Moderated by Susan Shaw, as part of
The UX Researchers’ Guild
This is an abridged version. View the full presentation here.

​In this session, Susan Shaw shares her expertise in UX Research by exploring the most effective methods she has used in the automotive industry.

Types of UX Research

Numerous methods are available and can be used in UX research. As explained on the Nielsen Norman website, the following chart compares “20 methods mapped across 3 dimensions and over time within a typical product-development process.” For more information, visit https://www.nngroup.com/articles/which-ux-research-methods/.

Of these, Susan chose to discuss in this session the following methods which are most common in the automotive industry:

• Usability Benchmarking
• Journal/Diary Studies
• Focus Groups
• Card Sorting
• Interviews
• Usability Testing

Using Usability Benchmarks in UX Research

Usability benchmarking is tightly scripted usability studies using precise and predetermined measures of performance, usually to track usability improvements of a product over time or compare with competitors.

All OEMs (Original Equipment Manufacturers) look at what other OEMs are doing well to improve their own features. An effective way to do this is by creating a form or questionnaire of what you want to know. Then using that as a guide, look at that feature in every vehicle you come across.

The following image shows the icons each OEM uses for the same dashboard feature. They are similar but may not be clear from one vehicle make to another, what the image means.

Other examples of where usability benchmarks are used in the automotive industry include:

• Exploring how many steps users take to turn off Forward Collision Warning systems.
• Understanding how users access the preset button for their favorite radio station, what shape/size the climate control knob is, and whether a driver can reach/adjust these controls without looking directly at them.

Journal/Diary Studies

Diary Studies are used to understand long-term user behavior and experiences, give contextual insights about real-time user behaviors and needs, and help define UX feature requirements. Participants in a journal/diary study use a mechanism (e.g., paper or digital diary, camera, smartphone app) to record and describe aspects of their lives that are relevant to a product or service or simply core to the target audience.

Diary Studies are typically longitudinal over an extended period of time (a few days to a few months) and can be done only for data that participants can easily record. During the defined reporting period, study participants are asked to keep a diary and log specific information about activities you as the researcher, are studying. To help participants remember to fill in their diaries, they may be periodically prompted through a notification received daily or at select times during the day.

(Image from: https://www.nngroup.com/articles/diary-studies/)

In a previous diary study, Susan combined the written log with video recordings. Qualified participants were given an instrumented vehicle (with cameras and other equipment) for 100+ days and asked to log their use daily. In addition to the data from the daily logs, researchers watched the video recordings from the installed cameras to record actual use versus reported use. In this study, she wanted to discover if people used a newly installed alternative technology or defaulted to using what currently existed.

These studies usually take place over an extended period for multiple reasons: (1) to get long-term data and (2) to ensure people were comfortable and past the initial awkwardness and acting naturally. Over time participants tend to “forget” cameras are there and act more naturally.

Focus Groups

Focus groups are an informal technique to assess user needs and feelings both before interface design and long after implementation. In a focus group, 4-15 users come together to discuss issues and concerns about the features of a user interface. The group typically lasts about 1-2 hours and is run by a moderator who maintains the group’s focus.

In a focus group setting, spontaneous reactions and ideas can be more readily observed.  In these groups, you can ask participants to discuss how they perform activities that span many days or weeks: something that is expensive to observe directly. However, researchers can only assess what customers say they do and not the way customers actually operate the product. Since there are often differences between what people say and what they do, direct observation of one user at a time should supplement focus groups.

Problems that can arise with focus groups is when one person monopolizes the conversation, when a participant doesn’t talk, or when someone just goes along with the crowd. The key to getting good data from a focus group is:

• To have a good moderator, one that not only keeps the group on task but also,
• Ensures that opinions and feedback from all group members are being represented.

(Image from: https://www.questionpro.com/blog/focus-group)

Card Sorting

Card sorting is a quantitative or qualitative method that asks users to organize items into groups and assign categories to each group. This method helps create or refine the information architecture of a site by exposing users’ mental models.

Part of making a site easy to use is organizing information so that people find what they’re looking for. Too often, content is structured based on what makes sense to the company, not to the users.  One of the primary ways to figure out an organization scheme that best matches users’ mental model is through card sorting.

Let’s imagine that you’re designing a car-rental site. Your company offers around 60 vehicle models from which customers can choose. How would you organize those vehicles into categories where customers can quickly find their ideal car rental? Your company might use technical terms such as family car, executive car, and full-size luxury car. But your users might not understand the difference these terms. This is where card sorting can help: ask your users to organize vehicles into groups that make sense to them, and then, see what patterns emerge.

As it relates to the automotive industry, Susan has done studies to determine the best locations for controls on a vehicular dashboard. She created three categories: Steering Wheel, Touch Screen, and Center Stack.  Her intent was to discover which controls needed to be duplicated and which did not. Instead of always relying on post-its and paper, she and her team have also put users in the vehicle and given them actual-sized buttons with velcro and asked them to place them where they best saw fit/what made sense to them when driving down the road and needing to make an adjustment.

Interviews Versus Usability Testing

A user interview is a UX research method during which a researcher asks questions about a topic of interest (e.g., use of a system, behaviors, and habits) with the goal of learning about that topic. Unlike focus groups, which involve multiple users simultaneaously, user interviews are one-on-one sessions, although several facilitators may take turns asking questions.

(Images from:https://www.nngroup.com/articles/user-interviews/)

Although you may feel that doing a UX user interview is simple and straightforward, there is more to a good interview than many people realize. You need to know how to dig a little more, make participants feel comfortable and willing to talk and keep participants on track.

Interviews give insights into what users think about a site, application, product, or process. They can point out what site content is memorable, what people feel is important on the site, and what ideas for improvement they may have.

Usability Testing/Clinics

Usability testing participants come into a lab, one-on-one with a researcher, and given a set of scenarios that lead to tasks and usage of specific interest within a product or service. In a usability-testing session, a researcher (called a “facilitator” or a “moderator”) asks a participant to perform tasks, usually using one or more specific user interfaces. While the participant completes each task, the researcher observes the participant’s behavior and listens for feedback. These sessions are best done in person but due to the pandemic, many have had to be done remotely as well.

(Images from: https://www.nngroup.com/articles/usability-testing-101/)

Which UX Study is best

So, now that you know a bit more about the most common research methods in Automotive, which one should you use? No one method is best in any given circumstance. It all depends on where you are in your research, what you are trying to find out, and how much information you want and need.

The following chart is a helpful guide to determine which method will work best at which stage of a research project.

You also need to understand what your budget is before looking at how many participants are involved, or where the testing will take place. Susan shared that when she was doing a study on Lincoln Sedans, she focused on an older population. In contrast, while testing the KIA Soul, she’d go to campuses or large cities such as Los Angeles or New York where she would find younger populations.

While this session focused on identifying methods for the automotive industry, these principles can be applied to any project. Be willing to do the work to understand your project, stakeholders’ expectations, and user involvement to create the most effective and successful study under any situation.

About Susan: Susan Shaw has a BSE, in Systems Engineering from the University of Illinois and an MSE, in Industrial Engineering from the University of Michigan, and is a Certified Professional Ergonomist. She has worked as an ergonomics engineer and consultant in automotive usability.

For seven years Susan was a Senior Human-Machine Interface/UX Engineer at Hyundai Kia America Technical Center, Inc. She is currently the ADAS Customer Experience Research Lead at Ford. Susan is also a Board Member of the UX Researchers’ Guild.

Moderated by Jillian Hudson, UXC; UXr Guild Board of Directors
This is an abridgment; view the full video presentation here.
Session 3 – December 8, 2022

Jillian Hudson shared in her first session that UX Strategy is the user plus the business. As the researcher, you combine users’ needs with business goals and create projects that help both sides. 

In her second session, Jillian shared some tips on identifying and creating UX champions, those stakeholders who can help you bring your UXr expertise to the table.

So, now that you have those stakeholders, what do you do with them? That was the focus of Jillian Hudson’s third session in her Leveling Up with UX Strategy series.

Collaborating with UX Champions

UX champions can be at multiple levels in a company. What you can accomplish may depend on where they sit within the organization.

With a product owner, for example, work with them on a project that you know has value to both the user and the business. Then, when you make the project a success, you both win. In this way, you can talk to and influence these stakeholders. Unfortunately, this isn’t a magic formula that is 100% successful. But you can work with the ones that will work with you. This will result in viable projects and a win/win situation.

It is then important to make others aware of the work that you’re doing together and how amazing it is that they are working with you. Take advantage of opportunities to provide kudos and praise within the company to be seen as a generous contributor.

If it is a VP of Sales that you need to collaborate with, showing them the ROI of fixing some of the user’s pain points can help them meet some of their goals. You can then help them see that they will sell more by removing inefficiencies. Find ways to make it easier for them which will help address the pain points and solve the problem.

Persuasion Tips with Stakeholders

Robert Cialdini and Steve Martin wrote a book in 1984 called “The Science of Persuasion.” In this work, they outline six suggestions on how to work with, and persuade people to your side. But these ideas must be used authentically and ethically to bring about the desired results.

Here are their six shortcuts and how they might apply in your interactions with stakeholders.

1. Reciprocity: Obligation to give when you receive. Key: Be the first to give and make it personalized and unexpected
2. Scarcity: People want more of the things they can have less of. Key: Focus on the unique benefits and what they stand to lose
3. Authority: People follow the lead of credible, knowledgeable experts. Key: Signal to others what makes you an expert before you attempt to influence 
4. Consistency: People like to be consistent with previous behaviors & actions. Key: Ask for small commitments to new behaviors before requesting larger ones
5. Liking: We respond best to people who complement and cooperate with us. Key: Seek ”common ground.” Share genuine compliments.
6. Consensus: People will look to the actions of others to determine their own. Key: Highlight what many “similar” others are already doing

Understanding Stakeholder Expectations

When working with a new group or product team, try to meet with them one-on-one. Ask: “What are you working on? What are your pain points? How can I help you?” Go in assuming that whoever you’re going to meet with wants to work with you to be successful until they prove otherwise. 

If they’re not going to be cooperative, help them as best as they will allow, and then spend your energy with the people who want to work with you.  

To understand expectations, you must understand your communication style and that of the stakeholders you’re working with. This is more than just speaking the language of business to business stakeholders. Knowing this will make your client more comfortable and receptive to what you share. It’s all about what Jillian refers to as “turning the UX lens inside.” It’s not about the users so much as it is about the user experience of working together on a product team.

Building Authority

Since we are all fallible, how can you effectively build authority amid mistakes and encourage others to share their thoughts with you? This is indeed a process requiring confidence on your part and trust on the part of the stakeholders. 

If ever the adage “Honesty is the best policy” applies, it is here. Owning your mistakes may seem like a step backward, but in reality, it helps your stakeholders know that you are taking responsibility and want to make things right. This in no way lessens your authority; it makes you human. And if you admit your mistake before anybody else notices, you’re coming from a place of power.

There’s no need to beat yourself up over errors or apologize profusely. Admit your mistake, clearly communicate how you will resolve the error, and then do it. You will be seen as honest, ethical, and trustworthy which will strengthen any relationship. And you want to be a trusted resource, a sounding board, and a brainstorming partner when your stakeholders are thinking through a business problem. 

Create a Long-term map

Jared Spool speaks on “envisionment” or looking down the road to where you want to be. You can do this as a researcher by bringing together key stakeholders and asking them where they want to be in five to eight years. They will likely state what they can accomplish with current resources. But to get them to envision a different future, you need to help them to focus on where they want to be, regardless of current circumstances. It be a challenge for many stakeholders. But it is the only way to create effective and lasting change. Once they have this in mind, do some reverse engineering to identify what needs to be done to reach that future objective. 

It will take time and effort and will be a new approach for many clients. But the benefits, both in the short-term and the long-term, will outweigh any discomfort. 

Using Strategic Discovery in UX Research

What is Strategic Discovery? It is continuous research: focusing not on a single project in a research study but on a user persona. For example, if you’re working with a sales team, you have a sales manager, a sales rep, and a sales system; that’s three personas. Strategic discovery emphasizes the need to look at all three personas to learn how they’re doing on the tasks that you’re making changes on and then identify their pain points. Ask yourself: “How can I help improve things for these users?” That will get the stakeholders that they want.

Presenting the results of a Strategic Discovery study is more complex and requires much more analysis as you’ll cover many disparate initiatives in the same session. But once again, the benefits will be worth the effort.

By incorporating these principles into your stakeholder relationships, your UX champions, you can be the person who sees the whole picture and can then guide them toward success.  

Jillian Hudson is NN/g UX certified in Research and Management. She worked as a UX Product Designer/Usability Expert for American Airlines and as a UX Strategist and Researcher for Bank of America, and Wells Fargo Bank. She is currently the Principal UX Research Strategist at XPO Logistics. Contact Jillian through the UXr Guild Slack channel.

Moderated by Michele L. Oliver, Ph.D., UXr Guild Board President, with Guest Speaker Reem Ayouby
This is an abridgment; view the full video presentation here.
Session 3 – November 10, 2022

In session two of “The Q&As of Quantitative UX Research Methods,” Michele Oliver identified various tests and when to use them. The first section here is a continuation of this previous discussion.

How to Do a Chi Square Test in Excel

For A/B Testing, we’re going to do a Chi Square test. An example of using this test was when users were asked to update financial aid holds, and they were in one of two conditions. In one case, the null hypothesis is that there was no difference. Before doing the test, there were a few calculations we needed to do. This would be easier in Spss, but if you don’t have access to that, here are the steps using Excel:

1. Set up your table with frequency counts. Here you will see the raw data. Then convert the raw data into frequency counts to see how many were successful in each group and how many failed per group.
2. Calculate the totals for the rows and columns.
3. Calculate what is called Expected Values in a new table. In a Chi Square test, the observed values are what you get in the test itself, and the expected values are the calculations that were made. We then need to compare these two values. Do this in a new table to clearly see the data. The expected value is equal to the row total multiplied by the column and then divided by the overall total. Exp = (Row total x Column total) / Overall totals.
4. Calculate the actual Chi Square value. To find this, take the observed value and subtract it from the expected value. Once you do that, you square it. Then divide that by the expected value. X 2 = ∑(O – E)2 /E. This is easier to do in Excel because you just build the formula, and then you can do this with all your values separately. Then add them all up to find that Chi Square value.
5. Calculate what is called Degrees of Freedom (df). Use a 2×2 matrix with two columns and two rows. To calculate this, it is Row minus one, multiplied by the Column minus one. df = (r-1) x (c-1).
6. Then put this calculation into the formula bar in Excel to calculate the p-value.
7. Summarize your results by comparing the two groups.

Using Advanced Statistics for UX Research

(The following sections were presented by Reem Ayouby.)

While basic statistics are sufficient for many studies, advanced tools result in a more in-depth analysis. Some researchers might shy away from complex mathematical equations, but it is possible to do this without knowing all the formulas. But first, let’s set the stage.

The Difference Between Function and Feature

A function is what needs to be done. This can be related to the Jobs to be Done framework. A feature is how the app enables the user to get that job done. These definitions are important because they can be used interchangeably. An example is the A/B Test where the same function can be performed in two different ways and one may work better. The function is the same; there are just two ways to implement it through features.

The Importance of Data Visualization

Data visualization allows users and stakeholders to see, understand, and interact with the information you are presenting.

Visualization tools show how different factors will change; how two variables behave together. If you add a third variable, you can observe any interactions among them. This is helpful when presenting information and helping others see the ramifications of adding other variables into the equation. And if you add an interaction term, it can get even more difficult. Exploring these tools can help identify which research questions these can answer for you.

Can we use correlation? (IV and DV) – the correlation visualization. 

http://statkat.com/visualization-regression-one-predictor.php

Can we use regression? (2 IV and DV) – the linear correlation visualization

http://statkat.com/visualization-regression-two-predictors.php

What if there is interaction effect visualization? – the interaction effect visualization

http://statkat.com/visualization-regression-moderation.php

What is Correlation?

Correlation tells us when two variables are moving together, and one is higher, the other one will also be higher, and if one drops, the other will drop also. That’s the correlation, but sometimes there is more than one variable. For example, perhaps you want to know which products an individual will use as they grow older. Instead of just looking at someone’s age, you may want to add a variable such as a personality characteristic. If both go up, then a certain dependent variable will change similarly. 

If two independent variables may influence an outcome, and then a third is added, it starts to get complex in terms of how we can visualize this and how well we can make sense of what’s going on with the data.

What is Quantitative UX Research?

To answer this, a group of research scientists at Facebook came up with the following definition:

“Quantitative UX research delivers insights about people. UX researchers often approach research projects with questions such as: What are the human motivations for using these products? How do people perceive and use the product? How do they react emotionally and physically to it? What do they like and dislike about specific features? What role does the  product play in their daily life?” Mary Nguyen and colleagues, 2017 

By removing human motivations, perceived use, reactions, likes, and dislikes, you can often discern some of these through your qualitative research. So, why use quantitative research to revisit these ideas?

Qualitative research usually involves small sample sizes, not interviews with hundreds or thousands of people. With this small sample size,  research results may or may not generalize to the wider population you hope will purchase your product. Quantitative research can give a sense of the magnitude and strength of the relationship and how to generalize these findings to this wider population.

An example of a framework that is used in UX research is the Perceived Ease of Use and Perceived Usefulness. As researchers, you may frequently focus on Perceived Ease of Use to see how easy a product is for people to use. If they are not using it, it might be too difficult. You will then need to determine how to make the process easier and more intuitive. 

But then there’s also the Perceived Usefulness. Getting the Perceived Ease of Use right will remove hurdles. But it still has to be useful, which means it needs to be perceived as having useful functionality. With that, you can go into a lot of depth.

This is a typical model often used in user research in academia, but it also introduces the idea of causal inference. The idea is that when the perceived functionalities are in place, that leads to perceived usefulness, which leads to use, which then would lead to an increase in subscription level. It may even lead to customer satisfaction and loyalty. 

The Dichotomy of Qualitative and Quantitative Research

The following breakdown of research approaches moves from qualitative methods through mixed methods to quantitative methods is from a presentation by Chris Chapman at the Quantitative UX Research Conference held in June 2022.¹

Example: Social Ethnography:

• Field Work
• Ethnography
• Interviews
• Discussion groups

Example: Digital pen

• Usability assessment
• Beta/trusted testers
• International studies
• Prototype testing

Example: Profile CBC

• Qual/Quant groups
• Satisfaction & CSat
• User profiles
• Survey research

Example: Sentiment overview

• Conjoint analysis
• Sentiment analysis
• Competitive analysis
• Psychometrics

Example: Feature demand

• Regression models
• Multivariate stats
• Casual modeling
• Market estimation

When looking at regression models, you are trying to understand how various factors affect your variable of interest, often referred to as a dependent variable in multivariate statistics. But, you cannot consider that many variables by using linear regression. This is because the relationship between these variables may become complex. The complexity must be captured by the statistical model for useful conclusions to be drawn from the analysis. 

A solution to this is to use structural equation modeling. A friendly and more forgiving variant of structural equation modeling is partial least squares structural equation modeling (PLS-SEM). It is friendly because it is visually appealing. And it is forgiving because the statistical assumptions which must be respected are less demanding than for other statistical methods with similar capabilities.

An example of where using structural equation models was helpful in a recent study was exploring the impact of social media use on well-being. This model helped address questions of the influence of motives and perceived social media functionality on social media use; how social media use affects an individual’s well-being; and how emotion regulation is involved in the outcome.

This scientific research revealed that although there is a risk for negative impacts, it is possible for social media use to have positive impacts on individuals’ well-being. With this knowledge, researchers could then help companies research and design electronic social networks that would have the desired impact on users and society.

The full presentation offers an in-depth analysis of the use of structural equation models in this study.

About the speakers:

Michele Oliver has a Ph.D. in Experimental Psychology with an emphasis on Psychophysiology, Statistics, and Research Methods. She has been a Senior Lecturer and Adjunct faculty member. She is currently a Principal UX Researcher at Ellucian, a provider of SAAS solutions for higher education. Contact Michele at michele@uxrguild.com or through the UXr Guild Slack Channel.

Reem Ayouby, Ph.D., is a UX researcher and data scientist who leverages a combination of qualitative and quantitative approaches in her research. Her doctoral research focused on the motives, perceptions, use, and impacts of social media platforms such as Facebook. Reem holds a doctorate in Business Technology Management, a master’s degree in Management Information Systems, and a bachelor’s degree in Commerce with a major in Management Information Systems from the John Molson School of Business, Concordia University.

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¹ CN Chapman (2022). Two UX Research Cases. In CN Chapman, KZ Xu, M Callegaro, F Gao, and M Cipollone, eds. (2022). Proceedings of the 2022 Quantitative User Experience Conference (Quant UX Con). June 2022, Sunnyvale, CA.

Moderated by Michele L. Oliver, Ph.D., UXr Guild Board President
This is an abridgment; view the full video presentation here.
Session 2 – October 13, 2022

This session in The Q&As of Quantitative UX Research Methods series is an extension of the first session. In this session, Michele discussed different statistical tests and how and when to use them. 

What are the Different Types of Data?

Identify data to identify which test to use:

• Nominal – For this kind of data, think name. You can use any type of labeling (words or numbers) but the categories assigned don’t mean anything. For example, 1 = Mac, 2 = PC, 3 = Mobile. It’s more helpful to think of a name. You can use any kind of label. Categories are different, but there is no difference between the name and the label. 
• Ordinal – For this data, think rank or order. These have a specific order and are typically labeled with an order or rank. However, there is no difference between the categories. Rank or order is going to be important. Example – the months of the year: there’s an order. But the differences between the months don’t matter. In research, we speak of the five-point Likert scale, where one is very difficult and five is very easy. Those ranks mean something. 
• Interval – This categorizes precise and continuous intervals, but it has no true zero. As an example, think of temperature. If we went to zero, it doesn’t mean there is an absence of temperature – zero degrees mean something. 
• Ratio – This is the same as Interval data, but it has a true zero. Because the two are so similar, except that true zero, that data is analyzed the same way, so it is usually called interval/ratio data.

What Kind of Test Should I Run Based on the Type of Data?

When you can identify what kind of data you have, it will help narrow down the types of tests which would be used in any given scenario. First, let’s break down Categorical Data, then we’ll look at Numerical Data.

A. Categorical:

• Nominal – How many variables do you have?
  a. Only one variable – Chi-Square test – tests one variable with a distribution. Test against the norm.
  b. Two or more variables – Chi-Square test of independence. Testing them against each other.
• Ordinal Data:  Are you investigating relationships between variables or differences between groups?
  a. Relationships – Use Spearman’s Rank Correlation
  b. Differences – Are you testing differences between independent groups or within your groups (repeated measures)?
  i. Independent groups – Use Mann Whitney U
  ii. Within groups –  Use Wilcoxon Signed Rank Test

B. Numerical – Are you investigating relationships between variables or differences between groups?

1. Relationship – Do you have a true Independent variable (IV)?
   a. Yes – Regression.
   b. No – Is the distribution normal – can we assume a linear relationship?
   i. No – Spearman’s Rank Correlation
   ii. Yes – Pearson’s r
2. Differences – How many groups are we comparing?
   a. One group – Do I  know the population Standard Deviation?
   i. Yes – Z-test
   ii. No – 1 sample t-test
   b. Only two groups – Can we assume equal variances?
   i. Yes – Independent samples t-test (or paired t-test for repeated measures)
   ii. No – Mann-Whitney U or Wilcoxon Rank sum test
   c. More than two groups – Can we assume equal variances?
   i. Yes – Analysis of Variance (ANOVA)
   ii. No – Kruskal-Wallis Test

Statistics in Action

You must have a clear understanding of what you and your teams want to know and understand what your variables are so that you can identify the most appropriate test for your study. 

Usability Testing: Create a New Communication Plan

Steps for Running an Independent T-test Using Excel

1. Select “Data” from Menu
2. Select “Data Analysis”
3. Select t-Test: Two Square  …  Equal Variances
4. Select the range for the first variable
5. Repeat the second variable
6. Ensure that “Labels” is checked
7. Set “Alpha” to 0.05
8. Set a range for the output to appear
9. Write up your findings!

Some tips on using Usability Tests:

• As far as the sample size for a quant usability test, try to get about 30. The idea is that as you approach 30, your distribution starts to look more normal. That’s the rationale since your goal is to get as close to our normal distribution.
• Don’t be afraid to collect more than what’s asked. You have participants right there, so get as much information as possible. 
• The 0.05 is standard – you will want to allow yourself a 5% error
• If you wonder when time on task is most appropriate in a usability test, it depends on what your team wants to know. 
• Use a one-tail test if you are predicting the difference to be in one direction. But if you have two prototypes and you’re considering going in two different directions, then you should go with a two-tail test. 

Surveys: (JTBD) Jobs to be done

An example of when surveys would be used is when you have no existing data anywhere. You may have assumptions but no data. Conduct several interviews to identify needs and then create needs statements from that data, to be put into a survey to validate those needs. This is where the value of JTBD or Jobs To Be Done, as described by Tony Ulwick, comes into play.

Steps for Conducting a JTBD Framework

1. Conduct interviews to identify needs.
2. Validate needs via a survey (importance satisfaction.)
3. Create frequency counts for each of the responses. How many people reported Not at all, Somewhat for both important and satisfaction metrics.
4. Create importance and Satisfaction proportions. 
5. Divide the proportion by 10.
6. Calculate Satisfaction Gap Score = Importance Score – Satisfaction Score
7. Calculate the Opportunity Score = Importance Score + Satisfaction Gap
8. Rank order the opportunity scores.

What About Correlations?

The good thing about correlations is that you can throw them all into the analysis. Be mindful that the output will only look at pairs at a time. Because of this, you don’t have to do separate correlations for each pair that you’re interested in. 

Steps for Conducting a Correlation 

1. Select “Data” and then “Data Analysis.”
2. Select “Correlation.”
3. Select the Input Range from your spreadsheet.
4. Select the output range.
5. Select Ok.
6. Write up your results!

In the third and final session in The Q&As of Quantitative Methods series, Michele will explore more detailed statistics including A/B Testing, Chi-Square, and effect sizes. These more advanced calculations may seem daunting, but Michele will explain how all these, and many more calculations, can be done using an Excel spreadsheet. 

Michele Oliver has a Ph.D. in Experimental Psychology with an emphasis on Psychophysiology, Statistics, and Research Methods. She has been a Senior Lecturer and Adjunct faculty member. She is currently a Principal UX Researcher at Ellucian, a provider of SAAS solutions for higher education. Contact Michele at michele@uxrguild.com or through the UXr Guild Slack Channel.

Moderated by Raymond Lee, Founder, UXr Guild
This is an abridgment; view the full video presentation here.

In this “How to Freelance” session, UXr Guild Founder Raymond Lee dives into how to select and establish your business entity, as well as tax strategies, contracts, and collections.

What is an Entity?

An entity is something separate and apart from you; an organization that has legal rights and is created in order to conduct business. 

Does a Freelancer Need a Business Entity?

A natural first question is whether you really need to create an entity as a UXr freelancer. If so, which entity should you choose and when is the best time to create it?

To answer the first of these questions, it’s important to consider the following benefits that an entity can afford you:

• Protection from liability. Whatever goes wrong in your business can cross over into your personal life, taking assets to rectify the problem or compensate those harmed. This can include your home, savings, and cars. Most people are very interested in protecting their personal assets from business liabilities.
• Tax advantages. 
• Elevate the professionalism of your business. 

Ideally, an entity is inexpensive and easy to set up and maintain. Consider the following:

• Will you need to hire a lawyer to help you create your entity?
• What are the maintenance requirements and annual fees to keep it current?

What Business Entities Can a Freelancer Use?

Sole Proprietorship. With a sole proprietorship, you are choosing not to create an entity. You don’t have an entity apart from yourself. What are the aspects of this option?

• You are doing business as yourself.
• You can operate in your own name or a DBA (doing business as another name of your choosing). 
• If you use a DBA, you must file a fictitious business name statement (usually within your county), which notifies the public that you are doing business in that name.

This is the simplest way to conduct business and it is the way most freelancers start. Many researchers start this way and wait to see if they are successful. They create a separate entity only when business volume and conditions warrant. 

Corporation. Creating a corporation is a more complex and formal option. Here are some of the reasons why:

• Corporations are governed by laws that differ from state to state, or province to province in Canada. 
• They generally have a board of directors, the size of which you can determine, 
• Corporations have regularly scheduled meetings, where minutes of actions and assignments are kept
• Bylaws are created to determine how the corporation will operate. 
• The Board must ratify important decisions: such as borrowing money, going public, acquisitions, layoffs, etc.

Publicly traded companies need a robust system of governance. As an individual freelancer, you probably don’t need all of that structure and governance. it is generally more formal and complex than a solo researcher requires. A corporation, with its Board of Directors, has many benefits, one of which is shielding your personal assets from business liabilities. But if a corporation doesn’t hold regular board meetings and maintain accurate records, the validity of the organization, as well as its liability protection, can be challenged.

That being said, in Canada, this is the only entity available to freelancers. Here in the United States, however, there is another option available. 

LLC. This stands for “Limited Liability Company” and is an appealing alternative to Sole Proprietorships and Corporations.

• An LLC offers liability protection like a corporation but is less work. 
• There is no board of directors, meetings, minutes, or bylaws to be concerned with. 
• While LLCs can have many people, even up to 100 individuals, a single-member LLC is very simple and does not require an operating agreement.
• It is a low-cost alternative that is easy to set up by yourself without the need for an attorney. There may be annual maintenance fees, but these will be considerably less than with corporations. 

With all this in mind, when is the right time for a Sole Proprietor to set up an LLC? You could set one up at the beginning, but most independent contractors wait until their business grows before creating a separate entity. It makes sense to match the entity with your business growth.

What Are Liabilities for Freelance UX Researchers?

If you are protecting yourself against liability by establishing an entity, how risky is freelancing as a UX researcher? It is extremely low risk compared to other businesses. The chance of being sued is extremely small. Nevertheless, there are still some exposures that should be considered.

The first is if you’re freelancing on the side, and have an employment agreement that prohibits it, your employer could sue you for violating your non-compete. In this situation, the damages are likely to be small. Generally, the employer will just want you to stop freelancing, however, it could also result in termination.

A second scenario is being accused of violating a non-disclosure agreement where you’ve posted a case study online. Once again, your employer will probably just ask you to take it down, although there might be some other repercussions, including termination.

A final consideration involves proprietary research and participant data that you collect or have access to as a researcher. If, for instance, your laptop is stolen, such data could fall into the wrong hands. This is an area where you need to take real precautions because it’s likely your biggest exposure.

Which Business Entity Saves Taxes for Freelancers?

With a sole proprietorship, you don’t file a separate tax return because there’s no other entity to file a return, it’s just you. For your federal taxes in the U.S., you file a form 1040 and a Schedule C, which is where you put your profit and loss from your business. It’s very simple; you don’t have to have a second tax return. (In Canada, you would use a T1 General plus a T2125, a Statement of Business or Professional Activities). Whether in the U.S. or Canada, you can still write off many business expenses, such as traveling to a conference, buying supplies, or spending money on marketing. Writing off a home office and healthcare premiums are some of the trickiest, so it’s best to consult a CPA to know whether these are allowable in your situation.

With a corporation or LLC, you can be taxed twice, once at the company level and again as an individual, and generally, the company will require a separate tax return. If you want to avoid double taxation (and who doesn’t?), you can make an s-corp election, which allows the income to flow to the corporate shareholders or LLC members without taxation at the company level.  Hiring a CPA to do these returns is a typical expense of freelancing, as are any required annual renewals and fees. If there’s not an offsetting benefit to creating the entity, you probably don’t want to do it or you may want to wait until the benefits exceed the expenses. 

A very attractive option is called a single-member LLC. These are considered disregarded entities by the IRS, meaning they know that you are operating as a sole proprietor, so there is no need to file a separate tax return. You do of course need to keep separate books and know what your business income and expenses are, but those can be listed on a Schedule C of your individual 1040. Avoiding a second tax return can save you $500 or more per year and the taxes may be simple enough to do yourself.

Do Freelancers Pay Self-Employment Tax?

As an employee, you pay 7.65% of your wages in FICA tax which includes Social Security and Medicare. Your employer pays the other 7.65%, for a total of 15.3%. If you are a sole proprietor (freelancer or independent contractor), you are required to pay self-employment tax of 15.3% on your earnings. Because there is no employer, you pay both halves. If you set up an LLC, you can define some of the income as wages, and some as income for the LLC, therefore reducing the amount on which you pay self-employment tax (because it is only paid on wages). 

Here is a sample of what that breakdown might look like under these various entities:

Freelancers Can Save Taxes with an LLC

As an employee, if you earn $150,000 in wages you would pay $11,475 in FICA tax and the employer would pay $11,475.

As a Sole Proprietor, earning $150,000, you would pay self-employment tax of $22,950.

With the same income as an LLC, you could pay yourself $75,000 in wages, and pay $11,475 in self-employment tax. The remaining $75,000 could be income to the LLC, which does not incur self-employment tax, saving you $11,475. The same strategy can be followed with a corporation.

If you have a full-time job and are freelancing on the side making less than $25,000 a year, it may not be worth going to all this trouble to save less than $2,000 in taxes. So, your choice of entity and tax strategy depends on the size of your freelance business. 

Which Entity is Best for Freelancers?

To answer this question, you first need to determine your freelancing status.

• If you are freelancing part-time: a sole proprietorship may be your best option until you have enough income to warrant tax savings and need liability protection.
• If you are freelancing full-time, consider creating an LLC when your income level reaches $50,000 per year. You may also need an LLC to prove that you are an independent contractor, not an employee, in which case you may need to set it up earlier.
• If you are freelancing in Canada, you will need a Federal Business Number from the Canadian Revenue Agency at $30,000 in freelancing income to pay GST/HST, but a sole proprietorship can obtain one. LLCs do not exist in Canada, so the only option beyond a sole proprietorship is a corporation.

Do Freelancers Need Insurance?

Because the risks are relatively low as a freelancer, you may not need it. However, be advised that larger clients may require you to have it. They limit their liability by requiring you to carry insurance for data protection, for example. Liability insurance sometimes referred to as general liability, or professional liability which includes errors and omissions, are the most common policies. The premiums are relatively inexpensive since research is low risk.

Do Freelancers Need a Contract?

A signed contract or agreement is an important part of any freelance engagement. Big companies can be slow to approve contracts and the process can take weeks. With startups or smaller companies, the process can be much quicker. It is generally not advisable to begin working without a contract in place. 

The two most a Fee for Services Agreement (hourly) or a Master Services Agreement (fixed-bid or hourly). 

In a Fee for Services Agreement, you will summarize your hours and bill on a regular basis. The most common frequency is once a month, but billing more often, either weekly or every two weeks is advisable. This agreement may include the following:

• Type of work contemplated
• Roles of the parties
• Terms for billing and payment (such as hourly rate, billing and payment frequencies).
• Hours not disputed within 30 days are approved
• Attorney fee provision, venue, limitation of liability.

With a Master Services Agreement (MSA), you negotiate the master or overriding agreement and write a statement of work (SOW) that covers each project. Typically these are fixed-bid projects.

• The MSA covers all work you will do together
• Each SOW enumerates the scope, tasks, and deliverables in detail
• The total fee for the project, or an hourly rate 
• Payment schedule: typically a percentage of the total fee is paid upon signature of the agreement, such as 25%. The remaining payments are usually tied to certain deliverables, such as acceptance of the research plan, completion of interviews, and delivery of the final report.
• Be aware of the possibility of scope creep, which is increasing the work to be done for the flat fee that was agreed upon. 
• If additional work is required outside of the original scope, specify an hourly rate so that you will be compensated for that work.

With either type of agreement, you can hire an attorney to draft it, or create a custom version of a template. The following website, www.wonder.legal/us, has easy-to-use templates for a nominal fee. 

How to Collect as a Freelancer

While you can’t prepare for every contingency, there are a few things you can do to improve the likelihood of being paid what you are due. The first suggestion is to bill often, preferably weekly or bi-weekly, but at least monthly, and call to collect if the invoice is not paid when due. This is especially important if you are working with a startup or a smaller company with unknown creditworthiness. It takes a bit of time and organization to stay on top of this, (and let’s admit, it’s nobody’s favorite thing to do) but you are more likely to be compensated if you follow up promptly. 

Another option is to require a retainer. A retainer can be a monthly amount that you have the client pay you towards your hours. It doesn’t have to be a fixed bid – you still might be billing hourly. You state your hourly rate and estimate how many hours you plan on working during the following month. Then ask for all or a portion of that upfront. At the end of the month, determine what else they might owe you and bill accordingly. 

When you are not paid as contracted, whether on a retainer or regular invoicing, don’t let too much time go by before checking on what is going on. That’s one way you might discover a problem.

Why would a client not pay? 

• Disagreement about the work
• The client does not have the money (but may insist they will pay when they get it).
• Never intended to pay. 

If it’s a local client, it is more likely that you know them, they know you, and they will pay. But if it is someone you met online, it is possible that they are not ethical. Be prepared and protect yourself.

Is Your Freelance Client Running Out of Money?

• Always be aware that it can happen, especially to start-ups
• If you’re worried, ask for 50% pay in advance or ask for a retainer. 
• Bill weekly and make invoices due in 10 days.
• Stop working if they stop paying. 

If they are not paying for your services, the best recourse is to stop working until you have been paid. This will probably have a greater impact than anything else you can do. This doesn’t happen often, but if you are owed a large amount of money, you may need the services of an attorney. A warning letter from a lawyer is an inexpensive way to get a company’s attention and may get results.

 

Raymond Lee is the Founder of the UX Researchers Guild. You can find him on LinkedIn. This presentation included guest speaker John Thompson, a New York-based freelance lawyer, who deals with freelance contracts and legal issues on a regular basis. You can view John’s full video appearance here.

Moderated by John J.Thompson, Esq, Guest Speaker on How to Freelance
This is an abridgment; view the full video presentation here.

John Thompson, a New-York based attorney who works with freelancers, gave the following presentation to the UX Researchers’ Guild.

Can Your Employer Stop You From Freelancing?

In some cases, yes! As an employee, you owe a “duty of loyalty” to your employer to protect their interests and you’re bound to keep the agreements you’ve made with them. You need to review the employment agreement that you likely signed when you were hired and have since completely forgotten about. Here are four clauses to look for that allow your current employer to limit your freelancing:

• No conflicts
• Non-solicitation
• Non-compete
• Non-disclosure

The first is a no-conflicts clause. This says that while you’re working for the company you can’t do anything on the side that would conflict with that company. For example, while you’re working for Coke you can’t get a side gig with Pepsi. The nice thing about this provision is that when you leave your job, the no-conflict provision no longer applies.

A second important clause to be aware of is non-solicitation. This is an agreement to not take away or encourage clients or employees to leave their relationship with your employer. If you’ve signed a non-solicitation agreement, you may be prohibited from freelancing with your employer’s clients, even after you leave. And you may also be restricted from inviting your co-workers to join you in a freelance endeavor.

The next clause is the non-compete. This is different than non-solicitation in that it specifies that you will not work for a competitor. This provision applies even after you leave the company, but most courts require the provisions to be very narrow. For example, you may only be restricted from working for direct competitors, in the same geographic area, for 12 months after your departure from the job. It’s common that non-competes go beyond what the law allows, so before you assume you can’t take a particular opportunity, you should consult with an attorney. The federal government and various state governments are even considering banning these completely.

The fourth common restriction inemployment agreements is a non-disclosure or confidentiality agreement. This states that you will not share confidential information from your employer with other parties outside of the business. For obvious reasons, they do not want their confidential business information to fall into the hands of competitors. This has important implications for showing case studies in your portfolio. You should obtain your employer’s permission to show the work you’ve done for them. You may have to scrub the company name and proprietary findings in order to gain their permission, and in some cases, that may not be enough. In those cases, it may be possible to obtain permission to show the work in person, but not display it on your website or leave it in a form that could be transmitted to others.

Many employment agreements also require you to obtain approval from management before taking on outside work while still employed. If your side work is not seen as a threat, maybe it can be framed as professional enrichment that will allow you to gain experience that will benefit your employer.

Do Freelancers Need a Contract?

You should have your own well-written freelancing agreement or contract which helps align everyone’s expectations. If you’re a freelancer and you’re starting out, plan on looking at a lot of contracts from your customers or having them ask you for a contract. Either way, it’s something you want to get comfortable with and be familiar with. John believes the best analogy for the importance of contracts is “Good fences make good neighbors.” It’s not just about the worst-case scenario. It really is about getting on the same page with your new client and is a great way to keep everybody happy. 

What are the Terms in a Freelancing Agreement?

Crafting your own freelancing agreement or contract is an important skill that cannot be overlooked. Whether you consult a lawyer to draft such a document (which generally is unnecessary), or access an online template, there are significant clauses that should be included. John recommends that every contract contain the following four provisions:

• Defined venue or choice of law
• Limitation on liability
• Attorneys’ fees provision
• Placing a deadline for your client to raise disputes about your invoices (e.g., 30 days after receipt).

The venue or choice of law is crucial if you are working with clients who live in different states. This is the idea that the contract should indicate the state or location where any disputes will be settled and therefore which laws would apply in such a conflict.

The second one is a limitation on liability. This can be very helpful if something occurs that you never expected to happen, but that you’re being held responsible for. Perhaps you are accused of losing data which then resulted in another failure. The limitation on liability states that you’re not financially responsible for anything beyond what you’ve been paid.

Going along with this, lawyers sometimes refer to what is called, the “concept of consequential damages.” An example might be if you hire someone to park your car but then they have an accident. The person would, of course, be expected to pay for damages to the car. But what if you then tell them you had an multi-million dollar Faberge egg in the trunk that was damaged? It is not fair to ask them to pay for those losses.

The last two provisions relate to the collection side and getting paid for work done. First is an attorneys’ fees provision. In the United States, the default rule is everybody pays their own attorney’s fees. Those expenses are not cheap and can totally overshadow whatever the dispute is. Having that attorney’s fee provision can change the game and they’re enforceable in all 50 states. You can put it in your contract which in essence says, “If you don’t pay me and I have to sue you, you will need to pay my attorney fees.”

The last provision, which is less commonly talked about, involves placing a deadline on disputes to invoices. Consider the following scenario: a business may be having a cash flow crisis, you haven’t been paid in months and they haven’t complained about your invoices. But when you pressure them or hire a lawyer, suddenly they start scrutinizing the invoice in their defense, with the ulterior motive of trying to get you to write off justly earned debt, or just to buy time. This provision can deter that kind of behavior because they agree in advance that if they don’t bring up issues within 14 days, for example, then the issues cannot be litigated.

In addition to adding these provisions, there are other steps you can take to avoid or negotiate collection issues.

What if Your Freelance Clients Don’t pay?

Being compensated when working for yourself is quite different than being fully employed and having a paycheck show up every week. As a freelancer, you have to put time into invoicing and bookkeeping matters. It is incredibly common, no matter who your clients are, to see a lot of people either not getting paid, or more often, having to wait to get paid. 

As you start your freelance business, you may begin to recognize warning signs of a particular client or company. John prefers calling them yellow flags, rather than red flags, because you don’t want to necessarily say no to business just because you might have some doubts. But you do need to be on the lookout for signs that you might have trouble getting your invoices paid by a potential client.

What might be some of those yellow flags? One thing concerns startups. This could a large, well-funded company that would be a great client, but many of even the best of early-stage startups are eventually going to run out of money.  And when they do, they’re going to leave a lot of unpaid bills. 

Also, if you are considering working with overseas companies, be aware that if they don’t pay, you don’t really have any practical recourse. The cost of hiring a lawyer in another country is rarely worth it.

So, what can you do to get ahead of the ball on this and cover yourself? Being professional and organized is more than just a fancy-looking invoice. Many freelancers make the mistake of being laid back about bookkeeping and focus exclusively on the work they are doing. This is understandable, but it comes at a real cost if they’re not sending out invoices at clear intervals. If you send a client an invoice once every three months, they might really get sticker-shock when the bill arrives. So, pick a more frequent interval such as twice monthly or maybe monthly, and then stick to it. The more organized you are, the more your clients will appreciate and respect your system which will increase the probability that you will be paid on time.

If you have not been paid on an invoice, you may want to consider hiring an attorney. But John recommends taking this action only if the unpaid invoice is more than $5,000 to $10,000. Even then, he says, call around to consult with an affordable lawyer. An unpaid bill of a lesser amount might result in attorney fees being greater than the invoice you’re trying to collect on. But if you do need legal advice, find someone in your area who understands local laws and statutes. 

Is a Sole Proprietorship or LLC Better for Freelancers?

If you’re thinking of setting up your own freelance business, or if you’ve left employment and want to make it work on your own, there is a lot to consider. The first issue that many freelancers run into is whether or not to create any kind of entity. For most freelancers, this is going to be a choice between an LLC or what’s called a sole prop, or sole proprietor,  which is basically the default status under the law. Take, for instance, a simple example of a lemonade stand. If you go down to the corner and start selling lemonade technically in the eyes of the law, you are a sole proprietor.

While there are other corporate entities to look at, for the vast majority of freelancers, the decision will be between an LLC and a sole prop, with an LLC being frequently the entity of choice.

Pros and Cons of an LLC

The number one reason to get an LLC is to create a layer of protection between your business and your personal finances. An LLC gives you what is sometimes called the ‘corporate shield’ or the ‘corporate veil’. This can be very beneficial if something goes wrong with the business or you take on a lot of business-related debt. But it is also there if you find yourself involved in a lawsuit and potentially stand to lose a large sum of money. With this shield in place, unless specific exceptions apply (e.g., for deliberate fraud), you can generally walk away from your LLC with your personal finances intact.

Other benefits of an LLC include giving yourself a more established and professional look, which shows your clients that you’re devoted to your business. There can also be some tax savings beyond a certain earnings threshold. Those are the big three reasons but, the liability shield is really head and shoulders above the other factors.

With any entity option, there are potential drawbacks. With an LLC, these are mainly administrative issues, and paperwork that needs to be filed to ensure you are compliant with state and federal laws. On this note, be aware that tax filings for LLCs can have different deadlines than regular taxes.

Another factor is the registration fee which varies from state to state. In California, for example, it’s upwards of $800 a year, whereas in most other states it’s significantly less. With more and more work being done remotely, this can be somewhat confusing. If you live in one state and are doing work for clients who live in another state, where should you register? John offers this: “Generally, if you’re doing a service-based business, like UX researching, and you’re in one state, the likelihood is that you don’t really go to the other state physically to work with clients. Because of this, I think you’re just fine just registering in the state where you live.”

Other Things to Consider

Do Freelancers Need Business Insurance?

If you’re a freelancer and you’re not doing anything crazy or earning millions and millions of dollars, it’s probably not necessary. Insurance can provide peace of mind but can be expensive with high deductibles. Even with insurance, it’s not always as clear-cut to make a claim on. It’s a rare freelancer that will need this kind of insurance.

Can I Include Work Samples in my Portfolio?

Another question that may arise concerns the risks of including samples of previous work done in a portfolio  to show to potential clients. This can be done with a few reasonable cautions put in place. De-identify, cross out, or cover up private or potentially sensitive information. If doing this would dilute the reason for adding this case or study in the first place, you might have to exclude it from your portfolio. 

Data Security Tips for Freelancers

Data security is definitely on a lot of people’s minds these days. And unfortunately, there are actually not many strict laws about data security or data privacy for most industries, with healthcare being one of the obvious exceptions. As long as you’re exercising reasonable precautions such as using passwords and maybe antivirus protection, you’re probably going to be all right from a liability perspective. 

But as a freelancer and professional in the UX space, you are working with different data and have to be cognizant of it. Be sure and talk to the client to understand if this is something that is a particularly sensitive issue. If it is, then you might want to take extraordinary precautions, and perhaps, even charge your client more for those efforts. It’s always fair as a contractor to factor in that risk. If they’re doing something that is going to require you to to be more careful, then then you should see some benefit from that as well.

 

John Thompson‘s practice includes employment law, commercial litigation, startups, and freelancers. He received his law degree from the Georgetown University Law Center, where he interned with the Department of Justice. John is a partner with Thompson & Skrabanek, a law firm based in Manhattan. Visit their website at https://www.ts-firm.com/.

DISCLAIMER: This content provides general advice, which is provided as-is. The advice may not be applicable to your specific scenario or your jurisdiction. This article is not regularly updated and may not be current. If you need legal advice, consult with an attorney in your area.

Moderated by Danielle Cooley, Guest Speaker on How to Freelance
This is an abridgment; view the full video presentation here.

How Do You Start Freelancing?

I thought about moving to freelance while at a consulting company. I realized that they had a lot of non-billable people for which the end client was paying. I knew that the work they were getting would be the same as if they just hired me directly. I could make a lot more money, they could save some money, and we could get the same results. That was my thought process at the time. 

I had my first son and decided to take it easy for a while and see how things went. Then two hours after I got back from maternity leave, I was laid off.  So I said:  “I guess I’m an independent consultant now,” and I have been ever since. I have enjoyed it for 13 years and have yet to find an in-house position compelling enough to pull me away.

How Do You Prepare to Freelance?

Knowing what I know now, I would have maybe tried to shadow or learn a little more from the sales and marketing people. Many of us who go out on our own are good at what we do as it pertains to our subject matter expertise. But there is a lot to consider before you freelance, such as learning how to run a business, how to generate sales leads, and how to structure your proposals. Expert business development people are as proficient at what they do, as we are at what we do. So, I think I could have learned more from them. I’m not sure how I would have done that without saying, “I’m about to start my own business. Can you teach me some things?” But just seeing the templates they used would have helped me a lot.

What are the Risks of Freelancing?

When contemplating freelancing most people ask: “Can I do this and how risky is it?” I had a spouse with group health insurance and a magical paycheck that dropped from the sky every two weeks. We lived in a low-cost-of-living area and were not going to lose our house if I didn’t find work right away. If I didn’t have that security, I probably would not have become an independent consultant at that point. I would have needed more stability and predictability until I could build up more of a safety net of my own. 

The reality is that freelancing does cost more than you think. At least it did to me. People warn you about self-employment tax and it is high. And you do have to spend a lot of non-billable time finding the work, writing the proposals and contracts, as well as handling administrative duties. So, it’s not easy, but I think it’s worth it. And it gets easier over time.

Should I Bill Hourly or by Project?

I prefer to work on a fixed-fee basis where there is a project with a start and a finish and a well-defined scope and outcome. However, what you don’t get when you bill hourly is capturing the value of the knowledge that you provide. So, as a researcher, I provide these clients with amazing insights that affect their product design that ultimately go on to affect their bottom line in big ways. Because of my experience, I can do that fairly quickly. If I bill hourly for projects like that, I would need to have a pretty exorbitant hourly rate to make that happen. But framing it around the value of the information, knowledge, and insights helps to maximize their impression of the overall effort and understand that the work we’re doing is important and valuable.

That said, there are certain situations where billing hourly makes more sense, particularly if the scope is not very well defined. In a case like this, I would offer the client some sort of hourly or  retainer agreement. When I subcontract for other consulting practices, that tends to work out better hourly – they bill hourly so that helps them determine whether they can afford having me participate in the project. But generally, I advocate for fixed fee value-based pricing.

How Do You Determine Freelance Rates?

My general guideline and this is just a point with a wide range on either end of it, is to take the salary that you would be worth, then divide that by 1000. So, let’s just say for easy math you make $100,000 a year. Your hourly rate would be $100. If you made $200,000 a year,  then your hourly would be $200 an hour. And a lot of people come back and say, “But I worked 2000 hours for an employer, so my rate is half of that.” It’s important to remember that they were paying your employment tax, part of your health benefits, covering your tech support, and handling administrative tasks that you now have to take care of yourself. This is probably the high end of your hourly rate.

You may need to be willing to negotiate and take less per hour if you have a large project. You also need to include some guarantees. I’ve talked to consultants who lowered their rate and then the project got canceled three weeks in. So the reason they lowered the rate was that it was going to be 20 weeks of guaranteed work but it didn’t turn out to be that way. 

And then, sometimes it just comes down to how deep are the clients’ pockets. Startups aren’t going to have any money and corporations are generally going to have more but not necessarily. And often when you’re in the beginning stages,  you can just ask them for their budget and then you can scope that way.

What Are Typical Freelance UX Research Projects?

In terms of the types of projects that come up, it does vary a lot. In 2020, I did a large fixed-fee project. The client was redesigning their whole website and wanted my help with the navigation structure and information architecture. What I proposed for an ideal situation was way outside of their budget which they didn’t disclose upfront. Then they asked, “How much can you do for this much?” So, we agreed on one to two card sorting studies, then one to two tree test studies to validate what came out of those card studies, and one to two usability studies of the prototypes that came out of those navigation studies. 

I am also engaged with a large Healthcare client who I have done fixed-fee work for in the past. But right now, I’m working with them on an hourly basis to help with a variety of projects they have going on at the same time: their public-facing site, transactional material, and some information architecture.

Is an LLC or Corporation better for Freelancers?

I am an LLC and chose that option because my accountant suggested that it would be the easiest route for me. However, I now think that it’s not the right structure for me, and would like to change it. But it seems difficult to do so because I have a lot of momentum going at this point. I am a certified woman-owned business and changing the paperwork would cause a cascade of other things that I would need to change. But being an LLC is costing me a lot of money, so I should probably figure that out.

I am not a money person, an accountant, or a small business financial advisor. But my understanding is that organizing myself as S Corp would give me tax benefits that I am not currently realizing. There is also an option where you can have an LLC taxed as an S Corp, but you have to take regular owner drawings and pay yourself a salary. I would suggest talking to an accountant or financial advisor about which option would be best for you.

Bookkeeping and Tax Software for Freelancers

Hire a bookkeeper! That’s the best advice. That’s hard to do though. I do pay my estimated taxes on time, set reminders for myself as much as possible, and automate that at the beginning of the year, which I can do here in the state of Maryland. What I don’t do is calculate what my estimated taxes should be this quarter. I just send some money and if I made a lot of money that quarter,  I’ll send some more, and if I didn’t, then maybe I’ll send a little less. And it all works out in April when I do my returns.

As far as keeping the books I do use QuickBooks Online for about $25 a month which I think is kind of high for a one-person organization. There’s also a QuickBooks self-employed which is less, but I think it’s a lot harder to use, navigate and sync up. I used it for a year and then went to QuickBooks Online. There’s also a free tool called Wave which I liked a lot but they’re in Canada so they use an invoice-based (accrual) accounting system versus a cash-based accounting system such as we use here in the States. It is supposed to be easy to reconcile, but if you invoice a client on December 20th and they don’t pay you until January 10th then it will show up on your previous year even though you didn’t get paid until the next year. I tell people, it’s very Canadian; they just trust that you’re going to get paid if you get sent an invoice which in America is not a guarantee at all. So that is another option especially if you’re just getting started and you want to keep track of income and expenses and you want a handy way to create your invoices. 

What is the Pay Differential between the Bay Area or New York City and Smaller Cities?

Using a tool such as salary.com can help you identify pay scales, and look at comparable companies. You could see, for example, that Facebook, being in the Bay Area, pays well because they have to compete for that top talent, while other locations outside of the large metro areas would pay less. Understanding geography definitely is important in determining your rate.

If you’re in the Bay Area, New York, or Boston the salary that you would be commanding would be significantly higher than if you were somewhere smaller like Lincoln, Nebraska.

How Do You Access UX Research Tools as a Freelancer?

On a personal business level, I haven’t had trouble finding solutions. In terms of running the business, as I mentioned, I use QuickBooks online and have an annual  Zoom subscription license at the lowest-paid tier. A lot of times you can get away with the free versions for a while. But Zoom cuts you off at 40 minutes so that’s not super great. Trello is a great and free tool for organizing your thoughts and “to-do’s.”  and there’s probably a paid tier there. I pay for Dropbox for extra storage which handles all of my backups. Web hosting is relatively inexpensive as well.

Last fall I had a project that was going to require some heavier processing. Around this time, my then five or six-year-old Mac was not going to be able to handle it. A new Macbook would cost $1,500 or $1,600. But I realized that if I invested that money in this new laptop, I would be able to do this $25,000 project. So the math was pretty easy.

There are some non-negotiables. I do carry business insurance as many of my clients require that. It runs me at about $1,000 a year. But again, if I don’t spend that $1,000 then the many tens of thousands that I would get from these clients won’t come in.

I do sometimes run into trouble when somebody wants me to use something that’s only Enterprise-wide: mainly research tools. So a lot of clients are now targeting the Enterprise. But there are alternatives. I frequently use Optimal Workshop. You can buy study credits for $99 a piece, but you can also do a monthly and shut it off at the end of the month. So again, that math becomes easy at the end of the month. I’m going to spend $200 for one month of Optimal Workshop so that I can have this $15,000 project. And I do factor that into the bid, or I will straight up tell the client that there is a software license expense that we’re going to have to itemize here and just pass that cost right onto them. If I do enough of this kind of work, I get an annual subscription and consider that to be a part of my operating overhead. And sometimes clients have licenses you can access. On a recent project, for example, I was able to use one of the two seats of a client’s User Testing which only targets the Enterprise.

Can Former Employers become Freelance Clients?

Usually, it’s companies that I have worked with or people that I’ve worked with that have moved to another company. In my consulting work, I work with a lot of people and have been doing this for over 20 years. During that time, those people have been moving around and meeting other people. That’s mostly where I get my work from. I try to speak at conferences and publish here and there. Every once in a while, someone will say, “I heard you give this talk two years ago, and now I’m at this company that has this problem and I think you can help us.”

I will also hear about opportunities through the grapevine. I’m working with a medical device start-up right now and found this work when someone on my graduate program alumni page was looking for help and reached out to me. I also rely on lots of word of mouth. I definitely want to learn more about marketing and creating a lead sales pipeline – something that a lot of people understand very well.

How Do You Succeed in Freelancing?

I think the diversity of experiences that I’ve had have been a huge factor in my success. It is important to differentiate yourself, to pick a vertical line, such as Healthcare. But, for me to be able to say that I’ve worked with a variety of Fortune 500 clients shows that I’ve been successful in various industries the past. Also, my Master’s Degree adds to this “street cred.” I’m also going to add speaking assignments to this list because you can’t come in like a mouse as an independent consultant. You have to be confident that you know what you’re talking about. Your client needs to be convinced that they can count on you to do the work and that they don’t have to handhold. I think practicing having an opinion and point of view, and being willing to share and articulate it clearly, is very important.

 

About the author: Danielle Cooley has been working in design research and strategy for more than 20 years. She founded her bespoke consulting practice in 2009. She has a BE in Biomedical and Electrical Engineering from Vanderbilt University and an MS in Human Factors in Information Design from Bentley University. Learn more about Danielle at www.dgcooley.com.