How to Get To $100k per year
There's a really good rolling thread on Reddit. The question posed there: "Freelancers earning $100K+ per year - what pushed you into the six figures?" (link). So what gets people to six figures?
Here's the take from the author of 100k Consultant . Here are some things that have helped:
- Raising my rate. Pretty obvious one there.
- Changing my billing structure. I still have one client on hourly, but I have billed with monthly retainers and day rates. I am trying to move my new clients over to weekly billing.
- Hiring subcontractors. Has allowed me to take on some larger clients, plus I mark up their rate. My usual split is giving the contractor 60% of what is billed.
- Monthly retainers. Recurring revenue is always nice, and provides some stability.
I have some other resources and approaches that I'm going to be doing in the future that I think will help as well, such as productized consulting services, and I am also working on a book I plan to publish in a couple of months.
To answer your questions about time:
- Residual Income: depends on project workload. I used to try to spend 30 - 45 minutes every day writing, but lately that has fallen by the wayside. I do plan on taking 2 weeks for myself once my current project is complete in order to focus on some projects of my own. I did however take 2 days out of my schedule to put together The Freelance Pricing Handbook.
- Prospecting: Depends on what you mean by this, but I am just going to include anything I call 'marketing'. It's usually 15 - 30 minutes of email a day, 1 - 2 hours a week of writing articles and emails for my mailing lists. I also attend any event I think could be a good opportunity to meet people whenever I get a chance.
- Admin: 1 - 2 hours a day. This includes emails, invoicing, but most importantly learning. I make sure to take time every day to read or work on something for the business itself. If you take one thing away from this post, let it be that. That's been the most effective change I've made.
- Projects: 20 - 25 hours a week.
I think there is definitely a benefit to focusing on a single client as much as you can. Task switching takes additional mental bandwidth, and it also allows for spending longer amounts of time on tasks. Usually I have one 'main' client, for which I am doing a majority of work. But during these times I will also clients on support contracts that may require attention, or possibly smaller engagements that come up.
Good points, but I want to counter some of his points with what I have hit.
Here's the rebuttal:
- Raising my rate. My rate is $80 per hour. I did try to nudge it to $90 per hour and suddenly my calls stopped getting answered. I think I know the weak point here: Victoria doesn't have large organizations. The city doesn't have spenders outside of government. When I pitch a double-digit hourly rate, they start to get squeamish. When it closes in on three digits, they run for the hills.
- Changing my billing structure. Amen! The best practice I can think of is to swap to a bi-weekly rate. Every two weeks, report what has been done and the billables generated.
- Hiring subcontractors. This has been so dodgy. The loading phase costs a lot of money. Bringing in a sub-contractor has to be on my dime and on theirs. When they don't work out, you have to make a snap decision to err on the side of caution and get rid of them at the first sign of trouble. I agree with the idea of getting sub contractors and paying then 60% of the billable they are working under, but I problems with getting dependable talent.
- Monthly retainers. Recurring revenue is really nice, but my clients, when on retainer, have challenged boundaries. There ends up being a lot of time lost to commiseration and catch-up. The ability to get hands on, actionable tasks to carry out was not as easy as you would think. Because they could "do that later" it meant that the client acted as if they were my only full time client, and both side got poor value out of the formula..
- Residual Income: I would like to put more time to generating something separate from consulting work.
- Prospecting: Marketing and prospecting in Victoria is pretty thankless. Because the dollars are low, the ratio of marketing to hands on work is very high. I know one local developer who spends most business days prospecting and most nights doing the development. While it seems like he's cracked $100k, it's more like he has two $50k jobs.
- Admin: I cannot rebutte his points. They're all excellent..
- Projects: 20 - 25 hours a week. This too is my goal and I usually work inside of that range. If anyone says they can bill 100%, they're using different math that others who do consulting.
Narrow Selection Criteria
One of the thread contributors says he finds higher paying clients and only takes on work that fits very narrow selection criteria. Most sales leads either get turned down or referred elsewhere. Selection criteria are like Spidey sense. It's not uncommon to hear, "I'm firing my client" come from a web designer. Can you imagine
The contributor said they sell recurring services and get a lot of business from existing clients. This does smooth out the income bumps a lot, makes it easier to say no to project, and makes life easier. But it's very possible to find work that gets you to that level without recurring income or existing clients, so not having these things yet is not a reason to not have six figure income.
He is writing a free guide on how to do the finding higher paying clients right now; and says that paradoxically it can be easier to sell larger projects (to the right people) than it is to sell smaller ones, and it's definitely more profitable to get one $50K job than 10 $5K jobs because you only have to make the sale once. I have found this to be case. $200 of work is a merciless death match. $15,000 can easy to land, easy to execute. All development projects need planning, communication, documentation, training, testing (oh, and coding). If there's no money to accomplish those tasks, then your project is doomed and all parties will be frustrated.
What gets you above $100k?
For one contributor, it was listening to business advice from people smarter than them and trying to generally follow it. How much you make is more a reflection of your business sense than your technical ability. For their software development consultancy and it's like selling water in the desert. People come with work and they've been raising our rates to reflect their schedule. Their advice:
- Don't use Elance or sites like that. Find clients by tapping your personal network and going out to meet people.
- Your rate doesn't matter if you have no clients. Find some clients to get you some money. Ideally, find one or two good clients who will pay you a reasonable rate and please them. Go out of your way to please them. Work extra for no charge. Make them love you. Ideally they'll be like 50% of your billable hours. I don't agree with "work extra for no charge." As soon as your discount to zero, tasks can be multiplied by zero and you can work 100 hours per week for no money. Doctors charge for treatments whether they work on not.
- Have those clients provide you with referrals. Tell them that you're trying to grow your business and that you're raising your rates, but you'll grandfather them into your old rates if you can use them as a consistent business referral for your new prospective clients.
- Use the testimonials and referrals as ammo to find better paying clients. This is pretty key. People don't respond to you telling them how awesome you are. They respond to other people telling them how awesome you are.
- The less free time you have, the higher your rates should be. You have your baseline of clients, so finding more clients is not an emergency. The rule of thumb I've always heard is that you should be charging a rate that 75% of your prospective clients will walk away from because it is too high.
Then $100k Consultant
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