Why Most Freelance Developers Fail (YOU NEED TO KNOW!)
What Are The Most Common Developer Mistakes?
Are you a freelance developer? Are you looking to become a freelance developer? You're looking for the most common mistakes and issues that freelance developers face, how they fail and how to avoid these mistakes? Well, in this video, I'm going to give you exactly that: how to make sure that you as a freelance developer don't have scope creep. So you don't have issues like underpricing yourself. So you can charge a lot of money for good contracts, and retain clients for a long time. So you can build your business. That's what I'm going to cover in this video.
Why should you trust anything that I say about this? Well, I've been doing it myself since 2008, and
1. Scope Creep
So what's the first reason that freelance developers fail? How did they fail the most? Well, it's called scope creep. Any developer who's ever done any project, even for a job, even for an employer knows what scope creep is, even if they don't know the term. It basically means that as you're completing a project, as you're working on a project, the size of the project keeps increasing, and the work keeps increasing, and the clients or the employer keeps getting more and more impatient. And what happens is, they get more and more stuff for you to do while you have less and less time to complete it. And if it's a freelance contract, oftentimes you don't even get paid more. How to actually avoid this?
Set Up Right Expectations Expectations From The Start
It’s through setting up the right relationship with the client from the get-go and set their expectations right that any extra work requires extra pay, and to do what's called cost control. So especially if you work with a team, it's not just. You need to control costs of the projects, because if you let them escalate and expand and grow in complexity while you're working on them, that just makes it less profitable to work on these projects as a freelance developer.
2. The Race To The Bottom Pricing
So the next way that freelance developers fail is called the race to the bottom pricing. A lot of new freelancing platforms or less new freelancing platforms like Upwork.com, they use what's called a reverse auction, where the freelancer is bidding as low as possible on every single project. Now, the way to avoid bidding as low as possible on these projects is to not bid low on these projects, or to bid low and tell them it's a placeholder. You need to build credibility. You need to build lots of proof.
More Proof = More Clients
It's all about proof. What have you done, what for, how successful was it, and have proof of this. As long as you're building this, as long as this list of your proof and your credibility, in your case studies is expanding, you're going to get higher and higher-quality contracts, and higher and higher-quality clients who are less of a pain to deal with. In the beginning, yes, you will have some contracts that are slightly more annoying. And, you know, there may be even a little bit of scope creep, as we discussed before, but later on, you want to work with contracts and clients that are great, where you get paid a lot, and the client is super nice, they have experience with working on this stuff. And they're happy to pay a premium for certain good things that they're going to get in return for paying premium.
3. Cost, Speed, Quality - Can’t Have It All
Now the third way freelance developers fail is they try to focus on three things at the same time, which is cost, speed and quality. The simple truth that no one wants to talk about with regards to development services is you can't have a cheap, fast and high-quality development service. It is just three things that don't fit together completely. You can go like halfway into some and a little bit into the other and kind of mix and match. And it's always going to be a compromise. However, agencies that are very profitable, excel and one of the three.
For example, some agencies run like McDonald's, and some freelancers run their projects like McDonald's where it's the same project over and over and over. And probably you should start with something like that when you're brand new at the game. Because what ends up happening is you can have a lot of clients who get exactly the same thing. And you can eventually build it into like a mini-factory, a production service where you produce the same type of thing over and over and over. And it's going to be highly profitable with higher volume.
So when you're doing cheaper projects, you probably want to templatize it to hell, and that way you can maximize profit, and you can systematize your delivery. Whereas later on, you'll probably want to switch to something like expensive services, but done at a very high quality, so highly custom development projects that are done for 80 to $120,000, for example. And then those projects are done in a way where the client gets exactly what's the perfect solution for their situation.
4. Not Doing Consistent Lead Generation
The fourth way that freelance developers fail is they don't do consistent lead generation. They go from project to lead generation, to project, to lead generation, and so on. And what happens is they never get a consistent, high-performing, predictable funnel. They just do projects and then lead generation forever and then try to increase their price a little bit in between.
This is not the way to build a really successful long term business. This is a way to basically be employed as an employee, but with a freelance contract. To avoid this, you need to keep improving your lead generation and keep doing lead generation no matter what. So that later on, within three to four months, you can start outsourcing or hiring a team to help you with delivery. And that way you have even more time to spend on marketing and on business.
5. Overpaying Staff = Low Profit Margin
The fifth way that freelance developers fail is a little bit controversial. So if you're sensitive to whatever topics, just go watch a different video where they give you very comforting lies. So the truth of the matter is, once freelance developers start paying staff members or freelancers, they're overpaying like crazy, their profit margin goes from 100% as a freelance developer, to running a small agency, and the profit margin is like 15%, which is absurd. Don't let anyone tell you that that's a good or valuable profit margin for a business owner because it's absolutely ridiculous.
But Cheap, Add Value, Sell Expensive
Unless you're doing like eight figures in revenue, the golden rule with any business model is buy cheap and sell expensive. Add value in the middle, but sell expensive. So the biggest cost in a service agency, like a web dev shop, for example, or a developer shop is the staff because they are creating what you're selling. As such, if you let that cost escalate, you're going to be left with nothing. And you do all this work, you manage all these people, you build all this stuff, you took all the risk and you're left with nothing. So the way to solve this is to hire people at a fair rate for where they live. But then make sure that you're making a 70%, perhaps 50% in bigger agencies, or 40% profit margin. If you can do that, which is entirely possible, then it's worth running an agency. Buy low, sell high. Keep that in mind.
Many, many freelancers who are starting to build an agency do this very, very wrong, and they end up with no profit margin.
So next up let's look at
Suggested Videos To Watch Next:
Interested in building a business like this? Get on a call with one of our instructors and get advised on what you can do to build a business like this.
You may even get offered a chance to join the mastermind where we all share working business models (optional). Click the button below to apply.
