Answer Type: Entrepreneurship

There are generally two categories of freelance development activities:

1. Affordable
2. ROI-driven

Freelancers often try to mix between both models and often fall back into the first category instead. Unless you demonstrate professional capacity which could contribute to the business, you’ll likely be compared by price instead of value.

I’ve discussed the value-based pricing in detail at Grow Your Business With Your Customers – WP Elevation and in various answers here on Quora. The gist of it is providing actionable business insights and a strategy that would support the business needs of your customer.

Clients are often not fully aware of the requirements of their application. They have a problem in mind and suppose that a web application will solve it. However, there are different ways to approach the problem – some being more effective than others.

With value-based pricing in mind, figure out what the application is worth to your client. Every project aims for one of two things (or both at a time):

1. Increasing revenue (through additional sales or higher conversion rates), or
2. Automating processes (saving time that could be invested in something else).

New business applications fall into the first category. Same goes for marketing websites and eCommerce platforms which could sell more than they do now – with the right techniques retaining customers longer and providing the exact information prospects are looking for.

The second type are CRM systems, ERPs, hiring tools, marketing automation platforms and anything else that would save people from manually clicking, browsing around, sifting through spreadsheets or browsing Google every time they need to perform a simple operation.

For value-based pricing, as long as you can ask for the expected revenue upfront or estimate the impact on your work, you can invest more into providing a better solution which would have a better impact on the business processes.

If you want to stick to simple projects and compete by price instead:

• Make sure you automate as much of your work as possible.
• Focus on a specific market and build reusable components which could easily be adapted and integrated into new software.
• Prepare contract and proposal templates, sign up for some stock photo websites and do anything you can in order to save time per project and compile all requirements early on with the least amount of friction.
• Sign some partnerships or reseller deals for hosting accounts, plugin shops, etc. These would pay for some of the components you provide as a part of your complete solution.

The price-based approach is generally riskier since most of those activities can be automated in a way. This is why there are so many site builders and 3rd party hosted tools available for most problems. ROI-driven deals require expertise which is harder to replace by a robot.

Both strategies can be decoupled into an actionable plan. The rest depends on hustling and attracting prospects in order to create an ongoing sales funnel for your consulting business.

Both approaches are feasible – although they require different strategies and a certain type of mindset for each endeavor.

Freelancing is selling your time for delivering a service. It’s an active engagement that is directly related to your involvement and time spent on a project.

If you have a client and a project in hand, it’s up to you to deliver the desired outcome. Unless you’re actively working, there’s no progress and therefore, no revenue. Still, you should also position yourself in the market – provide a unique solution that would establish you as an authority and find a medium that allows you to convert more clients.

Regardless of how successful you are (in terms of a pipeline of leads or hourly rate), you will still struggle to allocate enough time and resources to growth. Unless you build a technical team and outsource internally – which is no longer freelancing (in the first place).

Selling products is… different. It often requires more marketing and sales chops than programming skills. You have to identify a problem, build an MVP, define your buyer persona (target audience), reach out to your prospects, sell a few copies, ask for reviews and testimonials, work through your support queue and move some of the ticket requests to the roadmap. It’s a rough journey. The best product may be left hanging without the right marketing strategy in place.

It takes time to bootstrap that and close your first customers. It may be 6–18 months until you see some significant results and consider any form of expansion. Once you generate some traction, it may become a lucrative, yet passive, source of income.

Working with marketplaces may be a good option. Some would take over your marketing efforts in exchange of a fee. But this may bring you a good amount of cash with limited support and ongoing development (within 5–10 hours of week). The more the revenue grows, the more the engagement – but you may be able to hire a part-time support rep or another developer who can assist in improving the product.

Building a product is often riskier and has a good chance to fail. Your time is not directly connected with financial reward. It may or may not work.

But scaling a product business may be easier. Hitting a limit is harder. It’s possible to generate good revenue with less involvement on your end. If you’re sick for a couple of days, it doesn’t reflect on your daily sales volume.

Unless you’re aiming for a funded startup from the beginning (by investing in MVP and building a team early on), providing freelancing services and building your product on the side may be a good way to test both aspects. Just keep in mind that focus is incredibly important – the more time and attention you spend on a single activity, the higher the chance it will work.