How Losing $5,000 On A Freelance Deal Led Me To Adopt A “Kill Fee”

I made a bad deal with a client, and I wound up losing $5,000 on the project. So today, I want to tell you exactly what took place. And what I do now to make sure this never happens to me again. That way, you can also avoid making this mistake yourself.

A great client I had worked with before reached out to hire me for a video sales letter script.

But instead of paying my full rate — which was $7,500 at the time — they asked if I would be interested in a royalty deal instead. Where I would earn a percentage of the sales generated by the VSL.

Now when my client said that, I had an out-of-body experience…

I pictured myself laying in the sun on my yacht. Where my only “job” would be to walk to the mailbox, pick up my fat royalty check, and deposit it into my bank from my phone.

Spoiler alert: I don’t have a yacht. So things didn’t exactly pan out like I hoped.

But When You Find Out How Bad The Project Actually Went, It Will Probably Make Your Jaw Drop

See, I agreed to do the project for $2,500 up front. Which is a $5,000 pay cut from my normal rate of $7,500.

But in return, I would earn bonus payments at various sales milestones. For example, when the VSL generated $250,000, I would get $5,000 in total bonus payments. And it went up to tens of thousands of dollars at the bigger milestones.

So I had a huge incentive to make this VSL a winner. And I busted my ass to make it the best I possibly could.

In the end, I spent over 200 hours working on the copy.

And I even invested $3,500 to hire an A-List copywriter for a copy critique.

That means when I turned the copy in to the client, I had lost $1,000 on the project at that point.

But I wasn’t worried. Since I was going to make a killing from the royalties…

Or so I thought.

But Here’s Where Things Go From Bad To Worse

After the client approved the copy, I didn’t hear anything for a few weeks. Which is fairly common. Since usually once a client gets the final VSL copy, they move on to producing the actual video.

So I figured my client was just busy putting the video together. And that he’d let me know when it was ready.

But then a few weeks turned into a month…

Then one month turned to two…

And two turned to three…

Yet I still hadn’t heard anything more from the client than a few quick “we’re working on it” emails whenever I followed up.

Then finally, about three months later, the client dropped a bomb on me…

They were cancelling the project. And they wouldn’t be moving forward to create the video using my script after all.

And with that, any chance I had for earning royalties went up in smoke.

It Still Stings A Little When I Tally Up All The Losses…

First, I took a $5,000 pay cut on my normal rate in exchange for royalties that never showed up. So instead of making $7,500, I only made $2,500.

And on top of that, I also invested 200 hours on the project.

Which means I made a measly $12.50 per hour.

That’s so low, my first freelance client ever actually paid me TWICE as much ($25/hour).

Plus at that time, I was making at least $125 per hour — more than 10 times what I made from this project — from most of my other clients.

Yet as bad as that is, the $12.50/hour doesn’t even account for the $3,500 I invested in the copy critique.

And if you factor that in, my hourly rate for the project was actually negative $5 per hour.

So I spent money in order to do this project — instead of making money from it.

Yet Despite All Of These Losses, The Outcome From This Project Wasn’t ALL Bad

First, this was the first time I ever invested in having my copy reviewed. And it really opened my eyes to the value of getting feedback on my work.

In fact, without this project, I don’t know that I would have decided to invest in the copy mastermind I’m in now (Copy Accelerator). Since one of the main reasons I signed up was to get more ongoing feedback on my writing after I found out how helpful it was.

And my life and my income have all taken big jumps forward ever since I joined the mastermind.

So that’s one silver lining that came from this otherwise terrible project.

But I Also Learned Something Else From This Project That May Be Even More Important

And it’s a lesson that any freelancer can apply to their own business.

See, whenever I have a bad experience like this, I ask myself one powerful question…

“How do I make sure this never happens again?”

Now sometimes, there’s really nothing you can do. Just learn from the experience and move on.

But after thinking about what went wrong for a few weeks, I finally realized that there actually was something I could do to make sure this never happens again…

I Could Add A “Kill Fee” To My Contract Whenever I Make A Royalty Deal

Now in case you’re not familiar, a “kill fee” means that if the client doesn’t publish the copy I give them, then they have to send me a fixed payment to “kill” the project.

Which is only fair if you think about it.

Because if I’m reducing my up-front payment in exchange for potential royalties, then the client needs to give me a chance to actually earn those royalties.

Meaning the client needs to publish the copy and drive traffic to it.

Since if they don’t, it means I cut down my up-front payment and got nothing in return. (Which is exactly what happened to me in the story above.)

So Now All Of My Contracts That Include Royalties Or Performance-based Payments Also Contain A “Kill Fee” Clause Like This…

(Before I show you though, remember I’m not a lawyer. This is not legal advice. Make sure you review this with your own counsel before using it.)

As you’ll see, this example of my kill fee gives the client six months to publish the copy and drive 10,000 views of traffic to the page. Since that would give me a meaningful chance to earn royalties from the project.

But if the client doesn’t produce those views — and it’s their responsibility to prove to me that they did — then I get to invoice them for a $5,000 kill fee. Which then gets counted against future royalties if they wind up running the copy later.

You can update the sections in blue as needed for your own projects, though. (After talking with your lawyer, of course.)

And with that, now you see how you can avoid the $5,000 mistake I made by not having a kill fee in one of my royalty deals.

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Connor Inch, Freelance Copywriter