Archive for the 'Employment' tag

Setting your rates II

Posted on June 11, 2009

I Meant to post this yesterday and just plain forgot, so I’ll try to get two out today to make up for it.

I got some feed back on my post the other day about setting rates. It’s an interesting topic to a lot of people. One of the questions it did bring up was how to deal with negotiating on rates, or specifically dealing with a customer that doesn’t want to pay what you’re asking.

I for one set out my rate at the start in a quote, explain that it’s competitive and that’s what it costs.

I’m open to negotiation if for example you’re offering me a couple of days a week for a month, few months or a year. It costs less to develop and maintain one relationship like that than the equivalent in smaller customers – even if it is putting more eggs than I may like into one basket.

If on the other hand it’s a couple of days then I’m going to be much more firm about my rates.

One strategy for getting paid what you should, and giving a customer a price they want is to determine the budget from the outset then structure a proposal around that. Once you’ve got a number, make sure you can deliver what they want, or negotiate on a cut down version, which you can deliver within their budget. If it’s design work, cut some of the revisions, base the design on a template of their choosing. For coding work cut some of the scope, remove one or two of the lest important requirements.

A lot of times you may just find “you’re too expensive” really means, “we can’t afford it” and there are a lot of great companies out there that aren’t just being cheap, even if that’s the way it may seem on the surface and they’d be more than willing to compromise on the scope to get it done properly within their budget. Then who knows, revisit the rest in a few months time.

Other times you just can’t meet in the middle, you can’t do the work in the time allowed by the budget but don’t give up – there might still be a deal you can both cut. Maybe they offer a service you’re currently paying for, or have staff that aren’t being fully utilised you can borrow. Trading your services for theirs isn’t a bad thing, you still get a client, word of mouth referrals, case studies, testimonials and add to your portfolio and you still get something in return for it. I’ve done this in the past and it’s always worked out well for me, in fact it’s probably lead to more work from and through that client than we could otherwise expect.

If all else fails, my advice is to walk away. It’s hard but the brutal truth is that you’re risking getting stuck in a working relationship where the other side doesn’t value your skills. In my experience that attitude extends right through into how they value your opinions and the result of your labours. To them what you produce is a commodity and they’re probably going for the cheapest quote they can find. Everyone has worked with people like this, it’s not fun and it’s almost never worth the money. In fact, my advice is run – don’t walk.

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What to charge

Posted on June 9, 2009

Lloyds TSB just announced they’re shutting down all C&G branches with loads of job losses. Though they said they were hoping to avoid compulsory redundancies with early retirement and by hiring less contractors.

So they’re not cutting jobs, except for contractors. Which is too bad for the contractors but brings up an important point if you are a contractor and you’re setting your rates.

You are responsible for your own job security and you have to charge for it. You don’t get holiday pay, you need to spend some of your time on the non billables that need to be done to operate, you won’t get a redundancy payment if through no fault of your own the company cuts your role in a cost savings exercise. You just don’t have a job.

There are various ways to mitigate the disaster and the best is probably to have as many customers as possible. The more you have the less the loss of one matters.

But you also need to be aware of the reality that you may lose customers when you set your rates. You need to bill for your desired salary + operating costs + expenses + some headroom for the time you aren’t doing billable work.

Here’s an example. Let’s say you want a £30,000 salary. You have operating costs for equipment, software, travel, expenses, taxes, accountants, rent, phones, internet etc; say £15,000/ year. Given 45 working weeks in a year, because you deserve holidays like everyone else and you’ll no doubt catch a cold or two at some point.

30,000 + 15,000 = £45,000/year MINIMUM turnover.
45,000/45 working weeks / 5 working days = £200/day

So if you want to earn a £30,000/year salary and you have enough work to keep you occupied every single day – you can afford to do it for about £200/day.

Let’s for a moment say you spend just one day a week on things you need to do, but you can’t bill a customer for directly - your accounts, taxes, your website, finding new customers, writing proposals, travelling to and from meetings, meetings, professional development.

That’s a rate £250/day and you still have absolutely no cushion. Lose a customer and even if it’s one day a month you’re not at capacity and you lose £3000 from your salary. If you lose a few or a big one and you’re idle a day a week – you’re out over £11,000!

Now if you want to build yourself in a cushion so that if you lose some work you’ve got money to eat while you spend time trying to get more customers, you need to up the rate. For the sake of argument let’s say you want to be able to eat working at 75% capacity if the times get lean and stay that way for a while. That means you need to be able to survive billing for 3 working days every week, so with the numbers above we get.

£45,000 / 45 working weeks / 3 working days = £333.33/day

Now in theory, working at capacity that would give you enough to pay yourself almost £45,000/year – but if you were smart and like the C&G contractors a major client suddenly pulled the rug out from under your feet, you’ve saved that and now have a good cushion going forward to find new customers. If they were 100% of your work, it could take sometime to build up that client base from scratch so the £15,000 really isn’t that much when you start to eat through it – literally.

a crossroads

Posted on December 1, 2008

In case you haven’t heard, didn’t know or are just joining me –

I used to work 2 1/2 days a week as an employee writing code for another company and the rest working for goroam. The problem was always that I had to put my job first and goroam second- obviously, since one paid and the other didn’t. That was up until this weekend, when I got a letter telling me I had don’t have a job anymore.

So I’ve got a stark choice the wrong side of this close to Christmas, work hard to turn out the product we’ve been building for the last couple of months, get investment and make something truly great of it. Or get a job.

You hear plenty of confident statements about downturns being the right time to start great companies, all the successful ones that began when it was logically wrong. To actually have to make the choice is a difficult position.

I wonder how it will work out, anyone with a comment either way – leave a comment!

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Hiring startup hackers

Posted on October 16, 2008

I’ve seen a lot of posts recently about how to go about hiring hackers. Well not just recently, it seems to be common thing people ask, because it’s one of the hardest things to do. You’re using an interview, or even a series of interviews to try your best to determine if the person is going to be up to the task.

The problem is of course, you’re really just determining if the person interviews well, or if they’re the graduates that they’ve got good marks. The real problem is of course neither of the two matter because neither of them have much if any bearing on how good a coder a candidate is going to be.

The problem is exacerbated in a startup because unlike some of the more successful bigger players you really can’t afford to take people on a trial basis for 6 months. What can a startup do?

There are a lot of universities that run placement programs for their students, programs allowing them to get real industry work experience. I’ve also worked in companies that made it a policy to hire students for internships then offer the best jobs once they’ve graduated. It was a great way to get talent.

What if you need to hire to fill a more senior role, or you’re not hiring at the right time of year? Student internships usually start once at the same time every year so unless you’re looking for fill a role then, you’re shit out of luck.

I’ve toyed with the idea of a ‘hacker camp’, getting all the candidates together, and paying them to work as consultants on a project – then hiring the best into permanent positions. All the candidates need to be free to work on the project, and a lot of people would be pretty scared to leave a job to take part and some jobs would prevent them from working on the project, so running it over a weekend might be a good idea, but it limits the scope of your project. You’d also still need to have interviews, to make sure you were getting candidates who were really interested in the job, and also to weed out any candidates you knew were totally unsuitable.

I think it’s important that a ‘hacker camp’ should produce something at the end of the weekend and you should get as much of your existing staff involved as possible. To make the cost easier to swallow you could even go so far as making the deliverable a new feature or part of your existing product but that’s not as important as actually delivering something, because that will be the bottom line when it comes to integrating them into your team.

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