project-clients

Project Clients Vs. Product Customers – How To Maintain Sanity By Building Products

I’ve read about quite a few startup founders who started working as consultants or at web agencies where they cut their teeth and learned about development, project bidding, and project management. The problem is that: 1) Client work is a soul sucking endeavor that will leave most people hating their work after a few years and 2) it’s a black hole of quick money that will sometimes lock you in and prevent you from taking the bold steps to actually build a product and break free from the catch-22 that is having clients.

Below are my thoughts on the difference between Project Clients and Product Customers and why having a product is infinitely better in the long run.

Project Clients

project-clientsWhen you work at an agency or as a freelancer or consultant, you have project clients. Project clients are people who come to you with their problem and it’s your job to fix it, or build it, or make it better. The reason they’re coming to you is because they don’t have the personnel or tools internally to complete the task, or don’t have the time or bandwidth internally to tackle the project themselves.

When you’re in the position of the agency, your job is to take whatever wild, off the wall problems and projects your client have and come up with solutions. You will literally see everything if you work at an agency for a few years. People will come to you with a $500 budget who want you to sign an NDA for their genius iPhone app, or people who have a decent budget for a project but will pick apart every single task and line item to confirm you actually know what you’re doing. It takes a strong constitution to not enter rage-mode when talking to most clients, specifically because: you are the expert, but they act like the expert. That’s simply infuriating.

When you have project clients, you’re selling your expertise in units of time. You can’t put a price on your years of knowledge, so you put a price on a one hour unit of your time. If a project doesn’t take a long time but requires a seasoned expert, you are forced to quote more hours to make up for the fact that you won’t make much if you quote your actual time needed. That just plain sucks because you can’t get away with saying “this is going to take a half hour, but only because I’ve been doing this for 5 years and am one of the best in the world at doing this” because if you said that, your client will give you the middle finger in return and demand to be billed practically nothing.

Because your income is entirely dependent on the number of hours quoted to your clients, you are constantly in search of more projects. Agencies have a nearly 100% churn rate; sure, some clients will come back with more work, but 99% of them will be one-timers. You don’t have subscription income, you have no idea how well you’re going to do once all of your current projects are finished up. You can only depend on your reputation and the fact that the trend seems to be to hire you for more work. That’s friggin’ terrifying, and forces you to constantly be taking on new projects whether you really want to or not (sure, you can have a mass exodus of paid subscribers if you have a product, but that’s fairly rare).

Ultimately, you’re at the whim of your new leads. You have nothing consistent, nothing dependable when it comes to revenue. So you’re forced to be everyone’s call-boy, dealing with every little triviality and nuance of someone else’s project, explaining to them why you can’t make their massive pivot in their project because you bid them on what they wanted, not what they have now changed to a few months later.

So what is good about Project Clients? You can be up and running with a few gigs within a week of starting if you have a good Rolodex and reputation. That’s basically impossible to do when starting from scratch with a product. Additionally, the more customers you please, the larger your network becomes of professionals you can turn to for testimonials and referrals. Testimonials, referrals, and your reputation are the life-blood of an agency or freelancer.

Product Customers

product-customersAhhh products, my main love. The benefits of having a product are nearly endless, but it all ultimately boils down to this: you’re in charge. People either want what you have or don’t. If they reach out and say “I like your product, but it needs this this and that before I’ll pay you for it” you can just say “sorry” to them and tell them good luck in finding their uniquely customized version of what you built that fits their exact business needs.

The bottom line is that when you own a product, people come to you. They buy what you built. They don’t approach you with their idea and ask you to build a custom solution, they come to you because your solution you’ve already built fits what they need. This is a huge, massive, epic difference, and I feel that it strongly aligns with your own happiness and well-being. You can maintain your focus on your product, making it better every day, and every improvement increases the reach and appeal of the entire product to potential new customers.

Why? Because when people buy your product because it’s what they need to solve their problems, they’re validating your idea. It’s such a hugely satisfying thing to wake up to someone having subscribed to your product in the middle of the night, I can’t even begin to describe it. It’s simply fantastic. Your product exists separate of you. When doing client work, the project cannot continue unless you (or your employees) are working on it. Your effort is directly tied to your revenue. With a product, you are now detached from the revenue stream. People can sign up and pay for your product without you having to touch anything or do anything at all.

Also, subscription products have predictable revenue milestones. You can leverage your customer base through affiliate and referral programs to help grow your user base. You can offer free trials to build up a kick ass mailing list and then market to that list over and over without having to do any outbound marketing at all (I will cover this topic quite a bit in the future, don’t worry).

The other major advantage of working on a product as opposed to a bunch of client projects is that all of your effort goes into improving a single entity, rather than dividing your effort into multiple projects that ultimately don’t even belong to you. When you work on your product, you’re progressively improving it. Each bug fix a customer finds, each feature request (that aligns with your roadmap) that you add, each support email you field in your public facing FAQ system, all contribute to your singular product, making it that much better. That’s a really big deal, as you’re helping your individual customers and making your product great all at the same time. Whereas when you’re working on a client’s project, while you’re helping to make their project better, you retain none of that value. It’s all fleeting, and the client gets to take away all the value.

I’ve had weekends where I just couldn’t stand working on my product, and so I just let it sit there. And you know what? It went great. I got new subscribers, it ran fine, nothing caught on fire, and everyone was still happy on Monday. There is no direct connection between the hours I have to work and the amount of money I make now. Sure, I could put in 60 hours a week on marketing and significantly increase the amount of new signups per week, but it’s my decision to do (or not do) that. Sometimes I feel like doing that, sometimes I don’t. I don’t have any investors waiting on me to make millions, no clients waiting for their project to be finished, just customers to make sure my product is available when they need it.

The Ultimate Takeaway

Customers buy your product for what it is at the time of purchase. Clients pay for what they expect you to build, which can lead to frustration and disappointment on both ends. Products are purchased on face value. Projects are based on a proposed outcome that can be interpreted by the client.

So Why Even Do Client Projects?

Because it’s quick easy money. Because you can learn how to do stuff on someone else’s dime (come on, how many of us have taken on a project we weren’t quite sure of whether we could do it simply so we could basically get paid to learn how to make it happen?). Because you get paid up front rather than after 3 months of development and another 3-6 months of aggressive marketing to land enough customers to cover Ramen for the whole team.

There’s a lot of perks to doing client work, and that’s why it’s such a black hole. It takes a lot of balls to branch out and build your own product, but that’s only because the reward is so high if you nail it and make something that is successful. The trick is to take on client projects to keep the lights on and maintain a minimum standard of living, while working on your product in the rest of your free time. Then you can slowly taper down client work into your product and yahtzee, you’re a startup founder who isn’t broke.

  • Exactly where I am right now.

    I am running an agency and struggling with the same problems that you mention here. Meeting client expectations (and making them consistently happy) is a hard game. But it is a black hole, it just sucks you in because of the money. It sucks !

    This why I have started thinking how to branch out slowly and start building products. It is not going to be easy, but then it has to be done.

    Great post, it is almost as if it was written for me 🙂

  • Bootstrapped SaaS is definitely the way to go, funded by some client work at first but not too much.

    Right now I’m selling products to developers to bootstrap and pay the bills. I start off with customers and they quickly become clients by asking for custom modifications! Sometimes it’s difficult to say no when the money is easy, but if you need more time to create scalable products and services you have to. It’s a delicate balance for awhile.

    • Definitely, you have to treat your startup more like a second job that you need to make it to on time and clock in at, that way you can give it an appropriate amount of time. If you’re too non-chalant about things, you’ll end neglecting it in favor of more short-term cash sources (consulting)

  • Really enjoyed this post Darrin. Good to see I’m not alone in my client-directed ire. I maintain my sanity by refusing to meet with new prospects who want to ask questions and cutting off tire-kickers as soon as I sniff ’em out.

    I disagree with you saying 99% of clients are one-timers, it doesn’t work that way for me at least, and there are many instances of advertising agencies who have managed clients accounts for decades.

    Anyway, enjoying your blog, hope all is well… D

  • Thank you for outlining it so cleanly and to the point. It feels as if you were reading my jumbled thoughts and put them down all sorted out…

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