Start Up Blog

How to price yourself as a freelancer

Posted in entrepreneurship by Steve Sammartino on December 18, 2014

kids writing

As the friction of employment is being removed, many people are taking the opportunity to freelance out their skills. The independent digital craftspeople are arriving thick and fast, but one of the trickiest parts of doing such work is knowing how to price it. Getting it wrong seems scary, as it can be the difference between getting paid this month or not. So the inclination is to take a conservative approach, price low and ensure we get the business. But all is not as it seems. So here are some hacks to remember in order to get your freelance pricing right.

General rule of thumb:

Charge yourself out at least double the rate you would earn in full time employment doing the same work. 

So if you would earn $50 an hour, then charge yourself at a minimum of $100 an hour. If you’d earn $100k a year, then your rate should be based on $200K per annum. Divide $200K by 52 weeks and that’s the rate to charge out for a days work. And if you think you were getting under paid in previous gigs as an employee, then you should double the rate you think you should have been getting paid.

We need to remember that being independent has a lot of added costs, and we need to take them into account in our price. Even in a digital world we still have real costs like office materials, electricity and equipment. And there is no one providing us with paid leave, health care or a superannuation / 401k.

But there is also more to it than that. What we must do is put ourselves in the shoes of those who need the skills we can provide. We need to remember the costs of the alternatives and the mindset of the end customer. When we do this, the ‘double the price’ concept won’t seem nearly as aggressive.

Here’s a few things things to remember:

- It usually costs around 50% more than a persons wage to employ them. Office costs, management, administration, payroll taxes, annual leave payments, public holidays and the like really add up. This is inside the calculation of those who need people. They always consider the substitutes and make their own calculations on full time employees, so the premium on your rate is not nearly as high as it seems.

- We also need to remember that it is quite likely they only need your skills temporarily. Short term resources always come at a premium – just think of the price of renting a hotel room, versus leasing an equivalent place for a year – we pay a premium.

- Chances are the ‘buyer’ can’t afford you all year, and while your cost per day might be much more than it would be per day for an employee, you are most likely still a much cheaper option overall. You will be saving them money.

- It must also be said that smart employers know that much of an employees time is eaten by ‘the office paradigm’. Freelancers much less so. In this way, freelancers are usually far more effective in output per hour.

- Price is a perception game – in all products. The natural and automatic perception of all products is that higher priced goods are of better quality. Pricing sends a signal to potential buyers more than anything else in purchasing decisions. And counter to what we might believe, pricing ourselves too low has as much potential to lose work as pricing too high does.

- It’s easier to find people who will pay the correct rate than it is to make a living working for half of what you’re actually worth. It’s better to hunt a little harder to find a premium customer. They also tend to appreciate your work more than cheapskates, and take they advice they are buying seriously.

Finally, we need to embrace the idea that price is an experiment. It is the easiest thing to change in our offer. And we can do it without notice. Over the years of catalogues, discounts and sales, people are groomed to expect prices of all things to vary. Why should a freelancer be any different? So you can play with your prices. In the end it is about finding the right balance of demand with the personal supply of hours you have available.

The Uber attitude & surge pricing

Posted in entrepreneurship by Steve Sammartino on December 15, 2014

Travis from Uber

Today the ride share service Uber, did more again of what it seems to be good at – acting like jerks. During the Sydney Siege they conducted a price surge and put prices up to reflect the demand for transport at a time of serious civil disturbance. But the most disturbing thing, isn’t the price, it’s really the attitude.

This is one time when industry disrupters can take an important lesson from their industrial era counterparts. Let’s take legacy airlines. Our national carrier Qantas has on many occasions diverted flights at no cost to pull people out of countries which present an immediate danger to Australian travellers.

While Uber later countered their original decision with a ‘Oh, and we’ll pay the fares’ tweet – below – it was clearly an afterthought when the rightfully astounded community reacted.

Screen Shot 2014-12-15 at 4.09.50 pm

It turns out our natural intentions are revealed by how we behave before we get feedback.

New book – The Great Fragmentation – out now!

So what really happened to the music industry – in data?

Posted in entrepreneurship by Steve Sammartino on December 13, 2014

broken LP record

We all know the story of the music industry decline, but what do the numbers really tell us? Is the financial disruption as bad as we imagine? It seems there’s never been a time when more music has been consumed. Well, it turns out that downloads and streaming isn’t doing much to reclaim lost revenue from the vinyl and CD sales. Here’s some mind blowing data as to how heavy the industry loses have been over the past 10 years. (source RIAA).

10 years ago Now
Recorded music sales $16 billion

$6.9 billion

All streaming sales Nil

$1.5 billion

Download sales $250 million

$2.8 billion

CD sales $15 billion

$2.5 billion

The numbers show total revenues have more than halved. And it is also clear the revenue gap is not being filled by new low cost distribution methods of music. It seems as though the glory days of the ‘recorded music’ business shall never return.

We may even re-enter an age of Medieval Minstrels – where musicians all need to sing for the their supper, and the recorded version is the sample of a high paid live performance. But most of all, some industries, just like plants are seasonal, and not perennials. They have a brief moment of blossoming brilliance which will never be repeated. It pays to recognise when we might be in a such an industry.

New book – The Great Fragmentation – out now!

The reality of the screen

Posted in entrepreneurship by Steve Sammartino on December 12, 2014

Old Abandoned Drive in Cinema

The reality is that all screens are created equal now. Every screen can serve up the same content. Every screen is connected to the same world. Every screen doesn’t care whose eyes and ears are at the other end of it. Every screen can deliver the same data, on the same day, globally. There is no such thing as TV anymore. And so it then begs the following question:

Why do people who profit from screens treat them as different entities?

It seems the people who work in TV still think their screens are different. It seems the people who make movies think their cinemas are different. And pretty much anyone else who created content for the screen pre-broadband era thinks the new screen reality does not apply to them. And while the screens don’t care what they show, the people also don’t care which screen they view it on. In fact, they’d much prefer to have the choice over which screen they can use. I’m pretty sure many of these people, like me, would possibly a premium for such a convenience. And yet, in 2014, decades into this shift, the powers that be, sorry the powers that ‘were’, are still avoiding their potential revenue. And here’s why:

They love their infrastructure more than they love their customers.

Or more correctly, they believe their ultimate success is decided by their supply chain and not by the end consumer. Serving business partners at the expense of the ultimate paying customer down the line is a strategy fraught with danger. Especially when we are now in a phase where the middle man is quickly evaporating. Many of those business who could go direct to the end user choose not to, as they may ‘offend their existing trade partners’.

I like movies: I love seeing new release movies. A night out at the cinema is a fun and reasonably inexpensive night out. But now that I have very young children, getting out of the house to grab a movie is more difficult than it used to be. And so my wife and I just don’t go very often. But here’s the kicker – I’d pay a premium for the right to be able to watch a new release at home. $30 for a stream via Apple TV? – I’d pay that. It’d still be cheaper than paying for parking, ice creams, inflated corn and everything else at the cinema. And to this day I still can’t do it. No doubt I’m not alone. No doubt, this entices piracy. And I know what those in the movie business would retort with. They’d say the cinema chains would cry foul and stop distributing their films. And when they both claim this, they’d both not be understanding the true reason we go to the cinema – The night out. The movie is only part of the deal and the real competition is not watching a movie at home, but going to a pizza a restaurant, or a bowling alley. They’re also forgetting the margin enhancement opportunities of low cost digital distribution.

Here’s some simple advice for every screen business: If you have the opportunity to serve a customer directly, then without delay consider releasing all content in all forums simultaneously. Not only will it create a new direct relationship with those who actually pay for the product, it might just stop another startup eating your lunch.

New book – The Great Fragmentation – out now!

My smart phone killer app is…

Posted in entrepreneurship by Steve Sammartino on November 25, 2014

Screen Shot 2014-11-21 at 12.16.40 pm

…One which was already installed on my phone when I got it. It isn’t weather. It isn’t the web browser. It isn’t stocks, music, phone, mail or messages. But after paying attention for more than a week to which function I used most often on my phone, it surprised me to find out I use this the most.

The clock.

Yep, I take the phone out of my pocket to check what the time is. I use this more often than any other function on my phone. So for me, it is the killer app. And here is what is killer about it. When I do this, I unfortunately feel compelled to check out some other stuff while I’m looking at it:

“Has anyone tweeted me?”

“Are there any missed calls while it was silent?”

“What’s happening on my instagram feed?”

“What’s the surf like this weekend?”

Checking the time is a habit I formed even before the personal computer revolution…it takes me way back to grade school. It’s an old habit with a new solution. But what it does, it opens up related revenue streams and usage occasions. It’s another perfect reminder that we are far more likely to succeed when we leverage existing behaviour.

New book – The Great Fragmentation – out now!

Sack Your Boss – Wednesday night

Posted in entrepreneurship by Steve Sammartino on November 10, 2014

Screen Shot 2014-11-10 at 11.29.19 am

The thing that I’ve learned in the past 10 years more than anything else, is how transferrable many of our skills are. I started out my career working in the FMCG industry – Fast Moving Consumer Goods – think supermarket style brands. And while I chose to stay in the industry for more than 10 years, when I decided to leave, and even applied for jobs in other industries I kept getting the same barriers put up in front of me. The HR people and recruiters would say:

“They are after someone which the industry X experience”.

Even the surfing Industry rejected me twice given I hadn’t worked in it already, even though I lived the life and had the all marketing experience in the world – their loss.

I got defined by where I had been, rather than what I was capable of, or heaven help me, actually passionate about. But there is also one little truth to this that they never mention when we’re told we don’t have the right background. And that is this viewpoint and decision is entirely about them. It’s about their needs to simply fill a hole. It’s about their needs to justify a recruitment decision simply. It’s about them not wanting train you or, heaven help us, actually teach you something. In short this so called industry experience requirement is about making their life easier. It has nothing to do with us.

But here’s the upshot – there are some simple techniques to ‘Sack Your Boss’. I know, I’ve done it a number of times. And once you hear some stories about how you can transition to becoming an entrepreneur or a different career path, you’ll feel inspired. So we are running an intimate event on how to do exactly that. There are only a few seats, it’s small by design so we can deep dive. I’ll be sharing my story as will Ben Rowe on how we escaped the tyranny of consumer goods. But the stories will resonate no matter where you work.

Come along and have a drink and a chat. It’s this wednesday night in Melbourne CBD at the Hub, it’s free, and should be a fun little night.

You can register here. See you there.

Going back to the well

Posted in entrepreneurship by Steve Sammartino on October 29, 2014

Screen Shot 2014-10-29 at 1.14.36 pm

This year I’ve been working steadily on my new book and sharing ideas with people who want to know about the technology revolution. And while it is true we are always learning while on the job, I feel like people in the information business need an off-season as much as professional sportspeople and musicians do. Problem is we don’t tend to plan for it on an annual basis as much as other ‘seasonal industries’ do. Which could lead us into a dangerous pattern of already knowing what we know, or at worst obsolescence through ignorance. The ironic thing is that this exact behaviour pattern is what is causing large corporations to be disrupted. They are so busy doing what they do, making what they make and utilising the assets they already own that they rarely go back to the well.

If you’re an entrepreneur or freelancer (like I am) then we need to ensure we don’t get so deep into our work wormhole that we ignore the world around us. Screens and offices are very dangerous places to watch the world from. It’s probably better to make, break and explore a few things outside of our work to ensure we keep our edge.

New book – The Great Fragmentation – out now!

Five for Friday v4

Posted in entrepreneurship by Steve Sammartino on October 24, 2014

Here’s 5 pieces of information that got me thinking this week. Reading, viewing and listening pleasure for the impending weekend. Enjoy!

1. Are you suffering from Stuffocation? Author James Wallman takes about it here at Google.

2. Another reminder that the future is phygital – Both physical and digital have a place. One is not superior to the other. In fact, they are better together.

3. Crowdfunding the more important things in humanity – scientific research. Seems more important to me than a tricked up cooler. There’s hope for the internet yet.

4. This is BIG – Estonia has just become first country to allow for e-citizens. Just like corporations basing themselves in low-cost markets, humans can now do it too. Welcome to the Sans Nation State economy.

5. Isaac Asimov essay reveals the true secret of creativity – it’s about the cross connection. And guess what, creative industries and people don’t have a monopoly on it.

Yours in learning, Sammatron3000.

The people we want to meet

Posted in entrepreneurship by Steve Sammartino on October 18, 2014

The people we want to meet, would probably be happy to meet us too, before everyone wanted to meet them. The problem with the people we want to meet, is really in the timing of when we want to meet them. Because we usually only want to meet them after they have done something notable. It’s not uncommon to read about a lunch with Warren Buffett being auctioned for more than a million dollars. Or for people having a list of people they want to meet who inspire them. But what’s interesting is that no one wanted to meet those people before their fame and success was evident. Yet they are the same person. Add to this that sometimes a persons success is not due to specific, unusual or dramatic insight, but probably more effort and circumstance.

Right now, there is a lot of pre-famous people out there whose advice no one seeks, yet. Right now, we all have friends and colleagues who give great council and thoughts, despite the fact they’ve never fronted the cover of a magazine or featured in a human listacle. Often the people we should want to meet, are the people we already know.

Five for Friday v3

Posted in entrepreneurship by Steve Sammartino on October 3, 2014

Here’s another 5 things that are worth investing some weekend time postulating life, culture and commerce over.

1. Take the marshmallow test for grown ups. An intriguing look at an old study that was done on kids attitudes in the 1960’s.

2. Hey, just print your next car. More proof 3D printing laughs at the internet as childs play in terms of future global impact. This is the 2nd 3D printed car I’ve seen after the Urbee… Sh*t is gettin’ real.

3. Some timeless advice from 1956. Let Earl Nightingale open your mind to the secrets to happiness and success. The best advice in life does not have an expiration date. This is seminal.

4. Wanna get learned? Get your ears around the Econ talk podcast. My fav’ podcast that I’m not in…. actually I never listen to anything I ever record because that would just be weird and sycophantic.

5. The future of technology – don’t ask me, this pinterest page of a search for ‘technology’ has way more ideas. Read at your leisure…

Have a super weekend people.

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