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In Defense of Consulting Businesses

At conferences and meetings with other freelancers, a common desire I hear is to shift more of their revenue from “trade-time-for-money” services to “mailbox-money / scalable” products.

As a successful service provider with no plans to shift business models, I’d like to explain my reasoning and start a discussion. I’m not criticizing those who choose to make this shift – there’s many successful people I know who have, and I’ll highlight a few of them below. But I feel like everyone knows the reasons for making the shift and not many of the reasons for not making the shift.

There’s more than two business models

You can never be rich trading your time for money. You need to shift to selling products, so increases in revenue do not result in increases in time spent working.

Avoiding the obvious response to the first line (keep raising your rate until you ARE rich trading time for money), let’s focus on the second. Some people believe the decision is binary – you are a service provider or a product provider; small businesses are at one end, and startups are at the other.

I like to think of it as a spectrum. On the left you literally are trading time for money. For every X increase in revenue, it requires an equivalent increase in time. These are the people who work on an hourly basis. On the right, every X increase in revenue requires absolutely no increase in time (or other costs). This is the ideal, but is for the most part unobtainable. All businesses fall somewhere in the middle.

Brian Gardner has built a hugely successful business with StudioPress. He builds a theme once and can sell it an unlimited amount of times without increasing the time spent developing it. BUT, each new customer does result in a marginal increase in his support costs. The theme development aspect of his business is perfectly scalable, but the support business is not (X number of customers results in Y number of support staff). StudioPress is on the right side of the spectrum, but not all the way.

I’m a WordPress developer that converts designs to themes. Rather than working on an hourly basis, I charge on a per-project basis. While still on the left side of the spectrum, I’m able to lean towards the right for the following reasons:

  1. The more projects I work on, the faster I can develop a site through experience and reusing code written earlier. This increases my effective hourly rate.
  2. The more projects I work on, the greater value I can provide to my clients through my experience. A site I built in 2012 is substantially better than the one I built in 2010 (even though that one was pretty good too :)). This increases the rates I can charge, most evident through my project minimum. For the past three years, every January my minimum for a standard project has gone up. But I personally believe the value I’m providing to my clients goes up even more than my rate has.

For these reasons, even though I’m putting in about the same amount of time of work each year, my revenue for 2012 is much higher than 2011, and I expect the same for 2013.

As a service provider, find the more scalable aspects of your business and focus on them. Likewise, find the aspects that are less scalable and decrease your focus on them. Here’s a few examples.

I’m able to increase my efficiency at developing simple sites more than I can complex sites. Complex sites usually involve more site-specific features that you can’t leverage across projects. Clients can see a huge value in a site built at my $2,500 project minimum, but as the price increases the value I provide approaches a linear trend. The higher the project cost, the more of the project is non-reusable “time-for-money” work. For this reason, I try to focus on the smaller sites where I can deliver more value.

I can increase my efficiency at coding, but I have a hard time increasing my efficiency on the phone. An hour long call I have with a client two years ago will still take an hour today. For this reason, I try minimize phone calls and other one-on-one communication.

  • When you land on my homepage, you’ll see the services I focus on. If you don’t want those, you’ll leave.
  • Once you’ve moved past that to my specific service pages or portfolio, you’ll see my project minimum. If that’s outside your budget, you’ll leave.
  • If you’re interested in starting a discussion, you’ll send an email using my contact form. I’ll read it, see if I have any canned responses that address the questions you have, and modify it as needed (a lot of the initial emails ask the same types of questions).
  • If you’re satisfied with our initial discussion, we’ll hop on the phone for 30 minutes to resolve any additional questions you have.

This is much better than my old process, which was to post a phone number and let everyone who lands on my website call me.

Products are an Investment

When you say you want to build a product that provides recurring revenue, you’re actually saying you want to invest your time (and possibly other resources) to establish an income producing asset.

The two factors that are most important to an investment are often not considered by freelancers turning to product development: risk and return. People want the recurring revenue, but don’t extend the thought process out to how much revenue they want, how much time they’re willing to invest, and how likely they are to hit their target.

Thomas Griffin committed months of work to the development of Soliloquy. It paid off, and he’s now able to scale back his consulting services as Soliloquy supplements the income.

But for every successful product released, there’s many that never made it this far, or made it to launch but didn’t generate enough revenue.

Before spending months or years developing your product, make sure there’s a healthy demand for it. Since you’re a freelancer already, maybe it’s something many of your clients have been wanting. You can decrease your risk by subsidizing the development cost through client work (a few clients hire you to develop this feature and you retain the rights to distribute it).

Make sure you can generate a reasonable return on your investment. If you can charge $200/hr for client work, and instead spend 1000 hours developing a plugin that sells for $20, make sure you can sell at least 10,000 of them. Also consider the time value of money. Yes, you might sell 10,000 of them over 10 years, but a dollar earned 10 years from now is worth less than a dollar earned today. It’s also a riskier dollar.

There are markets where you can trade your cash for income producing assets. Stocks, bonds, individual loans…. Building a product or scalable business is not the only way to have recurring revenue. These alternatives are less risky and don’t have a waiting period.

Consider the Long-Term Costs

Since WordPress is GPL, and all derivative, publicly distributed works are also GPL, many developers who sell themes and plugins are actually in the support business. You need to make sure your revenue per customer covers the lifetime cost of supporting that customer.

Let’s say you’re selling a theme for $50, and you’re getting 100 sales a month. You’re doing pretty good! At first the money is rolling in, and the support costs are low because you don’t have many users. Two years down the line, sales have dropped to a trickle, but now you have a customer base of 2000 that’s still requiring support.

Make sure that $50 you earned from the first customer can pay the cost to support that customer. Don’t build your business in a way that the current month’s sales pay the support costs of all the existing customers, and you need to keep growing sales in order to maintain your actual product: support.

Do as Gravity Forms does and limit your support to a defined period. Or, separate the cost of the scalable item (the product) and the non-scalable item (the support), and charge accordingly.

In Summary

Since even your consulting business has scalable, “startup-y” elements, it’s beneficial to think like a startup. This means your time is worth $1,000/hr, and read everything else Jason Cohen has written.

Before changing your business strategy from consulting to products, consider if there’s ways you can improve your consulting business to include some of the benefits of a scalable business.

Enjoyed the article? Check out my WordCamp Austin talk on Managing a Freelance Business

58 Comments

  1. Excellent write up of all the facets of a modern WP centric business!

    I could highlight a dozen exceptional well said statements, but wanted to extend the discussion a the end from consumer of commercial open source code. As a consumer I’m fully comfortable paying reasonable fees for code and support, one thing I really do wish though is that plugin/theme devs would adopt a model that looked more like this: Pay $100 for code+lifetime updates+1yr support, renew yearly support optionally for $20/yr. The issue for me is that websites usually have lifespans much longer than one year and if I use someone’s code I want minor updates to that code that might be critical to it continuing to function with a new version of WP. What I don’t need 24 months down the road is support on how to use/install/manage that plugin, if I did need that I’d gladly pay for it. (Note, I’m not saying major version updates should be free for life, just that the minor “mostly bug fix or compatibility fix” type of releases should be).

    I wholeheartedly agree with everything you said and hope my little rant above isn’t too off topic. I’ve seen so many fellow devs try to adopt the “product” model or email marketing model and far too many flounder at. It’s great to see a well written defensive of one of the the alternatives.

    • Bill Erickson says:

      I completely agree. I’ll take it further and wish the WordPress community would decouple code and support. As a developer, all I need is up-to-date code and some documentation. Sell it to me for $XXX for a lifetime access to that, but with no support. If I choose to have support, I can pay an extra $Y every month or year.

      • +1 to this, makes a lot of sense!

      • As much sense as that makes, the GPL works against that approach. While the GPL does not forbade selling code, it makes it less practical and you run afoul of the WordPress mob by making money in ways not approved.

        Conversely the GPL would allow you to get your hands on the code, for free, if you don’t want the support.

        • Bill Erickson says:

          I agree, it could be difficult to do due to the structure of the GPL – anyone who buys it could then distribute it for free. But the theme shops right now don’t seem to have an issue with that right now under the same constraints. I think it would be an interesting experiment to try separating the code from support costs and see if it still works.

          But at the end of the day, I wouldn’t want to be in the business of selling code. GPL code should be free and openly available since that’s the end result of releasing it. If you’re giving your customers the right to distribute your code for free, you might as well do it to retain your brand and sell complimentary services (ex: support).

          This is technically what the theme shops do right now, but they don’t advertise it. If you purchase Genesis, you’re really just buying support access since anyone who ones Genesis can give it to you for free. Anyone could post Genesis online for free and be within their rights.

          Someone could force the issue by purchasing all the themes from the major theme shops (StudioPress, WooThemes…) and post them on GitHub or a website. Once this is done and widely known by average users, the theme shops will need to update their marketing to reflect what they can actually control under the GPL.

          • I think the challenges facing theme shops are slightly different to those faced by freelancers, and Bill’s post outlines a great strategy for the latter. I, too, in most cases charge on a fixed fee model and make a much better return per hour on short, less complex projects than on big, complex ones.
            Looking at theme shops, StudioPress (and formerly Revolution) has moved between two or three pricing models over the years. Separating code from support didn’t work out and they moved back to a fixed fee for code plus lifetime support. Clearly, that tells us something.
            Another point I would add is that I suspect theme shops (at least those high volume ones such as StudioPress and Woo) aren’t so worried about GPL for the simple reason that the people who “steal” their code wouldn’t have bought it in the first place. In other words, a “pirated” copy (so to speak) doesn’t necessarily represent a lost sale…

  2. Part of my shtick in selling WordPress services is the fact that previous to this industry I was in auto sales.

    I love what you said about being more efficient and I just talked about this on a recent interview over at FreelanceJam.

    We track our own internal processes, systems, and work hours in order to create an average cost of doing a project. Much like in the car industry, if you brought your car in for warranty service repair, the manufacturer has a “book” that they suggest the average mechanic should take to repair the job in question.

    We’re taking some of these operational ideals and applying it to our practice. Of couse because creative is so suggestive to every project – we’re not 100% accurate – but we’re pretty darn close at estimating in particular verticals.

    I think you’re right on with this post, service could be making a “come back” at the right price. There’s a lot of noise in the app/product market and boiling it down to just great damn customer service will come out a winner.

  3. Good write up, Bill. One reason someone might continue to do consulting is they can provide a solution for a unique (custom based on problem, client, industry, etc.) solution versus a repeatable product or service which, as you mention, can scale.

    We at Crowd Favorite try to solve new problems every day which is why a consulting (time) business should still make sense at our end of the spectrum. Thats not to say we don’t have and leverage best practices nor haven’t already seen some common things we can likely solve more efficiently. ;)

  4. Hi Bill, I’m David from Malaysia :)

    Excellent points in your post, which are very relevant to me as well. As a new entrepreneur I decided I needed to go the route of creating products. But as my business has grown and matured, I find my income coming largely the way of services.

    As you point out in your article, support goes on after the financial transaction ends for product-based business models. My business model is a service-based subscription, so my obligation ends once the financial transaction ends. For context, I provide WordPress support plans for bloggers and small business owners.

    Thanks for publishing your thoughts here. You’ve articulated my thoughts and own experiences in a way that I could never have done. Wishing you a Merry Christmas and much success in 2013!

  5. Interesting perspective. I’ve seen more discussions about hourly vs project rates for development projects, there are a bunch on the Modern Tribe blog explaining the pros and cons of both approaches.
    Do you think it’s easier to charge per the project when you’re a household name in your niche? I have lots of prospects insist on hourly rates vs a project price. Have you noticed any change in that as your business got more successful? I’ve gone back and forth with my pricing model but I can see the benefits of fixed project pricing. Also, I suppose it’s easier to stick to your guns when your pipeline is full.
    You mention you stick to one kind of project which is relatively small projects that you are used to doing, because those are the ones with the biggest profit margin. It totally makes sense business wise, but how do you make it interesting? Where’s the challenge? Do you have work on side projects where you can get out of your comfort zone and learn new skills?

    • Bill Erickson says:

      I haven’t really noticed many prospects that demand hourly work, but that could be selection bias due to how I market myself. When I do hourly work (very rarely), the clients seem more interested in using up the hours they’ve paid for than in the solution I’ve actually provided. If they pay my 10 hour minimum for retainer and I only use 7 to build what they want, they try to find ways to use up the last 3 hours. I think project-based pricing (if you are working on a whole project) better aligns the interests of the client and developer.

      Until your pipeline is full, you gotta work on what you can get. As you start filling up, you can be more selective. This is when you can start identifying and focusing on your more profitable types of projects, but also selecting interesting projects outside your normal area.

      I do take on some larger, less profitable but more interesting projects as well, since this is how I learn and expand my skillset. I’m not completely numbers driven :) But I recognize where most of my earnings come from and focus on that first.

    • Paul,

      I have always believed and taught that per project pricing is way more profitable than hourly fees.

      When I first started out, I charged $10 an hour. Back in 1990 that sounded like a lot! Then my best friends grandpa challenged me to quote by the project. He basically taught me that if I quoted a project and could do a great job more quickly – and sold on value – the more profitable I would be. Here’s an example on my past logo work:

      4 hours @ 10.00 = $40
      4 hours @ $1,250 = $312.50 per hour

      I was doing the same exact work. But when I learned to charge by the project, I actually started making a living! Eventually I raised my rates dramatically and became even more efficient at my work – to the point I could make $750 per hour for what others were charging $75 per hour for.

      Bill’s idea of finding your sweet spot in business is VERY effective. While it isn’t as glamorous or challenging when you can do the work in your sleep, you can make a great living and then take on more creative/challenging projects to fulfill personal needs.

  6. thanks for writing this up Bill, it clarified few things for me especially on how to move my service business towards more of a productize side without actually creating any product, I was already thinking on how to repackage my services in standard way and charge per project instead of per hour.

  7. I think it is important to note that while you consider changing your business model also be aware of your values. Do you want to start selling products just to increase revenue? Or do you really have a product that is amazing that you want to share with the community and you think it will benefit everyone? Obviously you need some financial support in maintaining a good product, but what is your motivation? Also lifestyle plays into this as well. I personally enjoy consulting and providing a service to my clients. Others may find more joy in providing support for their product. But lets also consider our motives and values when looking at changing our business models. This will better serve the WordPress community as well, because your products or / and services will have real value behind them, not just motivated by switching your approach to bring in more revenue.

  8. Bill,

    Great thoughts and something you and I have even discussed before.

    I think if an entrepreneur (for this conversation we’ll assume developer/designer/consultant) desires to create a product for the reason of satisfying a market or need, than it’s a worthwhile goal. If the objective is only to get “easy, passive income” into the mailbox, that may ultimately end in failure.

    Most people don’t realize the work that goes into creating, selling, and supporting a product such as a WordPress theme or plugin. They don’t understand that you can spend incredible amounts of time and money, only to become a slave to the support requests of their customers. The goal of being able to make money while you sleep or when on vacation can become the nightmare of you are always responding to unhappy customers because they expect an answer NOW!

    As a designer and consultant, my reason for considering the product line is a way to compliment my services and to raise up other great designers who can either help me build my business or build their own. This allows me to work on the best projects and also to provide work for others. But it does require an investment.

    The other notion in that some people believe you are not a real business unless you have a team or offer a product is hogwash. Solopreneurs tend to build a business that provides great benefits and results to their clients, while providing a flexible lifestyle for the entrepreneur. Why is it not generally acceptable to be the freelancer who mostly works alone?

    The likelihood that my design business will die with me is great, but that is OK with me. I love what I do and that I can build stronger relationships with the people who work with me. I can provide a level of service that bigger, scalable shops will not be able to do. I am content with that and that is what matters.

    OK, so all this being said … you are spot on Bill and you’ve provided some excellent points here.

  9. I’ve always thought charging a one-time fee for a theme and providing lifetime support was risky at best. I don’t know if some providers did that out of a sense of generosity or competitive necessity, but it seems unsustainable. I also agree about smaller projects often being more efficient than bigger ones.

  10. Recently I’ve been observing a trend for people to ‘convert’ to project-based fees just the same way as the ‘cool kids’ used to charge hourly two or three years back. I’ve tried the hourly/project/product schemes and failed miserably at 2 and 3.

    Product-based approach had the ‘support’ clause the life cycle of which you have just revealed – theme sales are constant (or even reduced in time, due to the theme getting old-fashioned) and support is increasing drastically.

    Project-based estimates ended in two possible ways: either in an insufficient initial negotiation and project preparation (leading to arguments with clients and requirements that were not mentioned at all) or spending almost as much time on negotiations and specifications at the beginning as on the work further (not to mention that after the negotiation + estimate the client could reject the offer).

    My personal losses on project-based estimates are probably in the 5-digits scale now (except for conducting a training, which is a time on-site + preparation of training materials, but still a project fee), whilst the hourly payments have been rewarding. What’s your approach on estimates for your services?

    • Bill Erickson says:

      Project based pricing only works if you can clearly describe the scope and estimate the amount of work required, quickly. If the scope can’t be defined well, then you’re either massively under- or over-quoting (or your extremely lucky at pulling numbers out of the air). If the estimate can’t be put together quickly, you’ll be spending more time quoting work than actually working.

      For over a year I kept track of the revenue and time spent on all projects, which allowed me to calculate my effective hourly rate on all projects. I looked for commonalities across my lower earning projects, and here’s what I found to prevent them:

      - I require a finalized design and a scope of work document (which I prepare) for all projects. This prevents scope creep and helps keep my time/cost estimates in line with reality. If they don’t have a clear idea of what they want, I recommend they hire a designer to mock up their ideas for clarification.
      - I focus on smaller projects, which are easier to estimate than larger ones. I found that on projects where I quoted more than $10,000, my effective hourly rate was at least 1/2 that of other projects. The larger the project, the more I underestimate the time involved, so I just avoid quoting on them now
      - There’s a lot of project types I avoid because I don’t have enough experience to accurately estimate my time required: ecommerce, BuddyPress, IDX integration, and a few others.

      The list above should describe the areas where an hourly rate would be better than project rate. But when possible, a fixed fee is preferable over hourly since you are rewarded for efficiency.

      Clients also prefer it because they know the cost going into it. If it’s difficult for me to estimate how long it will take, it’s absolutely impossible for the client to do so.

      • Right – so, at the end, it has it’s own limitations.

        I haven’t been freelancing for the past few months, but until then I used to decompose the project to several main modules and estimate them with hours, like:

        -admin: 4-6h
        -dynamic popup JavaScript logic for all browsers: 8-10h
        -styling: 2h
        -database interactions and blah-blah: 3-4h

        Therefore it’s easier for me to calculate what I’ve understood quickly by several bullet points. I explain to the client that these few points are what I’m about to implement and there is a free slot for expansion which would be calculated extra.

  11. There’s tons here I could add about support not being scaleable. :D It’s the first place a I see new theme and plugin sellers burning out on and the first pain point for.. well, any shop. I’ve long said that people don’t scale, so you do have to work smarter.

    That being said, there’s a whole pile of things anyone can do to mitigate how much support is needed and how much is given. Clear outlining expectations, TONS of docs, loads of standard responses as well as making the product easy to use from the get-go.

    And also? Lifetime means the lifetime fo the product – not the lifetime of the user. ;)

  12. I’ve spent the last few days thinking about product versus service businesses, because I just re-read The 4-Hour Workweek. In it, Timothy Ferriss presents the way to wealth as creating a product business that the owner can quickly scale through automation and delegation. He discourages service businesses because they’re not as easy to scale. He says if you have a service business, you should convert it into a product business by turning your services into information products like ebooks, webinars, audio recordings, etc.

    I’m a web designer who creates WordPress sites and provides WordPress consulting for small businesses, so I’m definitely on the service end of the spectrum. This conversation interests me because I’m also a business owner looking to maximize profits with the least effort.

    • Bill Erickson says:

      I think that book has done more harm to WordPress developers than good. I agree with it in principle – developing a product business can scale and be successful with minimal ongoing work.

      BUT, with everyone chasing these product businesses (like theme shops), the prices have been driven to rock bottom, and most people selling public themes are making less than they could doing client work, and doing more work (ongoing support).

      You need to analyze all your options, look at your expected (and risk-weighted) returns, and choose the best option.

    • Chad,

      The 4 Hour Workweek is a great book, but you should also take it with a grain of salt. I think so many books like this present a “pie in the sky “lifestyle that is neither achievable for a majority of people or that require years of hard work to achieve – and even then, businesses require more work. :)

      I will say that the advice of making your business scalable and delegating are very legit business points. I recommend reading The E-Myth by Michael Gerber, as it transformed by business.

      Overall, it’s great to create products you can sell and that you can count on for passive income. It still takes quite a bit of time and investment.

      • James, thanks for the recommendation. I’ve read The E-Myth Revisited and learned a lot from it (my review). I agree that The 4-Hour Workweek approach won’t work for most businesses, and many business owners prefer to be more involved in their businesses anyway.

  13. This is a much-needed counter-point to the push for products. Considering support costs and the difficulty of providing good support, unless you’re selling a single-use, consumable product with low quality standards (like soda or candy) there are few easily scalable businesses.

    One point you don’t make though, is how the influx of product businesses hurts both WordPress consultants and product shops. Customers of a $30 theme or plugin with mediocre or bad support don’t often turn around and invest in a professional-engagement. Too often they decide that WordPress is the problem and move on to other systems.

    If both sides of this debate would push for more quality, I think both sides would benefit from a stronger base of paying WP users.

    • Bill Erickson says:

      That’s a great point.

    • I totally agree with your comment:

      “Customers of a $30 theme or plugin with mediocre or bad support don’t often turn around and invest in a professional-engagement.”

      And I would add that even customers of a theme/plugin with *good* support don’t often invest in a professional design, either. I have a child theme for sale at StudioPress and I provide quick support for those needing help and lately, it’s been my experience that people come to my website looking for a cheap fix for their sites. Either they want to know when I’ll have more themes ready or they want free support on existing ones. It seems like they don’t value my time and skill like my custom clients do.

  14. Hi Bill
    Loved the piece and it really got me thinking.
    Going back to your projects, you charge a one-off fee for a project and that’s that.

    What about maintenance – Genesis upgrades, WordPress upgrades, plugin upgrades – do you enter into some sort of maintenance agreement?

    • Bill Erickson says:

      The clients are responsible for updating themes and plugins (just click the button). If they do have changes they want me to do, I bill them on a time-basis.

    • I think the add on services AFTER a website has been designed and developed is something many web design shops/freelancers/consultants should consider. Almost all the clients I’ve ever worked with need these maintenance type services and are willing to pay for them. These services are a great resources for reoccurring revenue.

      • I think we agree on that James.
        I’m wondering how many of my small business clients would like to venture into the WordPress dashboard and “just click the button”!
        Presumably after they’ve done a full backup.

        • I forgot to mention backup services! :)

          • Set me thinking about all the other services you could offer…
            Backup.
            Sucuri malware monitoring and cleanup.
            Google Analytics.
            Ongoing SEO.
            Anything else?

            Just can’t imagine delivering a project and saying “that’s that” job done.

        • Bill Erickson says:

          That’s why I host them with WPEngine. Daily backups, and before they click update on anything, it asks them if they’d like to do an entire backup right then. They say yes, do the backup, then update.

          Or, they can email me to do the update, I do it, and invoice them $50. A lot of my clients do this for the piece of mind of knowing they won’t break the site.

          I have no problem working on a time basis for small changes like this. I don’t like maintenance/retainer contracts where they pay you $x/month to take care of things. Either they won’t use it and will soon think you’re ripping them off (burn the bridge for profitable work down the road), or lots of your clients do use it and you end up in the WordPress editor business rather than WordPress development.

          It’s the developer’s responsibility to build a site that won’t break in the future from updates. That means:
          1. Building according to WordPress standards.
          2. Only use plugins that solve a very specific purpose, are necesarry, and developed by a top developer who you trust to not break your client’s site. If you can’t say “yes” to all of those, build it yourself for the client.

          Then you can confidently tell your clients they can click “Update” and it won’t break, because you know everything in there.

          If they choose to hire you to click update, that’s up to them. But if the sites you build *require* you there for updating since there’s always something that needs fixing, you’re doing_it_wrong().

          • “…Daily backups, and before they click update on anything, it asks them if they’d like to do an entire backup right then. They say yes, do the backup, then update.”

            That makes sense Bill but my small business clients would be struggling to afford WPEngine and despite our best efforts upgrades do go wrong…. Genesis 1.9 straight to 1.9.1 and a few rather upset people posting comments on Studiopress blog until… comments closed.

  15. Long story short–after a year of full time theme development, my business model is moving back to a more project-based one in 2013 ;)

  16. Just wanted to let you know your post made very interesting reading, at the back of my mind there has been a nagging voice telling me I should be producing premium themes for sale, but the support model has been holding me back. Do you think selling child themes for the big well-supported frameworks like Genesis is just as problematic from a support point of view?

    • Bill Erickson says:

      I actually sold a Genesis child theme (Driskill), so I can answer this question.

      Yes, even if you’re built on a well supported framework, you’ll end up with a lot of support requests. After about a year of selling Driskill, I still hadn’t made back the amount I spent hiring a designer for it.

      I was providing at least 5 hours a week of support, and many of the customers were very demanding (sending me 6-8 messages on a Saturday, and complaining about how poor my support response time is). For their $60 purchase (of which I got 30%) they demanded more of me than any of my clients who spend $2-10k for my services.

      A lot of the support requests were not specific to my theme. They were asking for customization help, didn’t know how to use WordPress, or general Genesis help (supposed to be in a Genesis support forum).

      I had planned to release a few themes for sale to see how it went, but after the first few weeks of this one I knew it wasn’t the business I wanted to be in. When StudioPress got ready for a redesign and asked the community theme developers to handle their own support, I opted to have the theme removed from their directory.

      • Hi Bill
        “…I opted to have the theme removed from their directory.”
        I was wondering what had happened to Driskill.

        Makes perfect sense now and will help other theme developers more informed business decisions.

      • Thank you very much for sharing this insight Bill; I had no idea that was the reality. However, it is disappointing to learn. I had planned on dabbling in child themes one day to perhaps earn a little extra income and exercise my creativity. Has any one had the opposite experience and found the benefits outweighed the drawbacks?

        • Bill Erickson says:

          The simpler the theme, the less support you’ll have. One of the problems with mine was that it’s responsive, and there’s a lot of things you can do to break a responsive site.

          But even with a simple theme, I’d rather release it for free without any support in the hopes that one or two people would hire me to customize it. The theme market is overcrowded and underpriced.

        • Keith–my experience has been the same as Bill’s. I sat down after launching my last theme and looked at how many hours it took me to do everything (probably 80-100 hours). That means I had around $8k of my time invested in the theme before I ever got to launch. That doesn’t include the ongoing cost of testing/updating for every new version of Genesis/WP, creating documentation (which does cut down significantly on non customization/basic CSS/core Genesis support questions) and providing support (especially for those themes included in the StudioPress ProPlus package, for which I earned $0 unless my affiliate link sent them there) means that it takes about a year to break if you can consistently pull in sales of about $650/month every month.

          Don’t get me wrong–I still love making themes–it’s a huge creative outlet for me, and they’re really fun to make. If I could afford to outsource the support as well as the coding, I’d probably release a lot more. But as my main business model, I haven’t found it to be extremely lucrative. For me, it’s something to do as a side project, not my main focus.

          • Oops–that was for Greg, not Keith–I was reading a post too soon!

          • Thank you for taking the time to reply Chris. I’m a freelance developer specializing in Genesis, trying to find my place in all this. Insight from those who have been through it, is tremendously appreciated.

            Take care,

            Greg

      • Thanks for your insights Bill, you were clearly more than qualified to answer my question! :). I suppose the problem with the business model is the same one I experienced starting out as a freelancer when I was charging low rates. The less someone is willing to pay for something, the more demanding they seem to be. Not sure I understand the dynamics of it though.

  17. Im glad someone has defended consultancy work, I dont see the issue with it if it works. For instance some CRO consultancy I did on a project was charged at x amount, yet increased a client conversion rate from 2.5% average to 4.5% average, paying for my initial consultation in a week at the new rate of sales. Justified quite easily. The issue I find in the industry in the UK is the high level of cowboys and cheap, low standard services available. Nice insight by the way.

  18. Excellent article. I think more than Consulting or Product business, it is about “scalability” really! I have bee conteplating on similar lines and this has given me some good food for thought! Thanks! :-)

  19. Bill, this article is down right spot on and premium. I can’t even add to what you’ve said except that I now have a premium answer for when people keep suggesting I go into products, which I have little interest in.

    A big thank you for such an in depth explanation and analysis.

  20. Reid from Modern Tribe here.

    Couple thoughts that often get lost in this conversation. There are certainly pros & cons to different approaches – but you can apply multiple approaches to your own business. We run both a service and a product business, and within the service business we apply both fixed fee and hourly billing to our work. Essentially – we’ll do whatever is going to work best (for us and the client) per the given context.

    The product side of the business demonstrates steady incremental growth – which is great. The service business can be far more erratic – which means higher highs and lower lows. Stable products helps flatten that erratic nature. The successes of the service business allow us to invest in new product development – essentially acting as our own investment arm. Our products business is much stronger because of our service business and vice versa.

    On the service pricing model, one aspect that is often overlooked is scoping. If I’m in a position where I can clearly understand and define the scope of what would result in a successful project – then I’m comfortable working under a flat fee with the potential for increased profit. If scope is fuzzy, or the metrics for success are difficult to evaluate – then flat fee based work becomes a risk and I’m happier to work at our hourly rate (which also includes a portion that we’ve defined as profit). It’s essentially a question of risk vs reward management. I acknowledge that we’re in a position where I can invest our own time in scoping larger projects, or demand a consulting fee to cover that time investment. That enables us to perform fixed fee work on much larger scopes. That can be a challenge when you’re a solo show.

    I can see a lot of value in setting package based pricing for service work. It does an exceptional job at setting expectations up front – which I think is the biggest challenge of any service project. When working in the small business world – setting upfront expectations can save your ass and help guarantee some viable income. There are some adverse side effects to this approach though. It can stifle growth – not speaking solely in terms of $, but in terms of your skill set, experience, and personal growth. Part of what allowed us to grow as a company was a desire to tackle new projects outside of our comfort zone. Package based pricing can discourage those opportunities (note – discourage not eliminate).

    • THIS response.

    • Bill Erickson says:

      Love your thoughts. I think you guys at Modern Tribe have also found a great balance between products and services.

      One more thought to add: you need to consider what kind of business you plan to build. Do you want to be a company of one, being flexible to changing market conditions but limited in the scope and scale of services you can offer? Or do you want to grow a company of many individuals.

      It would be difficult or impossible for an individual to replicate the business approach of Modern Tribe – there’s not enough time in the day to manage a services division and products division of the quality you do.

      I love the idea of having products that flatten out the revenue curve, but I know I couldn’t build a successful product and maintain my consulting services. I’d need to be like Thomas Griffin and give 200% to my products business (and even then I’d never be nearly as good at it as he is).

      • This is totally spot on.

        We were able to enter the product space by commoditizing our byproduct – essentially a client paid us to build something that we were able to spin off as a product. Without that, entering that new business space would have been very difficult.

        Every significant effort on products since then has involved an upfront of service work, savings, then a corresponding quieting of service work while product focus happens. So, we may be bigger but the same principle of not doing too much at once still applies. With proper planning I think a soloist can bounce back and forth – though it is very much a challenge. Even for us, the service business is constantly competing with and distracting product resources.

        Ongoing support is the wildcard. If you can’t to some degree systemize support and put some constraints and structure around it, you’ll be sunk. Don’t get into the product side without having a plan for, and being excited about customer service. Your commitment to serving your users is your *real* business – not solely the product you build.

        • Again, totally agree with Reid, it’s the same way we practice.

          Bill, I think you’re perfectly aligned for having a product, but perhaps not a consumer facing product like TG’s Slideshow or Gallery – but more the business or developer side.

          Like your custom CMS or a specific project calculator for managing time, revenue, profit etc. If you’re building these systems and features for yourself, it would be easier to put a price tag on it.

          You can also attract a higher paying client depending on the product which will give you breathing room for support etc.

          • Bill Erickson says:

            I’m always keeping an eye out for products. Just because I don’t do them now and say I’m not interested, doesn’t mean I won’t be selling a product a year from now :) Things keep changing.

            That said, Reid hit on my main holdup – support. I hate providing support, and I’m really bad with my free plugins on WP.org (usually log in every month or two and answer some).

            I can’t see myself starting a business that requires support as a core competency. So either I’d sell something without support, or have to bring someone in to manage support.

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