Preston (00:01.508)
Whats up and welcome again to a different episode of Freelance to Founder. It is a particular Q&A episode. We do these Q&A episodes each Tuesday. And on Thursday, in fact, we do our lengthy type teaching episodes the place we have now folks similar to you, freelancers, company builders, name in and we coach them by means of no matter hurdles they’re going through of their enterprise. However on at the moment’s episode, we have now a Q&A. Now we have folks proper in from everywhere in the world ask questions.
and we do our greatest to reply them in a little bit of a shorter format. And naturally, we’ve received a query at the moment as effectively. This query clay truly comes from Jim, I don’t know find out how to say his final title, Jim Crizon? Anyway, we’re going to name you Jim, Jim. However Jim was on the present in March, so it’s October proper now. So he was on about six months in the past and we talked about his enterprise. So Jim, thanks a lot for writing again in.
Clay (00:41.454)
I’ll simply name him Jim.
Preston (00:54.896)
Right here’s his query, he says, a latest theme you guys have been speaking by means of is to not cost an hourly price, to not cost on an hourly foundation. Which he’s proper, we’ve been harping on that loads currently. And he says, I 100% agree with that value-based charges are the way in which to go, however, how would you method paying your subcontractors? I’ve run into subcontractors preferring to go hourly price, as I believe they’re afraid they will’t precisely estimate undertaking prices or efforts for them.
Clay (01:03.103)
Mm-hmm.
Preston (01:23.1)
And he says, it’s less expensive for me to pay for the hourly price, which is why I push my purchasers for value-based billing. So I’d like to listen to your ideas on find out how to finest construction fee for retainer or subcontractors, significantly in case you’re attempting to construct a crew. So I’m gonna sum this up for me. The query is, sure, hourly is, sorry, value-based or project-based is best after I’m charging another person, however after I’m paying somebody, shouldn’t I need to pay them by the hour? What do you assume, Clay?
Clay (01:49.422)
Hmm. I can see the place this is usually a little, what’s the phrase I’m on the lookout for? Lower than simplistic. Much less congruent, proper? Since you’re charging, perhaps you’re charging a flat price to your purchasers, however then you definitely’re having to show round and pay hourly to subcontractors. Like, so it makes, I imply, logically on paper, I suppose it is sensible to
Preston (02:12.206)
Yeah, yeah.
Clay (02:18.934)
Be congruent, right here’s my, I suppose what I’d do is, it actually comes out to the identical, to be sincere, for my part, however in case you needed to be congruent, I’d simply attempt to negotiate with my subcontractors and pay them a flat price.
Preston (02:37.658)
Yeah.
Clay (02:39.03)
per undertaking or one thing. If you happen to don’t, and it’s a must to pay them hourly, which I suppose is okay, and also you’re nonetheless charging a flat price to your purchasers, I’d enterprise to say you realize the common quantity of hours it takes to do a sure undertaking, proper? Which suggests you realize the common quantity of {dollars} it prices you to pay a subcontractor, on common.
Is that, like, am I, I’m kinda considering there.
Preston (03:10.736)
Yeah, yeah, I believe so, significantly when you’ve got adopted our recommendation about actually systematizing your corporation and constructing processes so that you just don’t promote 100 completely different objects, you promote one or two issues and also you do them very well, then yeah, you ought to be very clear on what number of hours it takes to do sure issues.
Clay (03:17.961)
Mm-hmm.
Clay (03:31.338)
Yeah, so I believe you possibly can simply guesstimate how a lot it’s gonna value you. So let’s simply take an internet site undertaking. Did he point out what sort of tasks?
Preston (03:42.362)
No, he didn’t
Clay (03:43.582)
Okay, let’s simply say it’s an internet site undertaking and also you cost, I don’t know, $5,000 for an internet site. However then you definitely flip round and pay a subcontractor, perhaps you’re the one who offers with the shopper, proper? However you pay a subcontractor, an internet designer to design it. And perhaps this internet designer costs hourly to do it. I believe with web sites, you…
You understand, when you’ve got sufficient expertise, you realize about how lengthy an internet site takes to construct for a specific, when you’ve got like a brochure sort web site that’s similar to, yeah, lower than 10 pages, you realize, like brochure web site, it most likely like, I don’t know, lower than 20 hours, lower than 10 hours, you realize, it takes me lower than 10 hours to construct one thing like that. You instances that by regardless of the hourly price is, you realize?
Preston (04:19.472)
Yeah.
Proper, then it takes a sure period of time.
Preston (04:36.589)
Yeah.
Preston (04:42.undefined)
Yeah.
Clay (04:43.055)
After which contemplate that your common value. Now, I’d pad it.
Preston (04:48.044)
Yeah, give your self slightly little bit of wiggle room.
Clay (04:49.99)
Yeah, as a result of some tasks may take extra. However based mostly off that, that’s simply what I’d base that quantity.
to make use of in what you cost your shopper. And also you simply gotta know that you just’re gonna be over slightly bit on some tasks, you’re gonna be underneath slightly bit on some tasks, however the objective is to common round that.
Preston (05:15.06)
Yeah, you have got a median revenue margin that you just’re aiming for. I believe that’s one technique to do it. I believe one other method you can do it’s you realize what you’re planning on charging your shopper for a undertaking. And as a reminder, I simply re-looked it as much as remind me as a result of it has been a short while. We love you, Jim. Sorry that we forgot. So Jim does Salesforce work. So he’ll are available and assist an organization get all arrange on Salesforce and does custom-made…
like custom-made Salesforce stuff for his purchasers. So stuff, Clay and I frankly don’t know loads about, however I do bear in mind having this dialog with you, Jim. And I believe for me, you can have a look at it that method, or you can additionally say like, I do know I’m gonna cost my purchasers $5,000, proper? So now I must discover a freelancer who can do it for $2,000, or no matter it’s gonna be, proper? And so then whenever you’re on the lookout for freelancers, as an alternative of claiming like, how a lot do you assume this’ll?
Clay (05:48.887)
Mm-hmm.
Clay (06:05.023)
Yep.
Preston (06:11.824)
how a lot do you assume you can do that for? After which they’re attempting to determine their hourly price and it’s similar to in every single place. As an alternative, you simply say, might you do that for $2,000 or much less? It’s a easy sure or no, proper? And in order that’s what I do with the freelancers I rent. I do know what my finances is for the duty that must be accomplished as a result of I understand how a lot cash we’re gonna make from it. After which I’ve to maintain it underneath that certain quantity or we’re not worthwhile.
Clay (06:23.132)
Mm-hmm.
Clay (06:37.865)
Mm-hmm.
Preston (06:38.104)
And so I truly favor to go the opposite route the place as an company proprietor, as a result of that’s primarily what you’re turning into, in case you’re beginning to rent subcontractors and freelancers, you’re beginning to grow to be an company extra. As an company proprietor, I’ve to say, listed below are my bills, and I’ve to maintain my bills underneath a certain quantity. As an alternative of claiming, listed below are my bills, after which I’m gonna work in revenue on high. And it will probably work both method, proper? However I believe there’s two methods you can have a look at it for positive. You understand, if a freelancer involves me and says, I solely do hourly,
Clay (07:00.024)
Mm-hmm.
Preston (07:08.016)
To begin with, until they’re similar to probably the most unbelievable individual on this planet, I simply know I can discover a freelancer who will do it on a set price. And I simply favor mounted as a result of it’s extra predictable. As a result of what occurs in case you invoice your shopper three grand for a undertaking and your freelancer works hourly and he goes over the three grand as a result of he can’t determine one thing out. He’s truly rewarded for being much less environment friendly and being much less gifted and fewer succesful.
Clay (07:18.313)
Mm-hmm.
Clay (07:30.135)
Proper.
Preston (07:37.752)
It doesn’t, the hourly simply has by no means made sense in my thoughts. The more severe you’re at your job, it takes you longer to do it, the extra you receives a commission. What’s that about?
Clay (07:46.146)
Mm-hmm. It’s the identical factor like attorneys man. I by no means understood why attorneys charged by the hour, however like
Preston (07:50.368)
Yeah, in fact, yeah. As a result of, no, as a result of they sit in a room with you and discuss for 2 hours. That’s why they cost by the hour.
Clay (07:55.31)
Mm-hmm. Yeah, in case you rent a divorce lawyer, they’re incentivized to make that, to stretch that divorce, like, hearings longer. And by no means made any sense to me.
Preston (08:07.452)
Mm-hmm, yep, yep. And that’s why a few of the best attorneys are those who’re engaged on a contingency as a result of they know they receives a commission from regardless of the result’s, not from simply sitting in a room and consulting. And naturally, it might be superior if we might all simply sit in a room and seek the advice of and make an hourly price and never even have to supply any actual worth essentially, proper? And I’m not saying all attorneys are that method, however.
Clay (08:16.994)
Mm-hmm.
Clay (08:35.49)
Mm-hmm.
Preston (08:36.356)
however in most shopper relationships with an company or a freelancer, you ought to be getting paid by the worth. And I by no means pay for one thing that’s circuitously associated to the worth they’re gonna convey. I by no means pay anybody only for like displaying up. You understand what I imply? So I don’t know. What else do we have to add right here for Jim?
Clay (08:54.838)
Hmm, I believe that just about sums it up. I imply, I believe it’s simply all about Getting sufficient of an information set to know what your what your common value numbers are Pat pat it slightly bit and simply let that be it
Preston (09:06.896)
Hmm, yeah.
Preston (09:12.94)
Yeah, you gotta know your numbers. You gotta have sufficient of a system labored out to the place you realize like I’ve, I must have six purchasers on common in any given month. They should every be paying $2,000 for the month. That provides me $12,000 in high line income, which implies I’ve $5,000 to spend on subcontractors. So I would like to seek out perhaps three subcontractors who can every do, effectively now that’s laborious math, like 1,200 a bit or no matter. Such as you gotta know these numbers.
Clay (09:15.102)
Or, yeah.
Clay (09:20.318)
Mm-hmm.
Clay (09:42.398)
Yeah, now right here’s slightly tidbit for everybody, as a result of I do know we have now loads of freelancers right here. I believe whenever you’re pricing your providers, even in case you do the providers your self, I believe you ought to cost your providers as if you’ll subcontract it out.
Preston (10:03.248)
Hmm. Say extra about that.
Clay (10:03.81)
So, effectively that is the way you develop, proper? So, in case you’re charging based mostly off simply, you already know you’re gonna be doing it. So, let’s simply take an internet site for instance. So, within the case of hiring a subcontractor, we give the instance of like, hey, if it’s gonna value you 5,000, otherwise you’re charging $5,000, it’s gonna value you 2,000 to subcontract it out, you make 3,000, proper?
We all know there’s extra to it than that, however we’ll maintain the instance easy. Loads of freelancers right here shall be like, effectively, you realize, it’s solely going to take me, you realize, 10, 20 hours or no matter. So I’ll simply cost you $3,000 for the web site. That’s what most I believe most freelancers do, particularly at the start, is that they know that they themselves are going to get $3,000. However for my part, you can’t develop that method.
Preston (10:35.94)
Proper? Yeah.
Preston (10:55.301)
Hmm.
Clay (11:03.902)
as a result of finally if you wish to rent folks and also you don’t need to be a solopreneur, solo freelancer eternally, you’ll have to boost your charges sooner or later anyway. So I’d fake like whether or not you’re going to do it or not, fake you’ll subcontract this out, determine what it’s going to value, cost your shopper accordingly to that mannequin, after which at that time,
you resolve whether or not you wanna do the work otherwise you rent it out.
Preston (11:36.812)
Yeah, I really like that really. I really like that.
Clay (11:39.582)
Mm-hmm. And you are able to do it, proper? You are able to do it if you would like. However this offers you the liberty of, okay, I do know I priced it excessive sufficient to have the ability to subcontract it out. If my demand’s excessive, I received a workload or no matter. So like that. I believe that’s the way in which pricing must be accomplished.
Preston (11:56.696)
Yeah, that’s actually sensible as a result of there are going to be moments the place perhaps you want the money personally, proper? Particularly as you’re rising. Or there may be moments the place you want the additional time to develop your corporation. And so giving your self that flexibility, I really like that. I really like that. Very sensible. Properly, Jim, to begin with, thanks for persevering with to hear. Thanks for approaching the present six months in the past. Possibly we’ll attain out to Jim and see if we are able to have him again on the present. Study extra about your corporation, reply some questions.
Clay (12:01.038)
Mm-hmm.
Clay (12:10.219)
Mm-hmm.
Preston (12:22.34)
However Jim, thanks for listening, man, and thanks for submitting a query as effectively. Once more, if you wish to submit a query like Jim did at the moment, you possibly can go to freelance2founder.com slash ask. Clay and I’ll do our greatest to provide you our greatest recommendation based mostly on our expertise in rising a few companies. And yeah, I’ve been Preston with millow.co. In fact, Clay Mosley from getdrippify.com. That’s been us at the moment. Thanks a lot and have an amazing day.
Clay (12:43.952)
See ya!