Ditching Hourly

Hello and welcome to Ditching Hourly. I'm Jonathan Stark. Today I've got an audio excerpt from an answer I provided on my YouTube channel. You can check it out at thejonathanstarkshow.com and it'll redirect you to YouTube if you're into watching videos. Otherwise, you can just listen to the audio here on the podcast. Enjoy. Hey, Jonathan here. I've got a question from Ricardo Vargas who asks, what's a good strategy to charge 100% upfront for software development without getting rejected? So far, I've charged 50% to start and 50% on finishing. Thanks and regards. Okay, so people have a hard time believing that you can charge 100% upfront for a project. And I'm here to tell you that if you ask for it, you'll be surprised how many people are totally fine with that. They're like, yeah, sure. They don't even ask. They just send you a check. Where do we send the check? Or how do we make payment? Some people will say, no, how about, we can't do that. How about we give you 50% upfront and 50% on completion? Or some other milestone, like milestones or whatever. You know, it could be, you know, 25% at the beginning as a deposit, 25% when you reach feature complete, 25% when testing is done or whatever. So the problem with that is, and this is bad for the project, it's bad for the client, and this is why I try to talk them out of it, and I won't work with them if I can't, is that when you've got a completion payment, what that does is it encourages everyone to rush to sign off. So you want to, what you end up doing, in other words, there's pressure on everybody for sign off because the client knows you want to be done, the client wants to be done, and they want it to be over with. It's not a fun thing to be going, you know, have a long-term project. As anybody who's ever done a software project or had a home renovation or anything like that knows, you want it over. It's not fun. So everybody's going to rush to this sign off date. There's going to be pressure on everyone to say, yep, it's done. And then they say, okay, it's finally done, and they pay you, and then more stuff happens. There's always more stuff that happens after that. Well, now what are we going to do? Now there's going to be fighting about, well, you should have done this. It should have been done before sign off. It just creates a really bad ending to what could, you know, an extremely predictable bad ending to a non-trivial software project. You know there are going to be things that got missed at the end. It's not perfect on launch day. There's always going to be stuff that happens after that. At some point in the future, some, you know, maybe months after launch, everyone's confident that it's solid, everything's working, but it doesn't happen on launch day. There's still going to be some rough edges that need to be sanded off. So you know that's going to happen. So I tell people to plan for it, price themselves accordingly, and when it does happen, you just take care of it for free. So here's what you say when you present a price to somebody and you say, you know, it's going to be $100,000, 100% upfront. First of all, you have to do that. If you don't do that, then you're never going to get it. So you do it, and they freak out. They don't just say, okay, here's your $100,000. So they freak out and they say, no way, no way, no way. We can't do that. We can't give you all that money upfront. So how about we give you half and half on completion? And then you say, well, we can talk about that, but that's going to drive everyone to... It's going to pressure everyone to sign off before it's really done. So what I would rather do is do 50% upfront and then 50% on some particular date. So depending on the estimated size of the project or duration of the project, I would say either 30 days or 45 days or 90 days, however long you think is like, you know, you're really going to be rolling, you know, and you'll all have a sense of how the project is going at that point. So you'd be like, well, we could break it into two payments, but instead of pressuring everyone into a premature sign off, how about we just pick a second date, you know, say 45 days after kickoff, then the second payment is due and we'll just keep going until everything's done. We'll launch. We've got a six month bug free guarantee after launch. You don't have to worry about any of that stuff. If they are still, if they're still reluctant, then probably you've got a trust problem with the company, which is a whole different can of worms. But if they're still like, eh, I don't know, that doesn't seem fair. You know, how do we know you're going to finish if we send you that second payment? That's a red flag because they don't trust you. But if they come back and they say, well, 45 days, I don't know. Then you say, okay, look, pick any date you want. Pick a date at which point you think the project's going to be done. It's fine. But there needs to be two selected dates so that we can all plan for it and we don't have to rush to sign off because that's not good for the project because they're going to be.

And there's things undone that can lead to budget overages. We want to give you a price for the whole thing. We want 100% customer satisfaction, and we're not going to leave until you're happy. So having a sign-off, that cuts that short. We don't want to do that. Quickly before I finish, I want to talk about why it's important to ask for 100% upfront, even if you're pretty sure you're not going to get it. First of all, you might be wrong, and you could get it, which is great. But the reason why it feels to most people like an insane request, like people who have never done this before, developers who have never asked for 100% upfront, this feels insane. But you have to realize what you're doing is you're giving them a fixed price, which clients are not used to. They're used to this sort of hourly meter running ad infinitum, and that is a very uncomfortable feeling. They don't know when it's going to be done. It's just terrifying for most clients. So you giving them a fixed price, which you have to do in order for them to pay you 100% upfront, they're already going to be way more calmed down than anybody who would be looking at an hourly estimate. So they're going to be much more calm than you might expect. And then when you ask for it upfront, it gives you something to negotiate instead of the price. So instead of them being like getting sticker shock over the $100,000 price tag, they can freak out about the 100% upfront. And now you can negotiate and you can concede points and you can be reasonable with them and not like, in other words, you can negotiate with them about something besides the price, meet them halfway by breaking it into two payments or every month for 10 months you send us $10,000. We'll keep working until we're done, but every month for 10 months you send us $10,000. Then that gives you something to negotiate instead of them trying to get the price down. So all of that to say, if you feel like it's crazy to ask for, that's fine, but if you don't ask for it, you don't have it to negotiate away if you do need to work with them. So it gives you something to negotiate, if nothing else. And if trust is high, I mean, I had 75-80% of clients where I'd give them a quote for a non-trivial software project and they'd be like, sure, where do we send the check? And it was surprising to me at first, it's not surprising to me anymore. People will pay upfront. They will. They pay for almost everything upfront, so why not this? All right, that's it for now. I'm Jonathan Stark. If you have a question for me, you can hashtag AskJonathan on Twinker, on LinkedIn, Twitter, or YouTube, and we'll find it and add it to the list. See ya. Would you like to learn how to get paid what you're worth? How about selling your expertise and not your labor? We work through all of this together in the Pricing Seminar. Pre-registration starts soon, and you can sign up to be the first to know when early bird pricing is announced at ThePricingSeminar.com. That URL again is ThePricingSeminar.com. Hope to see you there. Hey, Jonathan again. Do you have questions about how to improve your business? Things like value pricing your work instead of billing for your time. Or positioning yourself as the go-to person in your space. Or maybe productizing your services so you never have to have another awkward sales call or spend hours writing another custom proposal. Book a one-on-one coaching call with me and get answers to these questions and others in the time it takes you to get ready for work in the morning. Best of all, you're covered by my 100% satisfaction guarantee. If at the end of the call you don't feel like it was worth it, just say the word and I'll refund your purchase in full. To book your one-on-one coaching call, go to JonathanStark.com slash call. C-A-L-L. That URL again is JonathanStark.com slash call. Hope to see you there.