Afterword: The Business of the Web
This afterword will look at a few different areas on how to best conduct business as it relates to the Web. We’ve known brilliant designers who weren’t very adept at billing. We’ve known excellent developers who have had trouble getting paid because they didn’t work out the terms of an agreement before starting work. Freelancing is a very popular option among people working on the Web. We don’t know whether it’s the nature of the industry or just the personality type of the people who work online, but based on conversations we’ve had at conferences with others working in the field, there seems to be a really high occurrence of people doing side work for themselves among those employed at larger organizations. It’s not uncommon to find individuals who work in completely different fields such as print design or photography (we’ve even met a couple of licensed electricians!) to occasionally work in web development.
This afterword will most apply to freelancers, or people in business for themselves. If you’re working for a company, you will likely have other people who will handle things such as invoicing, setting your rates, and collecting payment (consider yourself lucky there). From time to time, everyone will have to find a little help though, so the section on hiring is fairly universal.
Basic needs of the freelance web professional
You have skills and a love for what you do. In order to turn that into a business, however, you’re going to need a little bit more. If all you want is to build websites for the love of creating something, best wishes to you, and feel free to skip this chapter. If, on the other hand, you want to make a living at what you’re doing, you will need to handle the business side of things too. The good news is that, as far as businesses go, web design/development is one of the easier ones to be in. You don’t have to worry about inventory, shipping, or accepting returns; and you can outsource things like web hosting to any number of commercial web hosts. The risk factors are really limited because all you need in terms of equipment is a computer, and most folks have one of those already.
If this is going to be a viable business though, you’ll need to have a way to find clients, convince them that they should have you do the work for them, and then ensure that you get paid for the work you do. It’s only intimidating when you put it in terms like “accounts receivable,” “nondisclosure agreement,” and “payment schedule.” These terms all translate to plain English just as HTML, CSS, and JavaScript do for you now.
We think that the biggest shift you need to make is to get into the mind-set that you’re running a business. Even if your livelihood doesn’t depend on the income you’re getting from contract work, pretend that it does (it’s not as easy as it sounds). Your attitude and approach toward watching your finances and interacting with clients/prospective clients will completely change. While it’s great that you love what you do professionally, given the option, would you rather spent that chunk of time developing a web site or enjoying the outdoors with family and friends?
We’ll preface this section with the common Internet disclaimer of “we are not lawyers.” Even if we were, it would be impossible for us to write legal advice that would be common across all countries, states, provinces, or even cities. If you’re in doubt about anything, we encourage you to seek competent legal advice. With that in mind, there are some basics that we can talk about, such as types of businesses, and we will describe some of the current best practices in the industry.
We can’t think of a single designer or developer we know employed full-time who doesn’t freelance. Most employers are completely fine with it, as long as it isn’t done on company time or using company resources (equipment, bandwidth, server space, and so on). Freelancing on the side is a great way to get started if you’re eventually planning on going solo; it allows you to build a client base while still having the security of a salary and medical benefits.
The flip side is that if you become successful, you could find yourself with very little free time. It’s pretty difficult to find motivation to work on client projects after having spent eight hours at the office, especially if your full-time job is working with the Web, too. When we were working in this situation, we would always be up-front with new clients about the lay of the land. We wouldn’t try to pretend that we were working full-time on their project; we told them that it was a side business. If your client really wants to work with you, and they’re somewhat flexible, things will be fine.
So how do you find the motivation? Love for what you’re doing is a big part of it. Only accept projects that interest you and that you know you’ll be successful at. Also, set reasonable expectations for yourself; you won’t be able to put in four hours every day after work, and then spend 10 hours each day of the weekend working on projects. Allow yourself some leisure time, or you’re sure to burn out.
One of the most common questions is, “How do I know when to quit my full-time job and freelance full-time?”—assuming that’s your ultimate goal. There is no hard-and-fast rule on when you’re safe to leave a regular paycheck, but you definitely need to start thinking about some savings if that’s the direction you’re headed.
Every case is different; if you already have a defined client base that you’re working for and you’re earning a good, consistent monthly income from your side work, you’re probably safe to drop out of full-time work with three or four months worth of living expenses saved up. If you’re starting from scratch and need to build up your client base, you shouldn’t even consider going solo until you have at least six months worth of living expenses tucked away. Reaching a break-even point isn’t that glamorous, but it’s the single greatest feeling you’ll experience early on in your freelancing career.
Think of it this way: even if you have a number of big jobs lined up, it may be months before you start seeing payment on any of them (depending on the terms you’ve worked out with your client). One of the things we’ll look at later in this chapter is the concept of cash flow—having enough money to live on now. You may have contracts that are promising to pay you thousands of dollars when they’re finished; but if your account balance is zero, and you still have weeks worth of work to do on each, then you’d better start asking your friends for dinner invitations.
One idea to consider, if you’re moving in the full-time freelance direction, is to see whether your current employer will let you drop down to working part-time. That way, you’ll still have the security of a regular paycheck (although diminished), but with more free time, especially within regular business hours, to build your client base and spend with existing clients.
One of the best resources we found when making the switch ourselves is the Freelance Switch website (http://freelanceswitch.com). This site is a great source of information for everything from pricing your services to advertising and finding clients.
In Canada, there are three routes you can go for setting up a business; the United States adds one other option that’s worth exploring. We’re listing them in order of simplicity from what you can do today with no paperwork/setup to the most complex setup involving setting up a board and figuring out shareholders.
The good news is that, no matter what route you decide to go, you can handle most of your incorporation/business setup needs from the comfort of your own home. The final filing of the papers (depending on where you live) may have to be done in person, but all of the forms and name searches (if you want to use a cool trade name like Google—wait, that’s taken!) can all be done online.
The first (and simplest) option is a sole proprietorship—going into business for yourself. The majority of people we know who do “side work” operate a sole proprietorship in which they are the only owner and operator and they get paid directly for any work they do. Come tax time, any income you’ve made freelancing is included on your tax return (no need to file separately for the company). Customers pay you directly, and payments can be deposited directly into your personal bank account. Any legal agreements, such as contracts or nondisclosure agreements, are between you and the client directly. If you decide to try for a bank loan to grow your operation, you’ll be using your own personal assets as collateral.
The major benefit to this arrangement is that it’s simple; there’s really nothing special to set up. You can (in certain places) file paperwork with the government in order to secure a trade name (or “doing business as” name, sometimes abbreviated to DBA name). The drawback is that, if something goes sideways with a client or with the bank, your personal assets are on the hook. For example, if you’re contracted to build an e-commerce website that subsequently gets hacked and ends up costing your client its business (don’t get scared; although it’s a possibility, we’re talking worst case scenario here), then that client could choose to sue you. If you lose in court because you left some major security hole in the code, you will be personally responsible to pay what the court awards.
A partnership is similar to a sole proprietorship in that the profits don’t go to a company and then get paid to employees; the profits flow directly through to the partners of a company according to the division identified in a partnership agreement. There is no need to file a separate tax return for the company; any income is reported directly by the partners on their individual returns.
So, let’s say you and a friend of yours decide to start a company. She’s brilliant with HTML and CSS, whereas you’ve always been a killer designer and can produce graphics like nobody’s business. You’re working part-time for the local newspaper, though, and don’t want to give that up at this point, so you decide that you’ll be able to devote only 50 percent of your time to the company. It wouldn’t be fair to split the profits 50/50 in a case like this, so you opt for a 75/25 split because your friend will be devoting all of her time to running the business, selling to potential clients, handling the accounting, and doing all the coding on website projects.
Being friends and all, you may be tempted to just start working together based on this verbal agreement. It’s probably a good idea to go one step further, though, and put some things in writing. In certain places, partnerships are required to register a partnership agreement with a government office; other jurisdictions are far more lax (this is something you’ll want to check on). Regardless of whether you need to have a formal partnership agreement in place and registered, you should probably draft up something that answers a few basic questions:
- Who are the partners?
- How will money be divided amongst partners?
- Who will look after what parts of the business?
- How will decisions be made about the business (vote, certain people handle certain decisions, one person has authority)? What happens when there’s a tie vote?
- What happens if one of the partners wants to leave the partnership? What if one of the partners dies?
- What happens if one of the partners wants to increase their stake (such as if you decide to quit your job with the newspaper and go full-time)?
- What happens to any assets if you decide to end the partnership (dissolve the company)?
It doesn’t have to be complicated and written in heavy legalese. Just put something in writing that everyone agrees to and signs off on, so that you have something to reference in case any of these situations arises. We’re not trying to say that lawyers are useless here; in fact, if you have the money (usually a few hundred dollars), have a lawyer write up your partnership agreement for you; it could remove any ambiguity in future interpretations. But even if it’s just a friendly document you write up over drinks one night, it will help you to have something to reference in times of trouble.
Limited Liability Company (in the United States)
An LLC isn’t unique to the United States; it’s also available in certain European countries (usually under a different name). The gist of an LLC is that it gives you all the simplicity of a sole proprietorship/partnership in terms of taxation, with some of the legal protection of a corporation. An LLC’s profits can “flow through” to its owner/partners, so there is no need to file a separate tax return. LLCs can have shareholders, but they aren’t required to hold annual shareholder meetings.
Strictly speaking, an LLC is a form of a corporation. We mentioned it separately, though, because it’s not available in all places, and it’s probably your best bet if it is available to you. The most complicated route to forming a business is incorporating. In the United States (not in Canada), you have the option of either forming an S corporation (which has a lot of similar benefits to an LLC) or forming a C corporation, which is what most big companies are (like Microsoft or Dell). The differences between S and C corporations are pretty complex and have mostly to do with structure and taxation—so if this is the route you’re going to go, talk to an accountant.
The single biggest benefit to incorporating, instead of going any of the other routes, is that you have a tremendous amount of flexibility in how many/what types of shares you can offer. In general, if you plan on trying to raise investment money later or if your plan is to grow your business and then sell it off, incorporating may be the best route for you. This is not to say that you can’t sell any of the other types of businesses, but a corporation is the most formal of business structures.
Contracts are a funny thing. Depending on whom you talk to, the answer will be either “never start work without a signed contract in hand” or “don’t worry about contracts; a verbal agreement is fine.” We take the middle road in this discussion: sometimes you need a contract, sometimes you don’t.
Let us qualify that a bit: if it’s a repeat customer or someone we’re really familiar with, we’re usually OK with just a verbal agreement (unless they have a history of not paying us!). If push ever comes to shove and you need to collect for some work you’ve done, having a contract in hand will make things a lot easier on you, especially in court. Chances are that you won’t sue your Uncle Mort if he stiffs you for part of the bill (or maybe you will, that jerk!). Standard payment terms are to accept a deposit up front for new work, get another payment at the 50 percent point, and then get final payment on completion (25-50-25 or 50-25-25 percent are common splits). Occasionally, we’ll waive this practice if it’s a serial-repeat customer (we have a few of those). On the other hand, there’s nothing wrong with asking a client to sign a contract or being asked to sign a contract by a client. Call it an “agreement” if you want to soften things a bit. What’s important, after all, is that you both agree on the terms.
In most cases, a contract will cover a lot of the things we talked about in Chapter 2: time, money, and scope. If that sentence made you sit up a little straighter, thanks for having read and bought into what we said about project management: how can you define scope in the contract when you’re not sure what the project will look like?
You can define it generally (you’re going to be doing the website, but not a logo, business card, and three-panel brochure for the company), and then put in a statement about how things will be revised as the project progresses. This informal, up-front contract can sometimes be called a statement of work (SOW); it just provides a written record of some of the things that both you and your client understand about the project. It doesn’t hurt to describe the way you work, too; for example, if you’re only going to present a single design option, say so. If you’re only delivering completed files and none of the working files (for whatever reason), say that too. The less surprises, the better. Don’t get exhaustive, though; a 30 page contract for a two-week project is overkill.
Your contract/agreement/statement of work should contain a price and payment terms. It should also include any penalties for late payment (including the interest rate you charge). Finally, if your client has a “drop-dead” date, be sure to include that. If it doesn’t, feel free to include a launch date of your own—it can really help to keep a project on track if you’ve got a set end date written down and agreed to.
The short answer is maybe/eventually. When you’re just starting out, lawyer fees can be a bit daunting. Most lawyers charge hundreds of dollars per hour, which usually translates to a lot of billable hours for a new freelancer. Chances are that most of your clients when you’re starting out will be reasonably small, and you’ll be able to work really closely with them. That goes a long way toward avoiding potential the legal hassles that lead to one person suing the other. For the work you’re doing in the beginning, the costs to sue/defend a lawsuit will be way higher than just completely refunding your client (not that you should immediately offer that option if there is some disagreement).
What we’re getting at is that you should, in the beginning, skip the lawyer. You can find contract templates and other legal forms online or offline in a lot of business-supply stores and bookstores. You can then customize these templates to your own needs. It really isn’t until you start to get into projects that are worth tens of thousands of dollars that you should get concerned about the legal system. Even then, keep your head down, do good work, and everything will work out in your favor. Nobody is going to stiff you if they’re ridiculously happy with the work you’ve done (okay, somebody will, like that jerk Uncle Mort).
Here are some resources to keep in mind:
- www.designerstoolbox.com/ : Let’s you buy individual templates that you can then customize.
- www.nolo.com/ : Provides good, general legal advice on all kinds of things.
- www.mynewcompany.com/ : Serves as a good resource for new businesses, providing information on how to incorporate, and so on.
You’re not likely to have to deal with either of these early on (we have yet to see one from a client); but in the event that you do, it’s good to know what you’re getting into. Normally, a nondisclosure agreement is pretty harmless; it’s just there to make sure you keep anything you learn from your client to yourself. Your client/employer may ask you to sign one of these if you’re going to be exposed to some sensitive company material. Generally, these agreements are there to prevent you from learning everything about a client’s business and then taking that and marketing it to one of its competitors.
The only thing to watch out for is if the nondisclosure you’re asked to sign also has a noncompete clause. What that means is that you may be legally prevented from taking on certain clients for a period of time. So, if you went to work for Pepsi and were asked to sign an NDA with a noncompete that had a five-year term, you couldn’t then, two years later, go and work for Coca-Cola.
The two factors to look at are the length of the term and how general the clause is. We’re not saying to refuse to ever sign an NDA with a noncompete clause. You just need to be sure to read it before signing and to decide whether the benefits outweigh the costs. If you take the Pepsi/Coke example, add in the fact that your practice specializes in food and beverage manufacturer websites, and then also add in a clause that actually applies to all beverage manufacturers (not just Coca-Cola), then you’re effectively reducing your potential client base for the next five years.
If the contract with Pepsi is profitable enough (either financially or in terms of prestige) and if your practice is general enough that you’ll have no trouble finding clients outside of the industry, then go for it. The terms of these agreements are usually not written in stone though, so feel free to give it a thorough read and suggest revisions.
Making money: financial survival
You’re probably not in this just for the glamor of sitting at a computer for hours a day, and you probably want to make a little money. Thus, looking after your finances is a good idea. There are a few terms and concepts you should be familiar with in order to ensure your financial well-being. Although you hear a great deal about revenue and profits when you’re watching business news, a more important concept for new business people to learn is about cash flow.
Yes, it’s important to make money (revenue). And yes, it’s important to turn a profit (bring in more money than you spend). But both of these concepts are secondary in the early stages as you’re just struggling to survive. Cash flow is more of a big-picture concept where you look at how much money you’re starting out with (savings), how much you’re going to make every month (revenue), and what your expenses are every month. In the early stages of starting your freelancing career, don’t expect to be pulling in profits hand-over-fist. In fact, if you’re making enough money to cover your own living expenses, you’re doing great!
Let’s look at a quick example of cash flow. We’ll assume that you’re starting out with some savings and that you’re the only source of income for your household (you aren’t, for example, living rent-free in your parent’s basement). You’ve just quit your job and are starting up your own freelancing practice. You’ve managed to put away $5,000 in savings, in addition to already owning your own equipment.
You’ve also sat down with a spreadsheet and determined that you need $2,000 per month to cover rent, utilities, and to eat. It’s easy to see that, if you don’t get a single paying job for the next 60 days, you’re going to be out of business. You need to pull in at least $1000 over the next 60 days just to stay in business, and then you’d need to double that in the following 30 days. That’s not an impossible proposition, but taking a two-week holiday somewhere in the middle probably isn’t in the cards.
Getting paid (aka accounts receivable)
Standard practice in the web design and development world is to accept a down payment at the start of any work, another payment at the halfway point, and then a final payment that covers the remaining balance upon completion of the project. If you’re doing fixed-price work (quoting a total for the project up front as opposed to working hourly), then normal practice is to divide your payments into 50:25:25 or 25:50:25 percent (feel free to adjust these terms however you like; these are just guidelines).
The reasoning behind taking a majority payment up front is that it commits your client to the project. Although that might seem like a silly statement to make, it’s not uncommon to get hired by a client asking to have a project developed, for you to put in a bunch of work in developing a prototype or design for them, and then have that client drop off the face of the earth because the client gets busy with other things. If the client isn’t committed enough to pay you half of the total contract up front, then chances are the client isn’t committed enough to follow through until completion. We’ll reiterate here what’s been said a million times in this book: developing a website is a collaborative process; you are going to need your client to work with you throughout the process.
As with everything, take things on a case-by-case basis; but with new clients that you’ve never worked with before, a substantial deposit is your only insurance they’ll stay engaged.
Regardless of how you’re billing (flat rate or hourly), keeping track of the time you spend on individual projects is essential. It’s completely within your clients’ rights to ask to see an accounting of the time you’ve spent on their project, and it will help you down the road at estimating (quoting) a job. It’s the only source of data that you’ll have if you get into financial trouble and need to try to figure out why you aren’t making money. It might not always be obvious, but if you have a log of the time you spent over the past few months, you’ll at least be able to see whether the problem is that you haven’t been putting in enough billable hours or whether your rate is set too low.)
Thousands of different applications will run on a Mac, a Windows machine, or even a number of really good, web-based products that will let you track your hours. A lot of these products are integrated with some type of invoicing software, so once you’ve tracked the number of hours you put in on a project, you can then automatically generate an invoice to send off to your client. Speaking from experience, a client is far less likely to question the hours on an invoice if it contains a good amount of detail. Handing someone a piece of paper that says “10 hours: $300” just won’t cut it. Break it out into individual work periods (Mar. 2: two hours, Mar. 5: two hours, and so on), and be sure to provide a short description of what you were working on during that time.
We use an excellent web-based product called Harvest ( www.getharvest.com ) for all of our time tracking and invoicing (full disclosure: Jonathan also works for Harvest). Harvest makes it really easy to run timers for the work you’re doing (whether that’s billable or unbillable work) and then report on your time and invoice your client based on those hours.
Although we stayed pretty noncommittal about the need for a lawyer, we will highly recommend that you talk to an accountant early on in your freelancing career. An accountant will tell you what you need to keep track of come tax time and will be able to help you immensely (save you money) if you decide to set up a corporation.
If you’re really determined to save the expense, you can forego getting things set up professionally. Just bear in mind that it may end up costing you a little extra come tax time. Either hire yourself an accountant or save a little extra money from every invoice (just in case). Taxation varies a great deal from country to country, state to state, province to province, and in some cases, from city to city. If you decide to go it alone, without seeking the advice of a professional, then at least look for information that’s specific to your locale. Assuming that advice from the United States will apply in Canada (and vice versa) is foolish.
Resources
Here are some resources:
- http://cpadirectory.com/ : A directory of certified public accountants (in the United States)
- www.accountants-4u.ca/ : A directory of Canadian accountants
The best (and least expensive) way to gain exposure is to do really good work. If you build up a solid reputation as someone who produces high-quality work and is reliable in meeting time and budgets, then you’ll receive a ton of business through word-of-mouth referrals. What better way could there be to find more good clients than to have your current good clients recommend you to their associates?
If your specialty is in design, build up a great portfolio (and show it off). If you’re having trouble landing those first few clients because you have nothing to show them, make some stuff up. Just because the “Bank of Steve” doesn’t actually exist doesn’t mean that it doesn’t need a website. Similarly, the “Antarctic Beach Resort” is just crying out for a solid online presence; it’s way more fun making up your own clients with their own bizarre requirements than to have to explain real-life examples most of the time, anyway.
No client is too big or too small to be showcased, and no client is too real or too imaginary.
A word of caution, especially when you’re starting out: some folks will offer to “let you” do their web site for free in order to build up your portfolio. Under no circumstances should you ever accept these gigs. If you want to build your portfolio, do it on your own terms. If you work for people free, they won’t respect you, and they won’t respect your time. The project will end badly. It will. We’re serious.
Getting the word out
But hey, producing a great product is not enough. You have to shout it from the rooftops once it’s done. The best way to do that is to build up your reputation online. The only way to build a reputation is to get out there and communicate. It’s just like you’ll be telling your clients: it’s not enough to have a really great website; people have to know about it and visit it, too.
There are a few ways you can drive traffic to your website. You could go out and buy some advertising, but if money is tight, it might be more useful to look at some free alternatives:
- Participate : Comment on blogs, join threads in discussion groups, and write your own blog; do anything to get your name out there. It used to be said that there’s no such thing as bad publicity. That’s certainly not true online. If you’re out there stating your opinion and joining the discussion, don’t be a jerk. Nobody wants to work with a jerk.
- Write : Write and submit an article or two for an industry-specific website. Websites like A List Apart (alistapart.com) take submissions from their readers all the time. Your article will need to be well thought out and pretty innovative; but if you manage to get published, you’ll get an instant jump in prestige out of it.
- Design : Developers have it rough. It’s really hard to get anyone (other than another developer) excited about code you’ve written. We have yet to hear anyone exclaim: “Wow! Look how efficiently it parses that text string!” Designers, on the other hand, are constantly producing beautiful work that’s easy to show off. Similar to A List Apart, if you’re a designer, get your work featured on CSS Zen Garden(www.csszengarden.com) , and a number of other people in the industry will get to see it. Publish your own beautiful portfolio of work, as well.
- Develop : Join an open source project and get involved in the community. If you’re pretty good with PHP, Ruby on Rails, Python, or any number of other languages, there are all kinds of open source projects to choose from. Pick one and start looking at the code. Fix up/improve on it, and submit it; it won’t be long until other developers start noticing your work. Designers, this works for you, too. Many open source projects suffer from very poor visual design; pick one and clean it up.
All of these activities will give you name recognition, and chances are people will start to link to your website. Although you’re making your mark primarily within the community (you’re not really getting exposure with potential clients), when you’re starting out, a lot of your work may come as a subcontractor to someone else or as a referral from someone who’s just too busy and was really impressed with your work. That’s a great way to land clients, make new contacts, and even secure yourself a mentor.
Finding work to pay the bills
Following the steps in advertising and promotion (discussed earlier) will eventually get you the clients that you’ve always dreamed of. It’s really a wonderful feeling once clients start coming to you in sufficient quantities that you can pick and choose who you want to work for. However, that doesn’t happen overnight. Sometimes, you’ll just need to pay the bills.
You have two options for finding work right out of the gate. You can go local and try to drum up work in your city or town, or you can go online to a number of job sites that post contract jobs. There are advantages and disadvantages to each approach; let’s look at each individually.
Depending on your locale, this may be a viable option for you. If you’re in an urban center, flush with businesses looking to build an online identity, then you have a viable source of work. If you live in a rural setting, where you have to drive an hour to the nearest supermarket, chances are lower (but not nonexistent). The biggest single advantage to working with local clients is that you have access to them. If you’re developing a website for Acme Hotels down the street, and you want feedback on what you’ve done, all you need to do is go for a short walk.
Recruiting local clients can be much easier, as well (at least we’ve found this to be the case). It’s hard to convince someone that you’re the right person for the job using only e-mail and phone calls. Meeting with someone in person to discuss their needs and expectations and talking with them about work you’ve done is often a far easier way to sell yourself. In general, people will first look at whether you’ll be good/easy to work with before they will look extensively through your portfolio of work. That doesn’t mean you don’t have to produce quality projects; but small-business owners, in particular, like working with other small-business owners.
Working locally also has its challenges. The same advantage that access to people gives you during development can turn into a challenge if you land a client who is needy and believes that every problem is a disaster (you know the type). Other disadvantages—again, depending on your locale—are that local projects may be smaller (in terms of budget) and the local mind-set may be that web development services are worth little.
We previously lived in a primarily agricultural center. Although there was work to be had locally, the budgets for local projects were often no higher than a couple of thousand dollars (and that was for fairly complex projects). People in this center just didn’t realize the amount of work that goes into certain things, and they truly believed that technical skills are a very cheap commodity. Your mileage may definitely vary on this factor, however.
Be innovative in this space. Small businesses can be quite concerned with the costs of a website getting out of control and “hidden costs” in a web project. We’ve seen some really great approaches to addressing this issue, such as offering package pricing for a web site: the scope is very clearly defined, and a fixed price is set. Businesses know what they’ll be paying, and you can rest assured that a project will only hit a certain size and timeframe.
Finding work online has become increasingly difficult. There are a huge variety of job sites allowing employers to post contract gigs. You aren’t limited by geography; assuming the client is comfortable working at a distance, you can bid on projects nationally or even internationally. It can take some practice to produce projects completely online; for example, not being able to schedule a face-to-face meeting if something goes wrong is a bit of a detriment. Also, it can make it harder to enforce contracts/collect payment, especially from clients in other countries. If you do decide to go this route, be diligent about getting a deposit up front.
The major downside, of course, is that your competition isn’t limited by geography either. You’ll often find yourself bidding against folks from countries where the cost of living is significantly lower than it is in North America. Some clients won’t care and will simply go for the lowest bidder. Others will be hesitant to work with individuals where language may be a barrier to success. The only thing you can do here is stand behind your work; if you have a great portfolio, you’ll win over those clients who have a large enough budget to pay you. Just make sure you’re not cutting your rate to compete with individuals in India or Vietnam; that’s not a sustainable set up.
Finding good resources: people
You’ve survived the startup, and your client base and the corresponding workload have increased to the point where you need some help. It’s time to hire, subcontract, or partner. There’s a bunch of options here, and they’re all appropriate in various circumstances.
Hiring: finding the right skills and personality
Hiring is one of the most intimidating and difficult decisions for a new freelancer (or business owner) to make. It’s the point where you decide that you are making enough money to not only support yourself, but also to support someone else. You have to be sure that you’re not just enjoying a temporary spike in business, but that you’ve seen enough steady growth that you can now sustain two (or more) people.
All of that aside, you have to make sure you find the right person(s) for your business. Not only do potential employees need the right mix of skills and interests, but they also need to be able to fit in culturally. As the only employee up until this point, you’ve set the culture of the company. If you value alone time and being able to work through a problem on your own from start to finish, hiring people who need to constantly collaborate to solve problems may not be the best bet (or maybe it is, and you can offload all your client-facing work to them, which leaves you to work behind the scenes). Hiring someone who believes in a strict development cycle will certainly go crazy working for a firm that practices agile development.
We’ve sat through countless interviews and hired quite a few people to join our team in the past. Hands down, the people who have worked out best were those individuals who fit in culturally, well above those individuals who looked really good “on paper.” Skills can be learned, but the right attitude toward the work you do is something that only certain people will bring to the table.
Where do you find candidates?
The best hires we’ve ever made have been people we found out about through referrals. If a friend of a friend is looking for a job, we’re usually very interested. The main reason is that it’s difficult to recommend someone for a job. If a friend of ours refers somebody and that person is a complete disaster, we won’t even consider going to that friend for a referral ever again. Likewise, if we’re ever asked to refer somebody, we will draw upon only the very small pool of individuals we’ve worked with, people we know will be able to accomplish what needs to get done.
If you’re having trouble finding candidates for what you’re looking for, rethink what you’re looking for. We live on an island with 1000 other people. The chances of us finding someone local who can develop websites, configure web servers, and work directly with clients on projects is slim. Expecting a local candidate—or even expecting that someone be willing to relocate here to work for us—would severely limit our pool of candidates.
Likewise, you shrink that pool considerably when you advertise a job using the shotgun approach. Monster.com is horrible for job ads that request candidates be expert PHP programmers, Photoshop masters, Flash developers, and certified project managers. Although it may be true that what you really need is a generalist, most people don’t categorize themselves as such. Most people will say that they are a really strong designer, so listing “PHP expert” will immediately have them self-disqualify.
If you have to resort to posting a job ad, try Craigslist first. We’re not sure what it is; it’s probably just the type of person who frequents Craigslist, but in general, applicants to well-written Craigslist ads seem to be of a higher quality. The only real drawback is that you do have to target the ad geographically; if local/remote work doesn’t bother you, then you will have a difficult time reaching all potential candidates using Craigslist.
Finding temporary help: subcontracting
Subcontracting is pretty common in the web industry. The major advantage to hiring subcontractors is that the labor is available to pick up the slack when you’re busy, but you don’t have an ongoing commitment to feed those individuals work. The biggest drawback to subcontracting is that the people you’re working with aren’t your employees, so they may be busy when you need them. Also, identifying reliable individuals who are easy to work with can be difficult.
There are some key things to keep in mind when subcontracting work:
- Subcontractors work for you. They are not partners, and they don’t work for your client. If your client decides he isn’t going to pay you for a project that you’ve already completed with the help of subcontractor(s), you’re still on the hook to pay your subcontractor(s). This is another great reason why you should get partial payment up front on a job.
- Subcontractors are responsible for their own equipment. You aren’t required to buy them a computer or a piece of software to complete a job. The price they quote you to do a job is just like the price you quote your client: all-inclusive.
- You don’t need to deduct taxes or provide benefits to a subcontractor. They’ll take care of their own taxes when they report their income at tax time. They aren’t employees, so they get treated differently. Depending on the amount of work you throw their way though, you may still have some tax hoops to jump through, so check with your accountant on that front.
- In essence, you’re the client when using a subcontractor. All of the rules that apply to your clients may apply to you (depending on the contractor), and they may require partial payment upfront. They may also want you to sign a contract for their services.
Expect to pay a higher hourly rate for a subcontractor than you would an employee (of the same quality). Subcontractors are just like you; they’re trying to make a living. They need to provide for themselves all the overhead (e.g., office space, Internet connection, and computer equipment) that you would normally provide for an employee. As such, contractors will typically charge a premium for their services over what you would pay an employee with a similar skill set/level of experience.
Partnering with others to complement skill sets
We talked about partnerships earlier; but in a different sense, you may encounter people or organizations with which you want to partner. This makes complete sense if you each have a set of skills that is unique or if you both address a similar market. Joining forces will allow you to do more while sharing all the risks and benefits that go with that partnership.
Similar to hiring, however, make sure there is compatibility in company culture if you plan on working closely. A number of web designers and developers will either officially or unofficially partner with a hosting provider. It’s difficult and expensive to run a server and to keep it online 24/7. Usually, freelancers don’t have the resources to do it themselves (your home DSL line just won’t cut it for bandwidth).
A simple example of partnering is that most hosting companies will offer a reseller discount. So if you sign one of your clients up for web hosting with them, they will charge you 10 percent less than the normal rate. You can then turn around and charge your client the full rate and pocket that profit. There’s an advantage to the hosting company because you’re bringing it business, and it’s happy to reciprocate by throwing a little money your way in return. It sure beats buying a really expensive server, high-quality bandwidth, and better backups; hiring a systems administrator; and possibly even colocating your server depending on your needed uptime.
You may partner, on an ad hoc basis, with other individuals from time to time, as well. If you’re working on a job and need to bring in some expertise; or, if you’re brought in on a job because of your expertise; then make sure that you establish the relationship up front. If it’s a partnership, you’re entitled to a part of the profits (and you’re entitled to know what those profits are). You’re also at risk though: if the client doesn’t pay, you don’t get paid.
Growing your practice and increasing capacity
Don’t fear growth, but at the same time don’t rush toward it foolishly. If you need additional people or equipment or servers to host your clients, then get them; however, don’t do this in response to a “what if” scenario. What if your hosting plan doesn’t have enough disk space to accommodate this new website? Wait and see; soon enough, you’ll find out whether you need more disk space. Don’t upgrade to the next most expensive hosting plan in advance out of fear that you’ll run out of space. Don’t hire that new employee now because you think you’ll have enough work for them to do in the future. If you have enough for them to do now, hire them; if not, subcontract it or just juggle your schedule.
Growth is the single greatest thing and, at the same time, the biggest challenge to any team. You’ll hear that you need to grow to survive; that’s hogwash. If you have a good, diverse client base, you’re making enough money to cover your expenses (and feel free to increase those expenses as you become more successful), and you’re happy with what you’re currently doing, then you have no obligation to grow beyond where you’re at currently. For some bizarre reason, there is a mentality in the business world that you have to constantly grow and expand, turning higher profits every year and hiring more employees. Why?
Bear in mind that there will be additional overhead in growing your team. This means that, if your workload doubles overnight for some strange reason, and you have enough work for two of you to do, then hiring someone will not automatically solve the problem. Generally, when new people come on, they will need some time to get up to speed with company policies and practices; they will need to become familiar with your clients; and more than likely, you will have to be the one to bring them up to speed. So although you shouldn’t hire early to deal with an anticipated workload, you shouldn’t wait until the last minute either, expecting a new hire to come in and save the day.
Training to stay current and competitive
The last topic we’ll cover is training. As a web professional, you have an obligation to yourself and to your clients to keep your skills up-to-date. Thankfully, the very medium you work in is also one of the greatest sources of information about your profession. It’s really easy to keep up on things by reading various online sources of information.
Books are another good option, but the thing with books is that the information goes out-of-date at some point (we appreciate the irony of you reading this in a book!). That’s not to say that books don’t have their place; books are generally highly concentrated sources of information that are professionally organized and presented. A good book can really give you a leg up and jump-start your understanding of a particular topic.
There are also a number of really good industry conferences that take place every year at various locations. The cost to attend these conferences can be quite high, but we have never regretted a decision to attend one because of the great information and networking opportunities offered. Without fail, when we return from a conference, we always have a flood of new ideas and creative energy, even if the actual speakers contributed little actual new knowledge.
The bottom line is that training consumes resources, both in time and in money—but it’s also essential. If you don’t keep current on industry trends, you will lose your competitive edge in this business because clients look for designers and developers who can provide the latest solutions.