The presentation entitled “Knowing is Half the Battle,” discussed what we feel are a few of the essential points to starting and maintaining a successful business. Over the past three years, we have learned countless lessons - both good and bad - and wanted to share part of our story and detail some of those lessons. Keep in mind this is told through the eyes of a designer and developer, neither of us considered ourselves “businessmen” when we started. Since we entered this venture with numerous blind spots, we now want to shine some light on what we have learned to help others who are going through the process.
Context & Perspective
I have had the good fortune of a strong business partner through all these trials and tribulations; it has been an amazing learning experience for us. We’ve watched ourselves grow from two passionate young chaps freelancing from home, to a team of six talented maestros. The basis of our success is a direct reflection of our work ethic, complementary skills and effective identification of market placement (niche). Natural born talent and competitive drive are not sufficient to keep you afloat, those are merely fuel for the engine. Running your own business will require you to wear a variety hats (especially in the beginning), and you will need a plethora of tools to make your business a well-oiled machine. Below, we touch on some of these elements and use our experiences as examples.
Lesson 1: Taking the leap
This is undoubtedly one of the hardest decisions to make. After all, there is no secret recipe for success, and there’s no safety net. The leap to start your business is you taking a gamble on yourself. It is you putting forth your passion and skills and telling the world you are ready to take it on. You should not and will not make this decision lightly, instead contemplating countless factors and outcomes and repeatedly weigh the pros and cons of all aspects of your decision. While we had no doubt that we wanted to start our own business, we still had countless questions, worries and doubts. Deciding when to pull the trigger and leap was not easy.
In the beginning, our main concern was strictly financial. Erik, an analytical thinker, focused on crunching numbers and determining if the math was right: what revenue we needed to collect monthly, what we needed to stay above water and even what we would need in order to grow.
I on the other hand, being the eternal optimist, had faith that we had the skills and drive to make it out of the gate, and could then tackle the unknowns as they presented themselves.
You will have your own factors to account for when making the decision but in the end you will likely be looking at the same two questions we faced:
- Can I afford to make this transition while keeping the lights on and food on the table?
- Do I have enough faith in myself/my product to take the leap?
In the end we presented the numbers to our accountant with the hopes of some guidance, and perhaps a head nod to endorse our decision. The answer we received was unexpected, and changed the course of our year drastically:
“You can and should be financially responsible. But in the end only you can decide if you are ready to make it happen. Just because the numbers add up doesn’t mean you will enjoy it and make it a successful venture.”
This statement could not have been more instrumental in our decision to take the leap. We never once questioned our personal drive to succeed, so at that moment our decision was clear as day. We moved into our new office a month later.
- There is no secret recipe to the decision.
- Trust your gut.
Lesson 2: Understanding your value
Great, so you finally jumped. Now what? Beyond all the boring, yet important talk about structuring your business - Do I file as an LLC, C Corp, S Corp etc.?, who will be my accountant? - you also need to define your market value. This is a business and you need to make money, but how much do you charge?
As if starting your business wasn’t a big enough hurdle, now you need to sell yourself, acquire work and get paid. Early on this will mean that you will routinely accept work at just about any price on the principle that “money is money” and the idea that you are building your company’s portfolio. You might even trade services. I would strongly discourage barter in most cases, because trades are rarely equitable. Often, they come down to a person offering you something you do not need for something they do need, which isn’t much of a trade of in my opinion. We all climb through the crazy ranks of pricing in our own way, but I can tell you from experience that you are likely worth more than you think, and you are probably working against yourself.
There are a variety of tools to help estimate what your hourly rate should be which use things such as business expenses, personal expenses and profit margin to generate those estimates. But those calculators miss some very important factors including:
- Depth of knowledge
- Years of training
- Confidence and skill to deliver
A standard set hourly price does not capture your true value, and does not reward efficiency.
The story goes that Picasso was sitting in a Paris café when an admirer approached and asked if he would do a quick sketch on a paper napkin. Picasso politely agreed, swiftly executed the work, and handed back the napkin — but not before asking for a rather significant amount of money. The admirer was shocked: “How can you ask for so much? It took you a minute to draw this!” “No”, Picasso replied, “It took me 40 years”
Be wary of selling yourself short and devaluing yourself just to get work. If you work very quickly within your skill-set, you should be charging more per hour to account for this efficiency. Because of this risk, some people choose not to charge by the hour.
A battle you will face often is pricing work based on what you think the client will pay. When in fact you would need to assess the job and it’s value to you and the client. Then take that value and using your confidence to deliver a quote that is more appropriate to you and understood & respected by the client. When you begin to get comfortable in this mindset you will open up a whole new door. A note of warning though: not all clients will like this approach to pricing, so you may need to be flexible on this and accept you might miss out on some jobs because of it.
- Don’t work against yourself
- Remember, you are valuable
- Have the confidence to capture your value
Lesson 3: Contracts
The importance of a solid contract cannot be overstated. This is the shield that defines and protects the expectations of both parties. Without it, both you and the client are treading on a slippery slope.
Creating your first contract can be daunting, and if you are anything like us then your first contract will be a terrible compilation of online templates mashed together in an attempt to create the appearance of business responsibility. But even that first shabby contract offers markedly more protection than handshake-style agreements. Those inevitably turn into overwhelming and troublesome transactions, leaving both parties frustrated and trying to figure out who is to blame. Without a document that states the roles of each party and clearly defines the scope of work, you are leaving the door open for a dangerous thing called scope creep.
Scope creep is a sneaky little monster that looks for profit margin and eats as much of it as possible. To avoid this beast you need a solid contract that includes the project’s scope, sometimes called a Statement of Work (or SOW).
A contract will also define the border between a friendship based project and a real business transaction. If you don’t already have a contract for use we recommend you find a local lawyer who can help you find and/or assemble one that is appropriate to your needs.
- Contracts are a must
- Contracts protect both parties
- Contracts define the scope of work
- Contracts define a payment schedule
- Contracts cover your tail
Lesson 4: Managing expectations & communication
Under promise and over deliver.
It’s a common phrase that’s very simple in theory, but is not always easy to pull off in real life. Of all points in this article, this is one we are still learning in new ways as we grow. Managing expectations is all about discussing what should happen and what could happen with the client. The simplest example of this is saying something like “I’ll have that to you by Monday” to a client. That clearly states that you’ll be sending something to the client on a specific day.
This example illustrates one of the easiest pits to fall in. What if you get sick Sunday night and cannot work at all on Monday? You might just wait and send things over on Tuesday. But if you do that, you have officially started letting down your client. You said you would do one thing, but did another. A simple solution would be sending a quick note Sunday or Monday stating you are out sick and will need an additional business day. Simple and effective. An even better route is to over estimate when you can deliver something. Confidently tell your client you’ll have something to them Thursday and deliver it Wednesday. Under promise and over deliver.
On a grander scale you will want to set expectations about your long-term availability, work process and more. Never assume your client knows what’s on your mind or on your schedule. When in doubt, tell them what they might already know.
- Clear communication is essential
- Over communicate when in doubt
- Learn from your communication mistakes
Lesson 5: Learning to say “No”
As a business owner it is your mission to make money, deliver great services or products and satisfy client needs while being profitable. In this process you can become programed to take every opportunity that comes your way, over promise on deliverables and slowly transform into a “YES-man,” saying “yes” to everything that comes your way. While I understand that it may go against everything in your soul to turn away paying work, you will find that not every job is a good fit for both you and or the client, and that those are the jobs to avoid.
You will find yourself saying yes to certain requests and then, in retrospect, asking “Why?” Likely it was because you did not want to offend a current client or friend. Or maybe you really needed a paying gig at the time. But you need to think about which is worse, telling them “No” or saying “Yes” and then dropping the ball. I can assure you that the client would rather you said “No” upfront.
When to say no:
- The project doesn’t fit your business goals
- It is not beneficial to the business revenue / image / portfolio
- Clients that seem unorganized / unprofessional
- Something goes against your business ethics
What is interesting is that you will find yourself landing new opportunities by choosing to forgo others. For example, earlier this year we decided to pass on what would have been our biggest single project to date due to the simple fact that we were just not ready as a company to handle all the moving parts. It was a gut-wrenching decision to make, and at the time we were hoping we would not come to regret it. Long story short, we were actually able to land multiple projects of the same value over the next couple months that were a better fit for our team. We would not have been able to take on these new projects had we been entrenched in the first project.
- Do not feel obligated to say “Yes”
- Stick to your guns / business goals
- Wait for (or seek out) the right opportunities
Lesson 6: Slow and steady growth
So now you are protected by your detailed contracts and landing clients that understand and respect the value you bring to the table. You are getting used to the project management roles and power of good communication. You are also finally making money so you can begin to filter incoming projects and pass on work that doesn’t fit your goals. The next dilemma you will face is:
I have more work then I can handle. Should I hire someone?
Obviously growth is great, but be sure to understand the amount of growth you can truly handle. Taking on a new project that is going to make your pockets fat but drown your resources can be a very dangerous path. With growth comes added stress and the potential to compromise key areas such as:
- Quality of work
- Time management
- Peace of mind
When you get to the point where you are ready to hire someone the biggest thing to remember is to hire a person that is complementary to the team. You may be great at what you do and think, “I just need another me,” but that is incorrect. You can look for someone with some of the same skills but they should also carry a set of skills that adds something new and fills needs in the business. Before diving into the idea of hiring what would legally be considered staff, consider working with sub-contractors on a project basis. This will give you a solid idea of who is a good fit for the team.
This is even more true if you decide to create a partnership. The most valuable aspect of the business relationship between Erik and I is that our skill-sets and the work that we enjoy is completely different. This creates a nice harmony and balance within the services we offer and daily business tasks that need to be handled.
- Slow and steady wins the race
- Don’t compromise your core values
- Build a complementary team
Lesson 7: Self preservation
Let’s face it, you cannot work every waking hour of every day, whether you love your job or not. It is not healthy for you, your family or the overall quality of your work. You need to set limitations for yourself and define availability for your clients as well.
In the beginning you will gladly answer emails, phone calls and work requests on and off business hours. You will actually forgo the idea of there even being such things as business hours because, after all, you run the business and you are always on the clock. This may be a commendable example of your work ethic in the beginning, but you will actually be doing is creating expectations for your clients that you will not be able to meet forever.
Do yourself a favor early on and set some clear working terms and general guides for what working with you will entail. Setting these expectations and framework will again separate you from the loose nature of a friendship style transaction, and remove a potential roadblock to growth for the future.
It is important to step away and enjoy time outside your business. Whether it’s spending quality time with your spouse and family, a day basking in the sun or devoting time to a personal hobby, this free time will allow you to enjoy other aspects of your life. It will also recharge your brain so that upon return, you are eager to work and hitting on all cylinders.
A great example is those days where you seem to be hitting a wall trying to find a solution or idea. You could spend the entire day spinning wheels making no progress. As your own boss you have the freedom, and perhaps the responsibility to walk away from such situations. I cannot tell you how many times I have solved such a block by walking away and returning a day later with a fresh mind. Often, the answer just jumps out at you.
- Don’t kill yourself
- Set personal limitations
- Set client and business based limitations
- Create a balance of work and life
It was hard to limit our Geekend presentation, and by result this article, to only seven lessons. We felt these were the ones that helped us most in getting to where we are right now. They aren’t unique to our company, or even the creative services industry.
There will be lessons to learn the hard way and the easy way. We’ve by no means conquered them all, but hope that the ones we’ve shared will be helpful to those of you getting started. One of the best ways to learn these lessons is from the experiences of others. Dive into your community and learn from your peers. Share your work and experiences with others as well. Make a strong effort to continue learning.
At the end of the day it’s your passion and love of life that should be driving you to do what you do. Find something you enjoy that can fund your enjoyment of life and own it.
Go forth and conquer.
- Knowing is Half the Battle Slides, our slides from the presentation at Geekend
- Letters to J, a series from Mitchell Kimbrough, Owner of Solspace, Inc.
- Don’t Call Me A Freelancer, a presentation from Paul Burton, Owner of 16Toads Design
- F*uck You. Pay Me, a video presentation on the importance of contracts by Mike Monteiro
- The Dark art of Pricing, a detailed article by letterer and designer Jessica Hische
- Design Professionalism, by Andy Rutledge, Co-Owner of Unit Interactive
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