As I’ve been working my way around the Internet this summer teaching the fundamentals of the DYFR framework, I almost always end up getting asked the same question from people after I describe my method of writing proposals:
What if I can’t guarantee my client a specific return-on-investment (ROI)?
A quick refresher if you’re new: One of the concepts of the framework is to anchor your costs against what I call the Financial Upside of a project, or the long-term value of the project for the client’s business. This makes it so you don’t end up pricing yourself in a vacuum, but instead have something (ideally less than what you’re asking!) to contrast your price to.
The way you quantify this upside is pretty simple. Start with uncovering how your client makes money, and work backwards until you run across something you can affect. For example, you probably have zero influence in what your client charges their customers, but if you can deliver more prospective customers to your client, you will influence the number of customers your client has, and thus the total volume of charges.
An example of quantifying the Financial Upside of a project
One of my students creates WordPress websites, and a rehabilitation clinic reached out to him about a redesign. Instead of simply quoting them a price for a new site, here’s what he did:
“…OK, so you make money by having patients check into your facility. About how valuable is a patient in a bed for your business?”
They replied with $30,000. And you’ll notice that he was using words like “patients” instead of customers as a way to demonstrate that he’s focused on their model of doing business.
“Great, and how many people do you typically need to talk to before getting a new patient?”
About 1 in 10 prospects turned into patients, meaning they had a 10% conversion rate. Again, he has no influence over the value of a patient in a bed ($30k) or how effective their business is at winning new patients (10% prospect -> patient rate).
“So if I could get redesign your website with the sole intention of helping you generate at least one new lead a month — which is worth about $3,000 — you’re looking at making a minimum of $36,000 within the first year, right?”
Yes. There was no other possible answer. He was just repeating what he was told a few seconds earlier and applying some basic back-of-the-napkin math.
When he ultimately proposed a project that would help them get at least one new lead a month (that is, a redesigned website that leads as many people as possible to their lead form) and he quoted them $15,000 for it, they immediately signed. After all, who wouldn’t spend $15,000 to make $36,000+?
This is a straightforward example of quantifying the Financial Upside of a project. But it isn’t always this easy…
What if your client won’t open up to you?
Some pushback I’ve received during both these live events and privately over email is from people who have prospective clients who aren’t willing to share the numbers needed to accurately quantify an upside.
If they won’t tell you this info (or at least give you ballpark numbers), it typically boils down to one of two things:
1. They don’t see why you need to know.
After all, they just need a redesigned website, right? To counter this, I let my clients know that I ONLY want us to work together if I can be confident that they’ll ultimately make more money than they’re spending on me. If I’m in the dark about what they stand to make on this project, I can’t know that. I don’t want them to sink tens of thousands of dollars on me unless we can both be reasonably confident that they’ll make a return.
It’s vital to educate prospective clients on why it matters for you to understand what’s at stake. You want to be an investment, not an expense.
2. They don’t think you need to know.
Some prospective clients will look at you as a do-er. Your job is to do what they’re asking of you, and that’s it. To them, you’re just a commodity.
This could be either an education or a perception problem. Either you didn’t initially present yourself as somebody who is vested in the business success of your clients, or you found the prospective client in the wrong place (e.g, a job board — “I need a 5 page website that’s blue… pronto!”)
Occasionally, these relationships can be salvaged. Reiterate the importance of why you need to know and why it’s best for them that you know. But sometimes it’s too late, and you have no choice but to move on or to accept the work at a lower rate as a commodity freelancer.
What if you doubt your ability to deliver an ROI?
Here’s where most of the pushback comes from.
Not everyone has the experience of having historically made measurable improvements for their clients, or they aren’t confident that they can generate that one extra lead per month.
The thing is, you really can’t guarantee anything. There are so many environmental factors at work: your client’s industry, how good they are at managing their business, and so on. The best you can do is to give it your best effort considering what you know.
What I recommend people do here is to explain to your clients that based on all the data at hand, that the goal post for this project is the Financial Upside that you’ve quantified along with them. The fact that you’re focusing on these numbers, and are aiming to generate one new lead a month vs. just “redesigning a website” should signal that you’re focused on the right outcome. While your competition might be focusing on the framework of the website, what theme they’ll use, how many pages it’ll have, and so on, you’re talking about getting them more leads, which naturally translates into more customers… which is what your client really needs.
A beautiful website doesn’t have anything to do with getting more customers, but how many of us have attempted to sell a beautiful website in the past?
Or a solid, well-tested web application?
Or a 500 word blog post?
By focusing on the Financial Upside, you end up becoming constrained by it. You’re able to weigh each new request and thing-to-do by whether or not it gets you closer to the goal or farther away from it. And this alone should help you overcome any self-doubt that you might have, because your direction is sound.
This is why I like to preface all of the webinars I give by saying, “this will help you get more clients, close more deals, and make more money… but your clients will also get a better product from you.”
I have literally dozens of emails in my inbox from people who have successfully used Financial Upsides to anchor their costs and win higher pay work. This isn’t anything I came up with; these rules of anchoring have been with us since we humans first started exchanging stuff. But very few freelancers use anchoring because they haven’t taken the time to really investigate the why’s behind their projects, and are so focused on what they’re being asked to do that they miss the reason it’s being done in the first place!
Do you do any form of anchoring now? And if you’re a student of Double Your Freelancing Rate, let me and others know what anchoring the Financial Upside has done for your business. Sound off in the comments below… I’ll start 🙂