This is part 1 of 3 in our series: “Make More Money as a Web / App Developer”. Check out Part 2: How to Raise your Rates and Get Clients to Say Yes and Part 3: Creative Compensation Strategies for Working with Startups
Imagine a perfect world, where clients have unlimited budgets for software development, and are all amazing humans.
Sounds pretty great, right?
Unfortunately, while it is definitely possible to work only with people you love, the reality of freelancing is that your clients are generally tight on cash. So…
In a world where there’s a ceiling on what clients are willing to pay, how can a freelance software developer make more money?
When Dan first started freelancing, we thought there were two ways to make more money: Take on more work, or ask for more cash (the first of which leads to burnout, the second to a resounding “no”).
But over 2 years of struggling (I worked a grueling corporate market research job to pay the bills while Dan consulted from dawn til’ dusk — i.e., midnight), we hit upon 3 keys to success that completely changed the game for us.
At first, we were planning on only writing one post on this, but it got so long that we had to break it into three parts. Today we’re covering Part 1. Sign up for our email list and we’ll ping you when we publish Parts 2 and 3.
First and foremost, if you want to start making more as a freelance programmer, you MUST…
1. Find an anchor client.
What is an anchor client, and why do I need one (or more)?
Here’s the thing: when you’re self-employed, you never want to be in a position where your current negotiation predicates your next paycheck.
Practically speaking? The best thing you can do to start increasing your income is to give yourself enough of a safety net to take some risks.
Enter, the anchor client.
An anchor client is basically a longer-term project (say, 6-12+ months). Anchors are dependable, have consistent, fairly predictable work for you, and pay you a lower rate than what you’re targeting.
The best thing you can do to start increasing your income is to give yourself enough of a safety net to take some risks.
Now, this might seem counter-intuitive. But the key to maintaining an anchor client is giving them a really sweet, long-term deal that minimizes the risk that they’ll leave you.
Because if you have one anchor client, you gain negotiating power with everyone else.
If you DON’T have an anchor client, it can be really easy to just accept what people want to pay you. The fact is, it’s hard to hold your ground when you don’t have a fallback — because your livelihood, home, and maybe family depend on it!
This is key if you want to push your rates higher for the longer-term.
I know, this might feel risky – that’s why a lot of people don’t do it. It’s also why a lot of good consultants go out of business (that, or they apply their anchor rate to everything, and don’t apply success key #2, so stay tuned for next week’s post).
How do I find an anchor client?
By the time Dan had been consulting for about 2 years, we were getting a little bit fed up with the unpredictability of our income. Dan will be the first to tell you that he’s an introvert, so it’s no surprise that I had to force him to go to a Meetup in Santa Monica (we lived in LA at the time) — to try something, ANYTHING, different.
Well, lo and behold, he met some pretty awesome guys there – Andrew Blackmon and Patrick Coyne — who became the founders of The Black Tux (they recently closed on a $30mm Series C, AND were featured on this season of The Bachelorette — yes, I know that excites only me). And our first anchor client.
To be honest, identifying which projects are long-term is the hardest part of finding an anchor client, but there are a few ways to do it:
1. Treat every new client as a potential anchor — they might just become one.
If you get lucky, some of your clients will take off. We’ve found that the best way to pick winners is to assess potential clients like an investor would. Look for a rockin’ team that feels right — they’re going to be around for longer, they’ll be more successful, and they’ll have more work for you.
Some questions to ask yourself when vetting clients include: Is this project likely to grow? Could I work with this person / team for more than a year? Is there a viable business model? (you do want to get paid, after all)
The best way to pick winners is to assess potential clients like an investor would.
If the answers to all those questions are “Yes!”, there are a few ways to work with these clients longer-term. We’ll talk about different incentive and pricing models in a future post, so be sure to sign up for our email list to stay in the loop when we get around to that (it won’t be long). 😀
Need more inbound client leads? That’s coming soon as well.
2. Find a successful company in a non-tech business that wants to get into apps.
These days, it’s becoming table stakes that EVERY company—even traditionally non-tech ones—have an app or web presence. A perfect example of this are service-based companies, like HVAC & plumbing (we’ve worked on apps in both of these spaces ourselves).
A lot of these businesses are finding that they can’t stay competitive without an app to streamline their operations in field, or a way to make services that are unintuitive to customers (e.g. pricing a new part for a pipe) more accessible.
But since tech isn’t their core business, they’re generally not looking for full-time developers (nor can they afford them).
What they ARE looking for is someone who can take then into the age of apps, for a price they can afford. And they’re going to need ongoing help for bug fixes and new features, which makes these types of companies the perfect anchor clients.
How to find them? Go to some local meetups for service-based industries and listen to their challenges. Pitch yourself to solve them. You can also do this online if you find the right forums (Facebook is a good place to start for industry groups).
Take note: people in service-based industries prefer to get to know you face-to-face. That’s how they do business, and it’s what they trust. So swap your loungewear for your jeans and go meet them.
3. Find a successful company in the tech space with a small development team.
Once you’ve figured out what makes YOU unique as a programmer, you can start to identify companies that value software, but don’t have any applications matching your skillset. These potential anchor clients are often even easier to sell because they already “get” your value proposition — you just have to convince them you’re the right person for the job.
One example of this might be a company whose primary business is based in a web application, but wants to starting offering mobile apps.
For products outside their core business, smaller companies often prefer to hire a freelance web developers vs. a full-time employees because it’s significantly cheaper for them.
To meet these folks, I’d recommend starting local. Check out groups for founders, CTOs and even other developers. You can also search for lists of larger startups / smaller companies in your area, and do a quick Google search to see whether their business has a gap in offerings that YOU might just be able to fill.
What rate should I charge my anchor client?
While this will obviously depends on your skillset and experience level, a general rule of thumb for charging as a freelancer is:
Minimum hourly rate = full-time salary divided by 2,000.
So, if a full-time software developer in your niche and geographic area is getting paid $150k / year, your hourly rate as a freelancer would be $75 / hour.
I have to stress this—but this is the absolute minimum you should offer people. So if you can’t afford to say “no” to any of your inbound at this point, go with that as your starting rate for anchor clients.
In fact, I’d actually go a little bit higher in case they want to negotiate (and they may). This way, you have some wiggle room to tell them that you really like the team and / or are willing to be flexible on rate to make it work for their budget. Of course, this is a choice that’s up to you and will depend on who you’re dealing with and your specific situation.
At this stage, it’s more important to secure at least one dependable anchor client, even at a lower rate. Wait to play hardball with your inbound leads until you can walk away without any negative repercussions.
The ideal situation is to have 1-2 anchors that provide reliable work and a healthy cohort of clients to supplement that. The idea is that one of them could become a replacement anchor. If, for whatever reason, your current anchor drops, you can always pull up one of the others.
So…what’s the next step to getting paid more as a freelance developer?
In our next post, we share exactly how we get so much inbound that we can say no without fear — and lay out some of our tried-and-true strategies for raising rates (and more importantly, getting people to say yes to them 😉).
Once you have an anchor client, it’s time to make it rain.