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Finance


12
Oct 11

Project Length – Why you should measure the duration of your web development projects

As part of my series on simple business metrics, I write this elaboration on metric #6 – Project Length., to wit, how long should a project last from start to finish. This might sound like an odd thing to track, but hear me out.  And yes, I know that longer project lengths can be a sign of larger projects.

timeline draft © by neil cummings

I’ve found that I usually set (within certain limits) the duration of my projects.   The client then modifies the duration based on my starting point, and then the actual duration drifts in either direction.  I’ve found that I am well served by getting the initial project length right.   Here are some positive and negatives I’ve come across over the years:

Positives of a short project length

  1. You get paid faster
  2. Less time for scope creep
  3. Fewer chances for the client to shift project managers
  4.  The problem remains fresh and painful, so the client will be grateful when you deliver
  5. The assumptions you are basing your solution remain true

Negatives of a short project length

  1. They are much less pleasant
  2. You can’t time shift (for example if you get a change to bid on a new project, you simply can’t fit it in)
  3. Less room to adapt to sudden problems
  4. External disruptions are costly
  5. Less time to pay off your technical debt

Positives of a long project length

  1. A moderate project pace is pleasant
  2. You can be thorough
  3. External disruptions are more manageable
  4. You can work new opportunities into the project schedule

Negatives of a long project length

  1. You get paid later than you would otherwise be
  2. Far more time for scope creep
  3. Project managers can change  at the client
  4. New project managers can be added to the project
  5. The assumptions you based your solution on will get out of date
  6. If the project lasts for a sufficiently long period of time the client will get resentful of having to pay for something which is (sort of) out of date.

So, why is measuring project length important?  Since project length is largely a collection of trade offs, it’s best to get the trade offs you prefer.  If you find yourself never able to pay off any technical debt like you used to, or beset by problems with new project manages at the client, see if you average project length is increasing.

 

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.

 


10
Oct 11

Track your hourly rate over time to make decisions easier

Our Hourly Rates © by SMcGarnigle

As part of my series on simple business metrics, here is an elaboration on metric #5 – Overall Hourly Rate Over Time., to wit,  are you more productive per hour than you were in the past?  You won’t know this if you don’t track your hourly rate over time.  It sounds simple, and it mostly it is.  I’ve found that tracking your hourly rate over time makes many decisions easier.    Here is a partial list of the insights:

Insights from a Rising Hourly Rate

  • In general you are on the right track
  • You are doing more or less the right mix of tasks
  • Your capital investments (computer hardware, software and training) were a good idea
  • Now is a good time to bring on new people, especially people with similar skillsets to you
  • Your clients are solid – and you need to find more just like them

Insights from a Falling Hourly Rate

  • It might be a good time to invest in new software or hardware
  • The market might have shifted away from your bundle  of offerings, there might be new things to learn and offer your customers
  • Your might want to find new clients, and new types of clients.  Some clients will run you ragged if you let them, and it looks  like your current clients are doing just that.
  • You might want to reduce your outsourcing, or at least modify it - outsourcing should raise your rate (by allowing you to do higher dollar things)

 Why you need to use tools to track your time

I have found that my internal estimates of how much time projects (and clients) is distorted by personal enjoyment of the clients company (or lack thereof) and how much fun the project might be.  For example, a client that was a joy to work with who had an informative project might generate an off the top of my head estimate of 60 hours, when in fact it took 90 hours.  Similarly, a client that was torture to work with a project of pure drudgery has generated an off the top of my head estimate of 110 hours, when it took only 60.  Use an online time tracking service to record the actual data.

 

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.


3
Oct 11

What is the right size for web development projects?

As part of my series on simple business metrics, here is an elaboration on metric #3 – Project Size., to wit,  what is the right size for web development projects for your firm?  The answer is not necessarily “Larger”.

I’ve found that my projects consist of varying percentages of:

  1. Graphic design
  2. Client Management
  3. Project Management
  4. Web Development
  5. Estimating, proposals and accounting

Each of the above varies by client of course.

Each of the above tasks requires some overhead in terms of dollars, time and energy.  The cost of client management and project management will increase disproportionately with the size of the project.  Maybe you are an extrovert.  Higher amounts of items client management and project management will be easy for you.  If you’re an introvert you will prefer graphic design and web development.  Client management and project management will be draining for you.  The percentages that are right for you will depend on your skills and personality.

After a few years you will have some notion of what the right size is  for you and your company.  Too far below this size and you find yourself spending too much time and money on estimating, proposals and accounting for the project to be profitable.  Too much above this size and you find yourself outside your comfort zone and spending too much time and energy on client management,  project management, and one time capital items.  You can lose money on projects that are too small or too large.

However, one happy thing about doing multiple projects for the same client is that client management and project management will decline over time (as percentages).

So, in sum:

  • There is a right size for web development projects.
  • That size will vary from firm to firm
  • That size should vary by client.
  • The right size for web development projects should increase over time.

In closing – I ran this by several friends as I was considering the article and got a wide variety of opinions, some agreeing with me, some not.  This is only my experience, your mileage may vary, etc.

 

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.

 


2
Aug 11

Why you should NOT burn your boats, bridges, or escape routes

I recently came across the blog post “Founders: Burn Your Boats” on Hacker News and found it to be the exact wrong advice.  The logic behind the argument is that by removing your escape routes (boats) you are committing totally, and focusing your attention on your startup company, and you will of course be happier. will be more successful.   A good example would be not doing consulting work while working on your startup.  “Burning boats” works for marriage, where “forsaking all others” is one of the main points of the whole endeavor.

However. if you have a startup company, you’re only trying to make a product.  Total commitment is, at best, a necessary evil, not a virtue.  Sure, you’re showing commitment to other people, but why not just show them an  awesome product?  By “burning boats” the only thing you’re doing is putting yourself in a weaker negotiating position with venture capitalists, and looking good instead of doing good.

 

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.


20
Jul 11

The introvert’s guide to getting out of bank fees

Do you wind up paying bank fees because you’re introverted, shy, quiet, or just too well bred to complain about such things?  There’s no need to pay the fees.  Here’s how to get out of them.

I recently bounced a check because I chose the wrong account in the online bill paying process (I have two accounts with that bank, one of which I rarely use).  I had tons of money in the other account.  I got hit with a $35 fee and a warning that they would hit me with another fee if I did not make the account cash positive in five days.

This fee annoyed me.  I started with this bank  in 1998, how dare they charge me anything?

I decided to get out of the fee, with a modified version of the script from the best personal finance blog ever.  I say modified because the past few times that I’ve used Ramit’s script verbatim it hasn’t worked, so I changed it to fit the situation and my conversational strengths.

Here’s what I did

First I put money in the account to show good faith and put myself on the moral high ground.  Then I waited two days.

Then I called, somewhat awkwardly (I’m not great at this sort of thing, but I’m getting better) and asked nicely for the bank to remove the fee.  The customer service rep very nicely refused.

I then

  1. Explained what happened, telling him how I made an innocent mistake
  2. Told him I have money in the other account, (politely saying I’m not a deadbeat)
  3. Reminded him that I demonstrated good faith by putting money in the account (politely saying I won’t bounce another check)
  4. Told him that I expect the fee to be removed (politely saying I know my position in the relationship with them)
  5. Went into a detailed history of my dealings with this bank for the past many years
  6. Name dropped (I made up the names) the people I have dealt with at the bank over the years

Then I come to a full stop and enjoyed the silence, waiting for him to move next.  Note, I did not end with a question.  This is key.  If you end on a question, people can give you a short answer.  If you bury the question within a wall of statements,  people feel obligated to refute your entire argument (which took me about five minutes to deliver).  Did he check with his supervisor if it was okay to refund the money “Just this once”?  Yes he did.

Why did all of this work?  I emphasized

  • I was a good, loyal client
  • Management notices when long-standing clients leave
  • I was nice
  • I was long winded
  • To tell me no again would extend the call by at least ten minutes, I clearly had all the time in the world and he had no clear reason to hang up on me
  • All it would take to get me to go away is the refund

If they are going to bend the rules for someone, they are going to bend them for me, so they did.

The takeaway:- If you’re long-winded and don’t end with a question you make customer service do more work, which they don’t want to do, so they give in.  Try it out.

PS – the code word for this type of fee forgiveness is “Relationship Refund“.

 

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.