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Thanks Patrick! >>You can use software development to achieve very quantifiable results for companies. Can you direct me to books / resources to understand mo

Thanks Patrick! >>You can use software development to achieve very quantifiable results for companies. Can you direct me to books / resources to understand more in depth what you are talking about here. I have read what you are saying many times but never quite get it. I am struggling to understand why would someone want to pay me % of their profit when they can hire some programmer for $50/hour. Is it about how you present yourself to the client s or types of clients you go after ? I am working as a freelancer and all I am getting is very budget sensitive clients who doesn't want to pay more than their cleaning maid.

napoleond 13y ago
Far be it from me to speak for Patrick, but generally the sales pitch for this sort of arrangement does not sound like "Hi, I'm a programmer. I'll build anything you want if you pay me 2% of your company's profits this year." It's more like "Hi, I'm a business consultant. I possess a specific set of skills which involve using software to increase profits for businesses such as yours, often by as much as 5%. My services cost an amount which is comparable to 2% of your current annual profits." (The numbers in that example were picked at random, but obviously the return needs to be higher than the investment for things to work.) In other words, it's pretty uncommon (and generally ill-advised, IMO) to ask for a "% of profit". What you are doing is anchoring your price tag against the value you can create, instead of the time you spend. (This is somewhat muddled by the fact that consulting engagements are generally billed by multiplying a dollar rate with the amount of time over which the engagement took place, but the only number that matters to the client is the one at the bottom of the invoice. It is the consultant's responsibility to find clients for which that last sentence is true, and to make sure that they are able to consistently generate positive ROIs for those clients most of the time.)
patio11 13y ago
Like Napoleon mentions in a sibling comment, you're typically not asking for a percent of profit directly, but rather for a weekly rate which is at a substantial premium to $50 an hour. (I've billed at $30k for a week before and pitched successfully at $50k.) A $60k engagement for my typical client wouldn't represent 1% of their profits -- many of them spend more on sandwiches in any given year. (If lunch as a perk costs $3k per employee per year and you have 40 employees... yep.) Yes, it is extremely important that you're pitching the right sort of clients and that you're proposing to do something which meaningfully impacts their business. My typical client towards the end of my career was a B2B SaaS company with $10 to $50 million in annual sales. Bringing me on was generally not their #1 activity in any given year -- after all, they all have dozens of full-time employees, so they can do lots of things in any given year -- but it was generally for an initiative with a fair amount of strategic importance on, typically, a product which everybody knew would make serious bank if the initiative worked out. If you had come up to me and said "We're building an app and need an extra Rails programmer" I'd have said "Cool, I keep a list of folks I like. Let me hook you up with someone." rather than attempting to get that business. Like everybody else who is Good With Computers, I occasionally get pitched on "Hey my aunt has a catering business, maybe you should make her a website?" That will never, ever happen. By comparison, if you'd recently experimented with A/B testing a bit on your $X million a year SaaS product and had increased sales by 5%, I would be very, very interested in helping you find the next 5 to 15%. If you're continuing to find very budget-sensitive clients, how are you prospecting for them? How are you qualifying them? How are you pitching them? There are many ways to prospect for clients which will get you lots of crappy leads, like e.g. looking for gigs on Craigslist. Qualifying clients is an art. You don't have to proceed directly to the "prying" questions like explicitly asking what the budget for a project is. Just ask basic getting-to-know-you questions like what their core line of business is and how many employees they have. If their core line of business is retailing Beanie Babies and they have two part-time employees it is unlikely they can afford professional services. If, on the other hand, they have two dozen engineers on staff, they probably can write any check you can currently envision asking for. What are you selling them on? If you're selling them things that can get delivered by any other freelancer who speaks your language, stop doing that. Start only going after engagements which, assuming project success, meaningfully increase the revenues of their company. Get case studies about how you've done that previously. Make it mandatory that you build in metrics tracking into all your projects, so that your clients know the ROI you are getting (and so you can quote, in broad terms depending on the specifics of your relationship and legal commitments, the sort of ROI your projects have recently generated.)
- 31reasons 13y ago
  This is gold. It will take me some time to digest it and actually turn into actionable items but Thank you for taking time and writing this. Much appreciated. I wish there was a training course for this :)

napoleond 13y ago

Far be it from me to speak for Patrick, but generally the sales pitch for this sort of arrangement does not sound like "Hi, I'm a programmer. I'll build anything you want if you pay me 2% of your company's profits this year." It's more like "Hi, I'm a business consultant. I possess a specific set of skills which involve using software to increase profits for businesses such as yours, often by as much as 5%. My services cost an amount which is comparable to 2% of your current annual profits." (The numbers in that example were picked at random, but obviously the return needs to be higher than the investment for things to work.) In other words, it's pretty uncommon (and generally ill-advised, IMO) to ask for a "% of profit". What you are doing is anchoring your price tag against the value you can create, instead of the time you spend. (This is somewhat muddled by the fact that consulting engagements are generally billed by multiplying a dollar rate with the amount of time over which the engagement took place, but the only number that matters to the client is the one at the bottom of the invoice. It is the consultant's responsibility to find clients for which that last sentence is true, and to make sure that they are able to consistently generate positive ROIs for those clients most of the time.)

patio11 13y ago

Like Napoleon mentions in a sibling comment, you're typically not asking for a percent of profit directly, but rather for a weekly rate which is at a substantial premium to $50 an hour. (I've billed at $30k for a week before and pitched successfully at $50k.) A $60k engagement for my typical client wouldn't represent 1% of their profits -- many of them spend more on sandwiches in any given year. (If lunch as a perk costs $3k per employee per year and you have 40 employees... yep.) Yes, it is extremely important that you're pitching the right sort of clients and that you're proposing to do something which meaningfully impacts their business. My typical client towards the end of my career was a B2B SaaS company with $10 to $50 million in annual sales. Bringing me on was generally not their #1 activity in any given year -- after all, they all have dozens of full-time employees, so they can do lots of things in any given year -- but it was generally for an initiative with a fair amount of strategic importance on, typically, a product which everybody knew would make serious bank if the initiative worked out. If you had come up to me and said "We're building an app and need an extra Rails programmer" I'd have said "Cool, I keep a list of folks I like. Let me hook you up with someone." rather than attempting to get that business. Like everybody else who is Good With Computers, I occasionally get pitched on "Hey my aunt has a catering business, maybe you should make her a website?" That will never, ever happen. By comparison, if you'd recently experimented with A/B testing a bit on your $X million a year SaaS product and had increased sales by 5%, I would be very, very interested in helping you find the next 5 to 15%. If you're continuing to find very budget-sensitive clients, how are you prospecting for them? How are you qualifying them? How are you pitching them? There are many ways to prospect for clients which will get you lots of crappy leads, like e.g. looking for gigs on Craigslist. Qualifying clients is an art. You don't have to proceed directly to the "prying" questions like explicitly asking what the budget for a project is. Just ask basic getting-to-know-you questions like what their core line of business is and how many employees they have. If their core line of business is retailing Beanie Babies and they have two part-time employees it is unlikely they can afford professional services. If, on the other hand, they have two dozen engineers on staff, they probably can write any check you can currently envision asking for. What are you selling them on? If you're selling them things that can get delivered by any other freelancer who speaks your language, stop doing that. Start only going after engagements which, assuming project success, meaningfully increase the revenues of their company. Get case studies about how you've done that previously. Make it mandatory that you build in metrics tracking into all your projects, so that your clients know the ROI you are getting (and so you can quote, in broad terms depending on the specifics of your relationship and legal commitments, the sort of ROI your projects have recently generated.)

31reasons 13y ago
This is gold. It will take me some time to digest it and actually turn into actionable items but Thank you for taking time and writing this. Much appreciated. I wish there was a training course for this :)