Archive for February, 2011

Regular readers of this feed will know that when it comes to small business, I LOVE expenses.  As I have described in a previous entry, expenses are the perfect way of getting cash out of your company with little or no impact from taxation for either you or your company.   For freelancers and home workers, one of the expenses you can claim is a deduction for a home office against your household expenses.

It’s important to note that you can only really do this (so I have been advised) if you have a room that is clearly part of your business.  For me, one of the bedrooms in my house has been converted into a home office, it’s where I do a lot of my work, and technically it is an extension to my company.    Just to be clear (just in case the tax man does come knocking), I have placed a small plaque on the door to this office with my company name on it.   Also, because this is a rental, it has no impact on your home should you move and sell the house.

Anyway, because this room is part of my house, I rent the room to my company – which means that every quarter, I produce a bill to my company, and then put this as a cash expense claim.   The way I do this is as follows 

1. First, you need to work out the square footage of your home – this is all rooms, but not garages (unless they are converted into rooms), stairs or hallways – just the usable rooms (don’t forget toilets, kitchens ,bathrooms and the room you use as an office)
2. Now, work out the square footage of the office
3. Divide one by the other (office / total * 100), and this equates to % of your home that is part of your office – for me, my home office is 6.10% of my house
4. Now, list the rents and utilities for the quarter, and divide them by the office percentage – this then gives you per utility the amount to claim (so say a mortgage payment of £600 a month, for a quarterly claim its £110 (600 * 3 months = £1800, multiplied by 6.1% = £109.80p)

The items I claim for include Mortgage costs, Council Tax, Water Bills, Insurance, Cleaning costs, electricity and gas.

If you want a template based on my own claim and calculation form, you can download one here.

Sorry, this is a bit of a rant.   But I want to talk about train travel in the UK.   Actually, I want to talk about trains compared to cars as an option when it comes to business travel.   I am sure that whatever it is you do, whether you are a contractor, a freelancer or work/own a small business, you need to travel for your business.   And I bet you keep hitting the same old question when it comes to travel – do I drive, or do I go by train.

I see trains in the UK as one of the pointers why the UK is in trouble.    If I wanted to travel to say Edinburgh or Prague (or any other European city) I have a choice of which airline I want to use.  I can compare prices, I can compare rates, I can compare service, and make a choice.   But when it comes to Train travel, you are stuck with the operator that runs the line you need to use for your destination.

But the train operators are pricing themselves out of the market.  

I have to travel from my home office in Hampshire, to Nottingham.   By car, this is a distance of 165 miles.  At current HIGH petrol prices, it will cost me 17p a mile to drive (not including car costs such as car, insurance, tax etc).  That equates to £29 to get there.  Of course I would charge the customer the taxable limit of 40p a mile, so that’s £66 each way.   To drive, it will take around 2 hours 44 minutes.  I get to sit in a comfortable clean car, that’s warm, listen to my music, but I have the downside of wasted time behind the wheel.

For the train, the exact same journey would cost me £69.70 – each way – or £40 more than the cost of the petrol.  The train journey will take 3hours 48minutes – over an hour longer than the car journey.    With the train there are the possibilities of delays, cancellations, and of course a fight for a seat, but it does offer the advantage of possibly doing some work (IF I can get a seat).

It’s a spiral – in the wrong direction.  Train prices go up, so people avoid the trains,  so the train companies make less money, so they have to put the prices up, so more people avoid the trains.  The only solution thus far is to prop up the train operating companies with tax payers money.  But either the TRAIN ‘product’ works, or it doesn’t – if it’s a good product, fast, clean and a better alternative to driving, then people will use it and it will fund itself.  If it doesn’t work – if it’s more expensive, slower, and more stressful than driving, then the product does not work and like any other business with a bad product, it should be allowed to DIE.  Only then will it get re-launched with a set-up and price structure that makes sense.

One of the problems of doing ‘business’ is that you often get into a grove of doing stuff.  I am sure when a project or contract comes along, you have your own methods of doing things.  Your own routines and procedures.  Your own version of A leading to B leading to C leading to project completion.  I imagine that if you are anything like me, this method of working is based on years of experience and refining your techniques until they are razor sharp – delivering work in the most efficient way FOR YOU.  The problem is, these ways or methods may seem alien, strange or scary to other people (hence the image).  For some customers, it may be their first time using freelancers, so will not know what to expect.

Which is why when you start a project with a new customer, co-worker, or prospect, it is worth taking the time to take them through your processes.   The job is not done when the order arrives, or even when you produce the estimate.  From the very start, tell them what the next steps will be, what you will be doing, and when.  Let them know what they need to do, or that they can relax whilst you do the next step in your process, and what this will lead to.

Communication is the name of the game in small business, so don’t keep your customers guessing.   Let them know what the chain of activities are, where they are in the chain, what comes next, and always keep them updated on where they are in the path to completion.

Over the last few months, I have been looking to see if there was a free, easy and quick way to generate more business through my web site (I know, wouldn’t we all like that).   I posted a few questions on some web design forum sites (with links to my business web site) and I received back a whole host of ideas.  But most of the ideas pointed to the same change – a BIGGER call to action.   I made this change, and thought I would share my results with you.

Before, most of the pages on my web site had the same design – the same layout, with the same ‘contact us’ button you see here – a fairly (I thought) clear button for somebody to contact me – a clear call to action.  From the colour scheme of my web site, it stands out from the page, and there are various ways into the contact me form – from the button itself, to a Contact Us menu option on the main menu, and some hyperlinks within the text of the pages.  

This format did result in enquiries.   For the past 12 months, this resulted in an average 7 new enquiries a month (or 1.2% of all visitors using the contact form).  Of course, not all people actually pick up the phone, or fill out the form, so just for comparison, using Google Analytics, I know that in the last 12 months an average 18 people went to the enquiry form (with 11 not using the form).

Now, what I changed was to make the call to action bigger – a lot bigger – and I placed this at the top of the side bar.  Yes, the graphic may be a bit goofy (I selected 4 possible images and did a poll of a handful of people to see which worked best), but it’s big and bold and you can’t miss is.   It’s my ‘action man’.    This change has now been live for a month just to see the difference.   I know that it should run for a lot longer to get true A/B version comparison, but the results look encouraging.   For that one month, I received 11 new enquiries, (or 1.9% of all visitors using the contact form), with 27 people going to the enquiry form.   In total, the difference in total web traffic between the test month and the average for the last 12 months is almost identical, so its not a coincidence of more people hitting my site generating more enquiries – the big call to action does make a difference.

Now the next step is to work out how to turn those that hit the contact form and don’t call/complete the form into form fillers.

When you are on the lookout for more work, or new customers, there are several things you can try.  Here I list my top 14 places to find freelance or contract work, broken down into 3 groups depending on the urgency of your need:

Top Places to find Contract or Freelance work
These are the top places I recommend.   Even though I list other options below, 99.9% of any work can be found through this list.

Existing Customers – Contact your existing customer base, and ask them if they know of any other companies who need the same sort of service.  If so, could they provide a contact or even better, an introduction?
Old Customers – Don’t forget those old customers.  Get in contact and find out if there is any more work needed (or contacts in other companies)
Web Enquiries via Ad Words – If you have a web site with your details, use AdWords to boost its profile.  
Contract Databases – This web site is perfect for finding both contract and freelance work as advertised by agencies.  Just put in your skills and it will find all now work posted in the last few dates
Searchable CV Sites – Whilst using the contract database will get your CV and details out with the agencies, it does not hurt to also upload your CV to the various searchable job sites including JobSite, Monster and JobServe.

Worth a Try
If you have tried the top 5 places to find work, and have spare time, then you can try the following options.  These options do work, but the return on time and investment will be a lot lower than the previous list, so should only be used where you have exhausted the previous options:

Physical mailshot – Use one of the various mailing list companies, purchase a list of companies from them, and send out a mailer and brochure on what you or your company can offer.
LinkedIn contacts - Use LinkedIn to drop a line to your contact, or even the contacts of your contacts, asking if they know of any work going
Phone around the agencies – Depending on your industry, there are numerous agencies that deal with contract and freelancer work.   Contact them directly, make yourself know, and hopefully they can match you with contract work.
LinkedIn discussion groups – Depending on the discussion groups you join, there are occasionally discussions on companies needing contractors or freelancers.   There are groups for authors, marketers, salesman, developers, testers and analysts.

Only if you’re desperate
The final section is devoted to the list of options for the really desperate.   I personally do not know anybody or any company who has found work using these techniques.  I have seen many a blog or discussion about using them, but I personally do not use these as I don’t believe they work.  Bear in mind that these options are so heavily talked about, lots of people will be trying these.  These options are:

Twitter Traffic – Use tools such as Tweetdeck to monitor the twitter streams for keywords for your industry to see if anybody is talking about vacancies.  Bear in mind, you need to think about geographical filters, and need to react fast to any postings.
Create blogs – Creating blogs is supposed to generate traffic to your site – but with 26 new blogs crated every second, getting noticed is a hard fight, and the return of investment based on the effort is nearly not worth considering.
Free Content – Another technique is to create free content – papers, eBooks, applications and such.   I have done this in the past (ePapers) and whilst they have been read a lot (an awful lot), I have not seen a single enquiry from them.
Work Bidding Sites – Depending on your industry, there are a lot of work bidding sites out there.  However, unless you are prepared to work for pennies, the Asian bidders will always win when price is the main factor.
Local Media Adverts – It may be worth cutting through the noise of the internet by taking up an advertisement in the local or regional papers.  Generally, most papers will produce the artwork for you (based on a mock up you provide) within the price of advertisement.   The cost of an advert can range from a few £000 to a few £0000 depending on the size of the readership you want to cover. 
Search local companies through Google – The final suggestion is to use Google to search for local companies, and contact them directly by letter or email.  For me, this is to random to worth considering – you need to contact them at the right time, just as they have a need for your services, and be willing to want a contractor or freelancer instead of employing somebody in-house.

Inflation is up (again), and by all accounts, is going to continue to rise for the foreseeable future.   Of course the problem with high inflation is that it automatically devalues both the money in your pocket, and the money you bill your customers.   A loaf of bread today may cost a pound (or dollar) today, but with inflation at 4%, it costs £1.04 next month/year.   Flipping this on its head, if you charge £100 today, next month that £100 may be worth £97 in real terms.   This is why it’s important to regularly review your day rates and price of products, and uplift them with (or around) inflation.

At a time when everybody is cutting back on spending, it is easy to feel that a rise in prices is the last thing you want to do.  I know myself that whenever I get a letter saying prices are going up, I think about whether I really need the product or service, and always cringe when I have to put my own rates up.   But if things are done well, the process of putting up a price can actually generate more money. 

Regular Rate Reviews
One of the first principles is for regular reviews.   People hate change, but worse is unexpected change.   If your customers expect a rate review in March every year, when March comes around it won’t be so much of a shock.   In reality, your customers will not plan their life around your schedule of course, but at least when you do a rate rise it will be the same time every year so looks fairer than say a rise because you feel like it. 

Advanced Notification
When you raise you rates, don’t email or write to your contacts with a ‘I have put my prices up’ statement.   This gives the customer no opportunity to react to the rate change – it will feel forced on them.  Instead, give them some notice that rates are going up on a date in the future – 3 to 6 months is a good period of time.   Don’t forget to include in your communication, the fact that the rate increase is because of your own rising costs, you are forced to review your prices, and the rise is in line with the annual review schedule. 

Spend Now and Save
The big win is the ‘spend now and save’ option.   In my rate rise letters, I always point out that all quotations will be valid for the next few months until the rise takes effect, and any new quotations will be honoured at the old rate where orders are received before the date of the rate rise.   This sends a ‘spend and save’ message to your customers, and can make them re-review any outstanding quotations or think about any work they may need before the rate goes up.  Depending on the number of customers you have and the amount of the rise, this can be a strong call to action which can generate a sudden rush of new work. 

Staggered Customer Rises
Now not all customers have to have the rate rise at the same time.  In case this does have the desired effect to draw in more work, it may be worth having two rises in the year – with different customers having the rise at different times.   Its also worth thinking about, for really good customers, putting them on the 2^nd round of rises, giving them more notice with a ‘because you are such an important customer, we are delaying the rise as long as possible for you until….’ statement in your communication.   This will send a feeling of importance to them.

Keeping the cash coming in is probably the most important job in any company.   It doesn’t matter if you are a one man band or a multi national, if your customers don’t pay their bills, the bank account will quickly empty and the company will start to struggle.   Therefore, I present my 10 stage plan for dealing with late paying customers in your small or freelance business:

Monitor accounts and watch payments due
The first thing you need is a method of monitoring payments – when invoices are raised, when they are due, and when payment is made.    In its simplest form, this can be a spreadsheet which you update whenever you invoice or reconcile payments.  However, it’s far more effective to use some form of accounts package which provides tools for monitoring payments due.   The Freeagent system I recommend provides a specific screen of payment monitoring, but any good accounts system should provide this function.  It is useful if this is tied to the generation of the invoices (as with Freeagent), so the process becomes part of the invoice process.

Send a reminder as payment becomes due
As you (or your accounts system) sees that invoices are becoming due in the next few days, a gentle email to the customer is a good idea to remind them that payment is due.   Whilst the method of payment should already be on your invoice, reminding them of the ways to pay (for instance your bank account details) should be included in the reminder email.  Some accounts systems (such as Sage or Freeagent) allow automatic reminders to be sent out.

Send another reminder when payment late
As soon as a payment is late, its time to send out another email with another reminder.  For this reminder, the wording should be stronger, stating that the payment “IS LATE” – again with the methods of payment.

Phone them
Reminder emails, letters or faxes are easily ignored.   If the debt or delay is getting more serious, a call to the accounts department of the customer is more likely to result in quick payment.  Of course, accounts payable teams of big companies are used to being chased for payments so will have a range of excuses at hand (“its just missed our payment run”, “it has to be signed off by a manager who is out until…”, etc).  Even so, try and get a committed action or payment date from them.

Go to the manager
If the accounts department of the customer is not moving things forward, don’t be afraid to contact the person who commissioned the work or even better, their boss.  Again, whilst an email may work, a phone call is even better.

Put them on hold
At some point, if payment is being held up without a valid reason, you may be tempted to put the customer on hold.   A quick email with a subject heading of “YOUR ON STOP BECAUSE OF OVERDUE INVOICES” detailing the invoices outstanding can spur companies into action.  However, this tactic only works where the customer needs more attention (more work, ongoing projects or support).  The flip side is that it can be a fairly harsh tactic to use and could effect future work coming your way.

Distance yourself from chasing
A good technique is to distance yourself from all the chasing for payment.  Even if you are a one man band, sending the chase email from “The Accounts Department” (with an accounts@… Email address) of your small company means you remain the good guy, whilst its your nasty accounts team who are being the ones chasing the payment (even though its you under a different email address).   If things get held up for a really long time with no way forward, you can distance yourself even further by employing the services of a debt chasing company, but be prepared to pay either £200 or 25% of the chased amount (whichever is the greater) for such a service.

Change Terms for future invoices
Where you have a customer who is a late payer on a regular basis, one thing to consider is to change the payment terms of future invoices.   If they always pay 10 days after your 30 day invoice terms, changing their specific terms to 20 days means they may start paying on time.  You will need to inform them that you are changing their terms before you implement such a change, and depending on your accounts system, having different customers on different terms may be a lot of administration.

Firm but fair Terms
Of course, it always helps to have Terms of Service which are firm, but fair from the outset.   As an example, in the Terms of my own company, I have both late payment fees and interest on late payments clearly defined.  

VAT on cash
Regardless of the method or chain of events that you follow, it is worth checking with your accountant or accounts system that VAT and TAX is paid on cash receipt rather than on invoice.   Otherwise, you will be repaying VAT on payments that you have yet to receive.   In the Freeagent accounts system that I use, this is a simple configuration switch on when to pay TAX.

Today I went shopping for tyres for my car, and something occurred to me.   It struck me that I can’t actually remember the last time I went to a companies physical location to shop for anything – to traditionally shop.   For the tyres, I goggled all my local providers, went to their web sites, and checked on the prices of the range of tyres.   This has become my normal method of purchase now – using web sites to price up the products I want before I then go and purchase it (or order it if the price warrants an online purchase).   I suspect for more and more people, this is now the normal mode of shopping.

But you know what?  On a few of these sites, when I used the Price Enquiry button and was told to “Call now” for prices – I really could not be bothered.   I don’t want to get into a 5 minute conversation to get prices.  No, I expect to be able to find my prices on the web.  I don’t care if it’s a car tire, a tablet PC, a holiday or the services of a plumber – I want to know an idea of the price before I get in contact.

As I say, this has become the norm for me.   Yes, I will still ‘wander’ into shops for clothes, for food, for magazines and such.  But the times I use the web before I buy far out ways the phone up or wander in approach.   And I suspect that in the future I will start using the web for things like clothes and food shopping. 

Which brings me around to those companies with the ‘call me’ option as the ONLY way of finding out the price.  I went onto their web site (boosting their web hit count), tried to look at their prices, hit the call us area, and promptly moved onto the next site (so a web hit without a follow through).   Yes, car tyres are a commodity, but the tyres are actually part of a service (I am not going to fit the tyres to my car myself).   

So I am going so update my own site, and I am going to start listing typical project prices, and typical day rates – as part of an A/B site test.   If I demand to get an idea of prices before I make contract, you can bet there are others out there wanting the same from me.

So are you hiding your prices from your web visitors?  If so, is it costing you sales?

During December of last year, I noticed something odd.   Whilst I received 6 or 7 enquiries a month for new work, throughout the whole of December not a single web based enquiry came in.   I put this down to the time of the year, with the Christmas madness.   After all, checking my Adwords stats showed that people were still clicking through to my web site – so I guess people were just book-marking to come back in the new year, or my services were just not what they needed.  Right?    WRONG!!

What had happened was that my web hosting company were having problems, and as a result they had decided to change the IP address of my SMTP (email) server on their side which meant that when somebody completed an enquiry form – the email went…. nowhere.   The SMTP script did not connect with the SMTP server, and the problem was written to an error log.   The prospect got a nice web page saying that we would be in contact, but of course nobody contacted them because the enquiry was never received.   I have web monitoring on all of my sites, but this is not something that the monitoring would have picked up.

Now I could have put in all kinds of fancy checking, and auditing, and error logging, and error pickup and notifications – but you know what?  It’s just easier, quicker and more robust to perform a step through.

So now, every Monday morning I do a run through.  Starting with one of my search terms in Google, I click through one of my ads (which checks that Adwords is running and the adverts look OK), check that my web page appears when I click the advert, I then click through to the contact me form, and fill it out, to check that the email arrives.

Ok, it costs me £2 a week for the wasted ad-word click, and 2 minutes of my time every Monday.   But if one of those December click-throughs might have been a sale, that very small amount and that 2 minutes could be an awfully large amount of wasted money.

So how often do you check all of your flow throughs?

I am not a salesman.   In fact, I am hopeless at sales.  But that’s good – I don’t want to be a salesman – I am a technical person who loves what I do.  The problem is that in order to generate revenue from customers, I also have to do some selling.   But that doesn’t mean I have to like it and frankly, I am rubbish at it.   But, I have had a lot of success over the past couple of months using a technique which was suggested to me by a salesman at the end of one of my mentoring groups.

This technique is simply to hold back, and keep some bait for the fishing (this was how it was described to me).   Look at it this way, when we are meeting with a prospect or putting out a proposal, it is far too easy to give all the information, all the recommendations, all the relevant links and all of costs.   This is done on the belief that the more we provide, the better the outcome.   But then, we move into the follow up and chasing phase of the selling process… and then what?!?!   What do you say in those emails?

I have received my own share of emails saying just “Have you had a chance to look at the proposal, are you ready to sign up yet?”    Constant contact with the prospect is important, but the contact needs to add value.

Which is why holding back or 2 or 3 small items gives you the perfect reason for follow up and further conversations.   Much better to email or call the prospect with something along the lines of “By the way, in regard to the proposal, I thought you would like to also know that ….” followed by the extra bait.  But again, 1 item at a time gives reasons for chasing and follow up calls in the future.

I hate selling, I hate the closing even more, but using this technique makes phoning or sending those emails a lot easier, and I can confirm I have made a lot more sales because of it.