The portfolio strategy: getting creative with how you get paid

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In 2005 David Choe painted a mural in Facebook’s Palo Alto offices. He was offered $60,000 for the work, or stock in the company. He choose the Facebook stock.

Fast forward to 2012 when Facebook went public and the stock was worth more than $200 million.

To most designers, $60,000 in itself is a very nice payday. But Choe, being a risk-taker, made a decision that paid off in a huge way. 

I’m not advocating that you take stock in lieu of a cash payment when getting paid—I actually think it’s a bad idea 99.9% of the time—but I am in favor of diversifying the way you get paid once you are in a position to do so. 

Sidenote: Once you finish, read how 4 freelancers built recurring revenue models that changed their business. You'll love it.

I call this the portfolio strategy of getting paid.

For example, you might have a few clients who pay you 100% upfront for the project.

Others you do a payment plan over 12 months that is marked up because you are taking on added risk, and others where you get paid a percentage of the upside of the project.

There are dozens of different ways you can get paid, and the idea is to get creative with it and try different things. 

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If stock is offered to you and you don’t have that type of payment in your payment portfolio, you might think about agreeing to it if the upside is worth it. It’s a hugely risky bet but it might pay off. 

Here are a few alternative ways you could get paid. 

Think about working for free

Yes, sometimes it might be worth doing something for free, and some of you are probably shaking your heads in protest right now.

No spec work and all that-, or It devalues the industry! –I agree with you in most cases, but there are other forms of currency besides money. 

The key is to be strategic about it.  

It really depends on what you are getting out of the deal. It can be worth doing work for free if you get the right form of currency in return, but you have to be a good judge of what that return is. 

My rule for this is generally that:

1. I decide that I want to do it for free. Because I have something in mind that is of value to me I will receive in return

2. That I have “final cut” so to speak on the finished design/product.

Again, this might be something you negotiate, but those are two rules I stand by when thinking about doing “free” work. 

If someone approaches me to do free work, the answer is almost always gonna be a no unless they have something really compelling to offer in exchange.

For example, if you are ever offered “exposure” in return for free work, that’s almost always a bad deal for you.

Any business, outlet, or publication worthwhile doesn’t need to go looking for people to do free work for them because they already have people pitching them to do work for free or they can afford it.

But, if they are asking you, it’s likely the exposure they are offering you is really limited. So be wary, and make sure you are the one pitching free work, and not the other way around.

Pay what you want model

Another thing you can think about is using the Radiohead model. When they released their In Rainbows album in 2007, they let their listeners decide what the album was worth.

It was a radical move at the time. A lot of people paid nothing but many, many people did pay.

It’s not recommended to do this with a new client but if you have a client that you’ve worked with before and have a close relationship, get them to agree upfront that they’ll pay what they think is fair at the end of the project.

If you have a good relationship with them, they will want to pay you what is fair.

They might even pay you more then you might have estimated the project was initially worth.

Just make sure towards the end of the project you get that meeting scheduled on the calendar, so both you and your client know when you are going to talk about payment.

Price to the customer’s cash flow

Another way to get creative is to price around when it’s best for the client to pay you. For example, if your client has a seasonal business, they might make most of their revenue during the holidays.

You could set up the payment terms to get paid when it is easiest on them. Of course for this arrangement, you should be compensated for that added risk.

For example, if you are delaying payment until they have money in the bank, you are taking risk off their plate and putting it onto yours, so charge accordingly. 

Consider bartering

Bartering can be a way to significantly lower the cost of something you need. If you are in need of some services, trading your services can get you to a much better price. Your design services are an asset you can use as currency. 

Consider that other people have excess capacity but a shortage of cash—just like you might. So bartering can be an appealing alternative to paying with cash. 

I once traded design services for a year’s worth of haircuts. 

Think about how this works out for my hair stylist. She gets to “pay” me out over time while she gets her design services as soon as I complete them.

She’s paid nothing in cash but gets what she wants right away or as soon as I can fit her into my schedule.

She’s issued me credit, but I don’t use it up right away. It’s like she’s been handed an interest-free loan that is paid out over time with her services. 

Here’s another example,

You issue a $5,000 credit to a printer. He gives you $5,000 worth of printing and delivers it immediately.

You pay with your barter credits that give the printer a year to use the credit with you. Until the printer actually uses those credits, you haven’t paid anything. That’s $5,000 of services interest-free. 

A balanced approach

Having a diverse payment portfolio will balance your business out and occasionally get you a big cash windfall when one of your riskier bets pay off.

Or, when you get paid monthly on a payment plan you might sleep better at night with the stability of knowing you have X amount coming in on X date.  

These are just a few of the ways to get creative. There are no limits to what you can come up with when you negotiate with your clients and you get creative.

So play around and see what kind of offers you can come up with that make both you and your customer happy.

My favorite way to get paid

One of my favorite ways to get paid is to receive payment upfront before starting any of the work.

Getting paid in advance allows you to concentrate on the work and never worry about client late payments or chasing after them for payment like some kind of repo man.

Think it can’t be done? Well, here’s a training video on how to get paid 100% in advance. The video shows you step-by-step how to ask for and get paid in advance while keeping your client or prospect happy—it’s easier than you think it is.  

Let me know your thoughts in the comment section.

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About Ian Vadas

Ian Vadas is a designer and the author of Work With Clients You Love. Get the eBook to learn how to select clients that pay well, treat you with respect and allow you to do your best work.

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Comments

  1. Brilliant article had never even considered some of these options. Thank you!

  2. Hi Ian,

    Great points again.

    I’ve a quick question regarding “Price to the customer’s cash flow”.

    Suppose the services are provided in January and the best time for the client’s payment will be June. There is quite a risk factor involved that the client might not pay at all after that span of time.

    Since, we are shifting the risk factor in our plates, even a 50% down payment will not be able to compensate for the loss.

    What do you think in this scenario the profit margin should be? Should the 50% cover the entire project value? The price in this case would be something client will not accept at the time of purchase.

    Best

    Hammad

    • Not sure I exactly follow your question, Hammad but the thing to keep in mind is that you do this with a contract in hand.

      If you go into it worried the client might not pay you, then they are the wrong candidate for this type of payment arrangement.

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