Communicating ARR

Today, I feel a bit tense. Mentally, I am preparing for an interview or discussion, or I’m not quite sure what to call it. I will be talking with the founders of a team whom I greatly admire, as they have already achieved something in the field of information security. We have talked before. At that time, they wanted to offer me a job, but I already had an assignment.

During that conversation, it became clear that they could not offer enough to bring me closer to my goal, or what I would consider an average European developer salary. So, I’m already worried about the discussion. Will we be nostalgic about information security, or will we again manage to negotiate about a collaboration? And will I be dumb enough again to mess up the negotiation?

Communication Problems

If nothing else, I know very well that I’m bad at communication. Oh, no… if it’s a conversation about an interesting topic, I can talk for hours. It’s just very hard to follow me. At least for those who don’t have similar experiences.

So, I’m not surprised why I dislike talking with HR people, headhunters, sometimes developers, system administrators, security specialists, and the list goes on. They don’t understand what I’m asking. And when I explain why I am asking, they don’t understand the reasons that led to the question. So, they don’t understand me. Or perhaps I’m not good at explaining to others what I want to say?

I won’t know others at first sight, but I have already managed to recognize a few categories. What if, in the meantime, I thought about my own communication?

What is the purpose of the negotiation?

I always forget this, but a project interview is also a negotiation. First, we get to know each other. We talk about possible plans. Then, after a while, we move on to pricing. Nowadays, we turn to pricing too quickly, and it excludes further negotiations.

Every party comes to the negotiation with a purpose. I, as a contractor, of course, want to negotiate for as much as possible, for as little work as possible. The other party, as the client, wants to execute the given assignment for as little as possible. (Side note: Of course, we got involved in this crazy way of thinking again during our talk.)

In a previous article, I already proposed a possible pricing strategy. But this might be scary for many. Just briefly the amounts:

  • 80 euros, hourly rate for consultation
  • 650 euros for a workshop or a day of joint work
  • 2500 euros per month for a non-exclusive collaboration
  • 6500 euros per month for an exclusive contract

Oh my god, these numbers. Well, yes, that is really unaffordable for many.

But what I may not communicate well is that the goal is to reach the average 100,000 euros ARR within 4 years. I try to view myself as a business person, a company. So my goal, I hope, is clear. The question is, how can we achieve this ARR together?

But what might be the other party’s goal? I’m not naive; of course, they also want to increase their ARR or MRR while keeping their expenses low. Here comes the communication problem, as there seems to be a conflict of interest. I’m asking for too much.

However, that’s not my goal. Instead, it’s somehow to increase my ARR. How? By increasing the other party’s as well.

How can this be achieved?

How to jointly achieve a possible ARR growth is not a simple topic. Let’s just say that the value is not necessarily in monetary terms. But I could perhaps explain this better in a joint project. (wink :D)

  • What is the value of a well-written blog post? Maybe 1 euro after 1000 reads… That doesn’t sound like much. But what if among the readers, there is someone willing to pay 650 euros for a workshop? Then the ratio is much better.
  • What is the value of a low-paying client? As much as they pay? Or a referral to a better-paying client?
  • What is the value of having a beer while brainstorming on a project? Ah, that’s an expense. Or perhaps we are working on a new potential ARR-increasing solution.

If I knew all the answers, likely, my ARR goal wouldn’t be 100,000. Nor would the potential clients’. But you have to start somewhere. The simplest way to do this is to build relationships. In other words, gaining or acquiring information through others.

A Different Interpretation of Pricing

It’s no wonder others can’t follow my way of thinking. I’m thinking in business. Let’s convert the price table to ARR and MRR. Maybe it helps a bit.

  • 80 euros per hour. That’s 80x8x21, which is 13440 MRR, which is 161280 ARR, thus exceeding the target by 61%. (I must be doing something right)
  • 650 per workshop. 650x21, which is 13650 MRR, which is 163800 ARR, thus exceeding the target by 63%. (A bit cumbersome, but feasible.)
  • 2500 per month, that’s 2500 MRR, which is 30000 ARR, thus only achieving 30% of the target. (Something more is needed)
  • 6500 per month, that’s 6500 MRR, which is 78000 ARR, thus only achieving 78% of the target. (Close, but there’s room for improvement)

Could this be combined? Why not?

  • A client pays 2500 monthly for collaboration. 30%
  • One workshop a week, that’s 2600, about 30%
  • Occasional assignments, say, based on an agreement at 80 euros for 25 hours 2000, which is 20%
  • Selling digital content or another product monthly for 2000 euros, also 20% This meets the set goal. And countless variations exist.

Another important note is that this is an average ARR, which means 400,000 over 4 years. Why this amount? You can find out about it in the article.

Could this be split differently? Why not?

  • First year 30,000, which is a 30% ARR target; this could be achieved with one non-exclusive contract, or say, 4 workshops weekly.
  • Second year 60,000, which is 60% ARR, perhaps one client, a few workshops, and some digital content.
  • Third year 120,000, this is 120% ARR. With the client, I have been working with for three years but now on an exclusive contract. Plus, other digital content.
  • Fourth year 190,000, this is 190% ARR. Perhaps an exit? Not mine, but yours. :)

The only question left is how we can help each other achieve this. Or, a more important one, how can I help you achieve something similar?