Archive for the Business Category
Spec work for web developers
As a company edgeofmyseat.com don’t need to do a lot of responding to tenders. We sometimes help our design agency clients with their pitches but it is fairly rare for us to get a RFP direct to us. However, when we do get sight of these documents – perhaps because we have been approached directly to do development work for a company that already has a designer on board – I am often very surprised at the amount of work they expect us to do at a very early stage. Just to be able to have the “opportunity” of pitching for the work.
The main issue I have with these tenders is that they directly ask, or at least insinuate, that what should be submitted is an entire proposal for the development of the application. They often ask large numbers of very detailed questions about technology, approach and the finer points of how we would recommend certain features be implemented. To fully respond to these documents would take a couple of days of time for a senior developer – if we were to really do our response justice – essentially a couple of days of free consulting for the company putting out the tender.
As far as I am concerned this is as much spec work as asking design agencies to pitch with concepts. So when we are asking to put forward a proposal for these jobs, then our response tends to be a polite “no, thank you”. Even when the work looks interesting and very much the sort of project we could do well.
If an agency is spending a lot of time responding to tenders then they have to recoup that cost somehow, in our case it would mean having to charge a higher hourly rate for all jobs to cover the non-billable time used in responding.
In addition to the amount of non-billable time these proposals will consume, this work is in reality free consultancy for the person or company requesting the tenders. They can start the process with very sketchy ideas as to how their application should work, get 10 companies to present their concepts and suggestions and take all that knowledge, research and understanding with them to the final build – without paying a penny. When your input is ideas and experience it would be very difficult to prove that the information came from you, it isn’t the same as someone stealing a design concept. There are the occasional instances where an agency could cry foul over an idea that was so unique it would have been unlikely to have also come from another source, but these are unusual. This post from Solid State Group makes for interesting reading.
When it comes to clients with whom we have an existing relationship we are always happy to discuss ideas and approaches prior to a project beginning – that is all part of a good business relationship. However I will not give away days of consultancy to every company who turns up with a large document and a distant promise of a profitable job.
We have found that often these vague proposals expecting a lot of work are because the end client does not have a clear idea of what they want to do. With projects we have taken on we have found that a good approach is to suggest an initial stage of consultancy work. We work with the client and their designer to come up with a specification for the work, often producing wireframes of functionality; making suggestions for approaches and technology; essentially bringing our experience as developers to their ideas. At the end of that process that work is handed over to the client – along with a quote for our development services if we were to continue and build the project. However if they decide to then take the work elsewhere, there are no hard feelings, we have been paid for our consultancy work and we would hope that our years of experience will help to get the project off to a good start.
As I mentioned at the beginning of this article we are fortunate in that most our our work comes via long-term partnerships with the design agencies we work with, or from people who have already decided that we are the company they would like to work with. I know that many companies do get a lot of their work via responding to tenders and I would be interested in hearing how other people manage responding to RFPs, and balance that with billable work, and not giving away a lot of consultancy time for free in the process.
Moving accounts from Quickbooks to Xero
As I mentioned in my last post, last year we moved the business accounts for edgeofmyseat.com from Quickbooks to Xero. I’ve been asked for my opinions of Xero a few times recently and so thought I’d write this up here and it may be useful to others.
Why move from Quickbooks
Before discovering Xero.com I was already wanting to move our accounts out of Quickbooks. The reasons for this were:
- In the UK Quickbooks only runs on Windows, I run Linux and OS X, Drew runs OS X
- The copy of Quickbooks I had was out of date and I needed to upgrade, I didn’t want to pay a hefty upgrade fee for software that didn’t suit our needs
- Quickbooks was hard to understand if you don’t know accountancy terminology. I knew how to use it as I had been doing so for years but without investing a lot of time Drew didn’t really understand the day to day figures.
Our requirements
The most important thing was that any new software needed to run at least on OS X. So both Drew and I could use it on our Macs, I was less worried about Linux as I need a Mac for work anyway (until the glorious day when a version of Photoshop is available for Linux, but that’s another story) however needing to run a Windows desktop just for the accounting software was a nuisance.
Our day to day bookkeeping requirements are pretty straightforward – I send invoices, receive payments and spend money. We also need to track and reimburse a few expenses incurred by Drew and I – for example travel costs.
Ideally I wanted nice reports so that Drew could get a feel for day to day cashflow and budgets. I still intended to continue dealing with most of the financial side of the business but it was obviously important that both Directors of the company had a good overview on the finances.
I needed to be able to easily see our VAT liability and create the VAT return each quarter without spending days preparing it.
I needed to be able to export the accounts in a way that was satisfactory to our accountant at the end of the year.
Researching our options
The Mac financial software market is pretty limited. At the Mac Expo I saw a demo of MYOB which does run on OS X. It fulfilled most of the above points however was yet another untidy interface and a piece of software that required bookkeeping knowledge to be able to use. The main point in it’s favour over Quickbooks was that it would run on our Macs and so I was resigned to having to use that. As I started trying to set up our accounts in it, I quickly discovered how badly designed the interface was and started to wonder if there was a different way to deal with this.
It might seem odd that as a web development company I hadn’t, until this point, thought to look at web based software. It really hadn’t crossed my mind that there was a web application that could be a fully featured accountancy package. I was aware of online invoicing and time tracking applications but I needed something that would do everything – including the all important VAT returns. It was at this point that I spotted Xero, reading the features list it appeared to tick all of the boxes, had pretty graphs and easy to understand reports and didn’t look like something from the 1990s. I signed up for the trial.
Converting the accounts
Within a couple of hours of playing with the trial I was happy that Xero met all of our basic bookkeeping requirements … and then some! As a well designed web application it worked flawlessly on OS X and on Linux, invoicing and invoice tracking was excellent and VAT returns could be created automatically by the software. I also really liked the dashboard view that you get when first logging in – a quick overview of accounts, sales, unpaid invoices and so on. So I made a pretty quick decision that we would move the accounts to Xero.
To move the accounts I had to get over two hurdles. We were mid year and so I would need to import a lot of invoices and data from the current financial year, and I had to make sure my accountant was happy.
Moving the data ended up being a semi-manual process. I could import our customers contact details from Quickbooks, and then set up the chart of accounts so that it matched what we had in Quickbooks. I then made sure that the starting balances in Xero matched a trial balance taken in Quickbooks for 1 April 2008.
Once I had Xero set up as if it were 1 April 2008 I did a lot of data entry! All in all it took me 3 days to move our entire operations over to Xero – however I did use that time to also check up issues in our accounts, that had been hanging around, so it was a nice ‘fresh start’ leaving behind all the issues that had been hanging around unresolved in Quickbooks. Once all the data was in place I could confirm that everything was correct by checking the trial balance in both Quickbooks and Xero and seeing that everything matched. There were a couple of issues that I had discovered in the process to do with VAT on some very old bad debts, and that were actually a longstanding issue with Quickbooks, so it was time to show my accountant.
I was a little bit worried that our accountant would be unimpressed with our move to Xero, and that I’d need to do a bit more work at the end of year to export accounts in a manner he was happy with. However, I felt that the day to day operations of Xero outweighed that disadvantage. As it turned out though, he was very impressed with Xero, we managed to easily fix the couple of issues in the accounts in a way he felt was satisfactory by adding journal entries and I showed him around the system – he has since recommended Xero to other clients of his!
Benefits to our company
This blog post has become something of a Xero fan post, something I make no apology for. It really has made a huge difference to the admin side of running edgeofmyseat.com. My favourite features, and those that have made the biggest difference include:
- Importing bank data and the one click reconciliation as Xero intelligently matches entries and creates new ones
- The fact that the license is per company – so I can add additional users such as my accountant, Drew and anyone else in future with no extra cost
- The dashboard and at a glance view of our financial situation
- Invoice tracking – being able to quickly see who hasn’t paid us and chase them up, adding notes to the invoice as we do so
The Xero API
This year we launched a product that made our move to Xero even more beneficial. Until we launched Perch we sent out relatively few invoices every month as we were mainly invoicing for fairly large projects. Perch is a downloadable product, paid for via PayPal and costs just £35. Suddenly I had to deal with a massive influx of small payments, and account for VAT correctly for payments from all over the world.
This would have been an absolute nightmare with my old system, making the cost to us of each Perch license far higher – potentially meaning we would have had to increase the cost of Perch. However with Xero two things were possible. Firstly we could import the PayPal data (and a recent upgrade to Xero made that import happen automatically) so all payments and PayPal fees were imported. Secondly Xero has an API that we could use to create a new invoice for each customer – creating a new customer if needed or looking up an existing record. These invoices go in as a draft and once a day I log in, quickly look over them to make sure nothing silly has happened, approve and match them up with the incoming PayPal data. The VAT is all accounted for correctly and it takes a few minutes each day.
Conclusion
So there you have it, our Xero experience. Hopefully this is useful to someone and if anyone has any questions I’d be happy to answer them if I can.
Keeping an eye on cashflow – accounts and bookkeeping for web businesses
It seems obvious that cashflow and accounts are important elements of running a business. However when you first start your business, bookkeeping and accounts isn’t something you easily get excited about – unless perhaps you are starting a business as an accountant. If you watch the television programme ‘Dragons’ Den’ you can see how many would be business owners and current business owners have a very poor grasp on basic accounting principles. This post describes how I, as a business owner, have dealt with bookkeeping over the years and finishes with some ‘top tips’ based on my experiences. I run a business in the UK so some of the references in this article are UK specific, however if you replace VAT with ‘local tax’, I’m sure a lot of these tips hold true everywhere.
I was very fortunate when starting edgeofmyseat.com because I was helped by The Prince’s Trust and one of the things they do is set new businesses up with a business mentor. The monthly meetings with my mentor ensured that at least once a month, I got my accounts up to date and could talk about my cashflow, where I expected money to be coming from and where I was spending it. This was one of the most valuable things that The Prince’s Trust did for me as a new business owner. The mentor sat me down and made sure I realised that while I might be great at doing the work, if I also didn’t keep my eye on cashflow, the business wouldn’t succeed.
In my first year running the business I operated as a sole trader, I did all my own bookkeeping and end of year tax return. As the business grew we become a UK Limited Company and registered for VAT and at this point I took on an accountant. By the time he had been through our accounts he had saved me more than his fee, as there were various things I wasn’t claiming for that I could do. However I still continued to do the day to day bookkeeping, using my accountant for occasional advice, and also the end of year returns. Almost eight years on, I still do all of our bookkeeping and despite it being something that could be easily outsourced, I would rather devote some time to this and know exactly what is happening financially on a daily basis.
I am often asked what software we use for our accounts. Up until very recently I used Quickbooks, while Quickbooks is a very capable small business accounting package it doesn’t run on the Mac or Linux, and also takes some experience to understand how to use it. When Drew McLellan became a Director of edgeofmyseat.com it became clear to me that we needed to explore alternatives to Quickbooks that would enable him to become more involved with the finances of the company. In the time between me setting up the original accounts in Quickbooks in 2001 and Drew joining the company in 2007, several online accounting and invoicing applications had been launched and we eventually selected Xero as the application that fulfilled our requirements best. I could (and probably will) write an entire post about that transition but it has made life far easier for me as the person who does the bookkeeping and for Drew who just needs a quick overview. I would very much recommend Xero from our experiences so far.
Business cashflow tips
Know your financial position
If you run a business the financials are your responsibility. Get help when you need it but don’t outsource to the extent that you don’t know your financial position. If you don’t understand something that your accountant or bookkeeper is doing, ask them. Make it your responsibility to have a decent working knowledge of the books.
Have up to date details of your position available, in an easy to understand format
When I was using Quickbooks, it was very difficult for Drew to understand our financial position. I had spent years learning Quickbooks as the business had grown and I understood what was happening, however without that knowledge it was hard for Drew to just get a quick overview. With our move to Xero, Drew can now login and see the overview and reports so both Directors of edgeofmyseat.com are up to date with our position at any time. If you do outsource this side of your business make sure you are getting frequent management reports, and that you understand them.
Get professional advice
I do my own bookkeeping, but I wouldn’t dream of doing my end of year accounts on my own – I know my limitations! A good accountant should save you money as they will be up to date with current legislation. They should also be able to help you set up your accounting software to make day to day bookkeeping easy, and in a format that will make their job at the end of the year straightforward.
There are other places where you can obtain advice, business organizations such as the Federation of Small Businesses and Business Link in the UK offer lots of helpful advice on financial issues. If you have a good relationship with your bank they can be a port of call – but a lot does depend on the individual bank and branch.
Set aside your personal/company tax and VAT as you receive it
Ideally you should have a separate account to transfer the portion of every payment that is VAT (if you are registered) and the percentage of profit that will be tax to as you receive payments. Most business bank account providers can also give you a linked instant access savings account. I find that having the money in a different account stops me seeing it as available cash! If you don’t have a separate account make sure that you always know what amount of the money sat in your account is earmarked.
Chase unpaid invoices
An organized system for creating and tracking invoices means that you know when invoices become overdue. Don’t be shy in chasing invoices – if you have done the work then you should be paid for it. It is a sad fact that many businesses purposely avoid paying until they are chased for the money, and will delay as long as possible. Have a set procedure that you use to chase and enforce your invoice terms. In the UK the Better Payment Practice campaign site has lots of practical advice for chasing payments.
Don’t leave things to the last minute
Leaving end of year accounts or VAT returns to the last minute causes two issues. Firstly, you are more likely to make mistakes or forget to include things if you are running up to the deadline. Secondly, if you have made a mistake somewhere and find your VAT or tax bill is a lot more than you were expecting, you have no time to find the extra cash. I try and keep our books up to date each month, so I have as long as possible to sort out any issues before the accounts have to be finalized and outstanding tax paid.
Conclusion
The above are some of the suggestions that I have for keeping up to date with the figures in your business. If you have any other tips please ad them in the comments. Also, I’m planning to write a few articles on business related issues based on my own experiences, so if there is anything you think would be interesting to know – let me know and I’ll see if I have any ideas on the subject.
Web design or development profit share agreements
I had this post in mind for a while, prompted by Neil Dixon’s post on the same subject, however the recent post over at Carsonified and the responses to it reminded me of this subject, and that is might be a good time to add my thoughts to the debate having been on the receiving end of many such offers over the last 7 years.
At edgeofmyseat.com we build web applications, so we chat to people about their potential projects all the time. Every so often I’ll get an email or phone call from someone who is trying to get us to work under some kind of profit share agreement. I find that very rarely do they mention profit share up front, and the fact that someone isn’t honest from the outset is always the first alarm bell for me! We have a discussion about the project, I ask some questions so I can give a ballpark cost, and usually at that point they will say, “I was really hoping you would agree to be a partner in this business”. By which they mean, “I was really hoping you would develop this for free and I’ll pay you if it makes me any money”.
As Neil points out, most of the time with these offers, the entrepreneur has no business plan to speak of. They have an idea and think that if they can just find someone to build it, they’ll be rich! If the entrepreneur manages to find themselves a developer who is willing to entertain this idea they think they have themselves a real win-win situation, they lose the big cost of their venture, and only have to pay anything out if it makes money.
However, it might not be such a great situation for the entrepreneur as they think. Without payment they are really relying on the goodwill of the company or individual they have approached. They will probably find their project at the back of the queue behind any paid work that might come in. Without a well thought through business plan that both parties are excited about, it seems likely that both the entrepreneur and the designer or developer will be left feeling hard done by when the application either never gets built, or gets built but fails due to lack of marketing or simply because it wasn’t that great an idea in the first place. Without the market research, planning and forecasts that should go into a business plan you just don’t know.
That isn’t to say that such an agreement could never work. It could work really well in a situation where both parties are excited about the project, act as partners in the business rather than the developer just doing their usual job that they are normally paid for without the pay, and have a good contract drawn up to explain both parties obligations. It has to be said I’ve never been approached with a tempting enough opportunity yet, and if I were tempted it would probably be with a company or person I already knew and trusted.
The below are the points I would consider if I were tempted by any profit share opportunity.
Does the opportunity have a proper business plan?
By asking someone to work for free you are essentially asking them to invest in your business. Any investor will want to assess your business plan and ask questions. Treat investments of time and skills in the same way that you would treat an investment of money.
Are you happy to accept that I will want to have a say in how the business is run?
As an investor I would want to be able to help the business become a success, not just build what we are told to build. If you want someone to be quiet and just do what you say then you definitely wouldn’t want me as a partner. Any opportunity I was excited enough about to want to be part of, I’d want to be properly part of it.
Is this something I’m excited about?
I would want to enjoy being part of the business, not just see it as another job, so anything I partnered in I would need to be really excited by and keen to see do well.
Is this something I can be of benefit to?
I’d have to feel that my involvement would be more than just my ability to write code – am I the perfect person to be a partner in this business because of my other skills and knowledge?
Is this going to be interesting to develop?
I like building interesting things and I’d be far more likely to take on a project on a profit share basis if the work itself was going to be interesting, would show me and my company in a good light, and would increase my abilities.
Do I like, trust and respect the other partner(s)?
If I am going to partner without someone or another company I need to like an trust these people. I try to avoid having clients that I don’t trust – that goes much more so for those who I am going to enter into partnership with.
I would expect to be happy with all of the above before it even got down to contracts and breakdown of who gets what and when. Then it goes without saying I would expect to be involved in discussions about those contracts and that all parties were happy with the agreement before it was finalized and work started.
As to the comments over at Carsonified that Elliott knows and trusts Ryan, in my view that makes it even more important to have all of the exit possibilities mapped out in a contract. Contracts shouldn’t be seen as a means to beat the other party over the head if it all goes wrong. They should be a means to protect a relationship by spelling out exactly what happens in any given situation. So if either party needs to terminate the agreement for whatever reason, the steps are mapped out and a conclusion can happen without any wrangling or argument, and the relationship stays intact.
I wish Carsonified and Elliott Kember the best of luck, and I’ll be interested to see how their app turns out. This post isn’t really a reaction to Ryan’s post, as other than the details posted there we don’t know anything about the plans that have gone into this. However I’d love to hear your stories of partnerships, or of proposals you have received that you decided to turn down.
Starting your own business during a downturn
It is certainly shaping up to be a tough time for a lot of people right now. Several friends have found themselves unemployed and I’ve seen a number of people mentioning on Twitter how they are considering starting their own business. From my own experience I would encourage people to go for it – even from the early days I have felt more secure as a business owner than an employee. I am the first to know about any potential trouble spots and can do something about it myself rather than hoping my boss will. Starting a business at any time seems quite scary, as we enter a recession even more so, and as someone who has been through that process I wanted to share my own tips for starting up with nothing.
When I started edgeofmyseat.com in September 2001 the web industry was also in the middle of a crisis. The dot com boom was crashing and the market seemed to be swamped with out of work web designers. However we have gone from strength to strength as a company and I believe that the tricky start I had has been important to our success. Sometimes the best lessons are learned through dealing with adversity.
Conventional wisdom is that you should have a pot of money saved – around 6 months worth of salary – before taking the leap and starting up for yourself. If you’ve just found yourself unemployed you might not have that luxury – I only had the next month’s expenses covered when I started up. It certainly focuses the mind! Even if you are fortunate enough to have some cash in the bank, try and see it as your contingency fund and act as if you need to make enough to live from day one of your new business or freelance life.
Spend on only what is necessary
You don’t need much to start out as a freelancer or small company. A computer with appropriate software (which you may already have – even if it isn’t the shiniest and newest Macbook Pro), somewhere to sit and work comfortably, an internet connection and a phone.
You can do without a load of printed materials. When I started the company the only printed materials I had where some cheap business cards. These days getting nice and inexpensive business cards is easy – check out Moo.com. Even today we have business cards and printed letterheads – no compliment slips, leaflets, folders etc.
However, don’t scrimp on essentials
Your computer might not be the newest but it needs to let you do your job. If you need to use Photoshop and it takes half an hour to launch or crashes every hour then it is false economy to battle on as the hours you waste soon add up to a lot of money if you could have been doing chargeable work during that time. Learning when to economise and when to invest in equipment is a vital part of starting out on your own. For a few days keep a tally on the mount of time you spend waiting or rebooting. You can then work out when your investment in a new machine will pay for itself in time saved.
If you are sat at a desk all day essentials also include a decent chair. Back problems can leave you unable to work for weeks. I’m not suggesting you go out and get an Aeron, but shop around for a decent adjustable chair, you can often get really good deals in office stores on ex-display or end of line stock.
Promote yourself on the cheap
We have never advertised in the traditional sense. Instead I have always used the things that I’m good at to raise the profile of the business. A well written article for a busy site, that covers one of your levels of expertise, can be worth many expensive adverts in magazines or a fortune spent on Google AdWords. Think about ways you can raise your profile by putting in some time – writing, starting a podcast, spending time helping people out on mailing lists and forums or offering to speak at a local event are all ways you can promote yourself and help other people too.
I believe the key with this is to never treat what you are doing as purely an advert for your business. Write, speak or answer forum questions in the spirit of community and in sharing knowledge, and do the activities that you enjoy doing, where you can offer something.
Make sure everyone you know is aware of what you are doing
This bit I’m quite bad at, self-promotion not being one of my strong points. If you are already involved in the web community – on Twitter, on mailing lists and forums, have a blog or personal site – make sure that you let those groups know about your new business or freelance status. You may find that people you already know have work to offer or contacts they could introduce you to. It is worth being specific about what you do so that people know you are the person to come to if they need someone for that type of work.
Keep an eye on cashflow
I never wanted to be a bookkeeper but part and parcel of running a company is having a decent understanding of what happens in your accounts. I’d advise any company to get a good accountant to help with the year end accounts and advise on tax issues, however think seriously before outsourcing all of your bookkeeping. I still do all of our day to day bookkeeping, and find that checking into the accounts several times a week keeps cashflow at the front of my mind and prevents any small problems becoming big ones. It also saves us money with the accountant as I can send him neat up to date accounts to check and make adjustments to rather than a pile of invoices and a shoebox full of bills!
Chase unpaid invoices promptly
I find it really difficult chasing money from clients with whom I have a good working relationship, but it is one of the necessary evils of running a business. Have payment terms and stick to them, don’t feel bad about asking for payment when it goes overdue. If you’ve done the work it is your money! In times of trouble companies often use freelancers for a interest free loan, getting work done and then delaying the payment for 2 or 3 months. You are not the bank so don’t let your clients treat you like one.
The Better Payment Practice Campaign website has a lot of helpful information about getting paid and what to do if a client is not paying. A lot of this is UK specific – but some of the general points are true wherever you live.
Get Networking
If your target market is other businesses then getting out and talking to people can generate a huge amount of interest. Check out your local Chamber of Commerce and the local papers to see if you can find local business networking events. Some groups will charge for membership as well as for the events themselves but usually will let you attend a couple of sessions as a guest before joining.
My experience of networking is that I very rarely meet anyone at an event who becomes a client however, a few weeks or even months later I often hear from someone who has been told about us by someone from an event.
My top tip for networking is that you should never go out there and try and sell your services, instead just chat to people. Usually the first question anyone will ask is “what do you do?” so be ready to answer in a way that describes your company and services clearly and memorably. Then find out what they do! You will meet some nice people, perhaps find out about services and products you can use, and also spread the word in your local area about what you offer. If you work alone, networking groups can also be a really great way to discuss business issues in general with other people, and many groups have speakers who come in to talk about business related issues. You can get some good advice from these groups in addition to any contacts you may make.
As with online networking and promotion it’s all about give and take. If you become part of networking or local business groups, and try and help other people by referring them on to people or being willing to share your knowledge, you’ll soon find that people want to help your business as well.
Look for opportunities – even if they aren’t very glamorous
Starting a business in a downturn might mean that there is less really interesting work to go round. When I started out a lot of companies had found they needed to lose or trim down their web teams, and when their applications started to run into issues or need additions made they were looking for freelancers to fill the gap. I spent a good part of the first three years I was in business fixing up other people’s code. Definitely not glamorous work but it taught me a lot about web development and paid the bills until people started commissioning new work again. A lot of the clients who initially came to me to fix up old applications then came back and hired us to develop new ones, so it’s wise not to turn away opportunities too quickly, especially if you aren’t already swamped with exciting work!
So these are my suggestions for starting a business or going freelance during a downturn. I’d love to hear more suggestions in the comments.
