Payment Terms

Money

Recently, a fellow small business owner asked me how I handle billing. For a small business, money is often one of the biggest concerns. Without a steady flow of cash, you can’t meet your business objectives or your personal financial requirements. As a small business, you have to determine when to bill and how to bill. Even worse, you have to define how you deal with delinquent payments – which can kill your business.

When To Start Billing?

The first question to answer is when do you start billing? This is particularly true if you’re billing by the hour. Does the clock start ticking at your first meeting? After the project requirements are defined? After the project is complete? For my business, anything after the initial project meeting is billed to the customer. I think it’s important for a customer to understand that project planning, requirements gathering, and any other tasks completed before any actual code is developed is an integral part of the development lifecycle. I typically bill the first of the month after any billable hours have accrued. I’ve found that the longer you wait, the more the bill increases. Then, you risk the customer suffering from sticker shock when you finally send the bill after months of work.

Late Payments?

When I started my business, I was so pleased to have customers that I didn’t worry about late payments. I assumed that my customers respected me enough to pay me on time. I was incredibly wrong. What I’ve found instead is that many companies will put me at the bottom of the list of payees. Why is that? Well, I think it’s pretty simple. The customer knows they have to pay their lease on time or risk eviction. They know when they fail to pay their internet bill, they won’t be able to perform their mission. What happens when they don’t pay you? Likely nothing. Additionally, they know you don’t have a collections branch and are unlikely to use a collections agent. Thus, they have absolutely no reason to worry about when they pay you. I have learned to include verbiage in my contracts defining payment terms. I give customers a 5 day grace period, and after that the customer is charged a late fee. Additionally, all the customer’s projects are paused until payment is received. If you continue to work, you end up months behind on payment and continuing to work for free.

What About Equity?

I’ve had many ‘customers’ offer to pay me in equity. I do the work and they will give me a percentage of the revenue generated by the software. I have a very simple answer for this kind of relationship. No. While an individual may think that their idea will generate millions, they rarely do. Even worse, you’ve now wasted time developing software that you will never be paid for. The original ‘customer’ lost nothing. You lost countless billable hours to a project that will never be profitable.

Conclusion

Money is the lifeblood of any business. What I’ve learned is that it’s imperative to have clearly defined payment terms and procedures for your business. When you fail to make those terms clear to customers, you will quickly find that your business struggles to get by and that you are spending more time nagging customers to pay than you do performing your business’s objectives.

Surface Pro 6

As a developer, I tend to need a lot of hard drive space for projects and tools. As such, my MacBook Pro was starting to run out of drive space. This was only exacerbated by the fact that I was also running Windows 10 on the same machine for .NET projects. I decided it was time to replace my MacBook Pro, and looked at the newest product line. Unfortunately, I was very disappointed by the lack of ports on the new MacBook Pro. With a sticker price of nearly $4,000 for a machine with all the bells and whistles, the lack of ports is simply unacceptable.

What to Do?

After much deliberation, I decided to get a separate Windows machine and reclaim the space on my MacBook Pro for MacOS. I had been looking at the Surface Pro for a while as it looks like a great machine. So I went to the store and purchased the computer, a keyboard, and the pen for around $1000. Given a price tag one fourth that of a new MacBook Pro, how does it compare? So far, I am very impressed. The Surface Pro includes numerous features that the MacBook Pro can’t touch including: facial recognition for login, touch screen, functionality as both a tablet and a laptop, and he use of an optional pen for drawing.

Conclusion

While the Surface Pro does not compete with a top-of-the-line MacBook Pro in terms of raw horsepower, it is lightweight, multipurpose, and more than adequate for the occasional .NET project I need to support. Even more exciting, it will work far better than my MacBook Pro for taking onsite to gather customer requirements or take quick notes.

Note to Apple

Apple, your decision to remove standard USB from your laptop cost you $4,000 I would have gladly paid. Instead, I paid $1,000 to buy a laptop from your competitor. While you may think you’re a trendsetter, a large number of developers I’ve spoken with are less excited by your choice. For us, computers are a tool to solve a problem – not a trendy accessory. You managed to capture a growing portion of developers, but focusing on trends instead of solutions will negatively impact that growth in the future.

Lessons Learned

A little over a year ago, I decided to start using a planner to keep track of my todo list, take notes, and keep track of progress on projects. Each week, I review what happened during the week and note any lessons learned during that week. At the end of the year, I compiled all the lessons into a PDF document that I can frequently review. This helps me to continuously improve myself both personally and professionally. Some of the things I’ve learned may be worth sharing.

Fall in Love with Customers

I’d like to say this one was mine, but I read it somewhere and it really resonated with me as an owner of a service company. Imagine if you treated every customer like you were as infatuated with them as you are with the man or woman of your dreams. Deliver that level of service! This is a hard one, but if you can do it you will never be without clients!

Be a Leader in Everything You Do

It’s easy to lay back and relax, and let someone else take charge. But your success will only be achieved when you make it happen! If you want to be successful, you need to be a leader in everything you do – in your home, your workplace, your place of worship, your social clubs, absolutely everywhere.

Focus on People

As a business owner, it’s easy to focus on money. We worry that we won’t have enough or that our sales pipeline is drying up. When we do that, we lose focus on people. But relationships are really what matters most. Every job I’ve ever had – whether as an employee or a contractor – started by having a relationship with someone.

Be Selective of How You Spend Time

Life is short, and you’re busy. Do you really have time to commit to a new project? Volunteer at the school? Take on additional responsibility? If the answer is no, don’t commit. It’s easy to become overcommitted – and burned out. If you don’t have the bandwidth or the desire to do something – don’t do it. Focus your time on the things that will aid in achieving your goals.

Set Goals

I have found that by setting goals – both annually, quarterly, and weekly, I am able to achieve substantially more than I could before. I heard it once said “plan the work and work the plan”.

Conclusion

While I have hundreds of other lessons learned, the above represent some of the most important. This year, I have been trying to do a better job at all of the above. I’ve got far to go, but I can see the fruit of my labor when I look at how far my business has come during the past year.