Newbie needs help and advice

**Lucifer Box** · 3 November 2005, 08:01

Hi Setao, welcome aboard.

In the first instance, start with reading the First Timers' Guide here. You shold also check out the PCG Website. Regardless of whether you join or not, and many say it is worth it just for the tax investigation insurance you get as part of your membership, there is a lot of useful information there for first timers.

Secondly, please tell us a little more about your project, what it is, and how you came by it. At face value it sounds like you are being asked to develop from scratch a piece of software that you are also to design, implement and support. A number of questions and issues spring from this.

Quite importantly, where is the feedback system? If you are doing everything yourself, who is going to check you are doing it right? Auditing your own work is the "Nick Leeson" syndrome and exposes you to enhanced risk. At the very least you need to take out substantial professional indemnity insurance to ameliorate this risk.

You talk about pricing. As you are designing, developing, implementing and supporting a new product, is the per day pricing model appropriate? I would venture to suggest not. Bill Gates did not charge a client $x/day to develop Windows. You need to be looking to charge for the software as whole with payment on set deliverable milestones. To do this, what is this software going to do for your client? What is their business case or expected benefits (or are you expected to provide these as well). If it's going to save your client, say, £1m/year, you shouldn't even consider doing it for them for £200/300/400 whatever per day. You need to charge based on what it's worth to them.

Needless to say, you should not even consider entering into this sort of situation without a lawyer to draw up good, safe contracts for you.

On the brolly vs Ltd situation, my general advice is own Ltd every time, unles you only expect to be contracting for a very short time (few months). In your situation, I would say it is a no-brainer... your own Ltd. You need to control the money and make your own decisions on a project like that. You are clearly outside of IR35, as it seems your client has no control over what is being done.

Anyway, please give us some more information so more tailored advice can be given.

**BlasterBates** · 3 November 2005, 08:10

Well Lucifer makes a good point, the "worth" to the customer represents what you can earn if you're the only capable contractor available. Usually however the rates are determined by competition, and normally a client would have two or three to choose from after a round of interviews.

£300 - £400 does sound reasonable, and as you gain a foothold in the market you can look next time to up the rate.

Your negotiating position would be considerably strengthened if you have more than one offer, obviously there's nothing to stop you telling the customer that. But I would be more modest if this is the only client offering than when I have a string of interviews coming up.

**Lucifer Box** · 3 November 2005, 08:20

Blaster makes an equally valid point. If the client could get any half competent contractor to do this job (from your description of what's needed, that doesn't sound too likely) your negotiating position is much weakened. What is your USP?

Personally, for total responsibility and having to do everything, £500/day would be the bare minimum. Of course, this also depends on who the client is. Clearly an LEA wouldn't pay anywhere near that whereas an investment bank wouldn't bat an eyelid.

**BlasterBates** · 3 November 2005, 08:37

...however you might be doing everything because it is a small application. In that case I think £500 might be pushing it.

**Lucifer Box** · 3 November 2005, 08:41

Originally posted by BlasterBates

...however you might be doing everything because it is a small application. In that case I think £500 might be pushing it.

Absolutely. If it's something noddy like a name and address database, forget £500/day. As we said, it all comes down to who the client is and what's the system.

You need also to factor into your charge, whatever mechanism that might use, what might happen if you deliver late or deliver a pile of cr@p. Will they sue you? Shrug their shoulders and say "hey-ho"? I assume there is no agency involved - am I right?

**malvolio** · 3 November 2005, 08:42

Or since it is a self-contained piece of work, you could cost it at £500 a day for 12 months effort +10% contingency, which is £143k, and charge them £10k a month with the balance on completion. Then finish it in 9 months...

Think like a business, at all times. And if you're serious about contracting, get your own company - why pay someone else to tell you how to manage your own income?

**setao** · 4 November 2005, 01:22

Thanks for all the replies guys,

I will most certainly be reading the guides and taking in as much advice as possible over the next few weeks.

You are correct in that this is a new application being developed from scratch, basically there are 4 separate organisations that do practically the same thing and have very similar processes, they even share the same client base but do all of this autonomously and have done so for years. Two of the organisations have a computerised system of sorts (disparate, standalone excel spreadsheets and access databases mainly, with manual processes underpinning it all). Now here's the thing, they each deal with millions of pounds worth of transactions per year, yet have very little auditing, control and business intelligence bulit into their processes which is absolutely crazy.

They are all to join forces to fund a single application utilising a single datasource. Although I cannot say too much about the organisation I can tell you that they collect charitable donations from indivuduals, invest that money and then pass it on to the various named charities throughout the year. The whole idea is that these organisations get a much better rate of return due to pooling the donations as well as effeciently reclaiming tax from the inland revenue on Gift aid contributions. The potential operational cost savings to these organisations is substantial. The real kicker though is the projected extra amount of tax that can be reclaimed as the application will automatically generate a tax reclamation on all applicable contributions every month, meaning this money is banked as soon as possible. It is estimated that as much as £150,000 to £200,000 can be gained from the application year on year. But to be absolutely clear this is not business profit, but simply more money available to the benefitting charities. So this application is very much needed and will be funded appropriately.

The reason I am in the frame is that I was the lead developer/designer on another project for an organisation close to these 4 and what they require is very similar to what I did. Yes you are right no agencies involved in this, so it is down to me to negotiate with them.

Ultimately Charities benefit from all of this so I do not want to be greedy, as this is my first contract I am more concerned with doing everything right and obtaining a glowing reference from my first clients that will hopefully lead to a lot more work for me with them and their contacts. (although obviously I do want to get paid, which is why I am contracting in the first place).

I plan to have very clearly defined deliverables at regular intervals so that my progress can be monitored by an outside body, I am aiming for complete transparency and openness. The finer details of the contact have not been ironed out yet, so I am going with the flow at present. But put bluntly they want to outsource the whole project, they know what they require, and simply wnat to state this and have it delivered to them (put very simply, but that is it in a nutshell).

I totally agree a per day pricing model does not seem to fit here as there are many very different elements and deliverables for this project therfore I will push for a fixed price to deliver the 'finished' application rather than a per day fee. I also think I will need to hire various people throughout the project to deliver various elements of it, for instance I may get someone in to do the data migration as that can be run as an independent project alongside the main design and development phases, like wise the user manual and training.

I'm still working through options in my head at present.

As for the lawyer situation absolutely, I would not consider it without that and insurance, etc..

The Ltd option does appeal to me, I guess I am also looking at the paper work required after a hard days work, but I guess I can always console myself by looking at my growing bank balance

, as you say think like a business at all times, I'm hearing that for sure.

Anyway work beckons in a few hours I better get my head down.

**Lucifer Box** · 4 November 2005, 09:19

In which case, it's a no brainer.

- You must have your own corporate structure as you will be hiring
- You must have employers, public and professional liability insurance
- You must charge for the project as a whole - I suggest monthly invoicing as a proportion of the total with a "bonus" for early delivery - okay they are charities but you are not.
- You must get a lawyer help you draw up the contract
- You are not a typical contractor, but a business startup - contact your local business startup service / chamber of commerce to see what grants they will offer you.
- Consider locating your "head office" in a deprived grade one area (e.g the Rhondda Valley) to get even more grant money.

**boredsenseless** · 4 November 2005, 09:45

Originally posted by Lucifer Box

In which case, it's a no brainer.

- You must have your own corporate structure as you will be hiring
- You must have employers, public and professional liability insurance
- You must charge for the project as a whole - I suggest monthly invoicing as a proportion of the total with a "bonus" for early delivery - okay they are charities but you are not.
- You must get a lawyer help you draw up the contract
- You are not a typical contractor, but a business startup - contact your local business startup service / chamber of commerce to see what grants they will offer you.
- Consider locating your "head office" in a deprived grade one area (e.g the Rhondda Valley) to get even more grant money.

The last 2 points here are quite key, in areas of high unemployment (so forget London and South East) the council and chamber of commerce can give significant grants if you can show them a business plan that shows you will be employing x amount of local people. After all if they were going to be paying 4 people £100 week they may as well let you employ them and give you £40 a week each (numbers not correct just illustrations depends on the chamner of commerce).

Everyone wins.

Newbie needs help and advice