Heidi [00:00:00]:
Did you know that hourly pricing can be a race to the bottom? Now, yes, there are times that I actually do suggest hourly pricing for freelancers, but, ultimately, it is not the best way to grow. Here's the truth. There is a lot of psychology behind pricing your freelance services. Most freelancers don't consider this, and instead, they just pick an hourly price. Or they say, a tech pack takes 5 hours, and I wanna make a $100, so I'm gonna charge $500 for a tech pack. But there is a much better way to price your services so you can make more money and make your clients happier. It's called value based pricing, and it's something that today's guest, Jonathan Stark, aka the ditching hourly guy, is known for. Jonathan and I had so much fun talking about pricing that I split the episode into 2 parts.
Heidi [00:00:43]:
Here's the first part. You're gonna love it. Alright. Why don't you start with, like, a quick introduction of who you are, the ditching hourly guy, and maybe a little backstory on sort of how you got to this, like really strong mindset and stance of ditching hourly pricing and, the business that you have now.
Jonathan Stark [00:01:06]:
Cool. Sure. My name is Jonathan Stark. I'm in lovely Providence, Rhode Island. And I help I I'm a business coach. I help independent professionals make more money without working more hours, which seems impossible, but, I talk about a bunch of different topics that help people, start pricing their work instead of billing for their time. And I got there from software. My background's in software development.
Jonathan Stark [00:01:34]:
And in 2,005, I think it was, I was managing a dev shop that had about 10, 15 employee, 10 or 15 employees, depending on the timeframe. And at one point it just hit me like a lightning bolt. Like, if we were going to fire someone, we should fire our best developer. And if we were going to hire someone, we should hire someone terrible because we build everybody out at the same rate. And the best developer was really fast and the worst developer was really slow. And so the worst developer was, like, way more profitable. And I was just like, no. You know, our best dev at the time was great.
Jonathan Stark [00:02:16]:
I mean, he was amazing and he could have worked anywhere. We were lucky to have him. And I I just wrestled with that paradox for weeks before I even questioned the fundamental problem or the the underlying reason, which was that we were trading time for money. And if you stop doing that immediately, you do wanna hire the best developers and you don't wanna hire the worst developers because then you want projects done at a high level of quality very quickly so that you have maximum profit. So after I saw that, I was like, woah. It was a it was a major epiphany.
Heidi [00:02:52]:
Okay. So you were directly billing out to your clients, like, flat hours for each of the people in the team? Mhmm.
Jonathan Stark [00:02:57]:
Yeah. It was 1.50 an hour back then.
Heidi [00:02:59]:
Okay. And, like, what was was there, like, a specific thing that happened that made you have that epiphany?
Jonathan Stark [00:03:07]:
I had gotten I started at that company a few years earlier as a junior dev, and I worked my way up and ended up being the VP. I reported it directly to the owner. And when I got that promotion, I started doing 1 on ones, became a manager, and I started doing 1 on ones for people. And I knew what everyone's salary was. And when I saw that, I mean, we were paying our junior our junior debts. We were paying half what we were paying the senior debts. So I was like, woah, that's way more profitable. Like, you know, it was crazy.
Jonathan Stark [00:03:35]:
Like, not only did we pay them half as much, but they were making twice as much. So the the math was obvious. If you wanted to grow a that kind of an agency where you've just got you you're essentially in you're maximizing your hours inventory, and you've got this giant inventory of hours because you've hired more and more people and everybody brings 40 hours a week with them, and now you're gonna sell those out. Well, you want those people to be as cheap as possible, the salary wise, and you wanna want them to take as long as possible. That's the financial incentive. And but that wasn't the strategy for growing that business. They they didn't want the Boston want to hire a whole bunch of mediocre developers and, you know, and try and keep them busy and and just have more payroll. It was the whole the the the, I guess, the business model and the monetization model were in conflict.
Jonathan Stark [00:04:34]:
And I found that to be the case with basically everybody, basically everybody I work with who isn't trying to grow the business by getting up to, like, 50, a 100 developers. You know, they like, creating a huge body shop. Yeah. So so almost everybody that's got a small firm that's billing hourly is in this trap. They're in this. And and you can see it when you talk to them because if you see a graph of their revenue and their profitability, their revenue and their sort of margin and their profitability, it's the costs are scaling just as fast as the revenue is, and they can never get ahead. And they're like, how come I can never get ahead? It's built into the the the I mean, I guess you could call hourly billing a business model, but, yeah, it's it's just built in that there's no profit.
Heidi [00:05:23]:
Yeah. So did you guys shift and, like, figure it out right away?
Jonathan Stark [00:05:28]:
I had no idea what to do. I just knew I couldn't bill hourly anymore. I didn't it never occurred to me that there was another way to do it. Like most freelancers when they go solo they don't think, should I bill by the hour? They think, what should my hourly rate be? It's just a it's just an assumption that you're going to have some hourly rate when you first go solo and then you start to hire people because you can't make any profit going as a soloist billing by the hour. So then you think, oh, the only thing I can do is hire more people. So like I said, we had 10 or I think at the time that I left, there were 10 or 12 employees, maybe a few like an admin person. And, and I went into my boss and I was I explained what I explained to you about the, you know, the top dev and the bottom dev. And he was like, I see what you're saying, but but how would we switch? Because the base assumption of a billable hour was distributed.
Jonathan Stark [00:06:21]:
It had infected the entire firm. It was in our software systems. It was in our billing systems. It was in our incentives for the employees. It was part of our sales process. Every process assumed a billable hour. And I was like, I don't know. You know, I don't know how to do this, but I can't bill hourly anymore.
Jonathan Stark [00:06:39]:
So I just went solo to try and figure it out. And, yeah. So I went so in 2006, I went solo and it was off to the races from there. It went great.
Heidi [00:06:52]:
Okay. Cool. So, I would actually let that's such a great transition point because most of the people that are listening are solo freelancers and consultants, contract like, however you they call themselves. Not so much in this agency type of model. And so, it's interesting you made the comment most free answers don't think, should I bill by the hour? They think, what should my hourly rate be? We get the question a lot. Should I bill hourly or should I bill by the project? That does come up a lot in our community. So So people are thinking that, but here's where I think that they get hung up and where I think we could have so much fun chatting today about some of the psychology behind this is that they think, okay, hourly, let's just use easy numbers, $100 an hour. And then they think, okay, if I'm going to do a tech pack, which is like a blueprint for a garment
Jonathan Stark [00:07:39]:
Mhmm.
Heidi [00:07:41]:
And a tech pack takes me 5 hours, I should charge 500 for the tech pack. So so they they start
Jonathan Stark [00:07:47]:
That's even worse.
Heidi [00:07:48]:
Premium. Yeah. It can get even worse. Right? And it's like, well, no. We wanna think about the value of the tech pack. Not it's not about the hours. So we could dig so deep into all of this. But first, I'd love to hear a little bit about, like, what was your transition like? Okay.
Heidi [00:08:06]:
So you went so low. Then how did you think about strategically? How am I going to set my prices now? How am I going to figure this whole value project based thing out?
Jonathan Stark [00:08:16]:
Yeah. So I got lucky because I literally was in a Barnes and Noble back when there was were such things and you mostly got your books from there. And I was in the business section trying I was like, I am just like staring at the business section, like, not knowing what to pick up. And I grabbed a book called Value Based Fees by Alan Weiss, which became my Bible for the next probably 3 years. My copy of that book has like like sticky notes in every single page. It's ridiculous. And, it's a book for management consultants, but it introduced me to the idea of value based fees, which you're just referring to, which is a way of giving fixed bids that is not cost plus or time and materials, which is what you just described. Right.
Jonathan Stark [00:09:04]:
So it's and it's radically, radically different. It's a 180 degree mind shift. So I had that book. I was solo. I worked out a deal with my employer where some of the client, my previous employer, where some of the clients who were sort of my clients came with me and we split the money and it was so I I had a real nice sort of on ramp into going solo. I didn't I didn't have a I had work immediately, so that was great. But it changed the way I was pricing it for any new ones and for ones that I knew were amenable to a change. It didn't like me because clients don't usually like hourly either.
Jonathan Stark [00:09:41]:
So I changed it. So I changed it to what I thought was value based pricing at first, but still there was a lot of it's such a huge mind mindset shift that there is still this underlying, yeah, but how many hours is it gonna take me concept. And I was I was letting that bleed into my pricing too much. And I was also not handling my sales calls properly. If I was really, if I was really if I had really made the flip, it took me about 18 months to really change my mind about this and start doing sales calls correctly. But I would still in the sales calls, I'd still be talking to the client about scope, scope, scope, scope, scope. How many fields is it going to have? How many screens is it going to have? How many buttons is it going to have? How much business logic is there? So for you, I don't know what the words are for, you know, all the pieces that would go into a tech pack or whatever else they're doing, but you probably if you're listening to this and you've been doing these fixed price based on how long you think it's going to take, probably your entire conversation is around how much work you're going to have to do. So you're asking them like, what are what are all the things that you need? And then in your mind, you're translating that into time and then you're sticking a price on it.
Jonathan Stark [00:10:56]:
That is absolutely not what you do with value pricing. It's it's complete opposite. We'll get to that in a second because you asked about my transition. So I was kind of doing an okay job. I kind of what I was really doing, if I was going to put a name on it, was I was kind of doing cost plus where I think it's gonna take me this long and then just protecting a huge margin on top of it.
Heidi [00:11:19]:
Okay.
Jonathan Stark [00:11:20]:
And and I had some of the language around the value that the client would receive from the project so I could justify the higher fee even though I didn't calculate the fee in the right way. So I I accidentally it accidentally worked out, but it was more like surface level. It worked out. But what was happening underneath wasn't I didn't have it down yet, but I was it was good enough that I had a killer 1st year, and it just kept getting better after that. And because my profits were enormous compared to before, I probably did double I did about double, of what my salary was, which is apples and oranges because salary versus revenue, but it's very similar when it's just you. And, yeah, it was great. But the thing that I didn't expect was that was that my quality of life got dramatically better. Like, my client relationships got dramatically better because all of a sudden, they weren't worried about how many hours I was working.
Jonathan Stark [00:12:24]:
Like, oh, did he put in 80 hours last week? Did he put in 2 hours last week? So they weren't getting these surprise invoices all the time because they knew how much the price was upfront. I was like, yeah, I'm not gonna charge you a dime more than this. If it takes me twice so long, that's my fault for underestimating it. And they could just relax. And there was no deadline pressure. I mean, everybody wants everything done as soon as possible, but it wasn't like it wasn't like when the meter's running and they're like, oh, man, we're, like, 5 weeks into this, and it's already been $50,000. And I feel like we still gotta have to go. And I'm like, oh, that that I wouldn't have spent a 100,000 if I thought it was gonna be that much.
Jonathan Stark [00:13:01]:
So they chilled right out, and it was it was incredible. I didn't expect that. I didn't know that that was going to be a feature of fixed prices. But, yeah, that was fantastic. So the so, you know, 1st year went great. It was super chill and, you know, and then I just got better and better at it and then eventually transitioned into even even more weird things. But yeah. But for the purpose of this call, that was how that went.
Heidi [00:13:28]:
Okay. So I think where a lot of people get hung up is like, for example, I know you said you had, you know, some clients that you took from your previous employment and then transition them into more package value based pricing, what have you, however you wanna call it. Because I know you said it took you a while to really figure it out. I think where people's head immediately goes is, well, that client is used to paying 150 an hour, let's say, and then they, they have this understanding that the thing takes 10 hours or a 100 hours, then they know that technically it should, they can do the math. Right? And so, you know what I'm trying to say here? Like how do you, do you, did you get any, I know, I know you said you transitioned the ones that were minimal and would rather go to flat rate. But at some point, the value based price technically is quite a bit more than the hourly based price. And so I think that's where, I think that's where people get hung up. So like, for example, in fashion, now now broad strokes here, arguably, you can get a tech pack done anywhere between, let's say, 2 to 5 hours.
Heidi [00:14:42]:
And brands know that. And so certain brands might be like, oh, I'm not paying $2 for a tech pack. But I do have, I have students who charge $2 and they get it all day long. But but that's where people get so hung up is when the client like knows kind of the time. And then there's this backwards math thing that they do.
Jonathan Stark [00:15:05]:
Well, they're afraid of that.
Heidi [00:15:08]:
The very afraid of that.
Jonathan Stark [00:15:09]:
The freelancer is afraid of that. Probably in some points. Okay. And some clients might do it. Yeah. But there's there's, like, 2 or 3 different things going on in that premise. One is that it's so commoditized. Doing a tech pack is so commoditized that even the client who's not an expert knows how much it should be.
Heidi [00:15:29]:
Sure.
Jonathan Stark [00:15:30]:
So that's so that that's and there's no so, like, the value I I talk about this thing called the max price formula. So so it's desire, money, desire, money, and options, DMO. And if they want the thing really Options.
Heidi [00:15:53]:
Okay.
Jonathan Stark [00:15:53]:
Yeah. Desire times money over options. So if if a client has, like, extremely high desire for a thing and they have a ton of money and you're the only option, then, you know, it's not exact numbers, but it's just in theory, they would you'd multiply desire times money and then divide by 1. But if the denominator is a 100 or a1000, you can't. So so if it if so if you, as the person creating the tech pack to the client is not meaningfully different than the next person, then of course you're going to have downward pressure on your prices. But if there's something about you and your people who are charging $2,000, if that's a lot for a tech pack, then there's something different about them that's meaningful to their clients. They probably specialized or they work with really famous clients or something. They've got like amazing, amazing portfolio, amazing brands in their portfolio.
Jonathan Stark [00:16:54]:
There's something different about them where the clients are willing to pay a premium because they aren't the same as everyone else. The other thing that's going on that you touched on is you said, you know, a lot of times with value pricing, when value pricing is firing on all cylinders, your fees are way higher than they would have been if you charge by the hour. You make $2,000 an hour easily. So but the yes, the price is way higher. But the thing that's way lower that's invisible and most people don't think about is the risk. So the client, especially as the organizations get larger and larger, clients despise risk, especially if they're not the CEO, even if they are the CEO. But if you're like a SVP of sales or a CMO or even a director of a big business unit, something like that. The last thing you want is to get fired or get chewed out by your boss.
Jonathan Stark [00:17:49]:
And they're not spending their own money anyway, so they might as well spend the money on the person who they think is the least risky. So if you so if there is some kind of so value based pricing works fantastically in situations where there's a really big project, the risk is extremely high and there's tons and there's like some sort of calendar pressure. There's some some hard deadline. Like they basically get the the client has one shot at this and if it doesn't go well, heads will roll and massive amount of risk. And therefore, if you are perceived as the one and only person for this thing and you give them a fixed price, then the value is going to be extremely high. So the price you can set is is very, very much higher than it would be if they were hiring some rando by the hour.
Heidi [00:18:41]:
Mhmm.
Jonathan Stark [00:18:42]:
Yeah. So, yep. I'll stop there. There's I'm about to go off to another whole rabbit hole. You've used you've touched on my favorite subject. So
Heidi [00:18:52]:
Well, I mean, we've chatted before. I've been on your podcast and we've chatted casually before and I, I find the psychology behind this stuff like so deeply fascinating. And, and the way you talk about it and present it is very, I feel is very understandable for the, the freelancer to start slowly wrapping their head around it. I mean, you do these fun comics on LinkedIn, and I think they got your daily newsletter as well. Yeah. So we'll link to all that in the show notes because it's really valuable resources. And it does it takes time to shift your mindset on this. And I think kind of digging into the psychology is where people can start to have those moments.
Heidi [00:19:34]:
And like, oh, okay. So what is I mean, what were some of the things I know you said it took you about 8 like, at first, you you had a great 1st year, but you were still doing this cost plus pricing where it's like, okay, I think it's gonna take me a 100 hours and then I'm just going to add this buffer. So what were some of those things that you worked on mentally or or strategically in those 1st 18 months to get yourself into what you would now call true value based pricing? Like, can you walk us through a little bit of that mindset? And because that's where I think the listeners are going to be right now.
Jonathan Stark [00:20:12]:
Yeah. Yep. So the magic all happens in the sales call, the sales interview when you first and it's especially I find it especially easy with well, not especially easy. It's easier with clients you've never worked with before. So there's no there's no pricing expectation. There's nothing like that. And it's even easier with inbound leads. So if you're attracting inbound leads and you you attract one that hasn't worked with you before, that's that's the easiest.
Jonathan Stark [00:20:39]:
That's the softball. And, and in that sales interview, doing a sales call is kind of like a performance art. So you need to know. So like any performance, like guitar performance, I also have a music background or baseball or whatever. Since I just said softball, you're not going to get better at hitting home runs without getting off the bat swinging, striking out. It's totally practice. But the thing is, with all all performance arts, you know what the ideal is. You need to know what the ideal is so that you you know, you're practicing towards something.
Jonathan Stark [00:21:14]:
You're you're you're sort of spiraling into the target. If you don't know what the target is, then the practice isn't you're gonna maybe be practicing the wrong things or practicing things in ways where you can't tell. All you know is you didn't land the gig or you didn't get the price you wanted, but you don't know what you did wrong. So so this is where, like, a coach would come in in a baseball team or like a music teacher for guitar. If you like, here's what you here's what you want. We all know what you want. You want to play eruption by Eddie Van Halen. You're holding your hand wrong.
Jonathan Stark [00:21:45]:
That's the thing that's wrong. So just hold it more like this or your guitar tone is wrong. Do it more like this. So they can give you an idea of, first of all, if you're not sure what you're working toward, then they can help you with that. And then as you're working toward it, you can sort of get coached on how could you improve the next sales call. So so whether or not you need a coach is is is not relevant, but the the thing you need to do is have lots of add backs. So you can practice making this shift from thinking about scope first to thinking about scope last. So I describe this like being a doctor.
Jonathan Stark [00:22:22]:
So if someone, you're a doctor, someone runs into your office and they're like, doc I need a triple bypass. The doctor's not gonna be like, great. Hop up on the table. I'll go get my scalpel. They're gonna say, like, hold your horses. Like, tell me what's the problem? What what is normal like for you? How is it different now? Maybe you do need a triple bypass, but maybe you just need a Tums or something. So it it could be that they come in the clients come in running running in asking for a specific solution, a specific deliverable or a specific therapy, like some kind of self diagnosis and self prescription. And if they're not experts and you are, like in the doctor scenario, it's almost certain that there's a better way to do it than they think.
Jonathan Stark [00:23:10]:
Like, they googled around and they found something and, like, I think it's called a tech pack or whatever. Mhmm. And they're maybe they know enough to be dangerous. So when they come in, they tell you everything about that, and then you're like, okay, great, thanks. I took all these notes. Sounds good. I can do all of this, but it would be it would be helpful to me if we could go up a level and just talk about how this is fitting in your overall business. And you flip the conversation into this more diagnostic like a doctor would do.
Jonathan Stark [00:23:37]:
Tell me where it hurts. How long has it been like this? How urgent is it that you get it fixed? What would a home run look like? Why would you pick someone expensive like me? Why do we need to do this now? And you just ask them. It's maybe, I don't know, 15 minutes of questions, you know, maybe less when you get good at it. And then what you're what you're not asking is like, okay, how many words do you need in this white paper? I don't know what the components of the tech pack are, but like how many pages is it going to be or how many garments is it or how big are the garments or how many sizes of each garment? Like, don't ask any of that. That's all all stuff that you're gonna you're you're gonna need you're gonna hear some of that stuff from them probably. And you're like, great. Got it. You could ask a question, like, what are you gonna do next? Like, after I give you this tech pack, what's next? And they're going to tell you something.
Jonathan Stark [00:24:26]:
And what you want to do is find some business case, some underlying business case where downstream from your piece, they're going to make money because these are these are businesses and they're not doing stuff for fun. They want to make money. So you want to find out where you're contributing in that ups that where you're contributing upstream to some later downstream cash. And once you get a sense of how much the home run is worth to them, even though you're not going to do all of it, but you get the overall sense of what they're shooting for, then you can have a sense. You can you can do a sort of back of the envelope calculation of how much your piece might be worth to them. And then you can set some prices based on that. So if you if they think, oh my god, this new t shirt design or something, it's, you know, I'm gonna sell it to Supreme and they're gonna be selling them for $500 a t shirt. And you're like, oh, okay.
Jonathan Stark [00:25:24]:
You know, and and we're we wanna work with you because you've done some of these really cool street brands in the past. We know you get it. You know, I don't I'm just totally making this up. This is outside of my space. But Yes. It's it's a potential high win. It's a high payout downstream for the, your client. If you're like, okay, then you could say for, let's say they're, they're looking at a $100,000 payday, then you could say, well, you know, that sounds great.
Jonathan Stark [00:25:49]:
I can contribute to that in a few different ways. I know you asked for a tech back, but there are probably 3 ways we could work together that that would help you, you know, good, better, best types of things. Can I could I put together a proposal and get it back to you day after tomorrow? They can say, Yeah, that sounds great. So then I would say, All right, if we're talking about $100 win and we just divide that by 10, like they're not even going to be talking to you. If you couldn't contribute 10% to this outcome, they wouldn't waste their time. So $10,000 $22,000 $50,000 that would be a general rule of thumb. I would divide by 10 to get my first number, multiply that by 2.2 and multiply it by 5 to get you these 3 prices. And then I'd say, all right, how much would I be fist pumpingly happy to do? How much work would I be fist pumpingly happy to do for $10,000? And you create the scope then last.
Jonathan Stark [00:26:43]:
After you've after you've uncovered the value, you set some prices based on the value without even thinking about what you're gonna do and you say to yourself, alright, 10 grand. That's a pretty good budget for a tech back. I could probably do more. I could probably do 3 of them or I could probably do something that's even a little bit beyond what they asked. And then geez, 22,000. What can I do for that? Oh my gosh. I could do all kinds of things for that. I maybe I bring in I could hire a couple of people to help me and do some, like, crazy stuff that I'm not even that great at.
Jonathan Stark [00:27:13]:
And then for 50 grand, same thing. So once you have the price, then you decide what the scope is and you want it to be super, super you'd want to be like jumping for joy at any option that they pick. So you set the scope small enough that it can creep a little bit or there can be surprises and you don't care because you just
Heidi [00:27:33]:
absorb it.
Jonathan Stark [00:27:34]:
Right. So if now if these numbers sound really high to your audience, that's fine. It's fine. Okay so, so the value is 10,000 to the buyer divided by 10. What can I do for $1,000? What can I do for 2,200? What can I do for 5,000? And then set the scope. And then so you say to them, oh, you know, it's you got you know, it's a I see the business case. You stand to make it you believe they told you they believe that they're gonna make $10,000 from this. So you say, okay.
Jonathan Stark [00:28:06]:
Well, I can't really do a tech pack for a 1,000 for both for a 1,000. I can give you my course on how to make your own tech pack. Or I can teach you a a half day. I can sit with you while you do it. For 22, I can do a tech pack. And for 5, I can do a tech pack and other things that they're that you know they're gonna need.
Heidi [00:28:25]:
Would likely be maybe the next thing. Yeah.
Jonathan Stark [00:28:28]:
Right.
Heidi [00:28:29]:
Okay. So how do we how do we get them to tell us this 10,000 or a 100,000, like, payday number?
Jonathan Stark [00:28:38]:
Yeah. That's the art. Yeah. It's tricky, but sure. It's not as I think it's not as hard as it sounds. It's it is tricky, but it's not as hard as it sounds. So once you get them, once you get them talking about the business case and good clients will love to talk about the business case, They want people to understand what they're trying to accomplish. They don't want to just be giving orders and getting billed by the hour.
Jonathan Stark [00:29:02]:
It's like driving the back of the the the cab from the back seat in a city you're not familiar with. Like maybe turn right, maybe turn left. You know, it's a huge waste of money and it's very stressful for the client. They're not the expert and they don't want to be the expert, so they don't really want to be driving the cab. So when you ask them these questions about like, you know, it's like you get to that point where they brain dump for like 10, 20 minutes and then you're like, okay, I just want to understand how this is going to make your business better. So because there's a 100 ways I could do this. I want to make sure it's going to benefit you the most. So what are you what are you trying to accomplish? You know, what is the goal? And I I I can't even guess what in this situation what the goal is other than to, like, sell a design to, like, Target or something.
Jonathan Stark [00:29:48]:
I don't know. Like, what's the what's the typical goal?
Heidi [00:29:51]:
It would be less selling a design to Target or Supreme or something. It would be more that they're gonna sell the design themselves and that they're gonna be able to, like, sell a bunch of these t shirts. So a thousand of these t shirts or something and whatever their profit margin is on the back end and stuff. I don't know. But, like, I mean, we could
Jonathan Stark [00:30:09]:
You could guess. Right?
Heidi [00:30:10]:
We could get. Yeah. We could guess. Totally, we could guess. Profit margins in fashion are not great.
Jonathan Stark [00:30:16]:
So I might actually say this to them. Be like, well, why would you do that? Why not just try and sell the design to a major label or something? Mhmm. You know, how profitable can you be on this? Like and and get into almost like a a a business consultant kind of conversation with them. Mhmm. Because you could say something like, well, you know, if they said, oh, I'm gonna sell them for $10 each, I'm gonna make a dollar each. It's like, well, you're gonna go throw this trouble for $1,000. Like, you know, it's like what if you could start sort of brainstorming with them? What if we use this other material or we do this other thing or, you know, you do something to get the price up to $12 because if you get it to $12 from 10, you've tripled your profit.
Heidi [00:30:59]:
Mhmm.
Jonathan Stark [00:30:59]:
Right. Even though it's only $2 more. So it's 3,000. Like what if there's something that you could do in a I don't know if your people are used to having these kinds of conversations, but if you if you familiarize yourself with what's going to happen next and the profit models for these different kinds of businesses, then you could almost you're almost in this kind of like, well, how could we make this better for you? Conversation instead of like how many garments do you want me to you know? Instead of just taking orders from someone who maybe isn't even that experienced. Kind of working with them as the expert and saying, well, what are you trying to accomplish? And if you share that with me, I mean, I've been doing this for 5 years, 10 years with these big other people like you who are more successful that they're aware of. And, you know, perhaps this is what differentiates you from a 1,000 other people who do tech packs. So, yeah, you know, I've worked with Supreme, and that was just this guy, Joe, who's now, like, on a yacht. So, you know, what if we pulled some of that strategy? Like, are you interested in some kinda some something like that? And if there's something you can contribute there
Heidi [00:32:10]:
Mhmm.
Jonathan Stark [00:32:11]:
Great. May maybe you're maybe you will or maybe you won't. I don't know if they if they're capable of contributing, but that's the idea. You're like, well, what's the plan? Like, yeah, I can do this and you can pay me the money, but I I want you to keep paying me money for more projects down the road. I want you to be successful and that'll make me successful. So what does success look like for you? Because I'd rather have long term partnerships with clients and not constantly be getting new clients. It totally makes sense. It's it's not like a trick.
Jonathan Stark [00:32:37]:
And so they'll be like, well, you just totally made this is my first design or this is my 5th design. I'm trying this is I've tried a bunch of different things that didn't work. I'm confident this is gonna work or I'm not sure. This is my last chance. So I'll find out, like, what's going on with them, what they're how they're gonna sell it, whether it's through Amazon, I don't know, Shopify, Gumroad. I don't know. Whatever they're gonna do and say, like, okay. I think I get it.
Jonathan Stark [00:33:04]:
And if you have conversations like this, even if you hopefully, they would know how to help contribute to the specific kind of success the person is looking for. But even if you don't, you're gonna get a sense of how much their budget probably is. So how much how much money there is potential gain in the situation, you're going to get at least into the ballpark, you know, like, yeah, maybe these numbers probably not within a 0. It's not like it's like it you're but you're going to have a rough idea. Hopefully, that's the idea. The idea is that you just you don't need an exact number
Heidi [00:33:41]:
because you're
Jonathan Stark [00:33:42]:
going to divide it by 10. So as long as you're close, you're probably okay. And the number might be higher, it might be lower, but you're going to divide it by 10. So as long as you're like somewhere in the ballpark, they'll probably accept the proposal.
Heidi [00:33:56]:
Okay.
Jonathan Stark [00:33:56]:
Yeah.
Heidi [00:33:57]:
Now I've never, like so I think so many questions. So my first thought is someone who does TechFox or even does like the design is a fashion designer or technical designer. It they're not typically there's outliers, but typically they're not someone who's going to be confident or be skilled with this, like, end strategy of actually, like, going to market and selling the end product, selling it to Supreme, which doesn't really happen in our industry. You're not gonna, like, sell a shirt designed to Supreme for a $100,000. I I maybe, but not really. So, so I think where they're they might be getting stuck, where I'm almost getting stuck is I'm like, how do I help? Or I guess maybe I'm not I'm not helping on that strategy. I'm just really trying to understand what it is. But then also, you're kind of tasking me with challenging that strategy a little bit to some extent.
Heidi [00:34:59]:
And and and I might not feel super skilled in that because I'm I'm a technical designer and I spec garments and I do spreadsheets and I know how to do all the measurements and stuff and that's really my zone of genius.
Jonathan Stark [00:35:12]:
Yep.
Heidi [00:35:13]:
And it's like going to market and sales strategy feels very, very out of my comfort zone or my knowledge base.
Jonathan Stark [00:35:22]:
Okay. That's fine. So two things there. 1 is even if you are a technical freelancer, you're technical that's what you're you're still a business owner. Right? So you need you understand, like a business. You need to make money and, you know, the things that go into making a business. And it sounds like you're talking your people are mostly talking to other solo operators or small businesses. So the general concept, you don't need to be an expert at go to market with T shirts or whatever.
Jonathan Stark [00:35:52]:
You're probably familiar with it. I mean, you're in this space. You probably have some idea enough to ask smart questions and then not necessarily have the answers. But that's okay because they're going to give you the answers.
Heidi [00:36:03]:
Okay.
Jonathan Stark [00:36:03]:
So you don't need to be a consultant on the full, like, manufacturing type of thing, but it would be helpful for anyone listening if they're at least familiar with
Heidi [00:36:14]:
Sure.
Jonathan Stark [00:36:14]:
The things that happen next and could ask smart questions and and just write down the answers, really.
Heidi [00:36:21]:
Yeah. Okay. The other
Jonathan Stark [00:36:23]:
thing that I'm sensing is is like they came in asking for a tech pack, but you need to erase that from your mind while you're talking to them. You are not gonna do a tech pack for them unless they convince you that that's the right thing to do. So Okay. So that's the other
Heidi [00:36:41]:
thing. Bypassing.
Jonathan Stark [00:36:43]:
Yes. You're not you're not trying to figure out how to charge a ton of money for a tech pack. You're trying to figure out what is the home run for this person and what it might be worth to them and then set 3 prices and come up with scopes that fit inside of those prices. And one of them might be a tech pack, but it might not be. If the value to them is $500 you're like, well, I can do something for $50 I can do something for $120 and I can do something for $2.50 The first one's probably a book that you wrote. The second one or a a video course, or maybe you even record a video of you, you know, of you having done it for someone else and you sell those for $50 to people. So they come in asking for a tech pack, but the if the value is not there. So like if if the least amount of money you do a tech pack for is $1,000 and there's not $1,000 of value to the other person, well, you're not selling a tech pack to them unless you compromise on your price.
Jonathan Stark [00:37:45]:
So you just you need to erase the self diagnosis. Be like, okay, maybe I'll end up doing a tech back. Probably will, but maybe not. And then just let them explain to you what they're going to do. Like, what is the why would you do this? And, like, I wouldn't I couldn't at this point, I couldn't write a proposal for someone unless I understood what they were trying to achieve. Sure. I just would be like back to the cabin analogy. It'd be like someone getting in the cabin saying, just drive.
Jonathan Stark [00:38:13]:
And I'd be like, what do you mean? Like, I'm gonna drive really well. I'm gonna drive really safely. I'm gonna I'm gonna do all the best practices of driving, but that is not gonna get them where they wanna go unless we're, like, miraculous luck. So that's the you know, with hourly, people like, give me a tech pack. How long is it gonna take? About 10 2 hours or whatever you said. 5 hours. Okay. I'll do that, and here you go.
Jonathan Stark [00:38:38]:
Here's your tech pack.
Heidi [00:38:39]:
Okay.
Jonathan Stark [00:38:40]:
So that's just, the that's the scope first thinking. So if if you were going to move into value pricing, there's a bunch of things you need to do for it to really be worthwhile. 1 is differentiate yourself from you got to be different. You need to specialize in something or someone and be the best in the world at it or at least the go to person for it. If you're not, you might not think you're the best, but as long as they think you're the best, that's fine. So you need to be different, meaningfully different from everyone else. You need to practice these conversations and you need to scope last. Do not take their self diagnosis.
Jonathan Stark [00:39:17]:
So, you know, it takes practice. It took, like I said earlier, it took me like 18 months to stop scoping in the sales meeting.
Heidi [00:39:25]:
Mhmm. Are there ways to practice other than having, like, actual sales calls with real prospective clients? What do you suggest for that? Because I maybe you don't want to wait that long or, like, screw up on all these calls. Right? Mhmm.
Jonathan Stark [00:39:37]:
So the first thing I would do is just get really curious about all the business owners that I come in contact with. With. So just because they're all it's all I mean, small business, small business. Like, there are lots of things, motivations that are sort of generic high level things that small business owners stress about. So you could, you could just get in the habit of when you get your coffee in the morning saying, oh, how's biz? You know, at the cafe, not Starbucks, but like go to go to a small business, like run owner operated type of businesses, dry cleaner, how's business, liquor store, how's business? If you go to if you patronize these independent mom and pop places and ask them things like that, you're going to get an earful. So and you can just be curious about about, well, oh, I don't understand. Like, if you don't understand, just ask and you'll start to see that, like, there are a lot of things that people have in common when they're trying to run a small business. Yeah.
Jonathan Stark [00:40:34]:
Another thing you do is role play. That's you could just get a partner and be like, just practice it. You know, like, pretend pretend you're like, let's say you just came out of a sales call and it didn't go well. You could be like, oh, let me could someone role play this with me? Like, maybe you've got a partner that does it and just like, how would we and it's sloppy and it's not perfect, but it does. It does help. It does help. It's like sparring and martial arts. It's not a real fight, but it does help.
Jonathan Stark [00:41:06]:
Mhmm. Just learning learning perhaps by interviewing them, like maybe have a podcast where you interview the kinds of people that would hire you. So if you have a if you have a niche, you've specialized in some particular kind of what are they called? Like, like solo they're not manufacturing. What are these people what are these clients called? Like your
Heidi [00:41:32]:
The brands?
Jonathan Stark [00:41:33]:
People's brands. Okay. So you can interview these, like okay. So interview fashion brands, small the kind of fashion brands you wanna work with.
Heidi [00:41:42]:
Mhmm.
Jonathan Stark [00:41:42]:
They'll pick a type, sneakers or I probably wouldn't do sneakers, but like whatever. Pick a type or pick a pick something that you really like or you're really good at and get make a list of a 100 people that run those kinds of businesses and put together a podcast and reach out to them and just get their stories to war stories or whatever. Maybe some people will listen, but guess who's going to get a huge benefit out of it? You as the host. So and guess what? You're also gonna be exposing yourself to a a 100 potential clients who might be like, oh, wait. What do you do? Yeah. So those are 3 things 3 things to do. It's, you know, it just it takes time. But before before we before we I don't wanna I don't know how much time we have, but I don't wanna get off without talking about at least 2 other ways to price.
Heidi [00:42:34]:
Okay. Yeah. We have time. I have time.
Jonathan Stark [00:42:36]:
Okay.
Heidi [00:42:37]:
So, before we jump into that, and I do wanna talk about it, I never I call them discovery calls. I but I think they're the same thing. You're you're leading with a massive amount of curiosity, and you're really understanding the nuances of what they need, where they're trying to go, what they've tried before, what hasn't worked, what has worked. You know, you really just and you just and if they say something and they're like, oh, and it was a terrible experience. You're like, well, why was it a terrible experience? What happened? Like, you just kinda keep digging and digging and digging. And so just for people listening, because I teach this in my course, we call it discovery call.
Jonathan Stark [00:43:10]:
Same. Yep.
Heidi [00:43:11]:
It's the same. And then, the curiosity led conversations and whether you do it on a podcast or you just do it casually, I also teach that you do customer research before you like launch, you do customer research and you want to talk with at least like ideally at least like 5 or 10 brands who meet your ideal avatar and really understand. And and the the difference is you're not selling anything at the end, but you're still leading with a lot of curiosity to understand. So I think we're talking about the same things.
Jonathan Stark [00:43:40]:
Yeah. That sounds like
Heidi [00:43:41]:
it. Okay.
Jonathan Stark [00:43:42]:
If I don't know if this is what you currently do, but but thinking past just your piece, that's part of I think part of the curiosity is, like, be curious about things that are going to happen after you're done.
Heidi [00:43:54]:
Mhmm. Yeah. That's huge. Great point.