Down Tools!

For the second time in 12 months I find myself refusing to do any more work for a client until they settle outstanding invoices. What an Arse!

I went into software development and consulting because I like helping people and I like fixing things and I like coding. Not because I like or am good at, admin, chasing invoices, writing terms and conditions, etc etc.

One thing that really riles me about this is those organisations that expect an instant resolution to their unusual, one in a million problem from me, but yet need 45 days to process an invoice, which they must do thousands of times a day.

So there is a new Codematic rule now (website to be updated) our resolution time will be similar to the clients accounts payable cycle. (except pay in advance stuff!)

In fact I’m pretty fed up a fixed price work altogether, it seems to contain a lot of the things I dislike and a lot of free work with all the scope creep, client personnel changes etc. Is anyone successfully working on a day rate?

I’m feeling the attraction of the dark side (permie) more and more. Although if I did get a proper job I think I would aim for something outside IT. (one of my kids suggested I retrain as an astronaut for example)

How are you finding the current market?

Plenty of work? payment hassles? rate pressure?

The contract market seems to have really picked up in the last month or so, maybe I should look at that.

cheers

Simon

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29 Responses to “Down Tools!”

  1. sam Says:

    “fixed price” works better. Frankly hourly work is difficult to administer both for the client and for me…and we invariable argue about the half hour that was spent and if it was really required.

    I usually have a split payment terms
    20% – Advance (For clients I have not worked with before)
    30% – On Delivery of Beta 1
    30% – On Delivery of Beta 2
    20% – On Delivery of Beta 3(Ver 1)

  2. Jim Cone Says:

    A number of years back I was working at a computer disc company that was taken over by a competitor. The new VP of Finance implemented a practice whereby all vendor checks over $10,000 were routed to him.
    He kept the checks locked in his desk drawer until enough complaints had been received such that he was forced to release the checks. (I’m not kidding)
    After the biggest supplier to the company stopped making shipments to us (COD only),
    the VP dumped $150,000 in checks on my desk and told me to clear up the problem.

    It never hurts to establish YOUR payment terms in advance and complain loudly when (not if) payment is not made on time.

  3. Gordon Says:

    @Jim Cone

    That policy is frighteningly close to that adopted by a debt-heavy multi-billion dollar petrochem company (and who knows how many others) in the depths of the recession, only the amounts were in the millions and it forced at least one smaller supplier with a 30 year relationship with the company out of business.

  4. Len Holgate Says:

    I agree with Sam, fixed price works better for both me and most of my clients.

    I go for 50% up front and 50% on delivery of the code. Payment terms are 30 days from invoice date but I don’t start the work until the up front payment clears and I wont start anything else for the client whilst they have 2nd invoices outstanding. I also chase like crazy as soon as it looks like they’re getting late. Sometimes I’m a bit more flexible with clients that I know well, but only until they screw me around for the first time.

    It’s still a pain and I’d prefer someone else were doing it for me but I like working from my office at home and I like not having to answer to anyone except the clients…

    As for how the market is, well, I’m mainly in custom C++ server development and things are less busy than this time last year but part of that is because several projects that were running last year have now reached the point where they’re pretty much complete and we’re just shaking the last of the issues out of them. New enquiries were down on last year but seem to have got better this month and last. Conversions from enquiries to work is about the same but are suffering from the reduced enquiries. My main problem is that I’d prefer to have a few more clients with work ready to go and I don’t have them. Then again last year it was the other way around with too much going on and no time to think… I’m glad I diversified out of Investment Banking though, those clients have dried right up which means most of my XLL development has stopped.

    The problem I found with IBanks is that it takes a long time to develop a relationship with someone to the point where they can make the case for having you as an external consultant rather than simply trying to pull you in as a ‘standard’ bum on seat contractor. Then the contact moves on and you’re back to square one either convincing their new management that the arrangement works or trying to build a relationship with their replacement.

  5. Bob Phillips Says:

    I am interested in hearing these comments re fixed price work. I have engaged in several discussions previously where I was arguing that we (small development shops) should be pitching fixed price, because it is more professional, and it gives the customer a better cost control. Most of the others argued against, mainly to make it easy for themseleves it appeared to me, but the surprising thing to me was that most of them claimed that was how they were working, and doing well on it. Most of my clients would never enter into an hour/day rate open-ended commitment.

    Of course, you need to stage the payments as that gives you some control. You also need a good definition of what is and what is not included, and this is where scope creep is hard, often it is simpler to just do it than to spend forever arguing as to whether it was ofriginally in scope.

    As to Simon’s issue, I have had clients that have taken more than a year to pay me before, but it was usually is eemed attribuable to administrative cock-up rather than deliberate policy. Of course, I have my experiende of non-payers, but not many.

  6. Dennis Wallentin Says:

    Guys,

    The public sector in Sweden needs 60 – 90 days to process invoices and they ignore any interest rate due to late payments. One approach is to use the fix price model and a split to allocate it over the project lifes.

    In general I find the fix price model to be attractive but it’s difficult to apply as long as it’s based on hours.

    The 80/20 rules can be applied in this context; fix price for 80 % of the project and 20 % on running hours.

    It can also be argued that written specifications and requirements can be one good solution in order to apply this model.

    Because we have a financial weak position this is also a good reason to bring up the split and the 80/20 approach.

    Kind regards,
    Dennis

  7. Len Holgate Says:

    Bob,

    Scope creep is hard to manage but how you do so depends on the client relationship. Most of my fixed price clients know when they’re pushing it a bit with regards to scope creep; sometimes I let them get away with it, sometimes I don’t. I tend to work with the least amount of spec that we’re both happy with for some client’s that’s a lot of spec that they provide and for others it’s less. If a client tries it on then the next time around I insist on a more detailed spec and often then have that as the first fixed price item in that new block of work; i.e. you want to try it on with regards to scope then you can pay for me to nail the scope down really hard next time.

    Generally, it’s about how much risk you’re prepared to take with a particular client. I tend to go with my gut a lot on this but my general approach is to give a ‘big picture’ quote for a project and then break the project down into reasonable sized blocks (i.e. blocks of a size where I’m happy with the risk I’m taking). I then give a fixed quote for the first block (or blocks) of work and a slightly more open ended quote for the subsequent stages (perhaps a range rather than a fixed fee). Then as things get more understood by both parties I can firm up the prices for the later stages and possibly add in new stages or rule out particular pieces of work. Most clients seem to prefer this to the alternative, which is for one of us to come up with a bullet proof spec at the start.

    I have had one client ask me to switch from fixed to hourly. This is after we’ve done the bulk of the development work and where they now want to be able to fire the odd question or change request at me. They feel they’re getting better value for money with the hourly, but I’m pretty sure that’s just because they don’t track the time that closely on these changes and any subsequent follow up time taken with resulting bug fixes (which I charge for when on hourly but which are free if relating to a fixed price quote) etc.

  8. Charles Says:

    I mostly do estimated fixed-price based on £££s per day (which means that I reserve the right to charge more if scope creeps too much) rather than quoted fixed-price. Its hard to do time & materials unless you are working on-site (which I hate).

    Payment does seem to take longer these days !! But the worst cases are administrative cockups (I think).

  9. Bob Phillips Says:

    Len, I agree with you and that is my model, I was just raising the point that in previous discussions many others seem to be able to go the T&M route, which I just cannot sell.

  10. Simon Says:

    This was a proof of concept. To scope out the requirements for the full blown thing.
    Sadly I think I got too close to what they needed so they are just trying to put it into production with a bazillion can-ya-justs.
    Not that I care what they do with it, although in my experience shelfware has less support burden/opportunity. I just wish they would pony up.

  11. Len Holgate Says:

    Bob, I actually don’t want to sell the T&M route. I prefer fixed price (mostly) as it removes the burden of tracking and justifying all of the time to the client and IMHO builds a better relationship with them. Also it’s nice when I come in under my time estimate (though less nice when I screw up and go over ;) ).

  12. Simon Says:

    Sounds like you are better at estimating than me Len.

  13. Jon Peltier Says:

    I don’t like fixed fee. I am not very good at estimating, and several times I’ve gone way way over the quoted fee. Sometimes the overrun is scope creep, sometimes it’s unexpected things that needed to be done.

    I do mostly small projects for small clients. Usually there’s not much of a spec, because the client is trying to figure out what they want. Fixed fee doesn’t really work well in this context.

    I generally give an estimate based on hourly rates with an SOW in outline form. The invoice is based on T&M and may vary a bit from the estimate, usually not too much, depending on how the project proceeds, and how much the client has steered it.

  14. Jon Peltier Says:

    Most of my clients are good about paying on time. Some even write the check the day they receive the invoice. These tend to be one-man shops who know what cash flow can be like.

    One very good client (5 years or so) hit a rough spot and couldn’t cover an invoice. It wasn’t very large, a few days work, but the owner had to sell property to make his internal payroll. Given our relationship, I let it slide. He’s been paying a bit each month, and I have no doubt he’ll make good and we’ll be working together five years from now.

    One potentially lucrative client jerked me around last year. I’d built a workbook that helped him manage his internet business, and sent an invoice. He called to tell me how great the workbook was, because in one week he had sales in the 10s of $k. He also said he had to decide how much of my invoice to pay now and how much he’ll put off until next month. I said he might as well pay it all if he wanted any more of my time. It took a few additional weeks to pay, and I declined follow-up work. Who needs it?

  15. Len Holgate Says:

    Jon, The smaller the spec, the higher the risk. The higher the risk the higher the price. Often clients will understand that and try harder to nail down what they want (and spend more time on it) if they realise that they pay more as I take on more of the risk.

    I agree that fixed price doesn’t always work well when you’re scoping out the problem; I tend to work hourly in those cases too, BUT I try and keep those parts of the project small.

    As for estimating accuracy, well, sometimes you win and sometimes you lose but you get better the more you do it. The thing is you need to analyse the projects where your estimates are wrong and work out why they were so wrong…

  16. Bob Phillips Says:

    Hey Len, I don’tthink I have EVER come in under-estimate.

    Personally, I would like to go the T&M route, I just cannot see anyone buying it for anything more than a few days.

    Jon’s model of small projects has its advantages, they are easier to estimate, easier to keep under control. I tend to do both sizees, I recently did $500 job which went almost exactly as planned (a little scope creep, but that was as much my fault as the client’s, I was trying to please/show off), and a $20,000 job which went way over (and got fcartious at times). And of course, going over on a big job hurts far more, but getting lots of little jobs incurs its own overhead.

  17. Simon Says:

    Len – estimating accuracy – I already know the problem:
    ‘could try harder’!
    I have no belief that what I initially estimate will bear any resemblance to what the client actually wants, or what I will eventually deliver. Sure for sub 500 quid stuff no bother, but for the 10-20k stuff? not me. Maybe if I charged a proper rate for this initial investigation – mind you thats where they are shafting me just now.

    I just wish more people would sign up for VBA to xll conversion stuff – already having a working executable spec is superb. Mind you from what you were saying above xll demand is dying down – bugger!
    (ready for a big 64bit 2010 uptick???)

  18. Len Holgate Says:

    Simon, it’s hard, I tend to always try and break the larger projects into more manageable chunks with a vague overall estimate and then refine as I go. If the client can’t deal with that then sometimes it’s better to walk away. Likewise once you’ve broken the risk down it’s easier to regain a bit of lost costs on the next stage…

    XLL work was never my main focus, I’m hoping to try a different tack soon with a ‘managed XLL’ product aimed at people who can’t afford to take the IBank route of custom development or the expense of existing solutions. We’ll see. I have to get it into beta first!

  19. Dick Moffat Says:

    Simon:

    I have historically done T&M with an estimate up-front. I also billed incrementally making sure that while invoices were outstanding I wasn’t digging myself a deeper hole while waiting for the cheque. I still TRY to operate that way but mor eand more it’s Fixed price.

    I hate this but I also understand how clients legitmately want know their costs. On the other hand estimating is not an art or a science – it’s an impossibility. So I estimate as high as I think they will pay and try to get 25% upfront, 50% on delivery of a test version and 35% when done.

    I have a good friend in the biz (he does VB.NET stuff though) who prices fixed price by estimating the value of the app to the client plus figuring out what IBM or the other big consulting firms would likely charge and staying under that enough to be significant. He has three garages on his house and a membership at the highest-class golf course in town and he’s younger than I am too. Maybe he’s doing something right :-)

    Dick

  20. Dick Says:

    You guys get enough spec that you can estimate? Wow, that’s awesome. Based on the “specs” I get, there is no way I would give a fixed price. Or if I did, it would have to be so unreasonably large that I wouldn’t get the job anyway.

  21. Jon Peltier Says:

    Doing lots of small projects has it’s own overhead, as Bob points out. But my mind wanders, and the thought of doing $20k of work on a single project makes my eyes roll back in my head.

    Heck, a few clients give me half day projects once in a while, and also call when they have a 15 or 30 minute problem. These are my favorite clients, and this mode of work suits me well. I like to be able to drop what I’m doing and fix the problem. Then I like to write a blog post, work on one of my utilities a bit, then return to the small project du jour.

    I’ve done some value-based pricing now and then, as opposed to cost-based pricing (like Dick’s friend with three garages). It has usually worked out well, but I rarely take this approach to quoting.

  22. Jon Peltier Says:

    Hey DK –

    Send ’em to me for a second quote, and I’ll bid 50% higher. Think that will get you more work?

  23. Dick Says:

    Ooh, collusion in the bespoke freelance Excel market. Sounds good!

    Apropos of nothing: If I have to “sell” someone on my rate, the sale is already in the bag. I find that when I quote my hourly rate, people run away quickly or they buy. I’d guess about 75% run quickly.

  24. Gordon Says:

    @Dick Moffat

    I like it: invoicing 110% buys you a bit of breathing space ;)

  25. Dick Moffat Says:

    Ha ha – I can’t do math without a spreadsheet anymore you know what I mean :-(

    Dick

  26. Charles Says:

    I personally prefer big projects ($8K-$50K, above $50K you get that horrible feeling that its never going to end!), but for Excel or VBA speedup projects I will do a half-day minimum initial looksee/fix.

    If they are looking for something smaller than that I mostly don’t want to know – the overheads are too large!

  27. Charles Says:

    I have no idea what IBM etc charge these days for spreadsheet gurus/solution consultants?
    $2000-$3000 per day?

  28. Mike Alexander Says:

    Late to the discussion – hate when that happens!

    I am with DK and Jon on this. I have no idea anyone gets specs good enough to quote a fixed deliverable price. For most projects, the devil is in the details, so even if the Client knows exactly what he wants, complications in the project, more often than not, cause the work load to be much more than estimated.

    I have found that a fixed price model often puts me in a confrontational posture with the client, with me always reminding them of scope. With the fixed model, I inevitably look like a miser who won’t do any additional work without squeezing more money out of the client.

    It may be reality, but it’s bad PR.

    An hourly rate allows the client and I to decide together whether the scope creep is worth the cost on his end and the effort on mine.

  29. Al Gill Says:

    For what it’s worth, here’s another data point although bear in mind that only about half what we do is XL/dB/code based. A lot of our stuff is fixed price. We also do quite a lot of strucured fees – eg if our stuff is designed to help the client close a sale we might charge x% on delivery plus a kicker if the client wins the business. Anybody else do this? Per diems can be a pain as the ‘diem’ turns out to have 25 hours. Very hard to get people to agree to hourly rates.

    We have had three bad experiences since 2001. Only one was resolved properly – we did something similar to Simon and refused to undertake any more work until outstanding invoices were settled – interestingly the issue then went up three layers of management and we were paid within two hours.

    On the bright side, the vast majority of customers are perfectly reasonable. Some are outstanding. Best example is a customer in Munich. They’ve (extremely) bright and know how to extract their pound of flesh, but they don’t mess us about over contracts, their invoices are always paid on time and they have a very clear idea of what they want. In practice this means they get a very good effective rate as we’re happy to do one or two freebies for them and – as we can agree work / fees on a hand shake (albeit by phone) – there’s much less time / money spent faffing about. Also, as I visit a lot of different sites it’s sometimes feasible to throw work etc. their way.

    I agree stronly that the person chasing shouldn’t be the one who does the work though – difficult to be both good and bad cop.

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