19
Facing the Real Costs of Doing Business
Before you read this post, we’d just like to let you know that you should grab a coffee and make yourself comfortable. It’s a long one – but one we feel is worth the time to read. Enjoy – and please share your thoughts in the comment section.
What do your clients cost you?
That’s a very good question. It’s a question I think every freelancer should revisit each three months or so. It’s not an easy question to answer, either, because it sounds silly. Clients are supposed to increase our revenues, not increase our costs.
But they do. In fact, everything we do in life has a cost. Determining what those costs are before taking action on anything is just plain smart.
Every accountant knows this. Every entrepreneur knows this, too. Before we sell one piece of content or one design or one consultation, we have to know the costs involved in the creation of our product or service.
Then we need to determine a price to generate profits.
The problem is that most freelancers get this part wrong. They miscalculate the costs badly – and then they end up in trouble.
Nothing in Life is Free
Sad but true. There’s a cost to everything we do. We make choices every instant of our lives.
If we want a hot coffee in the morning, the cost is a cold walk to the kitchen in the dark. A night at the movies costs organization time, wear and tear on the car, and the price of the ticket. A day playing hooky costs the double-time effort of catching up the next day.
Even those benefits we feel cost nothing at all do have an expense. To earn a friendship, we must invest time. To receive a smile, we have to do something nice. For someone to bring us a gift, we have to build up the desire to give without receiving.
We lose something with every gain.
People often ask me how I can do business without taking calls from clients. “Don’t you lose customers that way?” They’re surprised when I tend to agree that yes, I might in fact lose out on great jobs. But the loss is worth the gain – every single time.
I sat down and thought of the impact being a web-only worker might have on our business. I figured out what I needed to be happy in my job and do the best work I can, providing the ultimate service to the clients we have.
I examined the effect of the costs on my life and weighed them against the benefits. Was it even? Were there more benefits? Was the cost too high?
How Cost Affects Your Life
Each new client costs time and money. We invest in creating portfolios, spend time marketing and work on convincing clients to buy. Then we land a customer.
From thereon, it’s all good, right? We’ve spent, and now we can receive the compensation and monetary rewards, the good referral and the compliments on our work.
Unfortunately, that school of thought isn’t accurate.
How much time do we put in the production of the content or the creation of the design? Do we have to invest energy in phone calls? Are there emails to respond to and feedback to receive?
Direct costs, certainly, all part of the cost of goods sold. But wait – there’s more.
How much time for yourself do you lose with each new client? Will your stress level rise? Are you going to have to stay up late a few nights and lose some sleep? Can you maintain the pace and continue to invest energy?
Or will you get through the week tired and burned out? Will you need a few days off to recover? Is the next project that comes along going to be one too many?
Even more, what other indirect costs are involved with the client? Will your family have to miss a weekend because you’re working? Will your child have to play by himself for a while you work? Are you going to have to make excuses for that promised afternoon outside playing ball?
People forget to think of these questions, and the answers matter a great deal. Nothing counts more in your life than your personal welfare.
If you’re burned out, stressed, crunching to meet a deadline, it’s no good. If your children turn away after asking you to watch Johnny and the Sprites, muttering that, “I’ll be there in a minute,” is a lie, the cost is too high. If your partner sheds even one sigh that he or she misses you and wished you two could just have a little more time together, you’re paying too much.
The money you’ll make at week’s end? Tell me. Is it really worth it?
Don’t Ditch All Your Clients
By now, you’re probably sitting there thinking, “Oh my god… What have I done?” Relax. It’s okay. Life’s not over and you don’t need to fire all your clients.
But you do need to make better choices that have a lower cost and more benefits. You need to start operating your business with more critical thought, knowing the expense of each client that comes in.
Choose who you work with. Examine the rewards. Determine the costs. Weigh the differences between the two, and know when to let go of a job that makes you pay instead of bringing you rewards.
It’s your turn. What cost do you face in your work, and how is that expense affecting you? Do you feel that the price is just part of business? Are you resentful of it and wish things were different?
Share how you feel – and let’s see if we can’t all make changes that create a fulfilling, beneficial situation that brings rewards without costing us our lives.
Help spread the word!
Welcome to our community. Kick back, put your feet up and join the discussion.
21 Responses - Leave your comments too!
Go ahead. Leave a Comment!
-
-
-
James is reading:
-
-
Taylor is reading:
-
-
Social Hookups
-
Hi James – those indirect costs you so vividly described are exactly why I quit my fulltime job in an agency to go freelance. ‘High maintenance’ clients (and colleagues!) meant stupidly long hours and high stress levels that took all the enjoyment out of work, but more importantly left me no time to be a wife or be part of my community.
Now, I actually have food in the fridge, I know who my neighbours are, I enjoy my work and I can support my husband (the major bread winner) by doing his taxes and the admin for his side of the business.
I’m also now free to work with clients on my terms and thought I’d share a few ways I’ve turned around clients who suck my time and energy.
Are they emailing you every 5 mins with little things – just reply once or twice a day in one email covering all their points.
Don’t agree to tight deadlines, unless they’re willing to pay extra and you’re happy to do it. Agree realistic timescales or even add on a day and deliver early to make them feel special.
Do they phone you ten times a day to ’see how it’s going’ – agree that you’ll have an update call at a certain time each day/week to discuss progress and any issues – explain politely that yours is a creative process that doesn’t work with constant interruptions.
Email a progress report once a week.
The key is that they feel communicated with and special – they know you’re on top of their project and they know exactly what stage it’s at – but it’s on your terms not theirs.
Sorry James – that was almost as long as your original post, but it felt pretty cathartic.
Rachael´s last blog post…Fact checking – has technology made us sloppy?
This is a tough topic for me. As a relatively new freelancer, I’m doing everything I can to bring in some business. I don’t give the milk away, but I’m not getting much takers on buying the cow.
I ended up with a client after he commented on one of my posts. He needed a little of this and a little of that to clean up his website and he wanted some advice to bring in traffic. I agreed to do the first month work of stuff for $50 – seemed reasonable and easy enough.
Jiminy-Freakin-Christmas-on-a-pogo-stick. The guy is killin me. I get 6 – 10 emails a day with suggestions for links and ding this and that. He got his fifty bucks worth on the first day!
Anyway, my bed and I know I gotta lie in it. How do I avoid these kind of situations?
Cheers
George
Tumblemoose´s last blog post…Query me this, Batman Part 3
@ Rachel – It sounds like you’ve established clear boundaries with your clients from the start, and that’s fantastic. Most new freelancers don’t do that, as they’re afraid to lose the client, lose work, lose income or miss their chance.
Truthfully, establishing boundaries and setting your own rules helps freelancers create situations that benefit them and allow them to gain clients, gain work, gain income and explore opportunities. Good on you!
@ Tumblemoose – By learning the hardest thing to do: Saying no.
I squirm with this myself sometimes (believe it or not). Since I like being the good guy, I often help people out or give a break on something – but then I’ve just set the pattern, boundaries and expectations for the customer.
It’s not the client’s fault that he believes it’s okay to email 40 times a day and get tons of free help. I was the one who set that precedence. It’s not the client’s fault he believes our rates are X or Y and doesn’t know that he received a discount. I was the one who created that perception.
Then it becomes a matter of writing a diplomatic email that explains why the situation can’t continue, and that’s hard. My best advice? Sandwich that “stop” between two positives.
“Hi so and so. I love you to death. Great client, great person, enjoy the work we do. (Positive).
Unfortunately, I’ve been spending too much time working in general (neutral, not attacking any one person) and need to make some decisions about my business. (Puts the weight on your shoulders, not his).
I’ll have to do XYZ (your solution) beginning X (clear dates, no confusion).
Thanks for your understanding, and I hope we can continue working together. I really love you, you’re great and I love that shirt you’re wearing. (Positive).
Love, Moose.
It’s always hard, but it becomes easier with practice, and it honestly does relieve a weight of guilt and brings relief once you bite the bullet. And often, good things come of it. What if the client says, “Hey, cool, I understand.”
@ James – you’re right, I know I was incredibly lucky to start out without a lot of the responsiblities and fears that other new freelancers face.
I was also fortunate to have had a lot of client handling experience prior to going freelance and it’s got to be one of the most important skills I use now. As you said to Tumblemoose it’s about learning how to say no, setting expectations and negotiating as well as delivering great customer service.
I’d encourage any new freelancer to look up tips online (MwP is a great place to start) or take any course you can on client handling – it’s an area that’s so vital but I think does get overlooked sometimes when people talk about freelancing.
Rachael´s last blog post…Comments – oops
James, You have hit a very important nail smack in the center. Having loose criteria in terms of clients is a recipe for a lot of stress, if not disaster. I have taken clients that I shouldn’t more times than I can count, and every time I end up having to cut them loose–never a pleasant experience. Far better to not have taken them in the first place.
When I coach my freelancing clients, the very first thing we cover is the Red Velvet Rope Policy–what type of clients witll the allow behind the rope and which will they turn away. We go through pretty thorough exercises to help them get real clear about what characteristics (not circumstances ) are on their ideal list (e.g., like you, I want clients who are comfortable with asynchronous online communication, NOT phone! Also clients with good sense of humor, high integrity, sufficient mental bandwidth to be responsive to project needs).
It’s too easy to work for anybody with a wallet if we haven’t thought through the kind of client that really works for us–energizes and inspires us to do our best work. That ideal client is good for the soul, good for the blood pressure, and good for the success of our freelance practices.
Thanks for bringing another key point to ponder into the spotlight!
Trish
@ Trish – Hey, just a note – clicking through to your website is giving me a 404 error. What’s the proper link?
Liberating post, James. I’m so used to the idea of selling your soul to The Man, that it’s difficult to realize that we don’t _have_ to do that.
“If your partner sheds even one sigh that he or she misses you and wished you two could just have a little more time together, you’re paying too much.”
That line really resonated with me: my s/o dreams of a freelance music career, but right now, he’s working two jobs to scrape by. And I miss him. Our lives are dictated by crappy $7.50/hour jobs, and some days, it feels like that’s all that’s out there.
It’s just nice to hear that one day, we can spend enough time together
Thought provoking stuff – especially right now. Whether I’m in an agency, running the scary freelance game or, like now, somewhere in between, there’s one thing I always want to see in a client. Respect. Do they do a good days work, believe in treating people fairly? And not just me but the lady who cleans the offices and the people who manufacture their goods. Yep. I want to be inspired and do great things with my carefully sharpened pencils. But I want to do it with companies who promote green initiatives, give generously to their communities and act responsibly.
So that’s my ten pence worth. Thanks for blog – it’s on target.
@ RLD – You know what kills me?
Two people who were a great couple, solid and secure, falling apart into a divorce situation simply because one person was working like a bastard to support the family.
The person lifts up his or her head from the work, blinks, and realizes that relationship has been shattered. He or she sits there thinking, “What happened? I was working so hard to give us what we wanted… and now it’s gone. How can that be?”
I find that many people lose focus over what really matters. Work comes and goes. Jobs do too and so does income. But if you destroy a relationship, it’s never the same again.
Same thing for kids – they’re patient, they love us, they want us, and they hang on hoping that they won’t wait forever. Then you look up and realize that your toddler is going on ten, and you’ve missed it all.
Sure, the kid has a roof, food, clothing and all the good stuff… but all they wanted was some time.
Jeez, I’m gonna make myself cry. I should drink more coffee instead.
Great post, but I think there’s another side to this too.
I’ve been doing freelance web design for several months now, and I’m still having trouble finding customers… partially because I’m so picky.
I agree whole heartedly that it’s important to be careful who you work with (in fact, that’s why I quit my job and went in to freelancing in the first place), but you can’t be too picky about who you’ll work with either, or you’ll find yourself without ANY clients.
My two cents.
@Alex: Agreed. My mom said the same thing. There’s a very fine line between being picky and cutting off your own nose. Between James and I, I’m always the first to say “No way! We are *not* working with this person!” and then James will say, “We’ll give it a shot, it might not be so bad…”
Most of the time, he’s right. And when he’s not, I try not to say “I told you so”.
Hey James,
I think the key is to parcel your time. Yes, some days you will have to burn some midnight oil to meet deadlines. Other days, you can take the afternoon off and kick the soccer ball around with the boys.
But generally speaking, boundaries really help. I’m working today from XXam to XXpm, and after that we’ll kick the ball or play Wii or do your dictée. This weekend we’ll go out for dinner. You’re in my book, it’s a date, it’s set in stone.
It is definitely harder to “leave it at the office” when the office is just down the stairs. But it is not impossible — and it’s definitely worth it.
~Graham
Graham Strong´s last blog post…The Art of Perception (Part IV): What Colours People’s Perception of You?
The real cost of business for me? Conversion stress and burnout.
I felt it in my hands-on organizing business and I feel it now.
I’m the sort of buyer who knows my needs. I go looking for someone who will fill that need by looking at the accomplishments. I decide if their product or their service (and customer service) fit with my need and with who I am, and then I look at price and buy.
I therefore approach my own sales in this manner forgetting that most of the world isn’t so practical and needs to be enticed. That causes stress, which puts me on edge and then not only does my business suffer, but everything else in my life does too, including my relationship.
If I could partner up with someone who better understood all this stuff and whom I got along with, I’d happily accept the cost of bringing in only half the earnings (because I’d more than halve my stress).
Any takers?
Alex Fayle | Someday Syndrome´s last blog post…Can You Just Enjoy a Moment?
So what can a client do to be a good client?
I think you’ve talked about that before though.
@ Pat – I have How to Avoid Being the Client from Hell… but maybe we’re due for a revisit to the topic?
I dunno, am planning on offering you guys some large design work early next year as have indicated, and as it will be a big project, this topic got me thinkign about whether I’d have to do any convincing myself to have you take it on, or whether there’d be a scheduled waiting period etc, or whether this kind of thing you mentioned in this post is really directed at ‘the client from hell’.
Of course, I’d like to be able to frame the work in a way that’s most profitable to both sides.
I’ve only been freelancing full-time for a few months, but have already learnt how true James’s words are…
The jobs which are least “costly” to me are ones which are ongoing, and which no more than turning over the goods to the client with a brief, friendly email. (Mostly my freelance writing jobs.)
My website jobs, which I initially thought would be a good earner, have proven FAR more costly in terms of my time, energy and attention than I’d expected. I mostly create small, simple websites for small (hopefully not simple…) clients. I’ve found that for each website, about 75% of the time I actually spend on it is in client phone calls, emails, tweaking things that clients changed their minds on, scanning in images for them… Actually creating the sites has been pretty simple.
I’ve learnt a couple of lessons from this:
- I’m focusing on my freelance writing rather than websites, and keeping the website design/creation for my own projects (I don’t want to give it up altogether).
- I’m learning how to handle clients better (I find that some rarely respond to emails until I phone, for instance).
So something I’d urge people to do is to really take in James’s advice about the real cost of doing business. I earn less in an hour’s writing than an hour of web coding, but the writing involves vastly less admin so actually works out better “value” in terms of my time.
@ Ali – So… a client who knows what they want and is decisive about it is a good one?
@ Patrick – Not necessarily. Too many clients fall in love with their own product, their vision, their philosophy, their language, and they lose complete sight of what the customer wants, seeks and desires.
They get stuck on a design idea that isn’t good. They fall in a rut with copy that doesn’t work. They use language that doesn’t matter to customers. They can’t reach their target audience because they want X – even if Y is better.
A good client is clear, respectful, patient and understanding, and he or she also has the open-mindedness to listen to feedback and suggestion.
After all – if you hire a professional, you should have the ability to let the professional do his or her job, right?
The nice thing about being in business for awhile is that you have data to work with.
One of the businesses I’m a partner in is a family owned local landscape company. Here’s a couple rules we go by:
- Know when to turn down a project (we learned this the hard way). Many times there are red flags all over the place. We even had one older couple try to copy major parts of our drawing (at the bid) by having the husband lure us into the backyard for a moment. My father realized we left the plans in the living room and when he went back to grab them, the wife was copying the plans (they loved what we had but wanted someone else to do it cheaper).
We turned them down.
- Keep stats. After a year or so you will be able to determine “how much” a phone call is worth. If your business phone rings, for example, does that equate to $50? Same with new customer emails.
- Never lose eye on what works and what doesn’t. Most likely your business plan will evolve and change some. Do what works and when it stops working (or never did), stop or change it. (sorry, that one might be off topic)
- Like our boy James said, when it comes to family, they come first. Every entrepreneur needs a solid foundation. If your personal life is on the rocks, you likely won’t perform as well as you could and will be distracted. Getting yourself together and building your beliefs and goals on a solid foundation is priceless.
@ Rachael – I was like you. I had a high level position in a local hotel/casino here in Vegas. It paid me $90k per year, but it came at a price. The only things I did at home was eat and sleep. Then on my days off, I was too tired to do anything.
I decided to live a simpler life and focus more on things I enjoy. In my early days as an entrepreneur I had a real estate investor mentor. One of the first things he told me was, “The worst thing you can do to build wealth is work a normal job.”
John Hoff – eVentureBiz´s last blog post…Do You Have A SEO Question?