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Ask HN: consultancy, how to?

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Re: Ask HN: consultancy, how to?

#21

Post by lp456 »

CyberFonic wrote: post #16
mseebach wrote: post #5

The easiest way to handle this when you don't have any investments, no professional liability or other complications, is simply that you set each your own individual sole proprietorship. Your friend, as he handles the administration, bills the client, and you bill him. Your agreement should likely be that you get paid when he does. This way, if things turns sour, you only stand to lose what your friend owe you - ther…

Having read the all the suggestions, this is the one I'd recommend. Partnerships are more bother than they are worth. There are a lot of IF's: If he brings in the business. If he does a "good" design. If he manages the client and responds to his calls. If he pays you on time. If he brings in clients that pay at the top end of the scale. Then he might be worth 50%. My impression is that your friend is trying to profit…

5% for an introduction? If I'm understanding this correctly he's selling and designing. The sale alone is worth 25%. Now I'm not saying 50% makes sense but 5% is incredibly low for a sale of anything (even if your cashmart).

Agree on all other points.

Re: Ask HN: consultancy, how to?

#22

Post by jamiequint »

CyberFonic wrote: post #16
mseebach wrote: post #5

The easiest way to handle this when you don't have any investments, no professional liability or other complications, is simply that you set each your own individual sole proprietorship. Your friend, as he handles the administration, bills the client, and you bill him. Your agreement should likely be that you get paid when he does. This way, if things turns sour, you only stand to lose what your friend owe you - ther…

Having read the all the suggestions, this is the one I'd recommend. Partnerships are more bother than they are worth. There are a lot of IF's: If he brings in the business. If he does a "good" design. If he manages the client and responds to his calls. If he pays you on time. If he brings in clients that pay at the top end of the scale. Then he might be worth 50%. My impression is that your friend is trying to profit…

When I did Facebook app development consulting I did both the client sourcing and acquisition and the development/consulting. From my personal experience, 50% is not a high percentage for the amount of time spent on this work. Between managing Ad Words campaigns, talking to potential clients on the phone, spec-ing out projects, and making proposals, I'd say the time to get to the development stage far exceeded time actually developing.

Also, you don't simply get a client once they are introduced, it almost never works that way. I would have to talk to clients for hours on the phone, most of who (as far as I can tell) had no actual interest in proceeding with the project, but wanted to ask a lot of questions anyway. The sales process is worth far more than 5%.

I'd say this agreement is very fair.

Re: Ask HN: consultancy, how to?

#23

Post by jamiequint »

caseysoftware wrote: post #11

50/50 splits always make me nervous. When the site goes down at 2am, who gets called? Once the design is finished, will he be doing anything? Does this deal apply equally to clients that don't need design work? Does this deal apply to clients he doesn't refer? Does he get 50% of the deal or 50% of the company? Regardless, a 50% "finder's fee" is ridiculously high..

I'm kind of restating from a comment I already made above, but I think that its very wrong to state that a 50% finders fee is very high.

From my personal experience with consulting (particularly Facebook app consulting) I found that week-to-week I consistently spent more than 50% of my time getting from potential leads to actual sale and spec'd product than I ever did actually developing.

Re: Ask HN: consultancy, how to?

#24

Post by pbhjpbhj »

tedshroyer wrote: post #18
ErrantX wrote: post #12

Earlier quoted context omitted.

Hi this interests me - LLP seemed a good approach but your comments make sense. Mind if I ask some more. Are you suggesting sole proprieterships and then have a contract between myself an him. My main issue is I want some way to tie us together (actually mostly so I have "deadlines" I have to meet) and to make sure the 50/50 agreement is protected somewhat. Im certain he wont screw me (I've known him for 3 years - he…

My advice is to bill hourly whenever you can because the client won't express everything they want done initially. This is because they don't know everything they want until they have part of it. Just think about doing a job for yourself and how many times you realize how much more you need to do after part of it is finished.

I do some web design. I wouldn't pay hourly for an initial website design & implementation. If you've got a designer/developer that is incompetent (or just out of practise) then they are going to take a lot longer and so cost more. Agree a price, technical problems are the designers problem.

Admin stuff takes quite a lot of time in a small business, in my experience (3 small businesses so far). Also just doing the design implementation stuff isn't enough - you do have to get out and win the work. 50:50 sounds about right IMO.

That's assuming he is doing inital design (graphical prototype, you'll need usability input here) and preparing graphical elements for the coded pages; as well as the up front promotion and sales.

Kinda depends on what sort of sites you're doing. A heavy app with lots of DB design or lots of scripting would need more weighting towards you. A simple graphical "this is us" site the weight is more towards him (and you're probably better outsourcing the coding of that sort of thing anyway).

FWIW

Re: Ask HN: consultancy, how to?

#25

Post by pbhjpbhj »

bhousel wrote: post #17

I would definitely recommend that you pick someone up front to be a Project Manager. Your friend might be this, as you described his role as "finding clients" and "some admin etc", but it's really a bit more than that - you might want to bring in a third founder with experience in running projects. I'll echo what others here are saying - don't split things 50/50 (or by any percentage, really). Everyone on the project…

And then one of you messes up on their part and either the billed hours total is more than the revenue or the client refuses to pay so much (depending how you're charging) ... what now?

Also billed hours means that there's an incentive to work slowly to get a greater share out of the business.

Re: Ask HN: consultancy, how to?

#26

Post by msb »

mseebach wrote: post #5

The easiest way to handle this when you don't have any investments, no professional liability or other complications, is simply that you set each your own individual sole proprietorship. Your friend, as he handles the administration, bills the client, and you bill him. Your agreement should likely be that you get paid when he does. This way, if things turns sour, you only stand to lose what your friend owe you - ther…

I agree regarding the rate. If you have professional experience there is no reason to start off at so low just because you are new to consulting. The voucher or one time discount is also a good idea. I have found it very difficult to increase rates on customers over the years. It is important to make clear that if you do discount that it is not permanent.

Re: Ask HN: consultancy, how to?

#27

Post by mseebach »

chollida1 wrote: post #20
mseebach wrote: post #6

Earlier quoted context omitted.

If you need lawyers at this state, you're doing it wrong (specifically starting up with the wrong person)

Couldn't disagree more. The reason we have lawyers look over documents is that they write these types of documents everyday and they can tell if you've missed anything. This comes in handy when a dispute arises or some other unforeseen event. Joel talks about this on the Stackoverflow podcast when they discuss using a lawyer to review the FogCreek office rental agreement. The gist of it is that when lawyers talk abou…

> Joel talks about this on the Stackoverflow podcast when they discuss using a lawyer to review the FogCreek office rental agreement.

This is not a rental contract, that the ability of 100 (?) employees to their job rests on. If Joel gets to the Fog Creek office one morning and finds the locks changed, he looses thousands of dollars a day - and not just his own money, that's money that he already owes in wages and so on. Absolutely, get a lawyer.

These two guys are doing some contracting on the side. There are no investments and no liabilities. Their worst case scenario is walking away, not talking to each other, maybe disputing a few $1000. Doing ten rounds with a lawyer (there's really no boiler contract that can cover every conflict two friends working together might encounter) easily costs that, AND then you'll still have to go to court to enforce the contract.

Spend an afternoon writing down a page of bullet points of the rules that should govern this cooperation.

> You should have a lawyer look at most contracts you sign.

No, you should familiarize yourself with basic contract law and be able to estimate the worst case scenario, and decide if that's a risk you want to take.

Re: Ask HN: consultancy, how to?

#28

Post by msb »

ErrantX wrote: post #13
caseysoftware wrote: post #11

50/50 splits always make me nervous. When the site goes down at 2am, who gets called? Once the design is finished, will he be doing anything? Does this deal apply equally to clients that don't need design work? Does this deal apply to clients he doesn't refer? Does he get 50% of the deal or 50% of the company? Regardless, a 50% "finder's fee" is ridiculously high..

Wicked questions: as this is in the intial stage that's the sort of thing Im looking for to ask. The idea is 50/50 on any money regardless (after costs - i.e. my travel costs) - I guess that is very vague and your right... I do need to nail that down into an agreement. He does have some technical knowledge so will be working on HTML aspects (but has no real knowledge of backend programming meaning Im needed for that)…

As others have said, it really needs to be per project. There may be some projects where frustration and resentment can creep in. For example, when the work is all design/static content or heavy programming.

Perhaps the best way to do this is treat it like a company. Your friend gets a reasonable finder's fee or percent of sales for bringing in the business. Someone else might have a better number but I would think 5-8%. When writing project estimates, you each add the hours it will take to complete your respective tasks. Track your hours in detail (I like to use Klok, but there may be better) and when the project is complete get paid accordingly. If you both come in under, then perhaps consider splitting the 'profits' 50/50.

I think this type of structure accommodates the variation of skill requirements in web projects and will also ensure that you both are getting what you deserve.

Re: Ask HN: consultancy, how to?

#29

Post by Derrek »

msb wrote: post #26
mseebach wrote: post #5

The easiest way to handle this when you don't have any investments, no professional liability or other complications, is simply that you set each your own individual sole proprietorship. Your friend, as he handles the administration, bills the client, and you bill him. Your agreement should likely be that you get paid when he does. This way, if things turns sour, you only stand to lose what your friend owe you - ther…

I agree regarding the rate. If you have professional experience there is no reason to start off at so low just because you are new to consulting. The voucher or one time discount is also a good idea. I have found it very difficult to increase rates on customers over the years. It is important to make clear that if you do discount that it is not permanent.

I second that. Plus, people often subconsciously associate higher rates with better service.

Re: Ask HN: consultancy, how to?

#30

Post by access_denied »

lp456 wrote: post #21
CyberFonic wrote: post #16

Earlier quoted context omitted.

Having read the all the suggestions, this is the one I'd recommend. Partnerships are more bother than they are worth. There are a lot of IF's: If he brings in the business. If he does a "good" design. If he manages the client and responds to his calls. If he pays you on time. If he brings in clients that pay at the top end of the scale. Then he might be worth 50%. My impression is that your friend is trying to profit…

5% for an introduction? If I'm understanding this correctly he's selling and designing. The sale alone is worth 25%. Now I'm not saying 50% makes sense but 5% is incredibly low for a sale of anything (even if your cashmart). Agree on all other points.

Here in the german advertising scene the standard comission for an "successful recommendation" is about 15% no questions asked.
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