Ask an Expert:
Get Rich or Die Cryin'
Welcome to the inaugural episode of "Ask an Expert," some bonus content to go along with our new podcast Overshare. Ask an Expert is a fun-sized program where creatives, who know a lot about creative things, learn about important things they know nothing about. Like accounting, legal, and shit that hasn't even hit their fans yet. We were lucky to have two WNW Members with great voices (and faces) for radio: Cooper Smith, a self-proclaimed parallel parking expert and Marques Gartrell, a self-proclaimed WaWa expert. Unfortunately for them, and luckily for us, the conversation revolved around a topic outside their respective wheelhouses: Accounting.
Cooper and Marques bring in the help of Robb Eng and Jaclyn Tanner, two accounting experts from FreshBooks, a cloud accounting software made specifically for freelancers and small business owners. Why is accounting important for creatives? As Robb would summarize in the ensuing conversation, "Creatives don’t realize the value that they’re giving their client and what sort of revenue [both the client and creative] can get from the work that they’re giving. Freelance isn't free."
Believe it or not, we had a really entertaining and insightful conversation about accounting, a topic that often tends to scare or sedate. We highly recommend you listen to the full 30-minute episode to learn about Marques' affinity for velvet and how to value yourself as a creative. Thanks to FreshBooks for their support and knowledge. Subscribe to Overshare on iTunes, Soundcloud, or with any other podcasting app via our RSS feed.
Creatives tend to be a little bit squeamish when it comes to money, and not just squeamish but not good at it. Why do you think that is?
Robb: They were never really trained in how to talk about money. When you were in school, you go through a lot of design and courses, they don’t tell you about how to talk the money talk. And that’s something where it’s more of a muscle that you need to flex and get more used to. It’s not like you’re not able to do it. You just have to do it more often and get used to it.
Is there anything you can do to get your invoices through, to make sure you’re getting your money faster, to not get screwed over?
Robb: One way at the beginning is to think about deposits. When you’re working with a client, require "this much" up front. Maybe it’s 20%, maybe it’s 50%. It gives you a little of that cash flow you need to keep the lights on while you’re working on the project. And if you do it at the beginning when they want your services, you have that negotiating power. It isn’t like you already delivered on the project and now they’re walking away and forgetting about you.
Jaclyn: Bigger clients and bigger corporations are habitual for paying just crazy crazy late. So if you score an awesome contract with a big client, "YAY!" But know that they’re going to take their dear sweet time.
Robb: Think ahead. For bigger corporations, typically it's a 30 day window after they receive [the invoice]. So don't send it at the very end when you need it in the next two weeks. You gotta give yourself some time for those bigger companies. Some creatives will send it right away.
What should go on an invoice?
Jaclyn: If there’s one thing Judge Judy has taught me, “Get it in writing." Pretending to get all the way to court, what’s the stuff that's going to help your case? Stuff like a date, stuff like who’s the recipient of this invoice, what’s the total amount, when was the payment date, when did you expect to be paid, all this stuff that helps you “build a case”. What’ the stuff that you need to get in writing. So you can go to your client and say “Nothing personal, but this is what we agreed to up front, so now we’re just going to be consistent with our commitments.”
Robb: In the creative space it’s very different than the food space. If you get a burger, and all of a sudden you want bacon, people know they have to pay for that. But for some reason, with designers and creatives, it's “Hey, can you make this one more change?” It’s going to take you that time to make that change and do all that, so if it’s not in your agreement and you don’t have this invoice on there, then you might have to do it, and waste all that time doing it. So if you have this invoice, you can say “hey, great suggestion, I can definitely do that. The charge will be this much."
Value-based billing. What is it?
Robb: This is not for the junior level freelancer. More for the established creative trying to get out of the trap of trading dollars for hours. It’s a paradigm shift, flipping the conversation toward the value you deliver, versus the cost that you’re incurring. Working with your client on what kind of return on the investment or ROI are you going to give. So for example, if you’re a web or UX designer and you’re developing a website for a client, and through working with them you're able to generate 100k more in revenue. You can look at that rate, so based on the amount of additional revenue, you can then work on a 10K dollar rate. So that’s a huge 10x return on investment based on that. What’s really great about this shift is they’re now not stressing about reducing your costs but more stressing about the profit and value that you’re delivering. You’re more a business partner with them and less about a transaction.
Jaclyn: It positions you as a professional. This is your realm, your wheelhouse. So to come to the table and say “this is my deal and I’m going to tell you where you’re at and where you could be" positions you as a partner. As opposed to this horrible race to the bottom that everybody’s doing. I don’t want to hire someone who is faster and cheaper. I want someone who is going to bring quality to the table because I care about my business. That’s what I dig about value-based billing, it positions you as the authority that you are.