Flaws in Handling New Business Inquiries

The WAV Group had researchers pose as consumers and make inquiries with real estate brokers. The results were depressing. Their results were about right for solo technology professionals as well, in my experience.

Unfortunately, that’s not the the most depressing part. It’s embarrassing for me to admit this, but the very week this study came across my desk I blew off a new contact …and we were discussing some ways we could work together. I didn’t ignore him intentionally. I simply completely dropped the ball on getting back to him in an email thread we were having.

I never like to leave somebody hanging. I have no excuse, though I told myself I was too wrapped up in a couple of projects that suddenly picked up momentum that week to continue the thread wholeheartedly. I still should have acknowledged him and said something before it became a 14 (!) day gap of silence. This is Customer Service 101 and I blew it. Learn from my mistake.

Learn all you can from the mistakes of others. You won’t have time to make them all yourself.


Alfred Sheinwold

How to get your consulting fee upfront

I could make this article very short with the smug answer: “Just ask for it.

But I know from real world experience that the more accurate answer is it’s both exactly that simple and, at the same time, not just that easy.

How much do you ask for? When do you ask for it? How do you ask? How do you make it in the client’s interest? How do you deal with objections?

How much you can ask for:

  • A portion of the fee upfront.

This one seems obvious to me now, but I went several years before I moved beyond the “work a bunch of hours then send an invoice and wait” model. You can do this whether you are fixed fee or hourly, basing the latter on an estimate. It did wonders for my cash flow, for my scheduling, and for eliminating clients (or worse, prospects — i.e. folks I’d never worked with at all before) that would say “Let’s do it” then drag their feet or expect me to move quickly to do my thing for them, but then would take forever to pay me for my promptly completed work.

  • The entire fee upfront.

You’d be surprised how acceptable this becomes once you simply start making it your convention. And, really, it’s not all that strange when you consider that you can’t drive away with a car (or even walk out of Walmart) before paying for your purchase, as well as the fact that in most cases you are taking on greater risk than the client is by working on a project for a client for a few weeks or months with only the “hope” that you’ll get paid at the end. You are a freelancer, not your client’s banker/lender.

When can you ask for it:

  • After you’ve set your fee (but not a moment before).

When you get paid is a discussion about payment terms, but not about your fee itself. I learned this from Alan Weiss. I don’t discuss payment scheduling until at the very end of my full proposal. The easiest and most seamless way to do this is to require payment as part of proposal acceptance. That is, nothing means anything until a check is in hand (you can’t deposit a signature and people can drag their feet even after signing agreements).

How you can ask for it:

  • At the end of your proposal.

A simply line or two entitled payment schedule or payment terms, at the very end of the proposal (after fees have already been stated), right where they are expected to elect any options and accept the proposal. My favorite way to do this (and what is in every proposal I send out) is an approach I borrowed and adapted from Alan Weiss is to require signature to proceed and to make payment equivalent to a signature:

Upon your acknowledgement I will provide an electronic invoice once you’ve made me aware of which options you prefer and if you wish to take advantage of any of the discount payment terms, which may be paid online or by check. Once accepted, all payments are due in accordance with the payment schedule above.

Your choice of option(s) and your signature indicate acceptance of this proposal as discussed and described above (in the absence of your signature, your payment also will indicate acceptance of this proposal).

  • With a discount carrot.

I routinely offer a discount of 5% to 10% for receiving full payment upfront (sometimes up to a year ahead). And no discount (or a smaller one) for receiving no or only a partial payment upfront. As a bonus, some organizations are required to take these discount terms when offered.

  • Offer different payment terms depending on the option chosen.

In nearly all of my proposals I give the client several options for achieving the agreed upon objectives, each with varying levels of risk, speed, client involvement, etc. This makes it easy to also associate different payment terms which each option. For example, for lower end (and generally lower fee) options I usually require the full fee upfront. This is justifiable because part of the way I’m able to offer a cheaper option at all is because I get paid upfront for it — i.e. it offers lower risk for me so I don’t need to get compensated for taking that risk, while for higher fee options I am more flexible — i.e. 50% of the fee upfront and the balance in 30 days.

How to handle objections:

  • Offer a strong guarantee.

One of the biggest reasons clients don’t like to pay upfront is because they are concerned about their options if you mess up. Take that risk away:

The quality of my work is guaranteed. If you do not believe I have met the mutually established objectives for this arrangement, I will continue to work toward those goals with you for no additional fee. If, after such an additional attempt, you still believe I have not met your objectives, I will refund your fees in total.

  • Make sure it’s really payment terms being objected to.

I never negotiate fees. I only negotiate two things: payment terms and project scope (which for me primarily entails engagement objectives and implementation approaches). This makes it important to distinguish between whether the objective is about the payment terms or about project value. The former is a very different discussion from the latter.

  • Be willing and flexible when it comes to negotiating payment terms (but not fees).

It’s okay to negotiate payment terms. I suggest that if it seems like you can’t get anything at all upfront, that you tie the first payment to a meaningful, but fairly minor milestone. As soon as the first payment is actually received, the remaining payments are far more likely. And your only concerned with payment terms for two reasons: to manage your cash flow (i.e. sooner is better; some is better than none) and to minimize your risk (i.e. of non-payment, of slow payment).

If you enjoyed this, I suggest you check out the book Value-based Fees by Alan Weiss.

How to Start Freelancing Without Having a Mental Breakdown

Sean Smith writes:

Your focus should be on automation & efficient systems first and foremost to easily manage the monotony while you get to work for your clients.

So, from my experience I’ve put together sort of a 101 for new freelancers and experienced ones alike.

His list is good, go check it out. I would add a few things to it:

  • Bench — The online bookkeeping service that does your bookkeeping for you. I used to do my own books (ahem, I mean I used to plan to do my books… they only got done when tax time came around or I convinced my wife to do them). No longer. And it’s all online so I don’t have to visit an office anywhere or wait for an appointment.
  • CFO Andrew — An independent CFO/CPA for Freelancers & Solopreneurs. I used to research my own tax questions and prepare my own taxes. No longer, and I don’t even have to go see anyone or wait for an appointment— I just send off questions from my phone as needed. My understanding is Bench can prepare my taxes too, but I like using a CPA because I often have other questions that come up throughout the year that aren’t just return preparation related.
  • A small business credit card (I had a good experiencing getting a Capital One Spark Business Credit card when I had very little credit) — Put all business expenses on this card and set the balance to be paid in full each month if possible. Doing this builds credit for things you are going to be paying for each month anyhow and also buys you another ~21 days of cash flow (since the credit card balance will carry it at 0% interest until your next statement is due). I have mine set to automatically get paid each month in full, but from time to time I may override this and only pay the minimum (or some other less than full payment) for cash flow management purposes. This gives me additional flexibility in that way too.
  • Fundbox — a simple way to fix cash flow (on occasion) by getting advances on outstanding invoices (you get a loan against the invoice amount immediately after you issue an invoice to a client — it gets deposited in your checking account the next business day — regardless of when the client pays you). This is handy, albeit costly. Use it when cash is tight and clients are slow to pay, but come up with ways to solve your cash flow issues in other ways over the long run. Even so, cash flow is key when you’re a small business and having multiple tools available is handy when cash crunches crop up. Fundbox integrates directly with Freshbooks.

The Business of Freelance: Tales of a Full Service Freelancer (Video)

Freelancer Michael Jones (of Mograph Mentor) did a pretty bad ass presentation (video) for a user group on The Business of Freelance based on his personal experiences and a broad economic examination of working as a digital creative services freelancer. His video presentation is 19 minutes long and well worth it. The good stuff starts just under 2 minutes in, but the first part gives you some context on his professional experience.

Do Freelancers Need to Have an LLC/Corporate Entity?

Over on the Dr. Freelance Jake Poinier answers a reader’s question about LLC/corporate entities for freelancers.

My own view on this is that even if you don’t form an entity (initially or ever), at least acquire an EIN (also known as a Federal Tax ID Number) just for your business activities so you don’t end up giving out your Social Security Number (SSN) to clients…

Getting an EIN was one of the first things I did because there was no way I was going to be handing out my personal SSN to clients. And doubly so when I’m doing information security consulting for them. 🙂

It was a pretty simple online process a few years ago and I even got it instantly (which was good because I needed it for a new client request that day)! It looks to be the same straightforward online application process to get an EIN from the IRS these days. Anyhow, go see what else Jake has to say on the LLC/incorporating topic and decide what makes the most sense for you. (The specifics of this are US-centric, but the principles apply elsewhere I imagine.)

What are you afraid of?

Alan Weiss writes in the Million Dollar Consulting Mindset newsletter:

Too often our personal “driving force” isn’t composed of our strengths and passions but rather of our fears. We are afraid to confront an issue; to start a conversation; to pick up the phone; to try something new. We are “driven” in another direction entirely, to procrastinate, make excuses, abandon a plan, endure a poor relationship.

As the same poles in a magnet repel, we are “repelled” in a different direction, antipodal to our intended goals. “Fight (our fears) or flight” results in flight. This makes us not only unsuccessful, but also uninteresting.

As with any problem, to remove it we must find the cause. And in this case the cause is almost always an ego problem, poor self-esteem, “baggage” being borne for no rational reason at all. We fear rejection, we fear a “loss,” we fear ridicule, we fear “defeat,” we fear fear itself. Our fears are, of course, irrational, because they create a far worse future than any pain in confronting the obstacles would actually produce.