Practical Pricing

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Emily Lewis: Before we get into today’s episode, I wanted to remind our listeners we have a donate link on our site. So if you love CTRL+CLICK and have a little spending money, consider donating to help us keep the show going. A dollar, five dollars, whatever you can spare will help us continue to deliver great content, high-quality audio and transcripts for each and every episode.

Now to today’s episode … we’ve talked about pricing on CTRL+CLICK before, and it was a great episode that really focused on how important pricing is to sustain and grow a business. Today we’re going to take the pricing discussion even further, focusing on practical, actionable things you can do right now to help improve how you price your services, whether you’re a freelancer or a web agency owner or even a small business owner.

Our guest is Brad Weaver, who is the Managing Partner and Chief Experience Officer at Nine Labs in Atlanta, Georgia. Brad is a UX generalist with expertise in product development, interactive, branding and market segmentation. Welcome to the show, Brad!

Brad Weaver: Hey, how are you guys?

Emily Lewis: Great!

Lea Alcantara: Awesome!

Brad Weaver: Thanks for having me!

Lea Alcantara: Of course. Can you tell our listeners a bit more about yourself?

Brad Weaver: Sure. So yeah, day to day, as Emily said, I am Chief Experience Officer at Nine Labs, which is a firm here in Atlanta. We work with clients in the consumer and business space doing mostly what you would call user experience work, and that ends up being UI design and development and applications … all of those things that end up being stuff that you use on your phone and on your computer. So we’re definitely not a straight-up dev shop or straight-up design shop. We kind of have our hands on a lot of stuff, and that’s how I spend most of my day as I’ve got this awesome team of designers that I get to work with every day. And other than that, yeah, I live in Atlanta where it’s freezing right now, which is rare for us.

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: And no snow though, we’re still haven’t seen any. And yeah, I’m just really passionate about the stuff that we’re going to talk about today, which is what I spend a lot of my time as mentoring other business owners and people starting their own practice, in addition to speaking at conferences and randomly tweeting about movies and whiskey and UX design.

Emily Lewis: [Laughs]

Lea Alcantara: [Laughs]

Brad Weaver: For the most part, yeah.

Emily Lewis: That’s like the perfect segue way to our first question, which was before we get into actual tips, how did you start giving pricing and business advice? Because you come from a design background, so how did that happen?

Brad Weaver: Yes, so I was in corporate for almost a decade. I worked for Verizon and American Eagle before that and that’s where I learned how to do what we do. There weren’t really schools for user experience design, and then I had learned what you would call web design, I guess. But I got pretty fed up. It’s nice to get promoted, but you get promoted to the point that you don’t actually do any work anymore, which was happened to me.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: And so I started a freelance practice on the side over the last couple of years in my corporate job in the mid-2000s and decided in 2007 to just take the leap and open my own shop and leave my cushy corporate job. And so for seven years, I had my own practice from ‘07 to ‘14 and that ranged from just being me as a solo freelancer to I had a staff of up to five at some points and then a few freelancers working for me, and eventually I merged with my current business partner. In that time, I mean, I had tremendous success and tremendous failure. In the introduction of my book, I share a pretty personal story about — people kind of told me that they were pretty surprised at the level of detail I share — but I almost lost my house.

Lea Alcantara: [Agrees]

Brad Weaver: I literally ended up in the hospital due to overwork and exhaustion, and it was all the result of bad business practices. And it wasn’t neglect or laziness or anything like that, it was just bad time management and it was bad pricing strategy. I fixed it. I grew it. I built this awesome business that eventually my business partner, who’s pretty well known in the industry, liked what I was doing so much that he wanted to be a part of it. And that’s why I’m a Chief Experience Officer now and I don’t call myself owner or guru.

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: But I’m still a 50% partner in the business. I help make a lot of financial decisions, but only one of us can be the CEO and I prefer that he do that because I still like doing work. I’m still a user experience designer.

Emily Lewis: [Agrees]

Lea Alcantara: Right.

Brad Weaver: And that’s a call we made and he’s great at it and I’m great at it, and it works because he buys into this. He believes in the same stuff, so we work great together, and it frees me up to do this kind of stuff and speak at conferences and mentor young business owners and write a book and write stuff that I wouldn’t be able to do if I was doing everything on my own.

Emily Lewis: [Agrees]

Brad Weaver: So partnerships, which is something I firmly believe in if you find the right one, can be the next step in evolution, so that’s why I give business advice because I have the time and the experience and the scars from it.

Lea Alcantara: Right.

Emily Lewis: [Laughs]

Lea Alcantara: So I feel like you just described the after, right?

Brad Weaver: Yeah.

Lea Alcantara: You kind of glossed over the tough times.

Brad Weaver: Yeah.

Lea Alcantara: I’m a little curious over those times, like how have your views regarding pricing and business evolved over the years?

Brad Weaver: They have big time. [Laughs]

Lea Alcantara: Yes.

Brad Weaver: As they should. I mean, I say this with humility and sincerity, but I’m a nice guy. I’m like a really nice guy. As you can tell by listening to me, I have a Southern accent. I’m from the South.

Lea Alcantara: [Laughs]

Brad Weaver: I’m not sheepish. I’m a big guy. I’m assertive, and I’m all that stuff, but I’m a people pleaser, and I don’t like saying no.

Lea Alcantara: [Laughs]

Brad Weaver: And when it comes to pricing and standing your ground, saying no to work and certain prices and hiring people that you want to work for, and all that stuff is hard, but it’s critical. You have to learn to say no, and I think that in a passion-filled business, it’s really easy to want to say yes. I mean, I have designers that I admire, that their 2016 resolution was saying yes to everything, like the Jim Carrey movie or something.

Emily Lewis: [Laughs]

Lea Alcantara: Right.

Brad Weaver: And I’m like, “Yes, I get that.” I’m not calling what they’re doing foolish, but when it comes to pricing, you can’t say yes to every project. You can’t say yes to every negotiation obviously. But my views really changed when things went really bad for me in 2009 and 2010. I’ve stopped reading other people’s books in the industry. I started looking at Economics and real business strategies and not how everybody else is running a creative shop.

Lea Alcantara: Right.

Brad Weaver: Because a lot of people were running their shops in the ground.

Emily Lewis: [Agrees]

Brad Weaver: And so I stopped reading all those creative business books and blogs, and honestly, most of them then were pretty bad — some new ones have come out that are good. I studied cost-plus pricing and other models that made more sense. And the one thing that stood out to me is how wrong service-based businesses are about profit.

Lea Alcantara: [Agrees]

Brad Weaver: That was the linchpin. That was where the light bulb went on for me, and when I changed my approach to profit, it just changed everything, and that’s where I’m at now. It’s a profit-driven approach, and that sounds bad to some people, but when you dig into what I mean by that, it’s the right call if you want to keep doing this.

Emily Lewis: And just to give our listeners a little back story, so I guess it was about four months ago, Brad, we had — I don’t know — 90-minute to 2-hour long phone call with you to talk about exactly what we’re talking about today on the podcast. And that was one of the first things that you said that really connected with me was wanting to make profit to me does sounds a little bad or did before you and I talked, but then you explained like, “If you have no profit, you cannot grow. You can’t do the things you want to do not only in your business, but in your personal life.” And that doesn’t mean, for me, making profit doesn’t have to mean I’ve got some mansion and fancy cars, but it could just mean that I can take time off to enjoy my quality of life. Profit isn’t a bad word.

Brad Weaver: No, it’s not, and you know I understand. I mean, especially in our 99% where most of the people that what we do are a more liberal generation and that’s a word that gets a bad rap. And we have to uncouple it from how it’s been hijacked by big corporations and that stuff. Profit does not mean not taking care of people.

Emily Lewis: Or being, you know. Another thing that I think connected with me as well was I feel like pricing for me when I was a solo freelance and also even up until our conversation with you, it was one of those situations that I kind of felt uncomfortable. There were some sort of underlying emotional anxiety presenting a number to a client. And I think what was useful about our conversation with you — and I hope is what our listeners will take away today — is that if you actually do the math and follow the formulas to figure out what it takes for your businesses to like just exist to get by and then figuring out what profit is on top of that, then it’s no longer emotional. You simply used that formula. The number you present to your client is simply what it takes you to operate your business.

Timestamp: 00:10:04

Brad Weaver: Yeah.

Emily Lewis: That’s all it is. It’s because it’s just much more focused, strategic way of pricing than what I had done previously.

Brad Weaver: Yeah.

Lea Alcantara: Yeah, I feel like just the word “profit” is such a loaded word.

Emily Lewis: [Agrees]

Brad Weaver: [Agrees]

Lea Alcantara: Just the term “profit,” because for me like when I think about it, profit is really about sustainability because if you don’t have profit, then you don’t have a business.

Emily Lewis: [Agrees]

Lea Alcantara: The amount of profit, that can vary, but you need to have profit or else you’re actually paying your clients instead of the other way around, you know? [Laughs]

Brad Weaver: Yeah, yeah.

Lea Alcantara: I mean, how do you end up paying your bills at that point, right?

Emily Lewis: [Agrees]

Lea Alcantara: Because I feel like, you know, especially when you see like all those crazy CNN or like financial shows where it’s like profit with the giant fonts and the yelling and the markets. And it just gets overwhelming, especially when you are a creative person or a technical person who has no business training or background and you went into this due to passion, as you mentioned in the beginning. And so there’s kind of a stigma over like why should you earn money if you’re already passionate about this and you like it when the thinking should be you should earn money because you are passionate about it.

Emily Lewis: [Laughs]

Brad Weaver: Yeah, absolutely. You guys got it.

Lea Alcantara: [Laughs]

Emily Lewis: So I think Lea and I were sort of talking about there are some perception issues. There may be some emotional issues. Do you think there’s anything else that contributes to people pricing their services poorly?

Brad Weaver: Yeah, the most common is fear of losing the work.

Lea Alcantara: Right, right.

Emily Lewis: Oh yeah.

Brad Weaver: I honestly don’t know how good you have to be. I don’t think you can be good enough to have a pipeline that’s full as it should be. Unless you get to that point, and I think this is more common with like illustrators and people like that that have a lot of inbound requests. But especially in the web space, I mean some of the best website designs in the world, even other web designers don’t know who did them, you know?

Lea Alcantara: Right.

Brad Weaver: And so work is just not going to show up at your door. Even like super talented people like Mike Monteiro have said he’d be lying if he told you that he wasn’t worried about where the next client is going to come from. So fear of losing the work I think is the most common.

Emily Lewis: [Agrees]

Brad Weaver: And I think people just go with what feels right, and I mean, it’s an emotional job. They ask what others are charging and just charge that as well, and when they have to come off of that rate or price, they just end up losing money. Like Lea said, you just work for free. When you use flat prices or project pricing, which is pretty common model, especially in web design and development, we suck at estimating. We’re just not good at it. It’s not easy.

Lea Alcantara: [Agrees]

Emily Lewis: [Agrees]

Brad Weaver: And when you combine all that with the nebulous and unknown nature of what we do in just this perpetual just Murphy’s Law that we live in or just crap goes wrong with what we do all the time, it’s just a pretty bad business to be in if you’re going to rely on guesswork.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: So we’re emotional, it’s what makes us creative. It’s really hard to remove that emotion. I don’t think it’s feasible to do that, but even if you try to get mathematic about it and there are these surveys out there, a lot of these recruiting companies put out and stuff. They’ll say that this is what you should make and this is what you should charge, but the sum of bad advice is still bad advice.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: So if you’re getting bad advice from a bunch of people who don’t know what they’re supposed to be charging, that doesn’t mean that it’s good advice just because they like compiled it.

Emily Lewis: [Agrees]

Brad Weaver: I think that those tend to be the fixes that people lean on and that they’re just not going to fix it for you, ever.

Emily Lewis: And I feel like we often, or at least I felt like I often heard so much through the years about pricing, but it wasn’t specific. It was just like “you should raise your rates.” Well, to what? Like what do I determine what I raise my rates to? It seems so random.

Brad Weaver: [Agrees]

Emily Lewis: Or “you should charge what you’re worth.” I’m like, “Well, I don’t think I even know what I’m worth.”

Brad Weaver: Yeah, that’s the worst.

Emily Lewis: But that’s what you hear, and so you’re like, “All right, I’m doing something wrong, but I don’t know what the right thing is.” [Laughs]

Brad Weaver: Yeah.

Emily Lewis: And that leads me to my next question. The whole reason we started talking to you a few months ago is Lea saw your presentation at ConvergeSE [Converge South East], and you were talking about pricing and one of the things you brought up was the concept of a base rate, also known as the shop rate, and then a billing rate. Can you define these terms for us?

Brad Weaver: Yeah, so the thing is, is that, like I’m saying before, we tend to go with what the market says or what we’ve been charging in the past. We’re flying blind when we do that because my situation is not your situation.

Lea Alcantara: Right.

Brad Weaver: Even if we live in the same city and do the same thing with the same experience, it’s just different. So we kind of go by what we think make sense and you’ll hear me use this phrase often, and I’ll probably use it more than once in this podcast, “your gut is not a calculator and you can’t figure this stuff in your head.”

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: So you need to know what you need to make to not only to survive, but to thrive. And the shop rate — that is the linchpin of what I lead people to do — is the basis for all pricing calculations. And it’s what helps you determine if you’re profitable and if the client and their project fits your business needs; whether you can take the work or not. It helps you determine if they are a value to you. And it’s basically puts you in a position to flip the conversation around and put you in the driver seat, you’re shopping your clients when you do it this way rather than being shopped. You only have so many hours in the day, and even if you’ve got a team, you still collectively have a limited amount of time that you can do this stuff. And you’re selling your time for money and time is the only resource that we can’t ever have more of.

Lea Alcantara: Right.

Brad Weaver: And if you want to thrive in this thing and not struggle and not just basically make a paycheck, you’ve got to find out what it costs to run your business with a profit and determine how much of your time you can give to each client to get there, and that gives you a shop rate that is gospel in my house.

Emily Lewis: And that shop rate, this is everything, like you have to be really honest with yourself about where you are spending, and not like, “Well, this is what we should spend.”

Brad Weaver: [Agrees]

Emily Lewis: But it’s what you are currently spending right now, everything from your salary, your staff’s salary, contractors, lease, licenses, everything.

Brad Weaver: Yeah, and it’s math, which is not fun. [Laughs]

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: Even those of us that do development at times, development is algebra, but it’s not the kind that makes you want to grit your teeth. So there’s definitely a lot of math behind it. I mean, we’re on a podcast, not a video. I’ll be glad to break it down if you want. [Laughs] So people can follow, but I don’t know if we want to do that, but yeah.

Emily Lewis: So well, actually, Brad, instead of us getting into the details of the formula, I think it’s a good time now to mention to our listeners that you have a book coming out that’s going to have all of this information in it; resources for readers to figure out their own rates and estimating and things like that.

Brad Weaver: Yeah, yeah. The book is called Creative Truth (http://thecreativetruth.com) and it’s out at the end of February. And we do go into breaking down this base rate, which is expenses plus profit divided by hours so it’s this really simple formula on the surface that is a process that you have to go through to really get to the heart of what it takes to make your business work, and obviously that’s not the sum of the book. It’s really detailed on how to start and build a profitable design business.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: And when I say start, the book is not geared towards people who are just now deciding to start — although it’s certainly applicable for them — but the advice in there is advice that is self-advice, I guess. Some of that I didn’t take up until my fourth year in business and fifth year in business on the start end of it on the first half of the book, and then certainly at the profit stuff I’m still learning every day. So if you want to know how to set this shop rate, that’s a huge part of it, and then what to do with it is a huge part of it. But most importantly, I want people to be protected when they’re building a business and really know where they’re going. And like Lea said earlier, you can have a passion and you can follow that passion and you can build an awesome business with it, but it’s not going to be in business very long if you’re not making what you’re supposed to make.

Emily Lewis: And speaking of that, Lea, so right after we got off the phone with Brad, the first thing you did was figure out what our shop rate was.

Lea Alcantara: Right.

Emily Lewis: So what was that experience like? Was it overwhelming?

Lea Alcantara: [Laughs]

Emily Lewis: I mean, be honest. [Laughs]

Lea Alcantara: Well, okay.

Emily Lewis: Because I had you do it because I thought it would be overwhelming. [Laughs]

Lea Alcantara: Well, in a word, yes.

Emily Lewis: [Laughs]

Lea Alcantara: It was, and I feel like though, in some ways, and I’m sure our longtime listeners know this, Emily and I are sticklers and who love to-do lists.

Emily Lewis: [Laughs]

Lea Alcantara: And one of the other stickler things that we do is we log almost everything essentially that we do that’s billable and unbillable. So anything we do just for Bright Umbrella as well as our client work. So we started off in a good place in that we had this data to work off of. So when we had spoken to Brad earlier, he explained how to create the shop rate, and part of it is like it’s really seeing where you’re spending your time and having an honest discussion about that, as well as essentially doing an expense report [laughs] of your entire business and kind of aligning the two of them.

And this involves a lot of spreadsheets, and Brad gave us kind of like a starting point, but we realized that some of the terms that he used didn’t really apply to our particular language for Bright Umbrella so it took me a while to be able to translate some of the things that I was calculating. But I think what was the biggest eye opener was even when we thought we were billing our rate, we weren’t billing our rate, right? [Laughs]

Emily Lewis: Yes.

Lea Alcantara: And that was the craziest finding, and this is because we did log all our non-billable items as well, which probably should have been mostly billable too.

Emily Lewis: [Laughs]

Lea Alcantara: So that was mistake number one, not billing, like misunderstanding what should be billable and what should not be billable.

Brad Weaver: [Agrees]

Timestamp: 00:19:59

Lea Alcantara: So when I was looking at our unbillable list items, I was like, “Maybe we should have charged for this.”

Emily Lewis: [Laughs]

Brad Weaver: [Laughs]

Lea Alcantara: So that was number one, and then number two was when I added all of the time spent on this one project, and even though the invoice said a billing rate that we thought was fair and even after I calculated like, “Oh yeah, this is a good billing rate,” when it compared to the actual full amount of hours and time and effort and value that we brought to this particular client, we were not even hitting our shop rate.

Brad Weaver: [Agrees]

Lea Alcantara: Because we were too much … like really when we go back to the emotional thing, we’re like, “Oh, you know, this might take five minutes.” And we’re like, “Oh okay, well, I like this client. It’s not going to be a big deal. I’m just going to log the time as unbillable.” And then the five minutes ends up, five minutes here, five minutes there, and then suddenly I’m giving them ten hours for free.

Brad Weaver: Yeah.

Emily Lewis: Yeah, and I mean, I’m listening to you talking, I’m just angry at us. [Laughs]

Brad Weaver: [Laughs]

Lea Alcantara: [Laughs]

Emily Lewis: Well, because you said at the beginning, you and I are sticklers. We log everything, but we never looked at it.

Lea Alcantara: Yes!

Emily Lewis: We never look at the log.

Brad Weaver: Yeah.

Lea Alcantara: But the crazy thing is that we logged it for the current time to just see like what’s happening right this second, but we never paused to reflect and look back once the project was complete, whether any of that made sense.

Brad Weaver: [Agrees]

Lea Alcantara: And like all clients, all of our clients, just like we would do, they negotiated the rates, right?

Emily Lewis: [Agrees]

Lea Alcantara: And we crumbled way too quickly.

Emily Lewis: We never negotiated. We just said okay.

Lea Alcantara: Yeah, we never negotiated really back.

Emily Lewis: [Agrees]

Lea Alcantara: We just kind of said, “Oh, I guess we’re okay with this.” But a lot of those decisions were made not with actual data.

Emily Lewis: [Agrees]

Lea Alcantara: Like as in we just emotionally were like, “Okay, I guess this is okay.” But now we have the data, we look back and we’re like, “Oh, this project actually made us lose money.”

Brad Weaver: [Agrees]

Emily Lewis: Yeah. Once you’ve figured out our shop rate, that base rate, I realized that the biggest project we got last year that I was so stoked about, we actually lost money on.

Lea Alcantara: Yeah.

Emily Lewis: Because once we knew what we needed to make, we realized we hadn’t been making it, which is just such an unfortunate way to learn a lesson. But I think it’s pretty common when you go into business for yourself without any business background.

Lea Alcantara: Right.

Brad Weaver: Yeah.

Lea Alcantara: Well, it’s just like about that reflection part, because I feel like when you are in an agency or even when you’re a freelancer, you’re just always looking, “Okay, what’s the next thing? How do I just keep working?”

Emily Lewis: [Agrees]

Lea Alcantara: As opposed to, “How do I work smarter so I’m not so exhausted?” [Laughs]

Emily Lewis: So moving on from the base rate, Brad, what’s different between your shop rate, your base rate, and what you bill, like what’s the difference between those two numbers?

Brad Weaver: The shop rate — to piggyback on what Lea was saying about negotiation — is the worst situation you can be in in any negotiation. I don’t care if you’re trying to talk someone off of a ledge or negotiate a website project, but you’ve got to know your boundaries.

Lea Alcantara: [Agrees]

Brad Weaver: You’ve got to know the line that you cannot cross. For you as a business owner, the line you cannot cross is losing money.

Emily Lewis: Yeah.

Brad Weaver: The line you should not cross is not making a profit and the line that I prefer that you not cross is not making a significant profit in building in your value. In order to understand that, you have to have the shop rate, and so with those people who haven’t read the book or don’t get a chance to, the shop rate tells you what you have to have and that includes profit. And that’s the important part.

And when you have that factored in — so you’ve factored in all of your expenses, including those over the course of the year, you’ve factored in your tax liability and you’ve factored in your profit and you’ve divided that by the amount of time you can give, your inventory of hours, not how many hours there are in a week, but how many hours you can sell — then you know what an hour is worth. Regardless of the pricing model that you use, hourly or whatever it is, which I don’t recommend actually — we can talk about that in a second if you want — but the thing that you land on, the shop rate, is your point of the line you won’t cross. It’s the point of no return in the negotiation.

Lea Alcantara: Right.

Emily Lewis: Right.

Brad Weaver: You then use that shop rate to understand how your projects are going, and you run your time against that, you run your materials against it and so on. So to answer the question about the difference between that and a billing rate, a billing rate is going to be driven by what your market will bear, what’s been offered. A lot of times people tell you, “This is the billing rate we pay,” there are a lot of factors that go into it, but the most important thing is that your billing rate is more than your shop rate.

Lea Alcantara: [Agrees]

Brad Weaver: I mean, they could be the same, so let’s say your shop rate is $150 an hour, then your billing rate can be $150 an hour. You’re still making a profit and you’re still paying everything on time because you’ve built profit into your shop rate, which is why it’s critical that the profit is in there rather than trying to bolt it on later. So you’re still doing okay and you’re growing if you match your billing rate to your shop rate, but you’re selling yourself short. And hopefully, especially in development, you’re scaling your company, so that you’re hiring people that cost you $30 to $35 an hour which is like a $60,000 salary or something and you’re charging shop rate for their work and that’s where as a business owner, you start to grow and thrive and you’re able to pay this people more and provide awesome benefits and you create that micro Google atmosphere you want with foosball tables and free lunch.

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: That stuff doesn’t happen if you’re not profitable.

Lea Alcantara: Yes.

Brad Weaver: And it doesn’t happen if your billing rate’s all over the place.

Emily Lewis: [Agrees]

Brad Weaver: So the two things I look for in a billing rate is that it’s more than your shop rate and it’s what you can get.

Lea Alcantara: Yeah.

Brad Weaver: I know that’s not the answer everybody wants, but I also don’t use hourly billing in my business so that’s how I look at it.

Emily Lewis: Well, I think it’s important to mention that the billing rate is going to change, like on a project per project as you’re estimating and thinking of it.

Brad Weaver: [Agrees]

Emily Lewis: And that’s what’s been useful for me is understanding the shop rate doesn’t change … Except, I do want to interject, the one thing you did say to us is that you revisit your shop rate regularly. You take a good look at where the business stands expense wise to make sure that that shop rate, like you don’t make the assumption that, “Oh, it’s a $150 and that’s just what it is always.”

Brad Weaver: No. Right now I check it about every three months or if we make a major hire like a director level position. That’s a six-figure salary, so we have to revisit our rates. When we make a junior hire like a junior designer or developer, typically the number of hours they add to our inventory and the amount of salary that they add to our cost is pretty level because they typically can work 35 to 40 billable hours a week and minimum 30 and they tend to even out at that. Especially here in Atlanta, it’s a pretty reasonable market.

Director may only be able to give you 20 billable hours because a lot of their time is in meetings and strategy or acquisition, so they can move it. The last director hire that we made shifted our shop rate by almost $15 because we had to go get somebody that was at a significant cost that we wanted to get and eat it for a little while so that we could grow with them. So it’s a constant conversation. I mean, we’re constantly checking in. I and my business partner run through it every three months, but we have a managing director that’s staying on top of our expenses all the time.

Lea Alcantara: Right.

Brad Weaver: But part of that shop rate is the annual expenses, and in the book, I break that down more, but the key thing is cutting out the surprises.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: So it’s not like when we hire somebody, we’ve got to go spend $4,000 on a MacBook Pro as well. We can’t just go get other work to pay for that, and I’m not going to put that on a credit card and carry debt.

Emily Lewis: [Agrees]

Brad Weaver: That’s why we forecast. Along with the hire, we forecast some of that overhead so that adds into it as well. So you’ve got to adjust because I’m hiring, I wouldn’t, but I go to hiring a 3D developer, then I’ve got to put on a $10,000 PC, I need a forecast for that. And so that’s a big adjustment with my shop rate. That can move my shop rate at $4 or $5, which could end up being a good bit of hours on a large project.

Emily Lewis: Yeah. I think one of the reasons that another one of the specific tasks that Lea and I set up for ourselves after Lea figured out the shop rate is that we have regularly scheduled check-ins, but now one of those check-ins is to talk about expenses and money and where we stand. Where we did not have that.

Brad Weaver: Yeah.

Emily Lewis: We check in on the business, but not the financials.

Brad Weaver: [Agrees]

Emily Lewis: We just didn’t, and now that’s part of our regular approach.

Lea Alcantara: And because of that, we’re able to plan for certain things.

Emily Lewis: [Agrees]

Brad Weaver: [Agrees]

Lea Alcantara: I feel like Emily and I were really lucky that we spoke to you earlier in 2015 that we were able to apply a bunch of things that you advised us to do almost immediately, and that allowed us … I remember in December our chat over were like, “Okay, we have this much extra in the bank now.” [Laughs]

Emily Lewis: [Laughs]

Lea Alcantara: So first of all, that was, “Yay, we have stuff in the bank, like all taxes and expenses were paid.” So first of all, we were just thrilled for that.

Brad Weaver: Yeah.

Lea Alcantara: But the other thing was, now we were able to have discussions over like, “Well, what we can do with this money to help the business be even better and to plan for certain eventualities.” Like you said, “Like how do I forecast for this?” We know that we want to go to a different type of conference each year, but instead of just like, “Oh, can we afford it? Can we not?”

Brad Weaver: [Agrees]

Lea Alcantara: Now, we have been able to plan for it so it is a guarantee to happen as opposed to like, “Maybe if we get this client, then this.”

Brad Weaver: Yeah.

Lea Alcantara: Because we have been a lot more responsible about our pricing and our discussions about expenses, we’re actually able to now plan for these future things for our business as opposed to like if we have stuff left over.

Emily Lewis: Just to throw in another little anecdote like Lea is really stoked that we have some extra money. I’m just stoked we paid our taxes.

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: [Laughs]

Timestamp: 00:29:54

Emily Lewis: Because two years ago, I got hit with a $20,000 tax bill because I didn’t have a sense of how much money I was bringing in.

Brad Weaver: Yeah.

Emily Lewis: I was paying the minimum of my quarterly estimated taxes.

Brad Weaver: [Agrees]

Emily Lewis: It’s not like I didn’t pay what was due.

Brad Weaver: [Agrees]

Emily Lewis: But we made more and I didn’t think about it and I didn’t pay any attention to it and it was probably the scariest thing I can remember happening in the course of owning the business.

Brad Weaver: Yeah.

Emily Lewis: I just thank god I had savings because otherwise we wouldn’t be here as a business talking is basically what it comes down to.

Brad Weaver: Yeah, yeah.

Lea Alcantara: Yeah.

Emily Lewis: Which is scary when you think about it, I mean, I don’t know what I would do without this. I don’t want to work for anybody else.

Brad Weaver: Yeah.

Emily Lewis: So that’s even more serious, like that’s why you have to look at this stuff. And I still can’t believe we are only just now figuring this out. [Laughs]

Lea Alcantara: [Laughs]

Brad Weaver: [Laughs]

Lea Alcantara: Let’s take a step back here. As we spoke earlier, this is emotional. Even though it’s business, it’s our business.

Emily Lewis: [Agrees]

Brad Weaver: Yeah.

Lea Alcantara: We are the ones making these decisions, and again, this is work that we enjoy doing so there are all of those things that happen. Brad, I actually appreciate how open you were over your struggles and you said like it took you Year 4 before you started like, “I better have some process here than just flying off the seat of your pants.”

Brad Weaver: Yeah, yeah.

Lea Alcantara: And Bright Umbrella, we’re just heading into Year 2.

Brad Weaver: Yeah.

Lea Alcantara: So let’s think about that, Emily. [Laughs]

Emily Lewis: Oh, yeah, but I’ve been heading into Year 7 on my own.

Lea Alcantara: Oh, like on…

Emily Lewis: I mean, these…

Lea Alcantara: Yes, yeah, sure.

Emily Lewis: Yeah, but what I’m saying is I think this reveals a deficit in our industry of where we talk all the time about best practices for design, user experience, front-end development. But I don’t ever hear anything more than “you should price what you’re worth.”

Brad Weaver: Yeah.

Emily Lewis: I don’t hear the specifics. You don’t hear about a huge agency having to lay off everybody until after it’s happened, but then no one tells you what happened and how they recover from it.

Brad Weaver: Yeah.

Emily Lewis: So you do, you almost have to be like, “All right, I’m going to learn about economics and I’m going to learn about this up or I’m going to find someone like Brad who’s going to help me figure out what I need to know.” [Laughs]

Brad Weaver: [Laughs]

Lea Alcantara: [Laughs]

Emily Lewis: But I mean, I think that’s why these sort of specific conversations are very, very important, especially in the creative services industry. And I want to keep giving our listeners some really actionable information so I want to talk about something you touched on, Brad, where you said you don’t price your projects hourly.

Brad Weaver: [Agrees]

Emily Lewis: So what do you do? How do you approach pricing a project?

Brad Weaver: Yeah, that’s true. Hourly is virtually nonexistent at Nine Labs and in my past company, I very rarely used it as well. The shop rate is you know how much each hour is worth and how you deliver those hours as far as how they end up in a proposal is where you have flexibility. But how much they’re worth doesn’t necessarily mean that’s what you sell them for, which I think is the mistake that we often make.

Emily Lewis: Right.

Lea Alcantara: [Agrees]

Brad Weaver: It’s like if you own the car lot, it’s like selling all of your cars at invoice. You’re fine, but is that really what you want to do? So for us, I mean, to be fully transparent, I mean, you guys learned, and hopefully the readers will learn if they check out the book and stuff, is that I’m very transparent to a fault. My wife hates it at times.

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: So like my business’ shop rate is $197. That’s exactly what it is right now. Our billing rate is $250. We don’t use that billing rate often, and it’s scary enough that most people don’t want to pay us hourly. So we got there because that’s what our market will bear. If people are willing to pay $250, we’ll talk about hourly with them in that scenario with some really strict timelines on how we do things. But there are seven pricing models. In the workshops that I teach in conference talks that I do, and definitely in the book, I break all seven of those down.

Hourly is obviously the most common and flat and project-based pricing, which is kind of “This project costs this much and you’ll get these things,” it’s pretty common and there’s value-based and retainers and so on. And they’re all good. I wouldn’t recommend the model that’s not good. There are tons out there that don’t make sense for this industry, but all seven are viable, so I will never tell someone, “Don’t use that one.” I would tell most people, “Don’t use only one.”

Lea Alcantara: [Agrees]

Brad Weaver: I think it’s a mistake to only use one as well because different situations call for different stuff and we have at Nine Labs, I’d say we use four different ones pretty commonly. We use value-based pricing as our core approach. We use value-based retainers, which is a little different way to do things. We use packaged pricing and we use equity pricing at times. Those are the four that come up when we look at a client.

Lea Alcantara: Interesting.

Brad Weaver: Now, I don’t want to get into this in too much detail. I want to give away a lot more tips, but there’s not a big difference between value-based pricing and flat fee pricing in the client’s perception so I think that’s important to know.

Lea Alcantara: [Agrees]

Emily Lewis: [Agrees]

Brad Weaver: I say value-based pricing and then if you saw one of my proposals, you’d be like, “That’s a flat fee.” And there’s a huge difference underneath the hood.

Lea Alcantara: [Agrees]

Brad Weaver: But what the client sees is no different.

Emily Lewis: So let’s talk about that “under the hood” because you provided us a copy of a Google spreadsheet that was like an estimating spreadsheet that you had used yourself and had some formulas built in and some various things that you used to price projects. And basically Lea and I took it and customized it for how we approach projects and also how our minds sort of think of these things.

Brad Weaver: [Agrees]

Emily Lewis: So can you describe sort of the process of putting together this worksheet and what you had in mind and what the end goal of this worksheet is supposed to provide. And then maybe Lea and I can describe why we customize it and how we customized it and how it works for us.

Brad Weaver: Yeah. Well, you guys did an amazing job. Thank you for sharing yours, and I think I’ll probably end up having to pay you guys to use yours.

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: No, I mean, and Lea made a great point earlier about the shop rate calculations and the stuff that’s in the book where she had to customize a lot of stuff because it was difficult for her to marry the terms of what you guys talk about and what I talk about.

Lea Alcantara: Yeah.

Emily Lewis: [Agrees]

Brad Weaver: And so Creative Truth as both a workshop and a book and a methodology is written for graphic designers, web designers, photographers, illustrators, writers and web developers and software developers. So I don’t want to be mile wide and an inch deep. I still don’t want to alienate that audience because what you said earlier, Emily, is that people are talking about this, but most of the stuff out there is not great — and I’ll recommend some stuff to you guys that I do think is good — but the result of that is that this process is you’ve got to customize it.

Lea Alcantara: Yeah.

Brad Weaver: I can’t give you, “Here’s a bunch of spreadsheets and your business is going to be perfect,” and I’m not trying to sell somebody consulting. I run an agency. I’m not interested in being a guru, but like with you guys, I hate seeing businesses struggle. And if I can give away a little bit of my time to help some people — maybe I have to monetize it later, I don’t know, because life is that way, but that’s not interesting to me as much as like, “Here’s a tool that you guys go and customize,” and like you did a great job with that.

Lea Alcantara: [Agrees]

Emily Lewis: [Agrees]

Brad Weaver: And the purpose of that spreadsheet is to ask the questions you may just not think about in getting those numbers together. So there’s estimation, it’s when it comes to estimating a project and there’s estimations when it comes to estimating your shop rate as well. And I think that as long as you’re real with yourself, that’s the most important thing when doing this. So whatever tool you use, I find it — and we were guilty of it for so long, if like the client gave us a number and then when you try to fit as much as work as possible into that number, which is just backward.

Lea Alcantara: Yes.

Emily Lewis: Yes.

Brad Weaver: It’s like, “No, it’s going to take this much time. This is our shop rate. That’s the final.” If it’s 30% over the client’s budget, then guess what, one of two things are going to happen, cut features and deliverables or give us more money.

Lea Alcantara: Yes.

Emily Lewis: [Agrees]

Brad Weaver: Otherwise, you can’t do the work, and I think that’s the linchpin of understanding is that we look at it and we go, “I want the work.”

Lea Alcantara: Totally.

Brad Weaver: Well, you can want it all you want, but I mean, if you’re going to lose money doing it, don’t do it. Like it just doesn’t make sense.

Emily Lewis: [Agrees]

Lea Alcantara: Totally.

Brad Weaver: It doesn’t matter, I don’t care who it is, they’re going to do that. I think you guys did a phenomenal job of how you’re estimating things. And I think that like you said, you guys are looking at a lot of your operational costs differently than some people might, in a good way. And I think with development, that’s smart because you have a lot of purchases and stuff like that you have to make whereas with design, that’s not typically the case other than maybe stock photography and you’ve got to set budgets for those. At my company, we treat our non-billable employees like rent and furniture.

Emily Lewis: [Agrees]

Brad Weaver: So like my project managers, my admin, they don’t factor into our hour inventory. We don’t charge clients for their services. Project management is necessary for us to get the job done.

Emily Lewis: [Agrees]

Brad Weaver: But there are a lot of things that you just don’t think about in an estimate, but you’ve got to have a consistent system for doing that.

Emily Lewis: Totally.

Brad Weaver: But that’s also got flexibility to where it can be customized whatever project you have. And I don’t know, I mean, like I think that I can give people the base of what they need, the type of information that it needs to be, but you’ve got to figure out for your business what specific information you’ve got to trap.

Emily Lewis: That’s what I thought was so useful about the worksheet that you gave us is while we approach our projects differently and we line-item things differently perhaps is the right term, we weren’t even doing it though, you know?

Lea Alcantara: Yeah, yeah.

Emily Lewis: I’d say, “Lea, how long will it take you to make some comps?” She’s like, “Ten hours.” I’m like, “Cool.” And that was it. [Laughs]

Brad Weaver: [Laughs]

Lea Alcantara: Yeah, yeah, yeah, yeah. We didn’t think about like how many times we have to do back and forth with the client, how many times do we …

Emily Lewis: Like we were not factoring in core project management, and that’s really critical because in a small team where we are where that stuff may be perceived as non-billable to the client, it’s actually billable.

Brad Weaver: Yeah.

Emily Lewis: And while we don’t necessarily want to bill that to the client on an hourly basis, we have to factor in that it takes us ten hours to do this, all this administrative stuff, and that has to be built into that flat rate or value-based pricing, that number that we present to the client because, otherwise, we’re losing money. Like we proved we can lose money, like that’s what we…

Lea Alcantara: Yeah.

Timestamp: 00:40:08

Emily Lewis: And that’s why I thought the worksheet was so invaluable because it was like, “Oh, well, let me think about all the different things that happen during this phase,” and I turned them into line items.

Lea Alcantara: Yeah.

Emily Lewis: And so now we may not put in a number in that field because it may be irrelevant to a project, but we ask ourselves, “Is that going to be relevant?”

Lea Alcantara: Yeah.

Emily Lewis: If not, we move on. If it isn’t, we put in a number and then it’s accounted for instead of Lea saying, “Oh, well, you know, it takes me this long to make some comps.” Well, that’s great, but also it takes 20% on top of those ten hours to communicate with the client, to go back and forth internally, anything.

Lea Alcantara: Yes, yeah, yeah.

Emily Lewis: And we just weren’t accounting for it and I felt like your worksheet, Brad, it just gives us a light bulb and saying, “Oh, I could really break down all of our processes into things that will help me calculate what it really takes to make this project come to life.”

Lea Alcantara: But I have to say like I think the biggest takeaway for all of that too, and it does bear repeating is that there are two options. If a client has a fixed budget, you just either remove features or they give you more money. Literally it’s that, and it actually just happened, what, yesterday? We had a client who gave this laundry list of stuff. All right, so we used our new estimating spreadsheet and we thoroughly put everything in there. We really thought about it. We also thought about the particular relationship we have this client. Now, keep in mind that part of the reason we’re able to even do all of this is because we built a relationship with the client.

Brad Weaver: [Agrees]

Lea Alcantara: So pricing isn’t just because we’re adding a bunch of numbers. It’s because we’re confident with the relationship we have with this client. So we sent this client the estimate based on her laundry list of stuff and she didn’t out and out say that was way too much, but she’s like, “Actually, let’s cut this all down to this one request now.” You know? [Laughs]

Emily Lewis: [Laughs]

Lea Alcantara: And then we’re like, “That’s cool.” We re-estimated the one request that like she literally cut down all her wish list and then she accepted that estimate.

Brad Weaver: Yeah.

Lea Alcantara: Yeah.

Emily Lewis: So we still got the work.

Lea Alcantara: Yeah.

Brad Weaver: There you go.

Emily Lewis: That’s the key. We still have the relationship and we know we’re going to get our billable hour or billable whatever.

Lea Alcantara: Yeah.

Emily Lewis: We’re going to get our shop rate instead of not. [Laughs]

Lea Alcantara: Yeah.

Brad Weaver: [Agrees]

Emily Lewis: So I think the worksheet, once people get an opportunity to get your book and see the resource, I think the key is just customizing it for yourself.

Brad Weaver: [Agrees]

Lea Alcantara: Right.

Emily Lewis: We broke ours down according to the typical phases that we follow in a project. We built in for the fact that we always fail to factor in project management. We built in for expenses and how we manage expenses and invoice those, and then we split it into tabs where it might be special requests that aren’t part of a typical project that have to be looked at separately and those are typically the things that might be options that we present to a client, but they’re still broken down and factored in. So I feel like a grown-up business person for having this thing. [Laughs]

Brad Weaver: [Laughs]

Lea Alcantara: [Laughs]

Emily Lewis: I think that’s the best way to put it, and it’s hard to feel bad asking for a certain amount of money when you’re like, “This is what it’s going to take.”

Lea Alcantara: This is it in black and white, yeah.

Emily Lewis: There’s no, “Oh, we’re doing you a favor or I feel like I’m supposed to.” This is what it’s going to take.

Lea Alcantara: And also the important thing with knowing your shop rate as well as your billing rate is that it’s still your business. As long as you never go lower than your shop rate, there’s flexibility between the shop rate and billing rate. So let’s say you quote something to a client, which is your full billing rate, and then they get back to you with something a little bit under that. If it’s still above your shop rate and it’s still something that you find fair, then it’s possible it’s something that you don’t have to remove a feature in order to get it done because it’s still within your profitable safe space. As long as it just doesn’t go below the shop rate. The shop rate is like the line you just don’t cross. That’s the line where you have to start saying no and removing features.

Brad Weaver: Yeah, you’re absolutely right. I mean, I have this matrix and actually I have like a napkin sketch of it in the book where it’s my project decision matrix and it’s basically three columns. And it’s like the number we start from, from a profit standpoint, is 40%, and I want to point out that’s on top of the shop rate.

Lea Alcantara: Yeah.

Brad Weaver: So just 20% profit built into the shop rate, and you guys have this in your estimating worksheet as well. You are targeting 40%, which is a great number. If you look at a project and you say, “Okay, do I want to do this project,” is the question you ask yourself with the decision matrix. If the answer is, “Hell, yes,” then I will consider going all the way down to 10% or 20% profit, which is still technically 30% profit or 40% profit, so yes.

Lea Alcantara: Right.

Brad Weaver: If my answer is yes, then I’ll consider going down 20% to 30% profit, but probably 30%. If my answer is maybe, 40% profit, or I’ll walk away.

Lea Alcantara: [Agrees]

Emily Lewis: [Agrees]

Brad Weaver: And maybe it doesn’t mean that I’m not interested. Maybe it just means that like we’ve already done five like this, it’s not going to improve our portfolio, it’s whatever.

Emily Lewis: [Agrees]

Brad Weaver: And as you guys said, the most important thing is you removed the emotion from the things that shouldn’t be emotional.

Lea Alcantara: Yes.

Brad Weaver: So that you can get emotional about doing excellent work, pushing it to the next level, writing cleaner code, better documentation, better designs, having fun with it, taking longer at lunch to talk to the client or whatever because you know that flex is built in with your project with your project time.

Lea Alcantara: Right, yes.

Emily Lewis: Yes.

Brad Weaver: All the stuff that makes the job fun, it all goes away when you’re struggling and you’re in the rat race.

Lea Alcantara: Yes.

Emily Lewis: Yes.

Brad Weaver: And it’s just like it’s a temporary pain to figure out what this is. You’ll lose some clients. You will lose some clients when you raise your rates. That will happen. You will lose work when you raise your rates, people who came to you before, you’re too expensive for them now. You’ve got to suck that up and deal with it if you want to do fun work for interesting clients for the long term.

Lea Alcantara: [Agrees]

Emily Lewis: I think what you just said really resonates clearly with me right now because we just finished some work with a client we’ve had for quite a long time, but we’d always been in the situation of… and I think it’s worth mentioning, this is a client that we bill hourly and we intend to continue billing hourly because of how they’re always like, “Oh, and this, and this, and this,” and there’s almost no way to keep the scope very fixed. But we would give them estimates of how long we thought something would take and invariably, we were going over those estimates, and also not billing for the time we were taking consulting with them and really getting to understand what they’re looking for and what they need so that we can make the best decisions for them. And now that we’re using this worksheet, the estimates we’re giving them, they have all this built in so I never feel like we just have to give them something.

Lea Alcantara: Yeah.

Emily Lewis: That we can also take the time to ask them, “Well, why are you asking for this? Well, maybe this would make a better fit here.”

Lea Alcantara: Yeah.

Emily Lewis: Because that’s what Lea and I love to do. Like yeah, we love our production work, but we really love to bringing value to our clients and understanding why.

Lea Alcantara: Yeah.

Emily Lewis: We don’t just want to implement stuff.

Lea Alcantara: Yeah. We’re not just worker monkeys.

Brad Weaver: Yeah.

Emily Lewis: Yeah, exactly, and when we have these accurate estimates that we paid close attention to versus what we were doing before, we can bring that value even more. We’re not just building something for them. We’re helping them make the right decisions for their business. And that’s really satisfying instead of being like, “Oh, we’re through two hours from crossing the budget. We can’t do anything more than this.”

Brad Weaver: Yeah.

Emily Lewis: Which feels terrible.

Brad Weaver: Yeah.

Emily Lewis: It feels terrible.

Lea Alcantara: Yeah, like when you estimated it properly — and we’re actually giving them a well-intentioned idea of how much the cost will be — then when we provide value, and usually because Emily and I are experts, we provide it at a faster clip than normal, and we already know they’ve accepted a certain budget, then we can say yes to some of their simpler, extra questions because there is still room in the budget, you know?

Emily Lewis: [Agrees]

Brad Weaver: Yeah.

Lea Alcantara: As opposed to we used to be in a position sometimes where we know this would help this client, but we’re not even going to suggest it because we’re already over budget.

Brad Weaver: Yeah, exactly.

Lea Alcantara: And that feels awful as a professional because you’re just like, “I know this would take their site or their experience or this in the next level, but we just can’t afford to even suggest it.” You just feel like a worse professional. So I feel like if anything that our listeners will take away from this is when you price yourself properly, when you price your projects properly, you actually are a better professional.

Emily Lewis: [Agrees]

Brad Weaver: Yeah.

Lea Alcantara: Because you have the leeway to be professional.

Brad Weaver: I totally agree.

Emily Lewis: All right, so I also want to keep going with the practical stuff. I want to talk about some of the like little scenarios or little scripts you told us that you use when you’re talking to a prospect about getting them to reveal what they’re working with in terms of budgeting.

Brad Weaver: Yeah.

Emily Lewis: I thought that was really useful because we’ve used them in our sales calls. [Laughs]

Lea Alcantara: We totally have.

Emily Lewis: So let’s talk about some of those ways you can get a prospect to reveal their budget and what they’re working with.

Brad Weaver: Well, the first way is to ask, which is crazy, but to say “what’s your budget?”

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: Which blows my mind when I talk to people at how many won’t just do that, which works probably half the time so you don’t have to go into Houdini stuff. [Laughs]

Lea Alcantara: Right.

Brad Weaver: If that doesn’t work, yeah. I mean, definitely, I’ve got some scripts that I supply as far as voicemail scripts and the email and so on and so forth that you can get into, but the thing you really want to get people to do is to agree to a discovery session, which is best for both of you. It’s just a paid consulting session. You go through everything. You scope the project and the deliverable is a tight scope of work with a model that works best for you both. Full transparency at Nine Labs, we charge $5,000 a day for a discovery and we sell a lot of discovery. We’re good at what we do and we stand our ground when we say that that if you want us to just blindly respond to an RFP, we’re not going to do that.

Timestamp: 00:50:11

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: I don’t need the work enough. The main thing is that some clients take discovery, some don’t. They’re like, “I’m not going to pay you anything. I don’t know you.”

Emily Lewis: Right.

Brad Weaver: So then I offer them, I do this thing called a “Chief Experience Officer for hire.” I offer them a 2-hour Skype session for $1,500 and we get to the heart of the problem there. It’s a mini-discovery. There’s no delivery. It’s more of an interview for me, again, flipping the table. By knowing what your shop rate is, I now know if I want to work with this person and whether they’re being authentic in their proposal.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: And if that doesn’t work, then I just give them ranges. I tell them, “Okay, well, I don’t have a full understanding of it, so you tell me. Is this something you’re thinking as $10,000 to $30,000 or $30,000 to $50,000 or $50,000 to a $100,000?” And we typically get an answer from that. You still have those few clients who’ll be like, “I still don’t know.” Well, then I think we’re at a point where I probably don’t want to work with you.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: But I’m amazed at the people who I think are going to come back and say, “Oh you know, the $10,000 to $30,000 range,” and they come back and they’d go, “We’re just trying to keep it close to a $100,000.” I mean, we had one of those a couple of weeks ago.

Emily Lewis: [Agrees]

Brad Weaver: I was like, “Okay then.” And that doesn’t mean that I’m rubbing my fingers together and saying, “Ha-ha-ha! We’re now going to get all this profit.” [Laughs]

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: It’s like, “Okay, clearly I didn’t understand what your expectations are.” Unless they’re just foolish with their money, and then I’m going to be honest and going to tell him, “Listen, you can do this with like $30,000 or $40,000, but if you’ve got a $100,000 budget to make this thing happen, can we look at doing these things for you?” Because maybe they’re just coming to us with a deliverable mindset, like they’re just going, “Hey, we need a ne website,” and their budget is a $100,000. I’m like, “There’s not a $100,000 worth of work here,” and then sure, you could cash that check and walk away with it.

Emily Lewis: Right.

Brad Weaver: But like you guys said, I like solving problems. I’ll be like, “Listen, you know, you’ve got enough budget to really dig into some other stuff, so let’s talk about where you want to be and not what you want.”

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: But the most important thing is I pick up the phone.

Lea Alcantara: [Agrees]

Brad Weaver: I don’t email people and ask them what their budget is. I’ll email them and ask them about the discovery, but if they say no to that, I’m not going to start an email chain with them or something. You’ve got to soften these barriers.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: People don’t know. They don’t know … I had a client, and this wasn’t my work I was doing for them, but their competitors would call them and try to get estimates on budgets for competitive espionage.

Lea Alcantara: Wow!

Emily Lewis: Oh.

Brad Weaver: And people, they’re sensitive to that. You don’t know what their experience is, that you don’t know why they’re not …

Emily Lewis: [Agrees]

Brad Weaver: Maybe they’re not giving you a budget because they just don’t want it in writing.

Lea Alcantara: Right.

Brad Weaver: Maybe because they’re accountable to an AP department, but verbally they’ll tell you anything you want. They’ll tell you the combination of their safe. And I think that that’s really common, but we just don’t respond blindly to RFPs. We ask for discovery. We get on the phone. We try to get face to face if we can, if it’s somebody we think there’s a lot of value, but phone call is best so you don’t waste your time.

If none of that works, then the main thing is that tells me, “Okay, I have to tighten the screws on how I work with this person,” if they still want to work together. We don’t do the nebulous six months for hundreds of thousands dollar budgets. We work in two-week sprints or one-month sprints at that point.

Lea Alcantara: [Agrees]

Brad Weaver: Because I’m not going to commit if I have no idea what your expectations are budget wise; I can’t commit to a long-term project.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: With small projects with $10,000 website or something, it’s fine. You just give them a price, maybe they take it or maybe they don’t. Just make sure it covers your shop rate, but you’re missing an opportunity for them to go, “No, I’ve actually got $40,000, but I want this thing to have this stuff.” It’s a miscommunication, which ends up backfiring.

Lea Alcantara: So I mean, all this sounds great, but sometimes you do everything “correctly.” You speak to them about their budget and all those kinds of things and everything seems like it’s all in line. What do you when there’s resistance to that cost?

Brad Weaver: Well, we covered a lot of that, I think, and don’t go into a negotiation not knowing where the line in the sand is.

Lea Alcantara: Right, right.

Brad Weaver: So knowing that shop rate and knowing your inventory, how many hours you have to give is really important.

Lea Alcantara: Right.

Brad Weaver: And then a lot of times you can just say this just doesn’t work, so you don’t feel like you’re being unfair, but let’s say that we’ve given them a quote that’s value based, it’s $20,000.

Lea Alcantara: Right.

Brad Weaver: And they come back and they say, “No, I can go and get this at five other places for $8,000.”

Lea Alcantara: Right.

Brad Weaver: And they’re right. They can. You can get everything for cheap if you keep going.

Lea Alcantara: Sure.

Brad Weaver: And it’s like the analogy I use, which is like I could go to Target and buy my wife a purse for $40. I can go to Hermés and buy my wife a purse for $10,000, right?

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: It’s about what you want and what you expect, you and the client.

Lea Alcantara: Right.

Brad Weaver: The kind of person that walks into a Hermés store and says, “Oh, I can get a purse for $40 elsewhere,” is not your target customer. End of discussion.

Lea Alcantara: Right, right.

Emily Lewis: [Agrees]

Brad Weaver: With those people, there’s no winning with those people, and they’ll show their true colors pretty early on and you just need to walk away. Again, you need to have a full enough pipeline and a strong enough profit margin to be able to walk away, which is a learned behavior, unless you’re desperate for the work, you’ve got to have it.

Emily Lewis: Right.

Brad Weaver: And you’re like, “If we don’t’ get another $10,000 or $20,000 project, we’re not going to make payroll.” So the mistake that we make pretty often is you start listing your experience and all that stuff. You know what, they don’t care. If you start telling them about how efficient you are and how great you are and all these people you work with, they don’t care. They’re a value, price-conscious customer at that point, and the problem is that this is the tower of Babel. We’re responding to a commodity-minded person with a solutions-based answer.

Lea Alcantara: [Agrees]

Brad Weaver: This is a person that sees buying what you’re doing no different than going to stick with Target and buying detergent off the shelf with Target and they don’t care what it takes to build a website and all that kind of stuff. And when there’s resistance to that and you’ve kind of done all of these things, you really have to get yourself in a situation where you know how low you’ll go. You’ve done like I said this, “Hell yes-yes-maybe matrix. You’ve ran through all these scenarios, getting to this point and they’re still just like, “You know, I just don’t think that’s fair. I think it’s overpriced.” Is that a client that you want?

Emily Lewis: Right.

Brad Weaver: Do you think that that’s going to go well when you’re doing very subjective stuff for them? If people are receptive to it and they’ve come back and go, “Listen, we want to work with you,” and they seemed great and all that stuff and they go, “You’re giving us 20. We’ve got 10, that’s the ceiling. Cut features?”

Emily Lewis: [Agrees]

Brad Weaver: But more importantly, ask them a question of where they’re trying to go, not what they want.

Lea Alcantara: [Agrees]

Emily Lewis: [Agrees]

Brad Weaver: So often, we’re a hammer looking for a nail. It’s like, “Hey, we sell websites. Do you want to buy a website?” And that’s not how to do this. If you want to sustainable, it’s asking them, “What does this thing going to do for you? Where do you want to be?” And their response may be, “We were just meeting with a guy this morning. It was a website solution and they said, ‘No, we need 25 franchises by the end of the year.’” The website is not going to move them from 7 to 25 franchises. It’s not.

Lea Alcantara: Right.

Emily Lewis: [Agrees]

Brad Weaver: But if you say, “Listen, if you’re going to spend $10,000 on refreshing the website, here’s Squarespace, let’s spend $10,000 on a content strategy model and let’s figure out how we market to your franchisees and explain the process the better.”

Lea Alcantara: [Agrees]

Emily Lewis: [Agrees]

Brad Weaver: We just stop selling the website altogether. That resistance is typically because they have a price in their head and when you don’t need that expectation, they immediately just lock up and you’re not going to be able to untangle that through tricks. So as low as you go, know what you have to make, decide whether it’s worth it to you to come down on your profit margins and if you’ve run through all the scenarios, and you just can’t make it work, you’ve got to be in a position where you can walk away.

Emily Lewis: And if I can just put a couple of things out there with regard to those initial conversations, I pulled up the notes that I had from our call a couple of months ago, Brad, and there were a couple of what I wrote down were “conversational touch points.” [Laughs]

Brad Weaver: Yeah.

Lea Alcantara: [Laughs]

Emily Lewis: And these were some of the things that we found actually literally worked when we’re talking to someone who’s keeping their numbers close to their chest. And before I get to them, I think you’re absolutely right, the talking to them.

Lea Alcantara: On the phone, yeah.

Emily Lewis: That’s another thing that Lea and I instantly changed after our call with you was that we are now sales is always over the phone. It’s just is, like we’re not going to take … We’re good on the phone, and so I don’t know why we kept avoiding it. I think it’s because it’s just easier to just shoot an email, but it doesn’t get you the work.

Lea Alcantara: Right.

Emily Lewis: But anyway, here are the couple of sentences you had suggested, “Do you know what you have allocated for this?” Or, “This project sounds complicated. We want to use your investment wisely. It could be a five-figure project. How does that seem to you?”

Brad Weaver: Yeah.

Emily Lewis: “Before we waste any of your time, are you prepared with the budget?” So it’s like a different way of asking them what their budget is that might make them feel like you’re not just being like “what’s the number?”

Brad Weaver: Yeah, which is awful, right?

Lea Alcantara: Yeah.

Brad Weaver: That’s like a hostage negotiation.

Emily Lewis: Exactly. But the key to being able to have those phrases that you can introduce is literally talking to the person.

Brad Weaver: Yeah.

Lea Alcantara: Yeah.

Emily Lewis: And the same thing also when we had a prospect who we chose to move forward with putting our proposal together. In the past, we would just send the proposal. Now, we schedule a call to go over the proposal with them.

Brad Weaver: Exactly.

Emily Lewis: And that was a suggestion that you had made to us as well that, Talk to them about what you’re sending them. Don’t just send it and leave it out there. Go over it with them to get a sense of their tone, their response, how they’re receiving.

Brad Weaver: [Agrees]

Lea Alcantara: The tone is everything too.

Emily Lewis: [Agrees]

Brad Weaver: I’ll add to that at how we suck at saying no, but clients do too.

Emily Lewis: Right.

Lea Alcantara: [Laughs]

Brad Weaver: When you get people — and this is not a trick, this is honest, I mean this.

Lea Alcantara: Yeah, right.

Brad Weaver: And I don’t think this is dishonest at all. When you get them on the phone and if you can get them face to face or on Skype, it’s even better. They’re much more obligated to say yes to your proposal because they don’t want to hurt your feelings.

Lea Alcantara: Sure.

Brad Weaver: Honest to god, that’s how Americans work.

Lea Alcantara: That’s funny, but I mean, it’s true, like I’m just thinking about that time about the proposal I think that Emily is talking about. And I don’t know, we were so scared before we did it because we’re like, “Oh, this will be the first time we go through a proposal with a client and we don’t know what they’re going to say.” They were so calm that it was so clear because we had priced it a certain way that we’re like, “Oh my gosh, if we had priced it a few months earlier, we would have underpriced it, and this is way more than we normally would have quoted earlier.” Their tone of voice put us in ease immediately because it was so clear that they had no problem with the price, you know?

Emily Lewis: [Agrees]

Brad Weaver: Yeah.

Timestamp: 01:00:09

Lea Alcantara: And if you just send the proposal and you just twirl your thumbs, all you’re doing is worrying, you know?

Emily Lewis: [Agrees]

Brad Weaver: Yeah.

Lea Alcantara: And here, because they were on the phone, immediately we were put at ease because the cost, like that wasn’t even an issue, which actually blew my mind. Now, the discussion over the proposal over was, “What do these line items that you quoted us mean so we understand what we’re paying for?”

Emily Lewis: [Agrees]

Brad Weaver: Yeah.

Lea Alcantara: And that was all really that, like this was before they even signed it, I already knew we’ve won the project within the first five minutes. And that’s like so empowering simply because we picked up the phone, you know? [Laughs]

Brad Weaver: Yeah.

Emily Lewis: [Laughs]

Lea Alcantara: Yeah.

Brad Weaver: It’s crazy, isn’t it? I mean, it’s crazy.

Emily Lewis: It is.

Lea Alcantara: Seriously, this could be a two-hour podcast.

Brad Weaver: Yeah. [Laughs]

Lea Alcantara: But I think we need to wrap it up a little bit, but before we do, we should get some of your best tips and resources, books that you would recommend our listeners to reference.

Brad Weaver: Sure, yeah. Well, obviously, my book. I’m not going to lie. [Laughs]

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: So yeah, and so the book is called Creative Truth. The website is thecreativetruth.com because somebody is squatting on creative truth (thanks, dude).

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: And he wanted to like $5,000 for it. So it’s thecreativetruth.com. It’s out on February 25, 2016. It’s on Amazon and publisher channels and all that kind of stuff, and I definitely think that, I sincerely believe I did not write it to make money. There’s no money in books.

Lea Alcantara: Emily would know. [Laughs]

Brad Weaver: Yeah, and I do not write it to feed my ego. It’s purely written because it’s the advice I wished somebody had given me and saved me a lot of pain and heartache, and if I could give it away for free, I would, but my publisher won’t let me. And if I hadn’t hired a publisher, I never would have written it.

Emily Lewis: [Laughs]

Brad Weaver: So yeah, some of my favorites, and this list will be on the resources version of the website that comes out after the book comes out, but there’s:

What to Charge by Laurie Lewis

The Designer’s Guide to Marketing and Pricing by Ilise Benun

The Wealthy Freelancer by Steve Slaunwhite, which is a really, really good book on the mindset stuff

Creative Inc, which is really good if you do a lot of art stuff. I cannot pronounce Joy and Meg’s last names [Joy Deangdeelert Cho and Meg Mateo Ilasco]. Just look up Creative Inc, it’s blue. [Laughs]

Design is a Job by Mike Monteiro, which is one of the [A List] Apart books. It’s probably the one I would tell you to go read first. He doesn’t break down pricing as much as mindset, and the guy is just a genius.

And there’s a guy named Brennan Dunn that has a thing called Double Your Freelancing. We overlap some. His book is more of a course. It’s really expensive, and I’m not trying to take his market. He’s brilliant, a super nice guy too. His stuff is worth the money if you want to invest in it. We’re not covering the same things in a lot of ways.

Dan Mall has a pricing book on A Book Apart as well [Pricing Design]. I love Dan. He’s a great guy. I disagree with him on a lot of stuff and I just caution that I hate to say that an audience of developers, but he’s a great guy.

Lea Alcantara: No, but that’s amazing. I love the fact that you can state that.

Brad Weaver: Yeah.

Lea Alcantara: Because at the end of the day, you’re saying your piece and your information, and it’s like we just need to customize the information that make sense to us, like Emily and I customized your estimating sheet for us, so that’s probably another thing our listeners should know, like whatever works for you that resonate with you, use that, and if it doesn’t work for you, then get rid of it.

Emily Lewis: [Agrees]

Lea Alcantara: Anything else?

Brad Weaver: Yeah, definitely, I mean, the books are great, and I think books are good for this because you need time to process it. Unfortunately, there are not conferences for this. There used to a Mind Your Own Business thing that AIGA or HOW did. HOW — which is a huge conference with like 4,000 designers, developers — they have a good business track. I’m speaking at it this year, but I actually about UX, not business, but their business track is good. I wish more conferences would ask people like me and the people who wrote these books to come and talk about this instead of another code talk.

Lea Alcantara: Yeah.

Emily Lewis: [Agrees]

Brad Weaver: And code talks are great.

Lea Alcantara: Sure.

Brad Weaver: But you’re not going to learn how to code something in 45 minutes per se, but I mean, not to sound egotistical, but like with you guys, I mean, an hour or two hour of somebody’s time, I can fundamentally change your mindset on the business that allows them to write better code and write articles for those developers.

Lea Alcantara: [Agrees]

Emily Lewis: [Agrees]

Brad Weaver: And I wish we get invited to do more of that stuff, but there are some online courses out there. There’s a guy named Paul Jarvis that has a great course. He’s really, really good. There’s a group called the nuSchool that I disagree with them on a lot of stuff as well. They tap into the same ideas as Dan’s, which I think are a little bit too emotional, but they’re really good. Their content is solid.

Lea Alcantara: [Agrees]

Brad Weaver: And I’m teaching this is as a workshop. You can go ConvergeSE in Columbia, South Carolina in April. I teach it at General Assembly here at Atlanta, Future Insights Live in Las Vegas, Yellow Conference in Los Angeles. And if you go into Creative Truth website, I’m going to list the workshops and appearances. It’s a full-day workshop, and we dive deep and you come out of it with all of the stuff. So take eight hours out of the office, come out and you know where you’re going and then that’s a commitment.

And I’ll go do it for people. If a group can get me out there and it makes financial sense to do it, I’ll travel and come do it, and it doesn’t have to be in a conference, and then I’m going to hopefully have this up on, some snippets of this on Skillshare in the next couple of months. I’m working with them right now and then there will be an online course at some point for people who can’t travel or can’t afford it, and I truly believe in getting this advice to as many people as possible. If you’re struggling financially, then asking you to spend thousands of dollars to go into a conference is probably a big ask.

Lea Alcantara: [Agrees]

Emily Lewis: [Agrees]

Brad Weaver: So within reason for it to make sense to take out the time and the production and all that stuff to put it out there, just like why I wrote a book that you can buy for $30 instead of one of these $300 books like a lot of gurus tend to do and they want you to sign up for all this stuff. I’m not doing that.

Emily Lewis: Right.

Brad Weaver: And there’s nothing wrong with that, that’s fine, but if you go on to Creative Truth website, sign up for the newsletter, I will not spam you. It will be this stuff. I will talk about other people’s books. I will give you these tips. It’s not a bait and switch kind of thing. I just want the stuff out there and for people to keep doing good work and make money at.

Emily Lewis: I’m extremely appreciative of you not only sharing this through the book, but also taking the time with us on the podcast and in our one-on-one that we had before, but I just think it’s one of those things that it’s missing and I’m glad you’re putting it out there because — and I hope more people get more open and transparent with how they operate their creative services agencies because everything that we can do to make our individual businesses better improves our industry as a whole.

Brad Weaver: [Agrees]

Lea Alcantara: Totally, absolutely.

Brad Weaver: Yeah.

Emily Lewis: And operating smartly and providing real value to our clients and earning what we deserve from that is critical. It’s not just the work.

Brad Weaver: Yeah, spot on.

Lea Alcantara: So before we finish up, we’ve got our Rapid Fire 10 Questions so our listeners can get to know you a bit better.

Brad Weaver: Okay.

Lea Alcantara: Are you ready, Brad?

Brad Weaver: I am, and I have no idea what these are. [Laughs]

Lea Alcantara: Okay. [Laughs]

Emily Lewis: [Laughs]

Lea Alcantara: Okay, first question, morning person or a night owl.

Brad Weaver: Morning person, big time.

Emily Lewis: What’s one of your guilty pleasures?

Brad Weaver: I actually like a lot of pop music.

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Lea Alcantara: What software could you not live without?

Brad Weaver: Slack.

Emily Lewis: What profession other than your own would you like to try?

Brad Weaver: I’m going to cheat and say writer. I wrote a book, but I do want to write fiction, yeah.

Lea Alcantara: Very cool. What profession would you not like to try?

Brad Weaver: Web developer. [Laughs]

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Brad Weaver: No, I mean, I am a front-end dev, but man, whew, the hard stuff, no thanks.

Emily Lewis: [Laughs] If you could take us to one restaurant in your town, where would we go?

Brad Weaver: Hankook Taqueria. It’s a Korean taco place, my favorite joint.

Lea Alcantara: Awesome. If you can meet someone famous, living or dead, who would it be?

Brad Weaver: Well, dead, Teddy Roosevelt. Living, I have no idea. [Laughs]

Emily Lewis: [Laughs] If you could have a superpower, what it would be?

Brad Weaver: Mind reading.

Lea Alcantara: What is your favorite band or musician?

Brad Weaver: My favorite band, it changes every day. My favorite band at the moment right now is Chvrches band. I’m a long-time Josh Ritter fan as well, yeah.

Emily Lewis: All right, last question, pancakes or waffles?

Brad Weaver: Pancakes all the way.

Lea Alcantara: [Laughs]

Emily Lewis: [Laughs]

Lea Alcantara: Nice, so that’s all the time we have for today. Thanks for being on the show, Brad.

Brad Weaver: Absolutely, thanks for having me.

Emily Lewis: In case our listeners want to follow up with you, where can they find you online?

Brad Weaver: Twitter is @sbradweaver. thecreativetruth.com website. My company is NineLabs, ninelabs.com. I’m on Facebook. Don’t be shy … I speak at a lot of conferences. My speaking list is on the thecreativetruth.com website. You can come meet me and hang out.

[Music starts]

Emily Lewis: Thanks again, Brad, this was really fantastic, and I know it’s going to help a lot of our listeners.

Brad Weaver: Awesome. I’m glad to hear that.

Lea Alcantara: CTRL+CLICK is produced by Bright Umbrella, a web services agency obsessed with happy clients. Today’s podcast would not be possible without the support of this episode’s sponsor! Thank you, mithra62!

Emily Lewis: We’d also like to thank our partners: Arcustech and Devot:ee.

Lea Alcantara: And thanks to our listeners for tuning in! If you want to know more about CTRL+CLICK, make sure you follow us on Twitter @ctrlclickcast or visit our website, ctrlclickcast.com. And if you liked this episode, please give us a review on iTunes, Stitcher or both!

Emily Lewis: Don’t forget to tune in to our next episode when we’ll be looking at the flexible box model in CSS with Zoe Gillenwater. Be sure to check out our schedule on our site, ctrlclickcast.com/schedule for other upcoming topics.

Lea Alcantara: This is Lea Alcantara …

Emily Lewis: And Emily Lewis …

Lea Alcantara: Signing off for CTRL+CLICK CAST. See you next time!

Emily Lewis: Cheers!

[Music stops]

Timestamp: 01:09:41