, "Can you do it for less?" And I said, let me see if I can remember how I worded it. I said it like in general, "I'm open to negotiating prices and stuff like that but I have to have some kind of justification. I'm not just going to lower it for no reason at all. If we can do less stuff then that's the case where maybe we can change the price. But we can't just lower for no reason." I worded it better than that, kind of get the idea of where I came from and they responded to that was, "That's totally understandable." And we kept the original price. Jonathan Stark: I'm not one of these people but I know plenty of them who just always ask for a better price. It's just like a reflex action. And a lot of people freelancers, contractors they'll blink and they'll just, "Yeah, sure." I mean tons of people. Even you could go to a retail store in the mall and you can even get away with it. Some people are kind of hard wired not pay retail so to speak. But if you've gone through the steps that you went through and you just stick to your guns and say, "I gave it some thought but I just can't make a business case for decreasing the price. Do you have some rational argument as to why it's not going to work for you?" I try not to be stonewall, like a jack about it and say I'm open top conversation and be like thermal nuclear polite. But the odds of me changing my price are zero. They could reveal some information that they did not disclose that would cause me to change the nature of the engagement, which could result in a lower price. But outside of that I just make it a policy to never do that, because it makes my life and their lives just way easier because I train them just never do that. It's kind of like Wall Mart every day little pricing, "This isn't the price." Unless you want to buy something else than what's described here, that's the price. So we don't even need to go back and forth. Jason Swett: I think another thing that can make it less likely that they'll come back with that question is the options thing. So what I could have done better is I could have provided them with a few different options. Jonathan Stark: Absolutely. Jason Swett: If you give them just one price, the question is should we accept this proposal or should we not? But if you give them options, the question is, which one of these options should I choose? It goes from should we work together to how should we work together? Jonathan Stark: You can imagine what happens in the client organization when you send a proposal like that. It doesn't just floated up the chain to the real decision maker who then has a knee jack reaction to it. Instead, they have to schedule meetings, have discussions. They could take 15 man-hours of discussion or 30 man-hours of discussions. And what are they doing the whole time, they're talking about Jason. And there's just more and more Jason and they're constantly thinking about your word. Other vendors probably if they give them one price, they're just, "No, that's too high. That's absurdly low, they must be terrible. Or this is maybe another candidate and how can we compare them to Jason." So it's almost like your coming in as three vendors because you've got three options and three prices. Jason Swett: Yeah. I think the other psychological part of that is it gives them a feeling of control if you give them one single price, then you're like in the more powerful position. Jonathan Stark: It's [inaudible 00:46:03] Jason Swett: They only have the power to say yes or no and if they say yes, then that was kind of you doing something to them which they might not feel very good about. Whereas if you give them three different options, they have the power to choose one of those three and you didn't force them to do anything. They made the choice in what to do. Jonathan Stark: Like you pointed out, you couldn't come up with two other options. Jason Swett: I could now. But at the time, I couldn't think of any. Jonathan Stark: Interesting. Jason Swett: I'll list a couple of examples. Some of these things are things that they ask me to do and I said yes just because why not at this point. But if I were to do this again for a different prospect, these would be add-ons that would cost more. So here's one. Bringing in industry influencers to give talks to the group over Skype. Jonathan Stark: Genius. That's awesome. Jason Swett: I happen to be acquainted with people who have written books and stuff like that, technical books and so those people can be brought in to just give a quick Skype and I'll offer to pay these people. But the amount that they're going to charge for that is pretty trivial compared to the fee for the bootcamp, so I don't mind paying for that kind of stuff. But that's something that could make a really good add-on. By the way if you reach out to people who'll have written books it's surprisingly easy, just to like reach and say, "High." And they'll respond to you and you can form a relationship. Jonathan Stark: As someone who has written books and emailed people who have written books, if somebody went through the effort, the marathon that it takes to write a book, they're happy to talk about it. Jason Swett: Suppose they want somebody who emails you and they say, "Hey I loved your book, it really helped me out." I have such and such question. How do you feel about that job, is that annoying? Jonathan Stark: Hell no. No I love it. You also get ones that are just either too fumble-ish with no actual question just three paragraphs of this is my life, those are not great. And you also get ones that are a thinly veiled attempt to get you to promote their stuff. Those are super annoying as you can imagine. Those are both basically span. But when you get someone who starts off with like mind blown on page 15, the thing about asking for a 100% upfront, change the way I do business. But there's something I don't understand. You better believe I'm going to write that person a three page email back. Because they invested some time in the material, they are stuck in a place that makes sense to get stuck and there's perhaps a deficiency of the book. If you are thoughtful and polite of course you can definitely get a response from an author. Jason Swett: More of this story is like, if you read and enjoyed a book and if you have a question that can be asked and answered simply, reach out to that person and tell them that you enjoyed their book and ask you quick question, they'll probably be happy. What's not good is like a super indepth technical question that requires understanding your whole background. Don't do that. Jonathan Stark: Don't write two paragraph, write three sentences. 'Cause if you write a giant email to me, it's going to sit in my inbox and be like, "I'll read that when I have time, I'll read that when I'm not on my phone. I'll reply it." And then all of a sudden a month is gone by and I'm embarrassed to reply and then I just delete it. Jason Swett: Exactly. So anyway bringing in those people to give talks is one potential add-on. Another is one I call the library package. So me hand picking 10 or 15 or whatever an appropriate number of books would be and actually bringing in those books and giving them that package, that's another add-on. I'm trying to think of other things but you can kind of imagine the lines these are going along and I'm sure after I do the bootcamp, I'll have about a billion more ideas. I don't know it might be like water under the bridge as far as adding add-ons till this one goes, I really hope not. I hope there are things that I can offer next year that will be more valuable to them. But definitely for other clients. Jonathan Stark: That's all great stuff. The industry experts thing, that's a great idea. It's very low. It's a perfect example of something that's low cost and high value. Because if you have the connections or if you can make them or if you understand how to approach people like that, it's really not a lot of work. But the value is insane. I'm writing that one down. Thank you very much. Jason Swett: Awesome. Jonathan Stark: Of course bundling in other products like books and that sort of thing, that's also a pretty common thing to do. The tricky thing i, just to call out a training situation. I don't know what the direct ROI is, or even if there is an ROI because this is like a grand type of situation and really the ... Maybe you know this and just didn't bring it up yet. But the thing that I would want to know in my why conservation, I would want to find out how the buyers were being judged. Because it could be that they're being judged on some standardized test that students take annually after the thing and you could add a followup session with individual followup or office hours with the students or some proactive drip campaign with the students to refresh their memories about the material before the test. I'm just making stuff up. It sounds like it isn't 100% clear, is how the buyers are judged on their efficacy. Jason Swett: That's a great question. Jonathan Stark: If my hidden agenda on every client engagement is to deliver 100% client satisfaction. So they are like scrambling to hire me again, 'cause I'd much rather continue working with great clients than constantly looking for new ones. So I want to find out, almost this literally come out and say like, how I'm I going to blow your mind? What can I do to blow your mind? What is hugest possible home-run that can come out of this for you personally? And it's not in this scenario that you deliver an amazing training to the students, it's kind of like the MVP. That's almost like taking for granted table sticks. How can you go above and beyond to get this person a promotion or something like that. People will reveal this stuff because they want it. Jason Swett: And even if the don't know they might respond with something that gives you an idea for how yo can do that. Jonathan Stark: Or it might reveal that they're a gate keeper and that you need to talk to someone above. Jason Swett: So there's a couple of real quick things I wanted to touch on 'cause I know we're probably running close to time. Jonathan Stark: Yes we should run. Jason Swett: After that training engagement was a deal. I lined up a couple of other ones and these other ones were through a training company. So if you Google things like Ruby on Rails training or Angular training or whatever, you'll get all sorts of training companies. I think the first time I did this, I reached out to, it was something like 10 training companies, I reached out one day. Then within a couple of days I had like seven responses back. That's a crazy response rate. So it's very much in demand. But I formed a relationship with this one particular training company and they sent me to do a five-day Ruby on Rails class. This is actually just last week that I did this. They paid me for that, they paid me $6,250 for the five-day class. That may sound like a lot if I'm billing a hundred bucks an hour for a 40 hour week, that's $4,000. So 6,250, that's better. But my plane ticket had to come out of that and there was prep work and stuff like that. So it's probably about a wash compare to a 40-hour week. But it was much more enjoyable than a 40-hour week of coding, to me at least. It wasn't necessarily easier but it was more enjoyable. Jonathan Stark: There's stress and risk levels are in the basement compared to doing 40 hours of dev work. Because there's no debugging after a training class. Jason Swett: Exactly when you're done, you're done. So that was that and that was good and then I'm going and doing a different one. This is a three-day class and that one is $5,250 I think it is. But again air-fair comes out of that. So that one is even worse money wise but at this point I'm just kind of taking whatever training gigs I can get because in the future I know from talking with ... Well you know [Roving Lennon 00:55:33] Jonathan and he's talked about this on the Freelancer show. He charges five figure rates for a week class, would be like 15 and $20,000 for him. I'm pretty sure I can say that 'cause he has said that himself publicly before himself. So I'm working on getting to there, but I think before that I have to know how to do the training, nobody is going to pay me $15,000 to do a class if I haven't done one before. So [Roving's 00:55:59] recommendation. There's a whole episode he did on training if anybody listening is interested in that. His recommendation was to go through training companies first and then make your way toward the direct engagement. So that's what I'm doing. Jonathan Stark: You get some street cred, you get in front of people, you sort of build your expertise and delivering it. And by the way you presumably for these gigs through the booking agency, you bringing your own content, you're not teaching their content? Jason Swett: So these I just grab my own, a lot of them actually provide the content for you. Jonathan Stark: Really? I've done a few of these in the past. I think through Marakana before they got bought by Twitter. I did budget training for Cisco and it's good money, but you're not really building up your business but you're building up your skills. So it's sort of a strategic engagement. Jason Swett: Are those gigs from your books or some other way? Jonathan Stark: I honestly don't remember. I know I did not reach out to them 'cause I had never heard of them before. Somebody reached out to me probably recruiter style and they was like, "Hey, can you do remote training." It was all through WebEx so id didn't have to fly anywhere. It was in the thousands of dollars. It wasn't like amazing money but it was worth doing a four-hour class on whatever responsive web design or something. It was all okay. I was more interested in what's a great way to give a remote training. Jason Swett: And for people who have only ever done hourly coding before and you're wondering how the heck do I make the transition into consulting? It's a pretty good tow in the water to real consulting, if you can't figure out any other way to do it. Which, I couldn't figure out how to do it and this is helping me get there. Jonathan Stark: Right. It's because people are used to pay for training like a bulk purchase. The hours come up 'cause it's like, we;; it's going to be 95 for ... But that's not really the focus. Jason Swett: They're paying for the outcome. Jonathan Stark: Yeah, they're paying for the outcome. I'm curious, how many people are in these you just described, the 6,250 and the 5,000 something one? Is that like limited to a certain amount of students or are they just trying to pack the house? Jason Swett: The first one was six students. The second one the three-day class, that's going to be like 25 students. Jonathan Stark: Wow! That's a lot. Jason Swett: The 25 students one, that's like open enrollment. So just whoever at that company can go and take that class if they want to which leads to all sorts of interesting stuff too like different backgrounds and experience levels and stuff like that. So we'll see. But way different class sizes. Jonathan Stark: That's awesome. All right well, we should wrap up but I will tell people that they should search out [Roving 00:58:56] Learner if they're interested in how to get started with training. He is one of my co-panelists on the Freelancer's show podcast. Which we've been referencing here. So Jason, where can people get I touch with you online? Where can people find out more about you? Jason Swett: I think if you just Google my name Jason Swett, S-W-E-T-T you'll find my various web presences. I have a site angularonrails.com. That's a whole thing we didn't get into and I won't talk about very much, which is just I blog there, I wrote a book, if you're interested in that kind of stuff, you can see. That definitely helps with the consulting and selling consulting and contracting gigs and stuff like that. Then my business website is benfranklinlabs.com. Jonathan Stark: Nice. You missed your calling, you should have been a R&B singer with that name. Jason Swett: There you go. My family told me when I was a little kid, they told me I was related to Keith Sweat. I kind of discovered later that it was improbable. Jonathan Stark: And with that dear listener we'll wrap up this episode. This epic episode. This is great though. Thanks so much for coming on Jason. Jason Swett: I loved it. Thanks a lot for having me on. Jonathan Stark: Hey folks I just want to let you know, I recently upgraded my mentoring program to include six months of unlimited 24/7 access to my private Slack community. So in addition to unlimited emails and phone calls, you can now ping me in Slack at your leisure. You can find out more at expensiveproblem.com/mentoring. Hope to see you there.
What do you do?
How to answer the world's most common cocktail party question
Lead with the symptom, not the disease
Bait your hook with worms, not poptarts.
Client don’t pay you to code
Clients are paying for outcomes, not outputs.
What if the client has no budget?
What to say when the client reveals that they have an absurdly low budget.
The Helicopter Option
Why clients don't always choose the cheapest option.