Posts Tagged ‘contract’

Once an initial project has been completed for a customer, the project invoice raised and the hand over done, it does not necessarily mean that your relationship with a customer is over. In addition to staying in touch in the hope of future sales and new projects, one thing well worth considering is arranging a Support and Maintenance contract with the customer.

There is no right or wrong way of selling Support and Maintenance. Sometimes, I will mention it during the prospecting stage (“of course, once the project is over, happy to discuss the support of the system”) or sometimes I will mention it on project completion (“So, that’s all done. Now are you happy to support the system in the future, or will you need support going forward?”)

Charging Support and Maintenance can be the icing on the cake of a project. Once the project is complete, the customer pays you an annual support payment upfront, and in return, you agree to fix any problems that come, up, answer questions etc, without further charge for the year.

Think of support and maintenance (S&M) as an insurance policy taken out by your customer for the year ahead.

What to charge for Support

Within an IT industry (other industries will vary), the going rate of support charges can range from anything from 10% to 20% of the original delivery cost. Typically, 15% is viewed as ‘fair’ – so this is the amount I generally try to aim for – charging 15% of the original project development cost per year. Sometimes, it is easier to work out how much time I am likely to spend supporting a customer (based on the help needed during initial development and handover), add a ‘fudge’ factor for the unexpected and then multiply this up by my typical day rate to find the annual cost for a customer.

And don’t forget that support charges also need to go up in line with your annual price increases on the anniversary.

Some customers prefer a call off support arrangement, where they pre-book a number of days of support in advance and use (and pay for) them as required. This may seem like an attractive option for a support and maintenance agreement, but unless they are paying up front, all the advantage is with the customer. It is a much better option to organise a proper and full support agreement.

Be specific about support dates and times

In addition to the cost the customer will pay for support and maintenance, the other major factor which can influence the price will be the dates and times of support.

Will you provide support from Monday to Friday? What about weekends? And will support be from 9am to 5pm, 8am to 6pm or will you provide support 24 hours a day? Also bear in mind that if your customer is in a different time zone to you, their 5pm may be your 2am.

Whilst there are again no hard and fast rules for how support charges change for different days of the week or times of the day, my general rule of thumb is that any weekend day is TWICE the cost of a week day (so 7 day support is actually charged as 180% cost of a standard working 5 day support contract – ((2 days * 2) + 5 days)). Then, for the extended hours (beyond 9am to 5pm), I add 12.5% per hour (so 8am to 6pm adds 25% again).

Companies who demand 24hour support will be used to paying through the nose for this constant level of support. Again, in an IT industry, typically a 24hour 7 day support contract will cost between THREE and FOUR times the cost of a standard Monday to Friday 9am to 5pm support arrangement (although I do know some BIG IT companies who charge upto 20 times a standard support cost for 24-7 support – and their customers pay it!!!).

Bear in mind that for extended hours or 24 hour support, you need to work out how they will contact you. In needs to be using a method that will wake you (if you yourself are providing the support and they decide to call at 3am) and that you can respond to.

Finally, when working out the costs, factor in the response times. You need to provide details of a) How quickly you will email/call them back, b) provide a solution or at least a get-around and c) A full solution if it’s a major issue. These times will vary from project to project, and industry to industry. My starting position for support agreements is 1 hour for call back, 4 hours for a get around and 48 hours if it’s a major issue or requires a fix.

What to Include and Exclude

Which leads us onto the big issue of what is and is not included. This list should be stated up front, and be in all discussions, all emails and in the final support agreements – as it is pivotal. Once agreed, if you leave holes, it is possible the customer could use the support agreement for all new future work or you may end up supporting things you never initially supplied.

Again, this will will be vary from project to project, and industry to industry. However as a starting point, here is my standard inclusion and excluded list:

• Support is provided only in terms of the project (name the project)
• Support is provided only in terms of hardware and software provided for the project by your company (name your company)
• Support is provided only for errors or questions relating to the existing functionality of the project
• Support is provided for any questions or software errors within the project, including data generated or stored by the project
• Support is provided in scope of the current functionality of the project or additional functionality added to the project by (your company) on a paid for enhancement basis in the future
• Support is provided on all functionality explicit to the project, including GUI front end functionality, back end database, supplied interfaces and data held in the database
• Support is not provided for errors resulting from 3rd party software, 3rd party hardware, interfaces or data (including database software, operating systems and the like)
• Support is not provided for additional features, additional data to be held, new entry prompts, changes to interface definitions or data entry changes – these would be provided under a separate enhancement quotation
• Support is not provided for additional reports or enquiries, either from within the software, or using 3rd party tools – these would be provided under a separate enhancement quotation
• Support does not include any additional training of staff. This can be provided separately as an additional service
• We reserve the right to charge separately for corrections or time required resulting from your staff errors (such as invalid entries)
• Support if provided on the basis on standard working days, excluding bank holidays, Monday to Friday, from 9am to 5pm… (etc)

If you want to see what my standard support agreement looks like (the wording), I offer you a copy to download for free.

When I am contracting on a customer site, one of the things I find most helpful to me is the alarm on my watch.

As per my last Freelancing verses Contracting post, with contracting we are being paid for our time, not for the products we produce.   So when I contract, it makes sense to me to ensure that I leave their offices each day as soon as the agreed hours have been met.

That may sound harsh or inflexible, but look at it this way – if a contract for resource time is for 7.5 hours a day and you end up skipping lunch and staying for an extra 30 minutes at the end of every day, that can add an extra hour or 90 minutes of effort a day.  Over a week this can add up to 7.5 hours – or an extra day of work.   You are not being paid for that time, so what you are effectively doing is either discounting your rates by 20%, or you are reducing the length of the final contract by a day a week.   If you do an extra week a month of unpaid work, its one week sooner when the contract will end (or wont get renewed).

Of course one of the problems of leaving on time is that you are running out of the door when the permanent workers may still be working.  But wait a minute – they are doing that not for the love of the work – they are doing it in the hope of a pay rise, or to further their career or just to keep their jobs.  As a contractor, you have none of these to worry about.  So why shouldn’t you leave on time?

I have found the best method of easing into the ‘leave on time’ is to initially work the hours agreed plus a bit more for the first week, and then to explain to everybody how I will miss a transport connection by leaving after the agreed time (oh the traffic is so bad after 5:15pm around here, oh I just miss my train connection, etc).  Then make sure you leave on time.  But to signal the exit by setting a discreet (but audible) alarm on my watch to signal and remind me when its time to end the day.

That way you do the hours, do the job, but your alarm is the one nagging you that it’s time to go.

Of course some contracts do pay overtime – in which case this is not needed.   But generally that’s not the way contracts work – you have a day rate for a fixed length of day.  So stop robbing or short changing yourself, and get out of the office on time.

PS – In case you are worried that this may effect any contract extensions, I have used this system on all my previous contracts, and never have I not been renewed or extended.

Here in the UK, there is a great divide between Freelancing and Contracting work.   Whilst there are a multitude of differences between the two types of work, for me, the difference is fairly clear:

Freelancing – Working with a customer, to provide a product or service.  This will consist of an agreed project, where the work if quoted, agreed, and fixed by way of a final delivery.  This delivery can be a product, a report, a site visit, a web site or anything else.  BUT, something agreed upon is delivered.  You get paid for the delivery rather than the time.

Contracting – A contracting role is where a resource is provided to a customer for a fixed length of time, and during that time, the resource works on the activities dictated by the customer which will typically vary during the contracted period.  You get paid for the time (normally paid by day at an agreed day rate) rather than upon completion of a delivery.

Now both of these activities can be carried out at a customer’s office, or can be carried out at your home/business office.   Both can be provided to the customer directly, or through a third party agency.  Both can be based on a hand shake, or can be nailed down with complex contracts.   Other than the product delivery Vs resource difference, the lines defining freelancing and contracting can be fuzzy.

Bread and Butter verses Meat

For me and my own business, the majority of the work I perform can be classed as falling into the Freelance category.

But here is a confession…… now and again, I love to do some contract work.   Generally, I like to do some contract work at least once a year.  More if time allows.

The way I view it is that contract work is the Bread and Butter of my business.   It pays pretty well (but no where near as good as a nice juicy freelance job), is nice and dependable, and the money is regular.  However, Freelance work is the Meat in the freelancing-contracting sandwich.   It is (generally) more interesting work, you have all the benefits of (generally) working from home (or a location of your choice) and you are the boss of your time and schedules.  Plus with freelancing, you have the option to run multiple freelance projects at the same time.

Given a choice, Freelancing for me is far juicer than contracting.

Why I love to Contract

So you may then ask, if I love Freelancing work, why then do I make sure that I do some contracting work at least once a year?   Well, there are many advantages to doing a contract stint for a few months for your average freelancer.  For me, the advantages outnumber the disadvantages:

1. Contracting for a short while forces me back to a regimented routine of 9 to 5.   It is terribly easy to fall into the easy working days that freelancing allows, so contracting reshapes my days
2. Contracting allows me to make more connections out in the field.   There is nothing better than picking a contract with a high flying company, and working with their teams for a solid block of time to build those connections for future work
3. Allows me to refresh my ideas of what commercial companies need.   As time changes, so the demands of companies change.  When sitting in an isolated environment of a home office, it is too easy to miss the subtle changes going on in the real world (such as technologies now being used, what products are starting to be shunned, etc)
4. Contracting can fill the void (time wise and cash wise) between freelancing work and so reduce the unpaid ‘sitting on the bench’ time
5. Whilst contracting, this for me is the perfect time to ramp up the freelancing marketing activities, and land freelance work ready for the end of the contract
6. I always find the mixture of ‘regular’ type office work when combined with a dynamic work approach (as demanded with a contract) together with working on new customer projects a way of ‘blowing out’ the cobwebs.   When I return back to freelancing a few weeks later, I am generally more energised and productive.

For me, a mixture of Freelance work, with some contracting thrown in from time to time is the perfect combination.

Last week I learnt an interesting fact from a friend who works in a contract placement agency.  Of all the emails he receives in his in tray from people looking for placement in contract or freelance positions, he only ever looks at about 10%.  Put it another way, 90% of people responding for a contract job fall at the first hurdle.

He suggested to me that this was fairly typical now for most of his fellow workers – they all ignored the vast majority of CVs and Résumés that were sent to them.   And this ‘ignored’ number is growing.

When I enquired why this was the case, he shared the following tip, which I now pass on:

Relevance

That was the word he used.   He had no idea if any of the candidates were relevant to the positions he had open.

He was in no doubt that the contract and freelance market was tough – very tough – and getting worse by the week.   Two years ago for every position he had managed to open in the market, he would have between 10 and 20 applicants.   Today, it’s more like 70 to 100.

Of course of these 100 applicants, many are also applying for 5, 6 or 7 contract positions in a day – and there lies the problem.   If he posts 3 contract positions online, by the afternoon he will have around 300 emails with attached CVs – it would take him more than a day to go through all of them.

How could he possibly know which to pick from all of that noise?

Why the Cover Email is King

In his view, the cover email (or letter) was far more important than the CV.  The contract or freelance agent is the first (and main) filter between the candidate and the client.  That is why the cover email needs to give enough reason for the agent to open the CV.

He suggested the following tips are the difference between him calling a candidate, and simply pressing the DELETE key on the email:

1. Keep It Short – The cover email needs to be short – as short as possible.  They don’t have time to read war and peace in an email – keep to the facts.
2. Reference the Position – If you are applying for a contract role, quote the contract reference number or as a minimum, the job title.  He said it was amazing how many emails he got which talked about “applying for the role” when he was juggling 12 or 20 roles.
3. List the skills THAT MATCH – the only way your CV will be looked at is if you have skills that the client needs – so list why you are a match for the position in the cover letter.  Cover the skills required, but don’t expand into unrelated skills.
4. Current Status – Show your current status.  Are you currently in a contract, in a full time job, available now, looking for something in 6 months time – he needs to match your availability with his clients requirement.
5. 5. What you are looking for – Indicate where you will work in terms of geographical location.  Again, this needs to match his clients requirement.  Also, say what your minimum day rate is – most jobs are listed as “Market Rate” – but he needs to know what you would accept.
6. Contact Details – Finally, make his life easy.  Include a telephone number that he can contact you on – mobile is best.

What to Take Away from all of this

In a nutshell,  make the cover email specific to the role.  If you are applying through an on-line contract search system, NEVER use the option for a standard cover letter – this is what most people use, it does not cover the points above, and it will mean that your CV will end up in the recycle bin.

And now we play the waiting game….. Ahh, the waiting game sucks. Let’s play Hungry Hungry Hippos!
Homer Simpson: From the Episode “Mr. Plow”

The above has to be my favourite quote from the Simpsons.  And I agree – the waiting game does indeed suck.  Especially when you are waiting for a customer to give you an order, to sign a contract, to agree to a meeting, or any other action they need to perform in order for you to move forward and win the business.   Now you could take Homers suggestion (and play a game of Hungry, Hungry Hippos), or you could use some subtle techniques to try and move things forward.

My top six of ways to move things forward are as follows:

1. Highlight new risks – Whilst you don’t need to go overboard, highlighting a risk in a conversation or email can make things happen.  An example may be to highlight that the delay in signing may mean that the delivery date slips beyond the customer deadline or you will no longer be able to meet the original agreed date.  This is my own personal favourite way of moving things forward.  This can even take the form of ‘other projects’ which will get slipped into the schedule if there is a delay in signing (after all, you can’t be expected to sit around twiddling your thumbs).
2. Delay costs – If you are in the middle of a project with a customer, and they are taking their time completing one of their steps, highlight that this again could add delays and (subject to your T&C’s) additional cost for inactive time.
3. Add incentives – Is there something you can do to get an agreement now through discounts, earlier delivery dates, or additional features?  But be cautious, they may still want these once offered, even if it does not motivate them.
4. Find out the reason for the delay and mitigate – Sometimes, the delay can be down to their own processes or even outside factors.  In some of the work I do, my customers are waiting for their customers to raise purchase orders.  If you can find the reason for the delays, you can mitigate these issues by offering no charges should their customer not sign.
5. Find the decision makers – It could be that the person you are talking to does not have the power to make a decision or sign the contract.  If you can, find out who is the decision maker, you can talk to them directly and move things forward.
6. Start Anyway – This is the most risky of the options.  If you know that time is going to be short and the pressure will be on you, you could start the work without cover.  But, the risk is all yours, and this is a last option which should be avoided at all costs.

As a freelancer or small business, it is very common to be asked to sign a non-disclosure agreement.   A non-disclosure agreement (NDA), also known as a confidentiality agreement, confidential disclosure agreement (CDA), proprietary information agreement (PIA), or secrecy agreement, is a legal contract between at least two parties  that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain purposes, but wish to restrict access to by third parties.

When you are working for or on behalf of a client, they will generally want to protect the data, processes, and systems they have in place.  The NDA is the most common way of doing this, and as long as you read through what you are signing, you should be generally happy to agree to and sign such documents.

However, what happens when you hand out work to somebody else?   What happens when you outsource some of your work, or work with a virtual assistant (VA), a graphical designer or any other professional?  Should you yourself use an NDA agreement?  The answer is.. when in doubt, use an NDA.

As a freebie, you will find below the NDA that I use for most situations.  Its all been legally checked and verified, and is a nice neat version of a 2-way NDA.   That means, it protects you as somebody who is supplying the requirement, and also protects the person providing the service.  Please feel free to view, print, download and use.

Getting money out of your Freelance or Small Business and into your own pocket is a complex area, best left to your accountant. However, in principle, there are several ways to take money out:

1. PAYE payments. For this, its all above board, you get a pay cheque each month/week with another cheque going off to the Inland Revenue for the tax and NI.
2. Dividends, which are tax free payments on the company profits. Looks attractive, but if you have too large a dividend, then the Tax Man may come knocking looking at Tax evasion. My accountant mixes (1) and (2) to reduce tax payments through PAYE but keep me safe from investigations.
3. Assets. Here I am talking about assets which belong to the company but you can use. This falls into the areas such as computers, cars etc. However, areas such as Cars are heavily taxable, and over say 3 years, you pay more tax on the cost than if you paid PAYE payments.
4. Expenses. Ahh – now this is my favourite area to dabble in….

Taking away more from your business account, in the form of expenses, is a very nice thing.  The advantages of this kind of movement is that it saves Tax both in terms of PAYE tax, and also Corporation tax when it comes to year end (better to have the money in your own bank account than the companies).

Lets take an example… Imagine you spend £2,000 in one year on business car travel. If the (your) company reimburses this, then the company saves 20% *£2000 = £400 in corporation tax.   If the company would have paid that £2,000 to you as a higher-rate tax payer as a salary, you would paid £2000 * 40% = £800 income tax.  The £2000 taken as an expense, well that is without any form of tax.

For expenses, to keep your accountant happy, you will need receipts, which of course means that they are at cost (no money for you). However, there is the wonder area of mileage, which you can reclaim at 40p per mile (upto first 10,000 miles) without paying tax. And that 40p adds up. A trip from say London to Manchester and back is just over 300 miles, which works out at £120. Do a few of those a month, and you can soon rack up a £1000 extra tax free. But the best thing about the mileage, is that as long as you don’t go silly, a business trip for say a meeting, will require no need for proof. Just don’t put down a trip where you also claim another expense elsewhere just in case.

Clearly you have to be careful on some items that cannot be claimed as expenses, or those that carry a personal TAX implication.   Such items include property, investments, cars, clothes (it has to be a group uniform or branded clothes to be allowed) and health insurance.  But, some of the expenses which are worth considering may be:

• Company pension contributions (the best form of expense you can have)
• Computers
• Communication devices – mobile phones, pagers, fax machines etc
• Cameras (you need them for the art work in your brochures, web sites, etc)
• Use of your home office (a % of your home bills including rent, mortgage, gas, electricity, water and council tax)
• Equipment – desks, chairs, printers, pens, pencils, paper, toner, etc etc
• Internet connection, mobile phone bills, and other communication costs
• Memberships to trade organisations
• Printing (hand outs, brochures, etc)
• Postage costs including stamps, postage containers, packing etc
• Home Office supplies – teas, coffees, milk, sugar, toilet roll, cleaning equipment
• Books, magazines, software, subscriptions to services, web hosting etc
• Accommodation when working away including meals

The best source of information will always be your accountant, but other reading material from trained accounts can be found here.

Whenever you approach the end of a large freelance project or the last couple of weeks of a contract, what do you do? Clear your desk?  Make sure to get the invoice out?  Organise the wrap up drinks?    There is a trick you can use to generate more work (sometimes) from the customer.  The trick is to generate a report.

When I come to the end of a project or a contract, I spend half a day creating a ‘wrap up’ report for the customer – a nice light report (typically 4 to 10 pages) which covers three areas:

1. A summary of the work I have done for them in the project or contract – this reconfirms to them what great value I have been, reconfirms that they made the right choice to select me, and tells them how busy I have been
2. A notes section – here I detail anything I have spotted which is not as good as it should be.
3. A recommendation section – considerations for future improvements

Now the trick is to make the notes and recommendations section not too scathing.  You don’t want to point out to the person who has hired you how bad their processes are or why their department sucks.  However, what you do want to do is bring to their attention areas which they may not be aware of, and (this is the most important part) recommendations for improvement on some (not all) of the areas noted and how you would deal with the issues.

A lot of managers live by the principle “don’t bring me problems, bring me solutions”, and that is what the report is for – to say in a gentle way “oh, I noticed that your process for xxxxxxxxxxxx is causing problems, if you yyyyyyyyyyyyyy this will stop this problems occurring”.    Of course, by branding the report with your personal or company details, who will be the first person they ask when they want to action on some or all of the areas documented?

The best bit is that if you cost this report into the project costs (hidden of course) or produce the report on their contract time, they are paying you to perform the analysis and advertise your follow up services.

As an example, of this, one of the gentle ways I documented and recommended a solution which I was then asked to develop is as follows (note, this intended to be fluffy, and not too critical but highlight an area of concern):

As part of the day to day standing data reference, it was noted that the operators need to adjust data into the SQL Server database using SQL Enterprise Manager.  Whilst this is an effective and efficient method of amending the reference data, it may be worth considering that this also could lead to accidental deletion of data, tables or amendment to table structures.  I would suggest a better method would be to develop a browser based data correction routine, which would allow the same functions to add and amend data onto the SQL database, but would provide audit and change control, whilst at the same time restricting access to the database to ensure that mistakes are minimised.  This would also have the advantage of….

As a freelancer and IT contractor, it may surprise you when I say I hate Entrepreneurs.  But really, I do.  Let me tell you why…

Firstly, I don’t consider myself as an Entrepreneur.   When I think of Entrepreneurs, I think of Alan Sugar, Richard Branson, and Donald Trump.   Me, I am just a guy running my own computer freelance business with a few spin off products and services.

Next, I see people using it as a badge of honour – as if it’s something to be proud of.  I don’t think being an Entrepreneur is anything to be proud of – in fact, its something to be ashamed of.

The reason why I say this is simple.    The online dictionary defines an Entrepreneur as:

–noun

1. a person who organizes and manages any enterprise, esp. a business, usually with considerable initiative and risk.

2.an employer of productive labor; contractor.

The part I have a problem with in the above is Risk.   Considerable Risk.

If I am going to do anything, I am going to plan it out, to work out the risks, to minimise those risks, to turn something into as much of a sure thing as it can be.  If you want to take considerable risk, climb a ladder in the rain, park your car on a level crossing, give your credit card details to a Nigerian or bet your savings on Red at Las Vegas.     If you want to run a successful business, whether it’s a contracting, freelancing or other small business, do the analyses, work out how to avoid possible risks, and don’t be an Entrepreneur.

I was speaking to another contractor the other day, and he was stressing about a difficult position he was in regarding a contract renewal. He has been in a contract for 18 months, the contract has been modestly paid (covers his costs but not much profit), it was due to end in a few weeks, and the customer was looking for a renewal.

However, on the other hand, he had been tempted to end the contract and look for something better paid, closer to home, with less travel. It would seem a no-brainer, with the exception that he was worried that with the worsening economy, he might say no to the extension, not be able to find new work, and end up placing himself on the shelf for weeks and months.

There are lots of options open to him of course, and it all depends on the length of the contract on offer, if he can get a better rate for the extension, how busy he is (i.e. is there the option to do his own thing whilst contracting) and does he have a pot of back-up cash in case he doesn’t get a contract.

But from my point of view, I suggested that the biggest factor is how he wanted to be viewed. He is not a charity (none of us are), and if he wanted the best of both worlds and wanted to risk a difficult couple of days, maybe the solution was to take a week off at the end of the existing contract, and get busy looking for another contract. If he landed a better contract – to jump to that, otherwise to renew with the existing contract.

Of course, if he did jump, it would leave the original customer in a bad state, thinking that he was going back when he wasn’t. It could mean that the agency would not touch him again, or he would need to mend bridges, but on the other hand, if could offer the best of both worlds.

So what would you do?