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September, 2011


30
Sep 11

How to raise your hourly rate? Start by calculating it properly

As part of my series on simple business metrics, here is an elaboration on metric #2 – which client has the highest hourly rate.  Calculating this seems simple, and for the most part it is.  You just have to make sure to include all time involved with the project.  It’s easy to omit non-billable time, hopefully you are including practicing  time tracking with some automated software.  You can only raise your hourly rate if you know what your rate truly is.  When calculating the rate, make sure to include all of your non-billable tasks.

Over the years, I’ve found non-billable tasks often include:

  1. Meetings
  2. Travel to meetings
  3. Phone calls
  4. Meeting prep (no one ever remembers to account for this)
  5. Pitch rehearsal
  6. Task disruption – on average, I have found it takes 15 minutes minimum to get back into psychological flow after a phone call or “urgent” email.
  7. Project research
  8. Client Research
  9. New software evaluation (ideally this should be spread out over several clients)
  10. Writing contracts and proposals
  11. Negotiating prices and contracts
  12. Consulting with outsiders (lawyers and advisers) about contracts
  13. Status emails

Have I missed anything?

Update: Bill From Coding Out Loud suggested the following points (which I have reworded slightly)

  1. Contract review and legal overhead
  2. Collections
  3. “Goodwill” support, i.e. items outside of the contract but needed to maintain the relationship (like when a client asks for the same file for the third time.).

Editor’s Note

This blog post originally appeared on the Profit Awareness Blog - as that app is up for sale, it has been consolidated into the main Digital Tool Factory blog.


30
Sep 11

When should you invoice for web development projects?

As an elaboration on my simple metrics post from yesterday I’m sharing my personal experience with each metric.  The first metric is “How long do clients take to pay their invoices.”  Why is that important?  The main reason is obvious – your money is safer with you.  And to get paid you must first invoice.  I’ve tried several methods over the years and here are some thoughts on when to invoice for web development.

  1. Invoice at the end, Net 30.
  2. Invoice 100% at the beginning, starting work on the sending of the invoice
  3. Invoice 100% at the beginning, starting upon receipt of the first payment
  4. Invoice 50% of at the beginning, starting work upon receipt of payment, and invoicing the remaining 50% on the completion of the project
I’ve tried them all, and here is my experience
  1. Invoice at the end – It has worked worked, but avoid if at all possible.   On some projects the money only changes hands at the very end and it can be profitable to use this method.  Be warned though, I’ve found most client relationships will take a hit from this method.   This method will draw deadbeats like flies.
  2. Invoice 100% at the beginning, starting work on the sending of the invoice  - I’ve found that this bring out counterproductive perfectionism in clients
  3. Invoice 100% at the beginning, starting upon receipt of the first payment - I have had mixed results with this method.   Since the client has already paid for the work, he usually feels no need to make anything easy for you, and will never feel bad for endless phone calls and meetings (this happens in about 80% of cases).  Also, clients who agree readily to this usually have little experience in the web field and require a lot of handholding
  4. Invoice 50% of at the beginning, starting work upon receipt of payment, and invoicing the remaining 50% on the completion of the project – I’ve found this method to be optimal, you attract experienced, non deadbeat clients who are willing to pay for quality
That’s my experience with invoicing for web development projects.   What’s yours?

Editor’s Note

This blog post originally appeared on the Profit Awareness Blog - as that app is up for sale, it has been consolidated into the main Digital Tool Factory blog.


28
Sep 11

Six simple business metrics for your web development company

After nine years in business at the best web development shop in Atlanta, here are the simple business metrics I wish I had kept from the beginning.

  1. How long do clients take to pay their invoices – it’s easy to overlook, bit if you don’t manage these they can creep up fast and it is hard to rachet expectations back down.  Read more
  2. Which clients has the highest hourly rate – Not always the easiest thing to track, particularly if you have a mix of hourly and fixed price projects, but you have to know who gets the extra effort – Read More
  3. Project Size – for all of the obvious reasons, and remember, a lion does not live on mice. – Read More
  4. Internal vs External Work – This metric has a host of obvious benefits, and it will usually show you where and what to outsource to outside services. – Read More
  5. Overall hourly rate over time – If it trends down for more than two consescutive months, you need to start retooling your business – Read More
  6. Project Length – How many days from start to finish?  It is easy to confuse this with project size, but how much time is lost in delays and approvals? – Read More

I track all of these simple business metrics in my Profit Awareness web app.  Indeed, I wrote the app because it is too much of a pain to do it manually, and QuickBooks is of absolutely no help at all with most of them.

Editor’s Note

This blog post originally appeared on the Profit Awareness Blog – as that app is up for sale, it has been consolidated into the main Digital Tool Factory blog.