Making Money

Quite often sales is like dating. The no-no’s in the land of courtship are exactly the same cardinal sins of the land of sales. Talking about yourself through the whole meeting. Never asking any questions about your date’s situation and needs. Taking the time to ask those questions, and not listen to their answers. Thanking them repeatedly in a gushing and desperate manner for meeting with you. Forgetting to make a friend. If you were a gecko on the wall of a meeting where those occurred, you would probably wince, laugh or both. And yet we have all done them.

Peter and I often talk in detail about sales, and yesterday, the conversation fell upon one of the most detrimental sales bloopers: walking away without booking another meeting in your calendar. What is your goal if you go out on a date? Have fun, land another date.
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I often find myself people watching as I work in coffee shops. A parent trying to explain to their toddler why it is not okay to scream at the top of her voice. The owner showing his employee how the coffee has to be brewed in a certain manner. The teenage girl offering coy glances to the guy next to me all dressed in leather and tattoos. The man in a suit to my right, chatting on the phone with a potential client, answering their questions. The puppy at my feet staring at me patiently hoping I might drop some crumb.

Too often, as contractors, we associate sales with the slicked back hair, polyester suit of the hollywood 70’s car salesman, when in fact you and I sell each and every day of our lives. When my wife and I decide to go to a movie this evening, I really wanted to go see 10,000 bc. I spent 10 minutes carefully steering us towards the movie I was excited to see. Any time you have an interest in the outcome of a situation, sales comes into play.
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A lot of lessons I learn come from personal tragedies. I am incredibly grateful that this is not one of those. I got lucky. Quinn sat me down when I was starting and told me:

Make sure you put a certain amount of your earnings aside each and every time you get paid. It is not your money, it is Uncle Sam’s.

I’m not going to write a big old post on taxes. I’m just not that cruel. The tragic tax yo-yo is quite simple and easy to avoid. I see too many business owners in that position. You make money, you spend it. Make more, spend that too. April 15 comes and BAAM … you owe Sr. Sam $25,000 in taxes. Problem is, you don’t have it because you already spent it.

A lot of first time business owners fall into that trap. So, you file an extension and work hard, saving up the money to pay the tax bill. You have a great six month, squeak by and come September, you manage to eek out an addition 25k. Taxes get paid. Thank god that is solved. You forget all about it, until February when you meet with your new accountant who looks at your projected tax basis and your bank account and … oh damn not again. This game of yo-yo is a tough one to get out of. There are two ways to deal with it: never fall into it in the first place (Thanks Quinn) or be frugal and figure out how to save up enough to get out of the trap. It is never too early to start preparing for taxes.

So how much should you save? Look at your projected income for the year, figure out what tax bracket it lands you in, tack on self employment taxes and park it. Depending on my earning at the time, I set aside 25-45%. That money gets transfered into a separate high interest savings account (ING Direct for us) and is not touched until tax time. I have always over saved, which usually makes for a very nice April bonus!

Oh – and check you get all your 1099s. You should be getting them any day now (deadline in the US is Feb 1). Make sure they have the same numbers as you do on your books, entered your name and your Tax ID correctly. I have had a dozen or so be incorrect over the years.

We had one of those epiphanys on Sunday while walking down the street to surf Sharks (inspiring name huh). Peter & I were discussing the value of attending TED in 2008 and whether it is worth the $12,000 it costs if we manage to get tickets. For a 12k entry cost, he wanted to make sure that beyond learning, we drove some business from that investment. As we walked along, Peter wondered out loud how we could find an opening to give our elevator speech when we met people. After all, it isn’t your standard technical business conference but more of an orgy of learning.

I thought about it and bit and realized, we don’t. We go there to make friends. We meet cool people who are as passionate about learning, people and technology as we are. People who can afford a $6,000 ticket and a week in Monterey, Ca. If you made a good enough connection, you follow up later. That is when you talk business.

The epiphany: All sales is nothing more than making friends. Giving your elevator speech, using the word which, all that crap, does you no good if you didn’t make a friend. As my wife told me not too long ago, stop thinking so much about your business and just try to have fun for goodness sakes.
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We just finished our business retreat and I am pontificating our one year goals. Last year was a huge year for us as we transitioned from two professional technicians to budding entrepreneurs. A little time in the woods, some long walks on the coast and we come out of seclusion with a strong vision and some big goals. All right, let’s do this:

In 2008, we are going to gross a million dollars and still have a life.

Now, if I laid that statement at the feet of most contractors, some might say “that’s cool” and offer a generic smile while others would certainly laugh at me. After all, we are a pretty long (long, long) way from making a million this year.

I can hear the voice now. I knew that guy in high school. There is nooo waaaaay he can make a million dollars. And the voice is right. There is no way that we could pull that off. But what they don’t know, and maybe you don’t know, is that we are not afraid to change. We will change and grow and become the leaders and team it takes to achieve the goals we are setting.
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I’m going to start off by actively apologizing to Eric. I was a doubting mustafa and I was wrong.

In my 10 steps to generating new business, I stated the number one key to success was to get out of your house. What ensued was a calm debate between Eric and I on whether or not you can network and build a viable client base without leaving your house through the medium of communities on the web.

My (old) stance: All REAL project deals happen offline.

Eric’s stance: Online networks are a viable source of projects.

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Four years ago, Julie & I decided we were (emotionally) ready to buy our first house. Santa Cruz is quite expensive, with the median house price weighing in at $740,000 and the medium apartment around $480,000. This was going to have a significant impact on our monthly cashflow. We had some savings, and a loving wedding gift from both our families gave us enough to put 20% on a small apartment or townhouse.

Julie and I sat down to figure out what mortgage payment we really thought we could afford. I was trying to stabilize my business at the time, as it was often feast or famine. Some months I could pull in $15,000, other months I would see $1,500. This discussion ran for weeks and continued into our family vacation.

Enter the parents. My father listened quietly as Julie and I ran through past numbers and possibilities for hours on end. One evening at dinner he asked me: “How much do you think you will make in the next six months?” A long pause ensued. The fleas began to leap for saftey as my craneum began to heat. I guess he couldn’t take the pathetic, confounded look on my face. “How much do you have in your sales pipeline?” he tried. I really didn’t know. Most of my gigs are word of mouth. Even the bids I was writing, or discussing with potential clients, could go on for months and fizzle. How was I supposed to know? After I suggested getting my tarot cards, dad laughed, put on his Australian leather cowboy mentor’s hat and asked me to pull out my trusty business notebook.
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Not all freelancers are content to provide services to their clients until the day they willfully leap into the grave. You’ve all heard Leo talk about multiple income streams. The most popular strategy these days? Make the next killer app, widget or plug-in. So, how do you turn your tiny startup idea into a full-fledged, well funded, revenue-generating business? Widget company, RockYou, discovered an answer early this summer, as did many other now-successful entrepreneurs. The answer was Facebook.

Alrighty then, you have made a decision and you’re ready to muscle down and “face” (snicker) the challenges head on. You’re gonna make an app! But, how do you get it to catch on?
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Unlike most of the freelancers I meet, I started my freelance career charging by the hour. The CTO of the company, now one of my best friends, carefully watched my deliverables and my bills to make sure they matched his expectations. Knowing this was my first gig, he explained to me that the company was buying my expertise.

He encouraged me to charge, and charge well, when I knew what I was doing and was kicking butt. He also insisted that I learn on my own dollar and not penalize my client for any lack of productivity. Basically, even though we had agreed upon an hourly rate, he made it very clear he was paying for the end product, not all the time I may have been spending.

There are fundamentally two payment structures used by freelancers in today’s market:

Hourly is the exchange of a productive hour of expert work for an hourly rate. For $xx per hour, I will provide you the technical expertise you need to develop the API for this prototype.

Fixed price is the exchange of a pre-defined amount of work for a specific total dollar value. For $xx,xxx I will provide your company a new brand including colors, typeface, logo, business cards, store sign and letterhead.

Both approaches are common and each has their appropriate place and time. What fascinates me is the intense emotion that we often see (even among ourselves) regarding which to choose. So what are the pro’s and cons, how do you choose and how do you price yourself once you do?
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Using the Get Clients Now Marketing Program

The other day I heard business described as a leaky bucket. Simply put, your customers and their projects slowly leak out of your bucket and into someone else’s bucket unless you take steps to actively keep it full. As the owners, it is our job to keep the bucket full of water.

The only way to fill the bucket is through marketing and the sales. Marketing is the process of doing simple things repeatably over time to make people aware of your business. Coming from a programming background, I had no idea what I should do to fill my empty bucket. I did some homework (thank you Amazon) and ended up reading a book “Get Clients Now!” by C. J. Hayden.

I decided to do their program for 28 days and see if I get more customers. Looking back, I can say that the program worked great. I went from a wet behind the ears freelancer with one customer to a newly minted businessman juggling 6 customers in 28 days. What follows is a brief outline so you can see the process I went through.
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