Lessons Learned with guest Jason Swett

Show Notes

Jason Swett shares lessons he’s learned in the process of ditching hourly.

Guest Bio

Jason Swett is a web developer from Sand Lake, Michigan, who has been freelancing since 2011. Jason has historically billed by the hour but in the last couple years he has figured out how to start transitioning into value-based pricing."

Links

• Million Dollar Consulting by Alan Weiss
• Better Training Exercises by Reuven Lerner
• Jason’s Book
• Jason’s Consultancy

Transcript

Jonathan Stark:

Hello and welcome to Ditching Hourly. I'm Jonathan Stark. Today I'm joined by a guest Jason Swett. Jason is a web developer from Sand Lake Michigan, who's been freelancing since 2011. He has historically billed by the hour but in the last couple of years he has figured out how to start transitioning into value-based pricing. Jason welcome to show.

Jason Swett:

Thank you.

Jonathan Stark:

Can you tell folks a little about yourself, what you do?

Jason Swett:

Sure. I'm a software developer, I have been for most of the last 15 years. I got started writing code for money in about 2000. My first job was actually working for my dad. We did that for a little bit and then got my serious start in 2005, doing PHP stuff, did that for a while and switched to Rails and been doing that ever since. The vast majority of that time has been either regular employment or hourly contracting but then in recent months, recent years, I've been transitioning into other better types of billing, which I think is what we're going to talk a little bit today.

Jonathan Stark:

That would be great. We've exchanged a few emails leading up to this and you sound like a really big win that you had this year in the training space, which I'd love to talk about. But in the pre show you also mentioned something about ... We were talking about how people will tend to call themselves consultants when really they are just freelancers or contractors and that there is a distinction there. It's not like you can just say, "I'm a consultant now." Even though I think it's good to push in that direction, to move yourself to be perceived or fulfill the role of a consultant because it's higher value. Can you talk a little bit about what you see as the distinction between contracting and consulting.

Jason Swett:

It's a great question. Freelancing 101 is like don't call yourself a freelancer because when you use that word and then prospects or clients hear that, there's something about it that conveys low value. Like you are a tool that's to be used. They tell you what to do, they make the plans and they tell you to implement the plans. So it's much better if you're perceived as a consultant. And the differences there to me is that rather than being an implementer, you're somebody who helps formulate the plans and then somebody else does the implementation. So that's a much better term to use. Consulting is way better than freelancer. But I think a lot of people who call themselves a consultant would really, 100% of their work is contracting.

So the difference between consulting and contracting is again, with contracting you're an implementer. Somebody else is coming up with the plans, they have an understanding of what the reasons are behind what they're doing and they made all the decisions and now it's your job to just do what you're told. Whereas when you're a consultant, you're more being paid ... Let me put it this way. A contractor, they pay you so they can tell you what to do. When you're consulting, they pay you so you can tell them what to do.

Jonathan Stark:

Absolutely and it's not just as simple as labeling yourself that, one or the other because in my experience people who are used to being a freelancer, or a contractor whatever you want to call it, have their entire business and mentality organized in a way that optimizes for being told what to do and for doing things like nailing down really specific scope of work so that they can turn around and blame the client if it goes over budget, while I just did what you told me to do. It's not as simple as just saying, "I'm going to call myself a consultant." You actually have to make that shift.

A big difference for me I think, when you start to feel yourself or if you're a freelancer now or you call yourself a freelancer or a contractor now, on a relatively, regular basis, you push back on clients and say, "Now I can't let you do that. That is a major mistake." The way a doctor would if you said, "Hey, take out my appendix." And they're like, "Your appendix isn't the problem." The doctor is not going to take out your appendix just 'cause you told them to. When you start behaving like that, then it's safe to start calling yourself a consultant, because you're right. The client is looking for someone who has expertise in the space, that they respect, they trust the consultant, they value that honesty and expertise.

Jason Swett:

I don't think it's a binary thing like you kind of alluded to. Just because you're a contractor, doesn't mean you're not going to be doing consulting type stuff some of the time, hopefully you are. Just because they're paying you to tell you what to do doesn't mean that you can't offer opinions and advice and stuff like that.

Jonathan Stark:

It's a good sign when you find yourself doing more of that. Some people listening to this will recognize that they do a lot of that at the beginning of an implementation, they don't charge for it, or they just charge for the hour by it or it's perhaps even part of the scoping of the work and may not even be paid to get the proposal together for the estimate. So if you recognize that you're doing that kind of stuff, then you're a candidate for perhaps orienting your business a little bit more around that, more high value, those more high value activities and less around the labor.

Jason Swett:

And just this is kind of a quick side note. I've found that it can be very difficult to start a relationship in a contracting kind of arrangement and try to move it more toward a consulting type arrangement 'cause you've already sent them the signal that you're a pair of hands. So it's very hard to shake that off once you've sent them that signal. It's much easier to start the relationship off under the understanding that they're paying you for advice and guidance and stuff like that, rather than try to retroactively become that person.

Jonathan Stark:

It's like trying to get out of the friend zone.

Jason Swett:

Exactly.

Jonathan Stark:

It's hard. I see it often that it's probably no more difficult to attract new fresh clients for this new fresh position or maybe a new product or service that you're going to orient around, a more prescriptive or diagnostic offering than it is to try and change the way past clients view you. It can be very tricky. I've seen people do it, but they're usually people who are more mature business wise and have really been sort of straddling the consulting/contractor world with their clients.

Jason Swett:

Here's another really significant thing about that, is there's one thing, which I mentioned which is the perception thing. At the beginning of the relationship, they have a certain perception of who you are and what they're paying you for. The other thing is that, at least I have found, the kinds of buyers who buy contracting work and the kinds of buyers who buy consulting work, don't have a heck of a lot of overlap. Like for example I'm thinking back to my client who I'm just wrapping up a month's long engagement with. This engagement was a total contracting engagement. And I was one of like seven developers, all with the same kind of role, just being paid to write code by the hour. The idea of having a consultant, it just doesn't fit into their picture at all. Like if somebody tried to pitch that to them, it just wouldn't compute because that's not part of their world, that's not part of their organization at all.

But then there's other people, like for example this contracting gig right now, this is for a software company. But I'm talking with somebody later today about a different project where it's not a software company. The people there, they know about their domain. I guess I can say that it's a grocery store. This prospect is a grocery store. They know about grocery store stuff, they don't know about software stuff and so what they need is totally different and we're starting from a different place. The thing I'm trying to convey I guess is those buyers are like two different groups of people.

Jonathan Stark:

Big time. And that can make this shift very difficult. So I'm going to go on a short run really quick about Valley startups because have a lot of students who start off doing stuff augmentation, hourly typing semicolons for valley startups. I've gotten in trouble because Uber is a startup technically. I wouldn't say Uber would be potentially a bad client, they're probably a very mature startup. I'm talking about people who would want to pay you in passion and pizza and equity and expect you work 80-hour weeks typing code for some phantom customer that maybe will appear someday. They maybe looking for their angel round or first round of funding, they don't really have any kind of product market fit yet, there's just basically an idea and they're rolling the dice to strike at it. "We're going to be the next Facebook."

The tricky thing there is to, just to give an example of exactly what you're saying is that a Valley startup, the CTO of a Valley startup is not impressed with your Rails skills, they would probably rather do it but they just don't have time to do it. So it's a situation where it's like cobbler's kids type of situation. Cobbler's who got no shoes, they do not want to hire another cobbler to make those shoes for their kids. But if they have to they will, but they're going to be the worst kind of client. They're going to be super picky about exactly how those shoes get made and they're going to be critical of every little detail because there's this pride issue. To convert that customer into a consulting arrangement to view you differently. Is exactly like you said, it's just wrong kind of client and to convert them over is virtually impossible.

Jason Swett:

It's a different problem. You've mentioned the cobbler analogy, it's a bandwidth problem whereas with a non technical problem it's an, I have no idea what to do problem and I need you to help me figure out what I need to do kind of problem. Two totally different kinds of problems.

Jonathan Stark:

I love that, that's perfect. Just shift gears a little bit. You mentioned earlier that you've moved into a little bit different space where you find it much easier to provide a price and not be doing hourly estimate. Can you talk about that a little bit, the training stuff?

Jason Swett:

Sure. And let me give a little bit of background to like I want to give an example of when I tried value pricing and it went horribly and contrast that with this more recent value pricing and it went quite well.

Jonathan Stark:

Perfect.

Jason Swett:

I started freelancing in 2011 and pretty soon after I started freelancing I read the book Million Dollar Consulting by Alan Weiss, which Jonathan I know you're an Alan Weiss fan and I am too. But when I read that book the first time, I completely misunderstood it. I took the value based pricing part of the book and I'm like, "Okay this makes sense, I'm going to start doing value based pricing now." So I went and worked for a startup that was local to me and it was a total ... From their end it was intended to be a staff aug type thing. But from my end, even though it really was a staff aug type thing, I tried to value price it.

But the way it ended up working out in practice is every couple of weeks or every week or whatever we would talk about what we want to accomplish over the next little bit and I would take all the separate features that we were going to do in that sprint or whatever you want to call it. And I would come up with an individual price for all those and then I would submit those prices and they would say, "Okay." And then I would work on those things and deliver the features. It might sound okay but it was a total nightmare because just imagine all the overhead involved in like estimating all that stuff and coming up with the prices. On a weekly basis and then like having and individual mini negotiation on each individual feature. It was just exhausting for me and for them and it was like awkward and weird and stuff.

Then there the issue of bugs. How do you charge for bug fixes and stuff like that. My policy back then was that if I give you a feature, it should work. And so bug fixes are free. But I was applying these features on top of like a horrible legacy code base that was extremely unstable in the first place. And so it's like, how can I guarantee that things are going to be bug free, it was just complete insanity. By the way, I made a huge mistake with that project that had like rippling effects over the next 18 months that I worked on that project, which was there as an existing product in place and I was hired to basically reverse engineer it and build a new version of it in a different framework. The spec our agreement was the existing app, just build the other one that does what this does. But the problem with that, you know Jonathan and as I know now is, you don't know everything that that original app does.

Jonathan Stark:

And parts of the original one are broken. So are you supposed to reproduce that?

Jason Swett:

Exactly. And there are all these like external communications that I didn't know about and all the stuff. And it was a total disaster. So it was just a number of mistakes like compounded there but my point is I tried to apply value based pricing to a situation where value based pricing did not apply.

Jonathan Stark:

That is fascinating to me because it would never occur to me to ... There are probably lots of people listening that have kind of followed that are kind of following the same thought process that you went through at that time, which had never even occurred to me that somebody would try and apply that at micro level like that. I value price pretty much exclusively for an entire project with a defined outcome. It's much more macro than that, it's very much like ... Three months would be a first one. It's usually 6 to 12 months.

Jason Swett:

I think the key word is outcome. You're pricing an outcome as opposed to pricing individual features like [inaudible 00:15:19] week.

Jonathan Stark:

It's like pricing a sprint. Men that's brutal. I'm surprised they even put up with it.

Jason Swett:

I know. Well it wasn't the greatest relationship in the world believe it or not.

Jonathan Stark:

Somehow I believe it. So that's the oops, that's the before picture.

Jason Swett:

Right.

Jonathan Stark:

So what's the after picture?

Jason Swett:

So that was like 2011, 2012 and then fast forward to today. So like 2016 and 2017 is when these projects are surfacing. Om 2016 in the Summer time, I got an email from a guy I knew just from the local Grand Rapids Michigan Development Community and I want to mention something that's kind of relevant and important. I give talks at local user groups kind of a lot and I have for like the last five years. So I knew this guy just from doing all these talks and stuff like that. Just even from participating I would have met him anyway.

But he sent me an email and he said, "Hey, these guys need an instructor for this bootcamp, they had somebody back out at the last minute." So I had a conversation with these people and things went well and we were talking about having me jump in and it was a very last minute thing, it was like a five-week bootcamp. And the guy like a week or two before, I don't know why but he just was no longer available so they're in a really tight spot. And we walked about doing something together, ultimately we did not. They ended up getting somebody else for whatever reason. But then a couple of months later, those same people reached back out to me, the people who ran the bootcamp and they said, "Hey do you want to lead a bootcamp next year?" So we talked about that. I'm trying to think back to what questions I asked and like just how I generally approached that conversation.

But the first thing I asked them was like, "Why do you want to have me do it? Obviously you've been doing something before. Why not just keep doing that." And what I'm talking about of course is the why conversation, which is just why this, why now, why me, why in this manner etc. I pick another way, you put that Jonathan it's like try to talk them out of hiring you.

Jonathan Stark:

Raise all the objections immediately because you're going to have to face him at some point so you might as well do it before you have to break the proposal.

Jason Swett:

Right because if there's any good reason that they shouldn't hire you, they shouldn't hire you. Try to get that reason out and you've vigorously tried to find that reason and you can't find it, then you have a pretty good case that they should hire you.

Jonathan Stark:

You made the sale. Let me just do a quick aside people because I know that probably 99% of the people listening to this, feel like they hate doing sales because they think sales is a particular used cars, slimy thing. But that doesn't have to be the way it is. I'm almost hesitant to even bring this up because what you're doing with that, they why conversation and talking about working with you. You're closing the sale, like that is the sale. By the time I read a proposal I can only think of one proposal in the last like five years that I have rejected and I know exactly why got rejected.

I totally screwed up the conversation. Like I didn't make the sale on the phone call and I just blew the call then I wrote a proposal anyway 'cause it was a huge client, I really wanted them and that was why I screwed up the call 'cause I wasn't in the right place mentally. I wanted the client too bad, I would have pretty much done anything to get this client. Of course that me come across like a sort of in a servile way, which is not what they were looking for. Huge mistake. What I'm trying to call out though is that, if you do ... I love that word vigorously.

If you vigorously try to talk them out of working with you and you cannot do it, you just close the sale because they now believe, they have just told you why they can't choose any option except for you and you are now convinced that they are going to benefit from the engagement and as a side effect you'll get a sense of how much it's worth to them, like the value of the engagement. Then you can say in your mind, "I get the sense the value of this is X so I'm going to charge them a 10th of X. I could price it at a 10th of X or half of X, less than X. Is that a profitable price for me is that higher than my costs? And if it is, it's going to happen. The pros are not going to get rejected. It's a way of doing sales in a way that isn't tricking the other person, it's a way of making sure, really confirming that you're a good fit in every way, personality, ROI everything.

I think if more people recognized that sales doesn't have a to be [inaudible 00:20:38] then they could embrace it a little bit more and actually be running a business instead of being told what to do all the time.

Jason Swett:

I totally agree and something that took me a long time to realize that sales is not mostly about persuasion, I don't think it is. I agree. It's more about connecting somebody who needs something with somebody who can give them that thing. And there's kind of two steps. The first step is matching up the person who needs something with the person who can provide that to them. But there still exists a barrier which is a lack of trust. And so to me the sales process is taking that barrier and removing the reasons they have to maybe not trust you.

That's all it is, it's not about arguing them into hiring you, it's more identifying first of all ... Perry Marshall said sales is a disqualification process. I thought that was a really interesting quote because again like I said before, if there's any good reason for them not to hire you, then they really shouldn't hire you. If there's any legitimate reason why you should not work together either for reasons on their end or for reasons on your end, get those reasons out there in the beginning because not talking about those reasons, doesn't make those reasons not exist, it just make it so those reasons get surfaced further downstream after more time and money or whatever has been invested and it's just more painful further downstream. So get that stuff out there at the very beginning.

And I say to prospects, the very first thing I like to do when we start talking is ask the question, "Is there any reason why we shouldn't work together? And if so let's get those out there right now at the very beginning." And people really appreciate that, they appreciate that frankness and they appreciate the fact that I'm respecting their time in that way. So I think that's a really great way to start those conversations.

Jonathan Stark:

This is turning into a fun, potentially a very long conversation. Because this is opening up all sorts of ... Thinking of a video I just watched with Gary Vaynerchuk who is totally random in this conversation but he gives startup conversation by saying, I'm just going to try and quote him. But it's something like, he said, "No matter what the negotiation is whether it's an employee asking for a raise or me trying to close a deal with Nike to do their marketing. The first thing I try and do is say, look let's cut to the chase. I want you trust me as first as possible. So let's just get everything on the table. If you don't trust me for any reason, what is it?" He's very iconoclastic, very bombastic type of guy if you don't know who he is. And he just goes straight to the trust issue, which is really the cracks of the problem in many cases.

Jason Swett:

I don't think I would quite so bold as to phrase it that way, but here's the only reason you don't trust me, what is it? But you can bring up the same thing in different ways.

Jonathan Stark:

Yes I agree. I mean it's a personality thing with him, he's just a crazy person. Let's switch to-

Jason Swett:

Back to the story.

Jonathan Stark:

Sorry I totally took us down the rabbit hole.

Jason Swett:

Those are good things to talk about. So at this point in the story, I was having my initial contact with this prospect asking them why me. Well, it turns out that before they had used the training company to deliver to this bootcamp. There were some cost reasons and there was some like flexibility reasons why they wanted to go directly with an individual, somebody like me. So we talked about that and there wasn't a heck of a lot to the possible reasons not to work together. The biggest reasons are usually like, is this not the kind of work that I really do? Or is the kind of money you're expecting to pay not the kind of money that I typically charge? Or just timing, I'm I not available when you need the help?

We were talking about this in Fall of 2016 when the bootcamp happens in the Summer of 2017. My Summer 2017 was looking pretty free at that point in time so the availability thing wasn't an issue and the qualification thing was fine because the technological part of it was pretty open ended, they were going to kind of look to my expertise to help guide that stuff.

Jonathan Stark:

Good sign.

Jason Swett:

That takes care of those possible reasons not to work together, so that just leaves money. They asked me to send them a proposal and I said, "Sure absolutely, I'll do it by the end of the day, Friday or whatever."

Jonathan Stark:

Is the bootcamp a public thing that they're like selling seeds or is it an internal thing that they do for companies?

Jason Swett:

Great question. This is like a government funded thing in my understanding. I'm a little bit shaky I'm like this part of it but the idea is that they want to help the Michigan economy. So it's funded by a grant and they take these recent computer science graduates. They're kind of filling the gap between, I just graduated from college and now I'm going to be an entry level programmer somewhere. They don't really teach all the skills in school that employers would like to see in an entry level person, so they kind of fill in that gap. The class size is 15 students, people apply and get accepted. I don't think it actually costs anything for the students, it's all funded by this grant.

Jonathan Stark:

Fascinating.

Jason Swett:

That was an interesting factor in coming up with the price. 'Cause there's not really a monetary ROI that can clearly be calculated there. If I save you a million bucks and I charge you $20,000 for that, that's a no brainer for you. But in this case it's a little bit mushier. Basically I thought about that, and I'm like, I don't know what their ROI is, I don't think they know and I don't think they can know exactly what their ROI is. So all I can do is come at it from the other direction, which is, what would be enough for me. So I started with my costs and people might not associate that word the way that I associate it. And I got this from you Jonathan, which is, you cost is your time. You can't really do anything for free.

If I spend the day working on something and you pay me X for it, I'm not a head X. If you walk up to me and you give me a thousand dollars, then that's a thousand dollars of free money. But if you give me a thousand dollars to do a day's worth of work, it's not really a thousand dollars worth of free money. It cost me a day of my time to do that.

Jonathan Stark:

That a thousand is the revenue not the profit.

Jason Swett:

Exactly. And if there's a job, let's say that I generally work for a thousand bucks a day and I'm comfortable with that fee but then somebody comes along and they offer to pay me $10,000 for a day of work, the way I think about that and I think different people could think about this differently. But the way I think about that is if my normal rate is a thousand dollars a day but I get something that's $10,000 for a day of work, then my profit for that is $9,000. It could be argued that that's not really like the perfect way to think about that, but that's kind of how I think about that.

Jonathan Stark:

Let me just explore that a little bit because it's utterly subjective. The scenario you just described is actually valid in my opinion because if you're used to a particular level of income then a dramatic shift, like all of a sudden somebody is willing to pay you 10X for basically the thing that you've been selling for a 10th of that. It's going to feel like profit. But if that keeps happening, all of a sudden 10,000 per day is going to be your cost and it's going to take somebody to give you a hundred thousand to turn your head like that again. This feels very squishy to people but I honestly believe that when you're talking about knowledge work which is really what we're doing, the only way to calculate your cost is to ask yourself what amount of money would I not even get out of bed for this? I would not accept X for this work. It doesn't matter what the reasons are, it could be that you just inherited a million dollars from your great aunt.

It doesn't matter, the reasons would be different for every single person. It could be that you just paid off your house and now you don't have that $5,000 a month payment. So it doesn't matter what the reasons are but your cost is the least amount of money that you would accept for a particular gig which is completely subjective, it can change on a daily basis depending on what else is going on in your life and your business. But I can come up with no better way to calculate a cost. The screwed up thing is that that is what people will typically set as their price because they want to deliver the lowest possible price to increase the likelihood of lending the gig which means they're making no profit.

That little scenario right there is super scary to me because that's one of the things that keeps people locked in this kind of fees famine cycle. Because they're constantly working for what they consider to be cost, they're working for no profit which gives you no days in the week to work on your business instead of in your business. Which it's just depressing to think about. So dear listener, next time you figure out, well what's the least amount of money I would take for this, put some profit on top of that number before you send the proposal or you're just breaking even.

Jason Swett:

I would add to that as a click aside, people price things lower with the assumption that a lower price is better, that's not necessarily true. I think Alan Weiss's the Mercedes example and my example might be a little different but if I go to the dealership and I want buy a $150,000 Mercedes, that's because I consider myself the kind of person who deserves a $150,000. And if you offer me a $40,000 used Mercedes, that wouldn't be more attractive to me even if the product is identical, I consider myself the kind of person who buys $150,000 cars, and so I want $150,000 car. I don't want a $40,000 or an $80,000 car. I want to pay a lot for it, because that is consistent with my self concept.

Jonathan Stark:

I heard a quote the other day that crystallized that beautifully, I think it was the CEO of Porsche who said the second Porsche on the street is a catastrophe because you want to be the only guy on the street that owns the Porsche. If they were 40,000 bucks, that can happen. If you're that kind of person, and those people exist that's the key point. Those people exist that want the Mercedes, that want the Porsche. Those people are out there and they want to be in this exclusive club. People like us do things like this, to quote Seth Godin.

Jason Swett:

Yeah, people like us do stuff like this. That makes sense.

Jonathan Stark:

They want to be people like us, they want to be in that crowd. This is why when you go to something like an agency like Blind or IDEO, they've got this client list, their position is horrible. IDEO's position is horrible but if you go there on their website. You see this client list that basically does the marketing job for them because any kind of company that wants to be in the club with Nike and Coca-Cola and Apple is immediately going to consider IDEO because they're like. "That's the club I want to be in, the price is not the main issue." And the price actually prevents the rabble air quotes from getting access to the same level of, let's call it luxury. So it's a very anti-Marxist kind of way to think about it.

Jason Swett:

It's an important thing to understand though, I think people make the assumption that cheaper is better, not true.

Jonathan Stark:

And sure if you have nothing to differentiate yourself from your competitors then the only thing you can compete on is price. So you should be constantly striving to come up with a way to differentiate yourself from your competitors, perhaps make yourself the only one in the category so that price becomes a non-issue.

Jason Swett:

Even if you have noted differentiation, even if you're providing the same exact service, the kind of client that's going to pay me a hundred bucks an hour for development isn't going to pay me 10 bucks an hour for development. There's a few reasons for that, one is because they think, how good can you be, but also they're not the kind of place that only pays $10 an hour for development. Anyway I think we got way off track with that, so I'll get back to the story.

Jonathan Stark:

It's good stuff though.

Jason Swett:

Yeah, I wanted to touch on that 'cause it's super, super important to understand that. But where we were at with the conversation with what the prospect was, it was almost time to give them a proposal. Now before I agreed to send them a proposal, I wanted to get an agreement on what we're going to do. I wanted to get what Alan Weiss calls conceptual agreement. 'Cause if that proposal gets rejected, I want it to get rejected because the price is too high, not because the stuff in it is wrong. So I make sure to get really on the same page, took notes on what we talked about, repeated that back to them and said, okay, here's what we've talked about, here's my understanding based on what we've talked about. Is this consistent with your understanding? If not how blah, blah, blah.

I got that all straightened out. About a half a page worth of stuff to summarize what we talked about. Then I did my calculation. Like I said, I could only calculate, I had been charging a hundred bucks an hour for quite some time for development. So I said, "Okay a hundred bucks an hour times 40 hours a week, times five weeks is a certain numbers." I don't know what that is. But that was like my minimum price, that was like my, I wouldn't even get out of bed to do this. Then I considered other factors like, if I were to do this project that takes five weeks, I'm going to have to move to where this bootcamp happens, 'cause it doesn't happen where I live. So that's a cost. I'm going to not be working for anybody else during that time and I'm going to have to wrap up any projects that I have going on before that and then afterwards it's going to take some time again probably to get another project lined up. So that's another cost.

Those are fuzzy things that aren't like super concretely quantifiable but I kind of figured out some numbers and put those numbers on there. I came up with a certain number. I guess I'll talk about the numbers. My original fee that I was going to put on the proposal was 50,000.

Jonathan Stark:

For five week training.

Jason Swett:

Right. Then I had a call with the mentor type person and he said, "You should really charge him more like 100,000." And I thought, "Men." He had reasons and I could see that his reasoning made sense, it's like they were probably paying the guys before me something or close to a $100,000. But there's a certain limit to how big of a check you can ask for. It's like, there's a certain size of jump that's really hard to make psychologically. So I bumped it up from 50,000 to 65,000. I put that number in the proposal, I wanted to provide options but frankly I couldn't think of any, and we'll talk about that a little bit if you want to but I put that 65,000 price in there, submitted the proposal and here's something that's really important. I didn't email them the proposal and ask, "What do you think?" I said, "Let's get on a phone call and go over this proposal. I didn't send them the proposal until the time of the phone call.

Here's the reason for that, if they had any objections, I wanted to have the ability to address those, right then and there. Rather than have them go think about it and get back to me.

Jonathan Stark:

Interesting. I'd never do that. But I've talked to enough people that do that to make me think that my way is not necessarily the only way. 'Cause a lot of people do this. The thing that feels a little off about that to me and I'm not saying this is incorrect. But the thing that seems strange about it to me is that's an extra sales call. And if I was going to change the way that I do proposal and switch it to that, that would take a lot of pressure off me in the first phone call, which I want. I want the pressure in the first phone call to make the sale.

Jason Swett:

Interesting.

Jonathan Stark:

How does it go, when you do that? When you have that followup phone call, was there a negotiation? Like what we thought since I literally never done this.

Jason Swett:

There was no negotiation because we had gotten a conceptual agreement before. We had taken the disagreement on the scope, we pretty much eliminated that possibility. The only thing that leaves is the price. So we got on the phone, went over what the proposal said and it was like, "Is this an agreement worth what we talked about?" Still and he was like, "Yeah."

Jonathan Stark:

Let me just pause there. That feels awkwardly. Did you read it to them? Or did you guys sit there silently reading it?

Jason Swett:

So what I usually do with that, is I kind of go over the high points. I don't read it out word for word. But it's usually brief enough. Like I said, this one was half a page, it's usually brief enough that there's not that much to talk about. So we just kind of go over the high level points and then in this particular case he said, "Okay I need to get back to you regarding the price. So let me do that." And then we got off the call.

Jonathan Stark:

Were the payment terms in there as well?

Jason Swett:

The payment terms were in there. So I said, it could either be paid 100% up front with a 10% discount if it was paid 100% upfront. Or the other option was if they could pay 50% of it upfront and then 50% at some later date. And those terms probably sound very familiar to you.

Jonathan Stark:

Yes.

Jason Swett:

'Cause that's the way you kind of do something similar right?

Jonathan Stark:

Exactly.

Jason Swett:

In this case, the person I was talking to was not the ultimate decision maker, which is the sales rules is talk to the ultimate decision maker, i just didn't have access to that person, couldn't figure out how to get to that person. So we ended up having one final call between myself, the person I just mentioned who I had to had the call with about the proposal and the actual decision maker. What they wanted to talk about which is kind of funny is a plan for what would happen if I died.

Jonathan Stark:

This happened to me once.

Jason Swett:

So if I died before this bootcamp happened, what happens? So we figured out like a backup person, stuff like that. But after that call, they came back and they said, "Yes, we'll do it." And they said, "We'll take you up on the 10% discount for upfront payment and what I didn't expect was that they interpreted that to me and like they could pay me any time before the bootcamp happened and still get the discount. So it was like a number of months before I got the first check. Next time I do that, I'm definitely going to include it like, it has to be within 30 days of when you say yes or whatever.

Jonathan Stark:

I'm not putting it on my calendar until the first payment is made. And because you had to make preparations that you described earlier, extensive preparations. Good move.

Jason Swett:

They did try to poke at my price a little bit. After we had an agreement, they came back and they said like, I don't remember how they worded it but they basically said, "Can you do it for less?" And I said, let me see if I can remember how I worded it. I said it like in general, "I'm open to negotiating prices and stuff like that but I have to have some kind of justification. I'm not just going to lower it for no reason at all. If we can do less stuff then that's the case where maybe we can change the price. But we can't just lower for no reason." I worded it better than that, kind of get the idea of where I came from and they responded to that was, "That's totally understandable." And we kept the original price.

Jonathan Stark:

I'm not one of these people but I know plenty of them who just always ask for a better price. It's just like a reflex action. And a lot of people freelancers, contractors they'll blink and they'll just, "Yeah, sure." I mean tons of people. Even you could go to a retail store in the mall and you can even get away with it. Some people are kind of hard wired not pay retail so to speak. But if you've gone through the steps that you went through and you just stick to your guns and say, "I gave it some thought but I just can't make a business case for decreasing the price. Do you have some rational argument as to why it's not going to work for you?"

I try not to be stonewall, like a jack about it and say I'm open top conversation and be like thermal nuclear polite. But the odds of me changing my price are zero. They could reveal some information that they did not disclose that would cause me to change the nature of the engagement, which could result in a lower price. But outside of that I just make it a policy to never do that, because it makes my life and their lives just way easier because I train them just never do that. It's kind of like Wall Mart every day little pricing, "This isn't the price." Unless you want to buy something else than what's described here, that's the price. So we don't even need to go back and forth.

Jason Swett:

I think another thing that can make it less likely that they'll come back with that question is the options thing. So what I could have done better is I could have provided them with a few different options.

Jonathan Stark:

Absolutely.

Jason Swett:

If you give them just one price, the question is should we accept this proposal or should we not? But if you give them options, the question is, which one of these options should I choose? It goes from should we work together to how should we work together?

Jonathan Stark:

You can imagine what happens in the client organization when you send a proposal like that. It doesn't just floated up the chain to the real decision maker who then has a knee jack reaction to it. Instead, they have to schedule meetings, have discussions. They could take 15 man-hours of discussion or 30 man-hours of discussions. And what are they doing the whole time, they're talking about Jason. And there's just more and more Jason and they're constantly thinking about your word. Other vendors probably if they give them one price, they're just, "No, that's too high. That's absurdly low, they must be terrible. Or this is maybe another candidate and how can we compare them to Jason." So it's almost like your coming in as three vendors because you've got three options and three prices.

Jason Swett:

Yeah. I think the other psychological part of that is it gives them a feeling of control if you give them one single price, then you're like in the more powerful position.

Jonathan Stark:

It's [inaudible 00:46:03]

Jason Swett:

They only have the power to say yes or no and if they say yes, then that was kind of you doing something to them which they might not feel very good about. Whereas if you give them three different options, they have the power to choose one of those three and you didn't force them to do anything. They made the choice in what to do.

Jonathan Stark:

Like you pointed out, you couldn't come up with two other options.

Jason Swett:

I could now. But at the time, I couldn't think of any.

Jonathan Stark:

Interesting.

Jason Swett:

I'll list a couple of examples. Some of these things are things that they ask me to do and I said yes just because why not at this point. But if I were to do this again for a different prospect, these would be add-ons that would cost more. So here's one. Bringing in industry influencers to give talks to the group over Skype.

Jonathan Stark:

Genius. That's awesome.

Jason Swett:

I happen to be acquainted with people who have written books and stuff like that, technical books and so those people can be brought in to just give a quick Skype and I'll offer to pay these people. But the amount that they're going to charge for that is pretty trivial compared to the fee for the bootcamp, so I don't mind paying for that kind of stuff. But that's something that could make a really good add-on. By the way if you reach out to people who'll have written books it's surprisingly easy, just to like reach and say, "High." And they'll respond to you and you can form a relationship.

Jonathan Stark:

As someone who has written books and emailed people who have written books, if somebody went through the effort, the marathon that it takes to write a book, they're happy to talk about it.

Jason Swett:

Suppose they want somebody who emails you and they say, "Hey I loved your book, it really helped me out." I have such and such question. How do you feel about that job, is that annoying?

Jonathan Stark:

Hell no. No I love it. You also get ones that are just either too fumble-ish with no actual question just three paragraphs of this is my life, those are not great. And you also get ones that are a thinly veiled attempt to get you to promote their stuff. Those are super annoying as you can imagine. Those are both basically span. But when you get someone who starts off with like mind blown on page 15, the thing about asking for a 100% upfront, change the way I do business. But there's something I don't understand. You better believe I'm going to write that person a three page email back. Because they invested some time in the material, they are stuck in a place that makes sense to get stuck and there's perhaps a deficiency of the book. If you are thoughtful and polite of course you can definitely get a response from an author.

Jason Swett:

More of this story is like, if you read and enjoyed a book and if you have a question that can be asked and answered simply, reach out to that person and tell them that you enjoyed their book and ask you quick question, they'll probably be happy. What's not good is like a super indepth technical question that requires understanding your whole background. Don't do that.

Jonathan Stark:

Don't write two paragraph, write three sentences. 'Cause if you write a giant email to me, it's going to sit in my inbox and be like, "I'll read that when I have time, I'll read that when I'm not on my phone. I'll reply it." And then all of a sudden a month is gone by and I'm embarrassed to reply and then I just delete it.

Jason Swett:

Exactly. So anyway bringing in those people to give talks is one potential add-on. Another is one I call the library package. So me hand picking 10 or 15 or whatever an appropriate number of books would be and actually bringing in those books and giving them that package, that's another add-on. I'm trying to think of other things but you can kind of imagine the lines these are going along and I'm sure after I do the bootcamp, I'll have about a billion more ideas. I don't know it might be like water under the bridge as far as adding add-ons till this one goes, I really hope not. I hope there are things that I can offer next year that will be more valuable to them. But definitely for other clients.

Jonathan Stark:

That's all great stuff. The industry experts thing, that's a great idea. It's very low. It's a perfect example of something that's low cost and high value. Because if you have the connections or if you can make them or if you understand how to approach people like that, it's really not a lot of work. But the value is insane. I'm writing that one down. Thank you very much.

Jason Swett:

Awesome.

Jonathan Stark:

Of course bundling in other products like books and that sort of thing, that's also a pretty common thing to do. The tricky thing i, just to call out a training situation. I don't know what the direct ROI is, or even if there is an ROI because this is like a grand type of situation and really the ... Maybe you know this and just didn't bring it up yet. But the thing that I would want to know in my why conservation, I would want to find out how the buyers were being judged. Because it could be that they're being judged on some standardized test that students take annually after the thing and you could add a followup session with individual followup or office hours with the students or some proactive drip campaign with the students to refresh their memories about the material before the test. I'm just making stuff up. It sounds like it isn't 100% clear, is how the buyers are judged on their efficacy.

Jason Swett:

That's a great question.

Jonathan Stark:

If my hidden agenda on every client engagement is to deliver 100% client satisfaction. So they are like scrambling to hire me again, 'cause I'd much rather continue working with great clients than constantly looking for new ones. So I want to find out, almost this literally come out and say like, how I'm I going to blow your mind? What can I do to blow your mind? What is hugest possible home-run that can come out of this for you personally? And it's not in this scenario that you deliver an amazing training to the students, it's kind of like the MVP. That's almost like taking for granted table sticks. How can you go above and beyond to get this person a promotion or something like that. People will reveal this stuff because they want it.

Jason Swett:

And even if the don't know they might respond with something that gives you an idea for how yo can do that.

Jonathan Stark:

Or it might reveal that they're a gate keeper and that you need to talk to someone above.

Jason Swett:

So there's a couple of real quick things I wanted to touch on 'cause I know we're probably running close to time.

Jonathan Stark:

Yes we should run.

Jason Swett:

After that training engagement was a deal. I lined up a couple of other ones and these other ones were through a training company. So if you Google things like Ruby on Rails training or Angular training or whatever, you'll get all sorts of training companies. I think the first time I did this, I reached out to, it was something like 10 training companies, I reached out one day. Then within a couple of days I had like seven responses back. That's a crazy response rate. So it's very much in demand. But I formed a relationship with this one particular training company and they sent me to do a five-day Ruby on Rails class. This is actually just last week that I did this.

They paid me for that, they paid me $6,250 for the five-day class. That may sound like a lot if I'm billing a hundred bucks an hour for a 40 hour week, that's $4,000. So 6,250, that's better. But my plane ticket had to come out of that and there was prep work and stuff like that. So it's probably about a wash compare to a 40-hour week. But it was much more enjoyable than a 40-hour week of coding, to me at least. It wasn't necessarily easier but it was more enjoyable.

Jonathan Stark:

There's stress and risk levels are in the basement compared to doing 40 hours of dev work. Because there's no debugging after a training class.

Jason Swett:

Exactly when you're done, you're done. So that was that and that was good and then I'm going and doing a different one. This is a three-day class and that one is $5,250 I think it is. But again air-fair comes out of that. So that one is even worse money wise but at this point I'm just kind of taking whatever training gigs I can get because in the future I know from talking with ... Well you know [Roving Lennon 00:55:33] Jonathan and he's talked about this on the Freelancer show. He charges five figure rates for a week class, would be like 15 and $20,000 for him. I'm pretty sure I can say that 'cause he has said that himself publicly before himself.

So I'm working on getting to there, but I think before that I have to know how to do the training, nobody is going to pay me $15,000 to do a class if I haven't done one before. So [Roving's 00:55:59] recommendation. There's a whole episode he did on training if anybody listening is interested in that. His recommendation was to go through training companies first and then make your way toward the direct engagement. So that's what I'm doing.

Jonathan Stark:

You get some street cred, you get in front of people, you sort of build your expertise and delivering it. And by the way you presumably for these gigs through the booking agency, you bringing your own content, you're not teaching their content?

Jason Swett:

So these I just grab my own, a lot of them actually provide the content for you.

Jonathan Stark:

Really? I've done a few of these in the past. I think through Marakana before they got bought by Twitter. I did budget training for Cisco and it's good money, but you're not really building up your business but you're building up your skills. So it's sort of a strategic engagement.

Jason Swett:

Are those gigs from your books or some other way?

Jonathan Stark:

I honestly don't remember. I know I did not reach out to them 'cause I had never heard of them before. Somebody reached out to me probably recruiter style and they was like, "Hey, can you do remote training." It was all through WebEx so id didn't have to fly anywhere. It was in the thousands of dollars. It wasn't like amazing money but it was worth doing a four-hour class on whatever responsive web design or something. It was all okay. I was more interested in what's a great way to give a remote training.

Jason Swett:

And for people who have only ever done hourly coding before and you're wondering how the heck do I make the transition into consulting? It's a pretty good tow in the water to real consulting, if you can't figure out any other way to do it. Which, I couldn't figure out how to do it and this is helping me get there.

Jonathan Stark:

Right. It's because people are used to pay for training like a bulk purchase. The hours come up 'cause it's like, we;; it's going to be 95 for ... But that's not really the focus.

Jason Swett:

They're paying for the outcome.

Jonathan Stark:

Yeah, they're paying for the outcome. I'm curious, how many people are in these you just described, the 6,250 and the 5,000 something one? Is that like limited to a certain amount of students or are they just trying to pack the house?

Jason Swett:

The first one was six students. The second one the three-day class, that's going to be like 25 students.

Jonathan Stark:

Wow! That's a lot.

Jason Swett:

The 25 students one, that's like open enrollment. So just whoever at that company can go and take that class if they want to which leads to all sorts of interesting stuff too like different backgrounds and experience levels and stuff like that. So we'll see. But way different class sizes.

Jonathan Stark:

That's awesome. All right well, we should wrap up but I will tell people that they should search out [Roving 00:58:56] Learner if they're interested in how to get started with training. He is one of my co-panelists on the Freelancer's show podcast. Which we've been referencing here. So Jason, where can people get I touch with you online? Where can people find out more about you?

Jason Swett:

I think if you just Google my name Jason Swett, S-W-E-T-T you'll find my various web presences. I have a site angularonrails.com. That's a whole thing we didn't get into and I won't talk about very much, which is just I blog there, I wrote a book, if you're interested in that kind of stuff, you can see. That definitely helps with the consulting and selling consulting and contracting gigs and stuff like that. Then my business website is benfranklinlabs.com.

Jonathan Stark:

Nice. You missed your calling, you should have been a R&B singer with that name.

Jason Swett:

There you go. My family told me when I was a little kid, they told me I was related to Keith Sweat. I kind of discovered later that it was improbable.

Jonathan Stark:

And with that dear listener we'll wrap up this episode. This epic episode. This is great though. Thanks so much for coming on Jason.

Jason Swett:

I loved it. Thanks a lot for having me on.

Jonathan Stark:

Hey folks I just want to let you know, I recently upgraded my mentoring program to include six months of unlimited 24/7 access to my private Slack community. So in addition to unlimited emails and phone calls, you can now ping me in Slack at your leisure. You can find out more at expensiveproblem.com/mentoring. Hope to see you there.

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Jonathan Stark

The Ditching Hourly Guy • Author of Hourly Billing Is Nuts • Former software developer on a mission to rid the world of hourly building

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For experts who want to make more and work less without hiring.