Being a Billable Boss with Mike McDerment of Freshbooks

April 22, 2016

We’ve got Mike McDerment, the co-founder and CEO of Freshbooks Cloud Accounting, joining us to talk all about billing for creatives, the fears around talking about money and getting paid—like a boss.

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"When clients pay up front, they feel accountable. They're more committed to the work."
- Mike McDerment

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Transcript

Kathleen Shannon 0:00
Hello and welcome to being boss. This minisode is all about billing for creatives, the fears around talking about money and getting paid like a boss.

Kathleen Shannon 0:16
Today we're chatting with Mike McDermott, the co founder and CEO of fresh books, cloud accounting. Mike, the last time we chatted with you was on our being boss vacation in New Orleans. And this week, we're vacationing with our bosses in Miami, and we are so excited to have the opportunity to chat with you again, welcome.

Mike McDermott 0:33
Thanks. Great to be back with you.

Kathleen Shannon 0:36
All right, we're just gonna jump right in. We want to talk about money. So money is one of the greatest benefits of going freelance, there's no limit on how much a freelancer or small business owner can make. So why are creatives so afraid of bringing up the topic of money?

Mike McDermott 0:57
Yeah, with their clients, I presume that's, that's the challenge is where the rubber meets the road. And, yeah, I think it's just awkward, right. And, you know, I think it gets more awkward because more often than not, we kind of try and pretend the moments never gonna come where we have to talk about money, avoid it, and we put it the background and then just gets more and more awkward because, you know, I think is a, you know, you're building a human relationship, and then asking for something from somebody is hard. But the flip of that is, you know, I think we should all just remember that, you know, our customers engaged with us because they want something. Right, and they should be willing to pay for that. So there's no reason for us to be ashamed or shamed isn't the right word, to dance around. Yeah, anyways, but I think basically, it's, it's, it's just awkward. And there are lots of ways you can overcome that awkwardness. But I think that's the root cause.

Emily Thompson 1:51
I agree, I find a lot of times that, that we tend to project our own fears about money on do our own client. So the reason why we're not bringing you up, or the reason why we have a hard time talking about it is because of like, is because of our own issues. And we project them on to everyone else thinking that everyone else has the same issues around money that we do.

Mike McDermott 2:12
If you think about it, like if you have a freelancer or somebody working on contract with you, or maybe an employee or something like that, and you know, it's time for them to ask for their money. Like, you're not weird about that. Probably it's like, oh, yeah, okay, that's, you know, what was agreed to, or this is what I expected or whatever. And so it just gets different the other way, I think, I think there's an inherent like vulnerability in relationship to it's, it's, you know, person who's writing the check has a, you know, perhaps an undue influence on your future financial viability. Right. And so that can be a little scary, but I think sometimes we need to get over that stuff and move on.

Kathleen Shannon 2:48
It's so funny, I never thought about it, the vulnerability of it that way that your career might lie in the hands of someone else's checkbook. Okay, so one of the things that I've noticed with creatives, as they're always thinking about, what am I taking away from that person? Like, whenever they write me a check, what is it that they can no longer buy? Because they've given me that money. And I always just like to remind freelancers and small business owners that you are helping them probably whatever service you provide is going to help them make more money. So stop thinking about what you're taking away from them, and Instead, focus on what it is that you're giving them. Okay, let's talk about books and the logistics of keeping track of money. Why do you think creatives tend to avoid their books?

Mike McDermott 3:34
It's just not interesting. That's the reason when you're busy, and you're passionate about, you know what it is that you love to do, it's like, it's just gonna fall to the wayside. It's trying to think it's it's like, you know, I don't know, like, sweeping under the carpet or something. I think that's a bad analogy. But the point is, it's the kind of thing you're going to put off, right? Because it's just not as interesting as whether it's serving a client or designing something new. Yeah, just just makes it to the back.

Kathleen Shannon 4:08
I disagree. You guys. I think it can be really interesting, looking at what's going on and what's going out. And obviously, Mike, you guys sponsor being boss, and we love you for that. But even if you didn't, I am a personal user of fresh books. And I love that it's so visual, I love that. It almost helps me take the emotion out of money and really just like my favorite thing to pull up as my profit and loss report, and to see like an even just going to freshbooks and looking at my dashboard and seeing where I'm at and what kind of expenses are going out and what kind of income is coming in. It just I think that the visual aspect of it makes it easier and a little bit more interesting and almost like a game.

Mike McDermott 4:52
I love that you said that. Here's a question. If you had the opportunity to meet a new prospective dream client are looking at your profit and loss statement, which you're gonna choose.

Kathleen Shannon 5:04
You're right.

Mike McDermott 5:11
We try to try to make it as fun as we can. But like, at the end of the day, when you're self employed, like you have a million pots on the stove at all times, and so everything's competing for your attention, your limited time. And so, relative to that, you know, it's kind of, we think of it as like, it's like a painful necessary task, we just try to take the pain out of it. But a lot of your other tasks are like exciting, or like, you know, a client is called, and you have to do something right now. So very, relatively speaking, just not interesting.

Emily Thompson 5:41
Well, I want to throw in there too, that I think that if you can set a specific time in your week, or in your month to look at your books to look at the numbers and things. Like, again, if you can just sort of take the emotion out of it in that way, like put it on your calendar that every Friday morning, you're gonna sit down and do your bookkeeping for the week, even if there are a ton of other shiny objects around you that you could be focusing on can be really huge. And I also want to out there that like, being interested in those numbers, and wanting to know what's going on with the health of your business financially is like where that long term entrepreneurial mindset comes in, like you can freelance all day long and just sort of take in money and do projects and, and, and send out your deliverables. But where you really get into that, like a business building piece of the puzzle, is when you do make time and find at least some interest in looking at the numbers.

Mike McDermott 6:35
Yeah. And so I think what you're all saying is we've moved beyond the like, Why do people put it off? Which is the question I was answering. But then it's like, but like, should you? Right? It's like, yeah, you know, it's like skipping a meal. Like, you don't want to do that, right? It's gonna come back and bite you. So, yeah, it is actually really important to have the discipline to say, hey, this isn't as interesting to me right now, I'll just use an example of like sending, you know, creating and sending invoices. You know, lots of people find that just something they put off till the end of the month. But that's a terrible idea. Because you're probably you won't get paid as quickly. Because you're going to wait a couple weeks, you should just invoice as you work. Also, you're going to forget work that you did. So you probably end up billing less, which is a terrible idea. So while the reason maybe you put it off because it's not interesting. I think as a self employed professional, if you want to be successful, the trick is to figure out how to develop a discipline within yourself to do the work now that you as it comes up, and then also to spend the time and study your business so you can improve. You can't put your head in the sand and not know whether you're actually losing money or not. Right, like that's, that's a non starter because you won't be in business very long.

Kathleen Shannon 7:48
Yeah, a little bit of tough love to our bosses. If you don't like the admin side of being a boss, if you just want to have fun all day. Being working for yourself probably isn't for you, because it's not puppies and unicorns all day. But once you are making bank, it can be worthwhile. Well, okay, here's another thing I'm always telling people is, especially for people who are just starting out in business and just starting to work for themselves. Get yourself into the habit of putting systems in place, like having accounting books in place, and having scheduling software in place. Get that stuff going now, so that you can, as you grow, you've already got these systems in place, and you're already in the habit of doing the work and doing the not so fun work. Um, okay, so earlier, we talked about money being a little bit of an awkward conversation with clients and the vulnerability that comes with it. How do you think we really should be approaching it and talking about it?

Mike McDermott 8:48
I mean, it's funny, you're talking about a process and systems there, I think, I think one of the biggest and most impactful things you can do is just set expectations up front, you know, when you're engaging your client, hey, here's how my billing process works. Okay, so I'm happy to engage with you, we're gonna make an outline, but I won't do a stitch of work for you until I have a 50% deposit. Right? And then when I deliver something to you, it's going to be you know, you're going to pay me another 30%. And then I'm going to take the last 20%. Once we've tied up any loose ends, let's just say that's your process. Like, you should explain that without any shame or awkwardness, like, basically in the first meeting, so they know what the expectations are. Right? Hey, great to meet you. I understand the problem you're trying to solve. Let me say that, okay, here's the thing, I think I can help you do that. This is this is how, you know, we run our business, right? And I think if you just build that into the early conversations in the way you do things, it's sort of de stigmatize it just makes it way more natural. They don't have to feel weird about it later because you've kind of handled off the bat.

Kathleen Shannon 9:49
Um, you know, one of my my sister who is also my business partner, her mantra whenever we're talking money with clients is it's only as weird as you make it and the more confident you can be about saying this is how much I cost, the more confident your client is going to be paying you. I find that creatives all the time are so nervous, or they say things like, Well, my dream client can't afford me, what should I do? I'm like, if your dream client can't afford you, then they're probably not your dream client. So money is only as weird as you make it be confident and people will be confident paying you. So going back to billing, one of the things that you said was that clients should or I'm sorry, that creatives should be billing as they go. Are there any other mistakes that you're seeing freelancers and small business owners making whenever they're billing their clients? And what are some billing practices, you recommend that calm some of that creative inks around getting paid?

Mike McDermott 10:48
Well, I really do like to start with the simplicity, which is like do the billing, you know, as you work. I think setting clear expectations around that stuff like this should be the biggest non event in the whole process. Like the fact that even like we're even talking about this is, is ridiculous to me, because it's not like you go buy a head of lettuce at the grocery store. And the person who, you know, is ringing up the cash is thinking, Oh, my gosh, you know, what would you been able to do if you didn't have to spend $1.59? We love this the plot completely? Yeah, so I think just doing the work as you go, I think, if you don't have a simple, you know, system built to help you get your invoices out the door easily. That's bad news. Like, if you're still using Word and Excel, you're doing it wrong, right? So find something that works for you, it's gonna save you a ton of time it's going to give you reporting, it's going to make tax time easier. That's a big thing. Yeah, I feel like I'm going to repeat myself on some of these things. But like, I think setting expectations your clients, like know what your process is, make sure that you actually you know, that you are financially secure through this thing, like don't go do all the work and show up at the end and say, I need an invoice, you've already done a work of, you know, like a month of work on something, right? Like it's no get get an upfront payment, right? Because I have and I'm sure you know, most of us who've been at it for a while there's delinquent clients out there, you may never get fully paid for your project. So you got to de risk things. I like to get 50% upfront to ensure that all my costs were covered. Maybe I'm not making money, but like the lights are on still no matter what. Right? And I think what also happens then is when your clients pay you to begin with, depending on the nature of your work, they're more bonded, and they feel accountable, right, because they've actually had to pay for something so then they're more committed to making the work happen and being successful. So I don't know. Those are a couple thoughts. Full stop.

Emily Thompson 12:40
I completely agree that like these are the kinds of things that we find ourselves repeating to our tribe over and over again. And it's it's really helpful for us I know to have someone have someone who has helped set the stage for freelancers getting paid what they're worth, to help us drive that home because these are things that that if you just build your business in a way that these things are systemized and automated then there's never a need to ever feel achy about any of it. You just get paid and you can do your work.

Mike McDermott 13:13
That's the way it should be. Yeah, amen. Here we go.

Kathleen Shannon 13:18
All right, Mike, thank you so much for your time. We've really appreciated getting just even just 15 minutes to chat with you. And thanks to freshbooks for all the support that you've given to being boss and for helping us have a really great vacation here in Miami. We love everything that you guys are doing and I'm I cannot wait for fresh books to be the new fresh books to be released this summer. I cannot wait to see what you guys have. With that.

Mike McDermott 13:46
We are super excited as well. Support y'all and I just want to thank you for slowing down long enough to help your bosses you know spend a little time on this kind of unsexy but very important parts of their businesses. You can't avoid this stuff, folks. It's good to slow down spend some time on it and yeah, hope this is helpful.

Kathleen Shannon 14:03
And once you are making bank and like getting to count those lots of dollars, it's totally sexy.

Emily Thompson 14:09
I was gonna say, I think there's nothing sexier than just piles of bills and like dollar bills, not paid bills.

Kathleen Shannon 14:16
All right, thank you so much, Mike. And hopefully we get to chat with you again soon. Awesome. Thanks to you both have a great day. And hey, don't forget that you can try fresh books for free by going to freshbooks.com/beingboss and enter being boss in the How did you hear about us section?

Emily Thompson 14:35
Did you like this minisode Be sure to check us out on our website at beingboss.club. There you can find more from being boss including our full episodes minisodes and blog posts. And while you're there, be sure to sign up for our mailing list so that you can get access to behind the scenes and exclusive content from Kathleen and myself to help you be more boss in your work and life. Do the work be boss