156 FS Red Flags

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02:44 - “We just fired our last dev. Can you help us?”

05:40 - Temporary Gigs

07:42 - Unrealistic Timeline

09:26 - “Our developers are above-average smart!”

10:40 - Lack of Communication / Communication Skills Suck

  • Prescreening Questions

14:15 - Bad CEOs / Crazy Personnel Changes

19:27 - When Clients Go Dark

28:03 - “We’ll pay you in equity!” or “We’ll give you a share of our profits!”

29:59 - Ridiculous NDAs (Non-Disclosure Agreements)

32:04 - Vetting Processes

37:06 - Payment

44:56 - Low-Budget CompaniesPicks

Kai Davis:Microconf2015 Recap (Eric)Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table by Reed Holden (Jonathan)CleanMyMac 3 (Reuven)

Transcript

REUVEN: When Chuck’s away, that's a real red flag.[This episode is sponsored by Elixir Sips. Elixir Sips is a screencast series that will take you from Elixir newbie to experienced practitioner. If you’re interested in learning Elixir but don’t know where to start, then Elixir Sips is perfect for you. In two short screencasts each week between five and fifteen minutes, Elixir Sips currently consists of over 16 hours of densely packed videos and more than a hundred episodes, and there are more every week. Elixir Sips is brought to you by Josh Adams, expert Rubyist and CTO of a software development consultancy, Isotope Eleven. Elixir Sips, learn Elixir with a pro. Find out more at elixirsips.com]**[This episode is sponsored by LessAccounting. Let’s face it. There are a lot of things about being an entrepreneur that we all hate. One of the things that I really hate is bookkeeping. LessAccounting has just started a new service where you can get your bookkeeping done for a really low cost each month. If you're interested, go to freelancersshow.com/bookkeeping to go check it out. I signed up, and they had me all caught up within a couple of days. It was awesome, and I can’t recommend them highly enough. Their people are professional and good at what they do. So go check it out once again at freelancersshow.com/bookkeeping]****[This episode is sponsored by DevMountain. DevMountain is a coding school with the best, world-class learning experience you can find. DevMountain is a 12-week full-time development course. With only 25 spots available, each cohort fills quickly. As a student, you’ll be assigned an individual mentor to help answer questions when you get stuck and make sure you are getting most out of the class. Tuition includes 24-hour access to campus and free housing for our out-of-state applicants. In only 12 weeks, you’ll have your own app in the App store. Learn to code, it’s time! Go to devmountain.com/freelancers. Listeners to the Freelancers Show will get a special $250 off when they use the coupon code FREELANCERS at checkout.]****REUVEN: Hi everyone and welcome to episode number 156 of the Freelancers’ Show. This week on our panel, we have Eric Davis. ERIC: Hello. REUVEN:   And Jonathan Stark. JONATHAN: Hello. REUVEN: And I’m Reuven Lerner. This week we are talking about red flags – the kinds that we wave in front of bulls, or the kinds [chuckles] that you might metaphorically see coming down the pipe as certain clients approach you and shouldn’t be warning you away from ever engaging with them; whether that happens or not, of course, it’s a different story altogether. So guys, what red flags go up when you talk to a potential client? What can they say or do that will convince you not to talk to them anymore?JONATHAN:The first thing that comes to mind is, ‘We just fired our last dev. Can you help us?’ [Laughter] There’s always two sides to every story when I hear about previous consultant getting fired – it makes me very nervous –or never mind sued. I had one people, ‘We’re suing our last developer, so we need somebody right away’.REUVEN: They really told you that? They said, ‘We sued our last developer’? JONATHAN:Yeah. [Chuckles]JONATHAN: Far away from that one. ERIC **: Yeah. That’s one I’ve seen a few times, I think. I know a lot of other people or other developer, freelance type people that see that a lot and they’ll pick up a project where the last developer’s on the last whatever.  Let’s say: last quarter of the project, quality went down. They were just doing this stuff, and then the client fired them, hired this people I know, pick up the ball and basically it was like the trouble project as soon as they got started. Most of the time, it works out. Some it’s like code problems – a good consultant is in there and actually helping and communicating and all that stuff, turns around, but the client’s already started off pissed off and on a bad foot with it. JONATHAN: Yeah, no doubt. It might be the developer’s fault – that's definitely true – but it’s not the kind of situation that I’d prefer to get into, given the option. REUVEN: Right. I just started with a new client in the last few weeks where they made it very clear that they thought the previous consultant, the previous developer, did a fantastic job on the software. But they said, ‘But he was really difficult to work with, and when we called him, he just never answered. We went weeks trying to reach him, and we couldn’t reach him’. So, a) they were trying to make sure that I would actually be communicative. And actually, this past week, we were watching another site, and it was not as communicative, so that was not a great way to start a project. [Chuckles] But secondly, we actually looked through his code. And maybe, to the late person it seemed fantastic but that was really like, ‘Yeah, it’s good, but it’s not that good.’ But, of course, they don’t know. They don’t know good code or bad code. They just know, ‘Did it fill my needs?’ and from their perspective, ‘It’s kind of did, but not enough, and that's why we’re not coming in to add to it’. But if it had been a more, I think, a more strenuous, ‘Boy, this developer was terrible’, then I might have thought all the more about it. ERIC: Yeah. And those are actually projects I like taking on because I’m really good at communication; really good at getting feedback for the clients or working with what they want or what they need. And ,so if I can step in – and even if the code is good or on the bad side – if I can step in and basically take what they have and actually show how this will work or put the final touches on to get to what it actually fulfills a need, it works really good. I enjoy those types of projects and enjoy showing the client, ‘This is what a good relationship can be and what you can get out of it’. REUVEN: Right. I often tell clients that I really enjoy having – and it’s true – as my pitchy advisor like to say, it has the advantage of being true. But, I really like having long-term clients. I like knowing them and engaging in their business and trying to help it and see it grow. Also, here’s another red flag: ‘We just need someone for a week’, or ‘We just need someone for a month or so’. And from my perspective, those projects are just isn't interesting. And often, they're trying to just be super cheap about it, too. [Crosstalk] JONATHAN: Yeah, that’s a classic red flag, too. It’s almost too obvious to say, but if somebody contacts you initially and they're already saying they don’t have any money – [chuckles] ‘We don’t have a big budget for this’, but – or the flipside to that, which is, ‘It should be easy, but we need you to do the same, it should be really easy, what’s your hourly rate?’ [Chuckles] That’s the email and that sends me running. REUVEN: Well, I’ll tell you this. There new client actually. They said, ‘We don’t have that much money. And so I said, ‘Well, ok, let’s turn this around a little bit’. I talked to them a little with what they want to do, and we came to some, I think reasonable – not amazing – but reasonable arrangement on such things. But, I’m also hoping/expecting that we’re going to push their business heads so much that in somewhere between 2-4 months, I’m going to go back and say, ‘Ok, now you’re really humming. You never had anything like this before. We’ve had a great relationship. Now you got to pay more because you’re actually making more.’ That is a bit of a gamble on my side, and I recognize that, but it seems like an interesting project. It seems like it has potential, at least. ERIC: Yeah, but it’s a tricky one. I’m ok with working with clients that have a smaller budget where they might only be able to afford a week of my time which is the minimum that I sell. But, it has to be where I can, for sure, get in, get up and running, deliver value, and then leave where there's no big unfinished part. That’s a hard thing. I have some clients where they're like, ‘We just need you for a few hours. We need to work with you for a month.”  And I’m like, ‘Well, when you factor in contract negotiation, getting started, and then doing the work, you might be out of actual calendar time for that if you have a launch coming up or something’. That’s something I’d watch for if they have the expectation of you can just go to a temp agency and hire a temp employee, and 4 hours later they're sitting down typing on the computer: it doesn’t quite work like that for what I do. JONATHAN: Right. That reminds me of another one, which is when someone comes to you, and in initial conversations, you already recognize that the timeline is completely unrealistic. That usually happens to me when I see there's a mandate from somebody farther up the organization and then I get contacted by someone who has no control over the timeline, and then they're like, ‘Look, we just need an app in three weeks. What can you do?’ and I’m like, ‘It’s impossible’. And if anybody tells you it’s possible, they're just taking your money. But, of course, we’ve had enough conversation at this point for me to know that the app is not the kind of thing that can be done in three weeks; it’s like a six-month project that they waited too long to start; and it’s a red flag. ERIC: Right. Some companies might be able to do that. They might be able to do a spy and have something out there. It could be they have the staff or the resources, or maybe the quality is really low, but in any case, I think we need to realize that these are red flags – someone else’s red flags might be different. If you go from turning around and building an app in three weeks – if that's your business model – having a short timeline is probably not a red flag –that’s probably, actually, a requirement to be a client. JONATHAN: Yeah, and a red flag doesn’t mean I’m not going to take someone on. It’s just like – it’s a red flag. ‘Hmm, I need to be careful about this and make sure it gets discussed’. So it’s not like somebody has one red flag, and I’m like, ‘Oh, I’m definitely not working with this person’. There are certain ones that I don’t have patience for, but if somebody has an unrealistic timeline, for example, but they're flexible on scope or quality, then ok. I can have that conversation, but I’m not going to, obviously anyone, be crazy to jump into a project that was doomed from the start; that doesn’t make any sense. ERIC: Right. REUVEN: I often have when I talk to people about training, one of the interesting red flags that often comes up is people say, ‘Oh, we know that your regular course is four days. But our people are all very smart’. [Chuckles] I think I’ve mentioned this in the past – I feel like it’s the Lake Wobegon effect of developers. Lake Wobegon [inaudible] public radio show where they would say, ‘Here in Lake Wobegon, all the children are above the average’. [Chuckles] It’s amazing. It’s amazing that in every company I talk to, the developers are above-average smart; truly amazing. In any of that, I have to explain to them that it has nothing to do with how smart their people are; it has to do with we’re just going to grind through exercises, explanations, and so forth, and that takes time. And yes, we can cut things down, but it will be to their detriment, and usually, that gets to them – not always, but usually. JONATHAN: Reuven, can’t you just talk twice as fast? REUVEN: [Chuckles] I say that sometimes. I’ll say, ‘Well, I already talk kind of fast. I can just talk faster, if you want’. And then someone realizes, ‘Yeah, but’ – often someone makes the comment, ‘But we can’t listen twice as fast’. I say, ‘Aha, right’. [Chuckle] Now, now you got it. JONATHAN: It’s like putting nine ladies on the pregnancy thing – [crosstalk] a month. Another thing that is a pretty subtle one and probably is very specific to me – or maybe another way to put it is that it’s not necessarily – it doesn’t mean that the client is necessarily bad, but it could indicate a bad fit with my personality and communication style – is that – typically the way it works with me is I get a lead via email, and I’ll respond to them and say, ‘Hey, grab a slot in my calendar for next week. In the meantime, if you wouldn’t mind answering these 5 or 6 simple questions, I can get – I can do some homework before we talk and we can really maximize the time on the phone’. And if they refuse to do that, or if they either don’t read the whole email, or they respond to a question I didn’t ask, like they read the question wrong, or basically if they don’t communicate well over email, it’s probably going to be a rocky relationship because I do so much communication over email. I’m not into lots of scheduled phone calls, so if they're the type of customer that would really just rather ‘let’s just jump on the phone and we can talk through this’, it’s probably going to be a painful relationship. REUVEN: I’m actually curious – say, you have these questions that you send to people, and – Curtis, when he was on the podcast, he was talking about this also – the prescreening questions. I can understand– I can totally understand that people don’t fill it out. It could be a bit of a red flag at the same time. Don’t you think it’s putting off people? That you're losing potential clients in so doing? JONATHAN: Yeah. Usually what happens is that I get a monster brain dump back, and that, to me, indicates that first of all, they're comfortable with email as a communication medium, or at least typing as a communication medium, which is important because I like to run most of my projects – I’ll run through Basecamp or there’s a chat room, as well, so people are insisting always on having synchronous phone communications – it really screws up my schedule, and it makes things much more complicated for me. So I prefer to work with people who are comfortable with asynchronous text-based kind of style. And the questions, usually, are fun questions to answer for any business or business owner, like ‘What’s your origin story? How did you get started? What are your favorite kind of clients?’ – it depends on the project, but the questions are always different, but they're usually pretty conversational and they are things I’d ask you at a cocktail party; it’s not really annoying stuff, in my opinion. So if they don’t want to answer, that’s fine, but if they don’t read them and they just type – I have a guy I’m coaching where he’ll send a simple question to somebody he’s working with, and she’ll just respond with this something that’s totally orthogonal to what he was asking, like he didn’t understand the question or she skimmed it so fast. And things can just go horribly wrong in email when you're like – now you have to jump on the phone because you're like, ‘Wait, did you not understand my question, or did you read it wrong, or do I not understand the answer?’, and you just immediately goes down this rabbit hole of confusion. And so then you have to get on the phone and talk to them, and that's fine. That’s probably a lot of people prefer to work that way, but I’m not one of them. So if somebody’s not get on email or in Basecamp or something like that, it increases my cost, if you will. So it makes it less attractive to me. ERIC: Right. REUVEN: Let’s say you started a project. They seemed to have passed the first hurdles, and they say – they answer the questions and they seemed decent to deal with, and they're not going to be total psychos, or at least it seems that way, what can happen during a project that will convince you otherwise, or that will start to make the hair on the back of your neck stand up? JONATHAN: That's easy. When all of a sudden, the real buyer comes out of the woodwork and is psycho. Basically, you can be, hopefully, near at the beginning of the project, but you can be in a project and then all of a sudden, the real boss shows up and it becomes clear immediately that the project was scoped wrong, and it’s like, ‘Ok, time to pump the brakes and let’s have conversation right now because this is not what I bid’ – that kind of thing. That’s just very rare, though. I can only think of a couple occasions that’s happened. REUVEN: Right. I had a project – I guess the closest equal into that that I ever had was I did this project with SAP a number of years ago. And only in a big company can this happen – I’m sure you’ve seen this before – it’s something like 40 people working full time on this project. After 8 months, the VP in charge of it just said, ‘Well, I’ll tell you what. We’ve actually now got to get approval for this thing’. [Chuckle] I’m thinking, ‘What?’ How is that possible that you have40 people working full time and no one thought to check if this was ok? And then they didn’t get an approval. So that was the end of the project. But it didn’t bother me; I worked on it for 8 months or so, I had a great time, I met a lot of great people, but it might have been interesting and good to find out at some point, ‘What’s the approval? What’s the timeline on this?’ JONATHAN: Right. ERIC: Yeah. One thing I've had happened was I would work with the lead, we’d go through a contract, basically finish up the contract – basically, it needs to be signed, and then deposit a payment, and then they’d leave or get fired, and their replacement would come in and basically take it back to square one. The one time, I think, when that happened, they really tried to distance themselves from everything – the original person dead – and so, even if working with me was a great thing for the company, because I worked with the prior person, they didn’t want to do it and they pushed back so hard, I completely changed the scope and all that. And then there’s another one I can – another client I can think of where I actually got in and I was working on the project and basically the PM changed completely. A new one came in. That one left, and by the time I was done in the entire dev team, everyone I worked with in the beginning was gone and replaced with other people. So that was hard. I was the one who’s having to tell people classically, this is why we made this decision 5, 6 months ago. We can’t change it now, but this is why – so that was kind of a red flag, and that’s actually what prompted me to exit that project. There was a lot of turnover because of the culture in the organization. REUVEN: Right. JONATHAN: Yeah, that’s brutal. I've had two situations that are like that. One was – in both cases, they had been pay up front, and in one case, the real buyer showed up on the scene, it was immediately obvious that it was going to be a disaster. It was not the kind of person that I could deal with, so I just sent them their money back. ‘So, thanks anyway’. And then another situation was same – very similar to what Eric just said, where new CEO, and just completely cleaned the house. I had been working with – closely with 3 or 4 people, and occasionally with up to 40 or 50 people in the company, and new CEO came in and everybody just disappeared. I don’t know if they got fired. The whole project just got killed and nobody ever contacted me again; they just keep sending checks. So it was like [laughter] ‘Ok’. No one would get back to me. It was super weird. That was the weirdest. REUVEN: It was like it was one of these big company things where someone authorized a retainer for the next x months, and [inaudible]  – I keep being cut – but the person who would be watching over the budget was fired or something. JONATHAN: Yeah. I kept on emailing my contacts and stuff, and being, ‘You guys, you’re still paying me. You might as well get on the phone’. Nobody ever did. They just disappeared. REUVEN: Wow. JONATHAN: So, I guess that worked out well, in a sense. I didn’t lose any money or anything, but – and it didn’t get awkward, but it was super weird. But to the larger point, when there's a big personnel change, everything is thrown into limbo, or can be. REUVEN: Right. Because regardless of how close a relationship you might have with the company, at the end of the day, you're still a consultant, you’re still an outsider. And so, you need some stability in your client to be able to talk to them, communicate, offer the advice, hope that the advice is being taken. And if there’s a complete chaos going on this, that’s not going to help anyone; certainly not you. JONATHAN: Yeah. Everybody I was working with, it wasn’t their money that was getting sent to me, and they were pretty angry at the management anyway, so they probably thought it was funny. Who knows? I was definitely the last of their worries. ERIC: Oh, that’s like a lot of people say is when you're working with businesses and sales and all that stuff, you're not really selling to the business like Apple or Nike or IBM, you're selling to people at the company. And so, in that case, you sold to [inaudible] the VP of Engineering. And when he left, all of a sudden – you sold to him, the company is still paying for it, but he is gone, so it’s this really weird dynamic ‘ok, should I keep working for the company? Should I start cancel our contract? What?’ But that’s something to keep in mind. It’s people, it’s relationship you have with the people, not with the actual organization or the company. One red flag that I find that comes up a lot actually comes up during the sales process most of the time, but also can come up during a project, is when the person you’re working with – you're direct client – they actually start going dark on you. They stop returning phone calls, stop returning emails, and it’s just a pain to get a hold of them. The biggest fear I have is – because I’ve had these past experiences with personnel changes – is that I’m worried – ‘oh, they got fired and no one’s going to tell me about it’. JONATHAN: Right. ERIC: That’s something that I watch for. There are some circumstances like someone’s really busy, or – I've had a client in Switzerland which time zone is just really far away from Oregon. I knew of him, I had to give him a lot more – a lot more slack, a lot more buffer, because I knew it would take him a while to get back to me, but if people just don’t reply to emails, or don’t do that stuff, I start slowing down, and then I’ll put the brakes on and say, ‘Hey, this project – I’m putting this on hold because you're not answering questions. Even if I’m not blocked on stuff, this needs to have communication. We need to have a relationship here, and if you can’t do that, then it’s not a good fit for us because of the style that I work in’. JONATHAN: Right. REUVEN: Yeah. Somebody going dark – there was a client where I went in and gave them a bunch of help on PostgreSQL stuff, and we had a really, really great relationship. And then in one of the meetings, the guy I was meeting said, ‘Oh, let me introduce you to our new person on the team’. ‘Oh, that’s very nice’. And then, of course, the next week I discovered through a LinkedIn update that the guy I’ve been working with has left the company. And the reason he was introducing me to this person was he was hoping there would be some continuity, and he was very nice about it. I guess he couldn’t say anything at the time – maybe he hadn’t told them – whatever it was. So, for the client perspective, I lost the client because there was no way, basically, that they were going to continue with this guy’s favorite consultant. They actually didn’t call me in once, and we spoke for an hour; that was that. So it was a good relationship while it lasted, but it’s useful to keep track of who is sticking around and who is not, and how happy they are with the company. Someone’s got to be there to be your advocate because in my experience, someone’s to be your advocate to keep you coming back. JONATHAN: Yeah. I’m big on the conceptual agreement thing, and that is a very personal thing between you and usually a specific individual who then becomes your advocate internally. They're the ones that you agreed with ‘What is the value of this project to the company? How are we going to measure it?’ And that stuff’s all written down to, but for me, a proposal is very much like an after-the-fact type of artifact that is just repeats in writing what we’ve agreed to in speaking, and it’s not necessarily persuasive on its own. So when somebody new comes in, and they go over the proposal or whatever, they look and see what the deliverables might be or what the schedule is, it’s really out of context and it could be really hard to salvage that unless they were totally onboard, or they had been involved in the conversations from the first place. I can see it’s happened very often to me now, because my projects – I always do short-term projects, like 3 months for me would be a long one now. They're usually nowhere near that long. And they get paid upfront, so a lot of the times, I don’t care if somebody goes dark or the project gets killed. REUVEN: Right. I [inaudible] thought that you do a lot of retainer work over many months. JONATHAN: Yeah. Occasionally, I will do software projects these days – it’s pretty rare, but if I do, I bill for them in advance. But the thing is, I try and keep them really small – I think Eric does bigger size projects – I like to break mine down into these smallest possible chunks and move one step at a time. And that doesn’t always work for everybody, but I try to work with people who – that is good for a retainer type of thing, that’s like a subscription feeling, like an ongoing retainer that recurs monthly that’s not paid up front, but it’s almost always names a specific person in the organization who’s allowed to contact me, and if that person left, it would definitely be the end of the retainer because I’m like a [inaudible] divider to that particular person, not necessarily to the entire organization – certainly not the entire organization. So there is something about that person that clicked with me and what I do, and we just clicked together and that’s non-transferrable, if you know what I mean; you’d really have to start over. ERIC: Yeah. I could see them renewing up [inaudible] a whole new relationship just with company you've worked before. JONATHAN: Yeah. There are certain points where it’s like – sometimes I’ll work out a deal with the company that I really trust where I will say, ‘I’ll give you a 6-month price, but you can still pay me monthly’, but they get a discount monthly. If you're just paying me month to month at will, the price is higher, and because I want to incentivize people to have more long-term engagements with me, like 6 months or a year, I’ll give them a break, give them a month or two months free if they pay for a whole year. Sometimes, I don’t want that check all up front; sometimes I want it spread out. So I’ll say, ‘You guys can pay monthly. It’s better for me anyway’, and if the person then got fired at the 6-month point, I would be in a pickle, to use the term that my grandmother used, because almost certainly, they would not want to pay for the remaining months even though that was the deal. And to be honest, I would probably – I would fight for myself a little bit and be like, ‘if you’re going to cancel now in the middle, then really, the only fair thing to do it would be to pay me the balance of the discount I gave you for a longer purchase’, but they’d probably never do it, and I wouldn’t do anything about it. ERIC: Yeah. It becomes not worth your time at that point. JONATHAN: That’s actually happened to me. I did a project for a large retailer and I was advising their internal web team about a responsive redesign of an existing loyalty site, and the project just got out of hand. More and more people just kept getting sucked in to the project and all of a sudden, the iOS team is in the meeting, and I was like, ‘what is going on here?’ and finally, they had killed the project. And they were supposed to – the deal was they were going to give me 50% up front – 50% in 30 days, regardless of where the project status was because that was the negotiation – that's where we landed in the negotiations. And they never sent me the second payment even though they were on the hook for it. But the project got killed too, so I was like, ‘What am I going to do?’ REUVEN: Quite the trifecta. JONATHAN: Yeah. Big companies, you just don’t know. Anything can happen. As stable as a big company is, anything can happen on any day – hiring freeze, billing freeze. ‘Yeah, I know we were planning on doing that, but word came down from on high that we’re not, so –’. It’s so weird. REUVEN: Yeah. It’s not exactly I tell people – in terms of big companies – I've been starting to do all sorts of training directly with big companies now, it’s more and more – and so dealing with this multinationals with their billing department, and so forth. So the people in the US approve it, but the people in Israel who will actually get the training, the people in Poland deal with the billing stuff. And so, the billing gets bounced around, and basically [inaudible] invoice just yesterday, and they said, ‘No, no, no. We can’t serve this invoice. We need to get a receipt saying that we gave you the money already’. Back and forth, back and forth, I finally said, ‘Look, I can’t do that unless you want to pay me right away’. And they said, ‘Ok. How do we pay you right away? We will pay you within two weeks, is that ok? Isn't that net plus 60?’ ‘Alright, sure’. I never, in my wildest dreams, would have imagined that a big company can turn around with a dime like that, but basically, it’s easier for them to just pay me than to go through more billing bureaucracy. It’s so amusing. ERIC: It’s like one client I worked for. It was so hard to get into their system that he actually paid me – I know it’s out of his personal funds, or his company’s expense account, but he did that for – he would do that every week and then – I think it was like 4 or 5 months – and when I was showing the katana value, he went to his boss, pitched it to his boss, and then we shifted to the company I should be paying for. But there was just so much friction set up in their purchasing staff that he couldn’t get it done, and he really wanted to work with me. That was a weird thing, so he would say, ‘Ok, I know you invoice me, we’ll say a thousand dollars. So I’m going to pay 400 now, pay off that credit card, and then I’ll pay another 400 and pay it off –’; it was just this weird, weird situation. It ended up nice. He was a great client for years, and the stuff I did actually helped him. I think he got two or three promotions out of it. So everyone benefited, but it was just like this confusing weird thing just because it was a large bureaucracy. REUVEN: Here’s another fun, fun red flag. This is related to the ‘We don’t have a big budget’. It’s the ‘We’ll pay you in equity’, or ‘We’ll give you a share of the profits’ or something like that. JONATHAN: Get it on the ground floor. This is a billion-dollar idea. REUVEN: God! Oh my god! These people really believe it. So I can’t mock them too much. And I recognize also that –. ERIC: Yeah, you can. [Laughter][crosstalk] REUVEN: That’s part of the startup culture also. I think it’s also safe to say that very few of the companies that have become billion-dollar companies were started by people who did not believe that. But the belief itself doesn’t make it true, and just because you believe you're going to have a fantastic company does not mean I have to effectively become an investor in your company and then share the risks. ERIC: That's what I said to him. I’ll be like, ‘You can pay my normal rate in cash. Give me a check. And if you're going to do an equity thing, or whatever like that, show me all your bank accounts, show me your audited financials, give me all the data you would give to an investor, and then I’ll make the decision’. And most of the time, they're like, ‘Whoa, we just have an idea’. [Laughter] ‘Sorry. My investment’s criteria requires these things done, and if you haven’t done that, we can’t do business. So if you want to pay me, just full price cash – I’m fine with it. If you want to do a split, you're going to need that stuff set up’. My requirements are so high like they would have to have funding at that point, and if they have funding, they would have cash, it would be better for them to do cash, so it’s like Cycle 22 or whatever. JONATHAN: Yeah. Why even indulge them? REUVEN: I just say straight out, ‘I’m sorry, but my business model and my paying of rent and other such things doesn’t work that way’. JONATHAN: Yeah. I just tell people I’m not a gambler. I’m not in gambling. REUVEN: [Chuckles] I’m sure that makes the starch you deal with feel so good about what they're doing. JONATHAN: No. I think they know it’s a gamble, and it’s not just my personality style, so I’m not interested. That reminds me of one that's related is when you get the email from somebody like, ‘Oh, we’d love to have a preliminary phone call’, which I’m always cool with. That’s fine; we can have a phone call. ‘But you have to sign an NDA first because I got this great idea’, and I’m like, ‘Nah, I don’t do that’. I’ll sign an NDA if you're paying me, like once we decide that it’s a good thing, but I can’t sign an NDA if for every person that has an idea that I get on the phone with. It would be ridiculous. REUVEN: It totally doesn’t bother me, because I say to people – I say it straight out – I say, ‘signing an NDA does not change anything. I will still keep your idea confidential, but if it makes you feel better for me to sign something like that, go for it’. I figure, what the heck. Probably their idea is terrible, anyway, the odds of me going executing on it, even smaller than the odds of it being a good idea, [inaudible] in doing, because they could, in theory, come back and sue you someday. [Crosstalk] JONATHAN: Yeah. That's why I don’t want to read it; because you have to read it; because there could be non-compete buried in there, and now you can’t work with pizza places anymore, or whatever. [Crosstalk] ERIC: I think it was a 10-year, NDA, non-compete, I couldn’t write software that ran on websites just for talking with them. REUVEN: Well, I’m glad they weren’t restrictive then. Wow. JONATHAN: I never get into a legal arrangement with someone that's not paying me. It’s ridiculous. ERIC: Yeah. I’m ok. I’ll send over my master services agreement if they want an NDA, because it has an NDA in there, and the master services doesn’t really bind anyone to doing anything yet, it’s just like, ‘here’s the terms’, but it’s also a 10-page of legal documents, so if they are not serious, they won’t even read it and will back off. If they are serious, then ‘yeah, that’s great’ and that’s like one step closer for them to be an actual client. But I actually don’t get on the phone with anyone unless they have gone through my qualifying process, and make sure they have budget, make sure they have timeline, make sure their requirements can actually – I can fulfill and do all that stuff. I actually push back really hard on just doing a phone call right away. JONATHAN: That’s an interesting corollary to a red flag. How do you set up a process to vet people? It’s like the reverse of the red flag. What gates do they have to get through for you to think, ‘Ok, no serious red flags’? ERIC: It really, at first part, depends on how they came to me. Did they come through your website? Did they come through open source work I’ve done? Is it a referral? So that sets them up maybe farther along the path. But early on, I try to send them a list of questions, and unlike yours, they're pretty hard; they're like, ‘What’s your budget? And if you don’t want to tell me the exact number, give me a range. Is it 5,000 high or is it 5,000 low? It’s 10,000 – I want to make sure we’re playing in the same game here. Who are the owners? Are you one of the person who makes these decisions on it, or is there someone else or other people we need to bring in the conversation? What are you trying to do? What is your business trying to do?’ Really, details, stuff like that. I’ve actually had an attorney basically back out of the process because their questions were overwhelming him and he’s an attorney. [Chuckles] The idea is once I go through that, they're serious, they’ve given me really good background information, and at that point, I’m like, ‘Ok great, let’s schedule a call’. So it’s really like getting people to answer the questions, schedule a call. And I might tweak it a little bit because I can actually back off a bit and make my response rate scale a little bit higher, but this way, basically, if I get on a call with someone, there’s – I don’t know the exact numbers – but there's probably a 50% a greater chance that they’ll end up a paying client just because I vetted them so early on. JONATHAN: That's a good point. You're making me reconsider my questions. Some of the ones you mentioned in there, but I don’t get into the budget there, and I don’t get into the owner there – those are two things that would be good to add because you're right, if you don’t have that person right away and they're not on the phone call, it’s a bit of a waste of time or is often a waste of time. ERIC: Yeah, and I’m trying to think there's two cases I know where those – where I fell back on those – they had half-answered around it, but didn’t actually gave me something straight, and I’m like, ‘Oh whatever, I’ll get on the call with them’, and found out one time, they didn’t have the budget, and then on another time, the set of person – they weren’t the owner; they were having a person two levels below the owner actually on the call doing a demo and talking with me, basically wasting my time. And then when I went talk to the owner, they're like, ‘Yeah, we don’t really need to work with you’. So those two, specifically, I pushed really hard on to make sure about that. In one recent project, finding out the actual owner has actually been helpful because I actually jump through a couple of hoops of people to get to where I need to be for it. REUVEN: Right. I, at this point, don’t have any sort of vetting process. I figure people will call me; we talk through the phone a bit. Now I’m moving much, much more toward training, I think, also, it’s becoming just more of a prioritized consulting thing where once I finish changing my website, it will be much more obvious what people are interested in, and then they can say, ‘I’m interested in x or y or z, or x with some changes’, and then we can start talking about things. But probably, mentioning budget or having them as part of an initial query email, even if the form is generated partly by my website, it’s probably not a bad way to go. ERIC: I'm doing those – I'm trying to start up a prioritized consulting service, and the idea for that is they’ll come in, check the box, agree to terms and conditions, which is basically my contract and all that stuff, but webified with a little click or dialogue, and then they’ll start working with me. And I might even feel, for the higher levels, actually say like, ‘ok, so you agreed to all this’, but instead of ‘putting your credit card and pay’, it’ll be ‘fill out this application’, and there we’ll have some of these questions and I’ll do qualifying through that. So if someone fills that out, but I look at it and like, ‘They don’t seem like a good fit’, like it’s going to hard for them to give them value, I actually wouldn’t let them to even the product area where it’s more automated just as a way to qualifying – keep people that I know, not necessarily with problem clients, but they're not a good fit for me out of my business, out of my sales process. JONATHAN: Yeah, that's a good point. I didn’t even think of this, but I just set up an application process for my new productized thing, so my coaching thing is productized 4 levels, and it’s so personal – the interactions – that there's no way I can just take everybody who applied. It really needs to be someone that is open to changing their business and has a risk profile that is going to allow them to weather the changes. I ask about 25 questions, and some of them are really personal, like ‘Do you own your own house? Are you married? Do you have kids and pets?’ and I explained to them that the reason I’m asking is because depending on some of these answers, they could be in a position where they just can’t take a lot of risks, or they're going to be very [inaudible]; but there’s other stuff in there, too, like ‘What time zone are you in? Have you ever been in a coaching arrangement before? What books have you read on this subject?’ It’s a little bit more of a high bar – still not super high, but at least it does weed out people that would just ask for their money back, basically. REUVEN: I think both of you – you guys get prepaid for your work, right? So lack of payment or delayed payment is not a red flag for you guys. JONATHAN: I start off asking for a 100%up for consulting arrangements, for speaking gigs, and stuff like that. And if people bulk, then I'm prepared to negotiate, like I said before, half up front and half in x number of days regardless of project status. If it’s a speaking gig, I usually pretty much of a stickler bug getting the second payment before the gig or at the gig unless I've worked with them before and I’m friends with them or whatever; there’s some extra trust level thing, but it can go 6 months after a speaking gig. If you haven’t gotten paid before, then the urgency is just gone. They're on to the next event and they just don’t care. But in general, I get paid up front, probably about 75% of the time, so invoicing and finding about that stuff and chasing people for money is really not something I – I usually do that stuff all the time, but I'm set up to avoid that now. ERIC: It’s the same thing for me. [Inaudible] everything up front or I think it’s 50% deposit sometimes if there's not a lot of trust there yet, but that is completely driven by I got tired of having to chase people for payments, or not knowing when a payment’s coming in, or this client pays late every time and all the red flags in that. They were red flags about payment and I've changed the way my business, I changed my process, and basically, I’m not allowing the red flag to even show up anymore. And [inaudible] qualify a lot of clients just because they have a lot of work up front, and I’m like, ‘sorry, it doesn’t work like that’. JONATHAN: Hmm. I have some colleagues who insist on doing development by the hour, but they will sell blocks of hours that must be paid in advance instead of in arrears, which is an interesting angle on it because generally when people bill by the hour, it implies billing in arrears and I don’t like either of those things for different reasons. So if you can, at least, get rid of one – if you still want to bill by the hour, but you sell a block in advance, then it would take away some of that uncertainty. ERIC: Yeah, I actually thought of that idea of when I was hourly, I was thinking, ‘oh, I could sell blocks’, but then, ‘oh, why don’t I just jump to weekly? Did the jump and had to do a little bit of a stress, a little bit of changes, but in the end, it was only about a month or two of transition and now I’m completely happy I didn’t do that – the block of time – because like you said, you still have that – the hourly – the nitpicking of ‘is this worth an hour of my time or not’ versus ‘is this something we need to do? Is it viable to the business?’ REUVEN: Right. And I’ve gotten my first client, I think ever, who’s paying me in advance. With rare exception to the company where I’m going to be doing training in another month, and they basically ask if they can pay me two months early because they were just quarterly budgeting. I can’t believe they actually asked me, but I was like, ‘yes, yes, I think that would be fine’. But as a [crosstalk] JONATHAN: Yeah, go ahead. I was going to say you get paid for training? You don’t get paid in advance for training? REUVEN: No. No, no, no. I checked with a few people, and the standard in the training world is net plus 30, or net plus 60. JONATHAN: That’s not my experience. ERIC: It doesn’t mean you have to be the standard. You can make yourself different. REUVEN: Yeah. JONATHAN: You pay for classes in advance. REUVEN: Here’s the thing. If I were doing open enrollment, if it were – I've got a room and I want to fill the room, then it’s totally payment in advance. That is a hundred percent true. But if it’s me going to a company and me doing training on site there, my experience has been it’s all – typically, it’s net plus 30,a although there are many big companies that try to get away with net plus 60. JONATHAN: Yeah, I know that companies will tend to – for development work, there's like – this gets into a different topic, kind of, but I would push to get away from that, if you could. I realize you're working with huge multinational companies for training, but – and maybe you don’t care – but if you are consistently chasing people for money, then there's something you can do about that. The example I give when I get pushed back from people – I got a speaking gig coming up and it’s basically a morning; it’s not even – it’s about a half-day, let’s say. And I insisted that they pay me in advance, and they were like, ‘whoa, we were thinking we’d pay you half when you delivered’, and I was like, ‘well, you’d be surprised how many times people cancelled the engagement and there's a bunch of stuff I have to do and we have to do together leading up to it, so if you want to get in my calendar and you want to schedule all those meetings, and you cancel the thing at the last minute, I’m not dealing with that. So let’s just get the money thing out of the way and go from there’. And maybe they don’t trust me and they're not going to do that, and then went on to the thing. Or maybe I agree to 50% up front, 50% pay off. Or if I really need the money, I’ll say, ‘ok, you can pay the second half 60 – 30 or 60 days after’, but I haven’t done that in a long time. REUVEN: Yeah, I think my experience has just been that actually chasing them big companies for money is usually not a problem. I've had some issues, but for the most part, my experience is that their billing department is fairly standardized, and they're so used to just paying out on a regular basis that it sometimes takes a month or two for them to get how it’s going to work and for all of us to synchronize. Now I know how [inaudible], I know how [inaudible] their things. So it’s not as good as getting the money in advance, but it’s not too bad. It’s not too different from just taking the hour, 2 hours each month; they're going to the invoices and maybe even less than that – probably less than that. But with smaller clients, I definitely like the idea of getting paid in advance because there, it’s small, they're going to forget, I’m going to have to chase them down, and that is really annoying. So it’s really, really pleased when I got this client – this new client – about a month or so ago, and I said, ‘well, and this is part of the deal also’. I said, ‘I’m willing to discount the rate a bit, but you got to pay it a 100% in advance’, and they said, ‘ok’, and I nearly fell over my chair, but [chuckles] I wasn’t going to complain. ERIC: Yeah. What I like to do is I’ll tell my clients – because this is the truth, this is all my clients pay weekly. They all pay in advance either a portion or the full thing. And so if one client bulk and wants to pay net 30 – whatever – I’ll be like, ‘Look, we can set the contract up to do that, but I’m not walking in your time in the schedule until I get some payment. So if you have your hearts set on starting the first of March, then I have another client that actually pays me in advance and they want the first of March, they get the time you get bumped’. The way I communicated it to them is so that they understand that until they pay me, they're probably going to get bumped and their project is just a filler project at that point because they are this oddball. And I think two people – two groups I've talked to about that – they decided, ‘yeah, let’s do at least half up front just so we can get it locked in Eric’s schedule so we can work with him’. JONATHAN: Yeah. I’ve had a good reaction when I say the ‘locked in’, like ‘locked in to the calendar’, ‘locked in to the schedule thing’ because then they're like, ‘oh, he’s got to block out time. He’s got other things going on’, and that usually – I guess what I’m trying to say is that occasionally when you do get pushed back; it’s not strong push back. The hardest one I ever had was from a government organization that was like ‘no effing way that we’re paying you in advance’. [Chuckles] I was like, ‘Alright, you can pay me’ – this is one exception I made, I knew these guys were going to play real hardball – and I said, ‘ok, well, that means I’m taking on a lot of risks. You guys could cancel or change it the last minute, and I’m doing a lot of preparations for this, but I’ll take on that risk if you're willing to pay it premium’, and they said ok. So I quoted double the rate that they were going to pay me in advance, and it was still – we had previously agreed that there was still 50% up front, which was the joke, because I was like, ‘ok, you can pay me 50% up front and 50% after the [inaudible], but I’m going to double the rate’. REUVEN: And they were ok with that? JONATHAN: No, they paid me the lower amount. [Crosstalk] REUVEN: Oh, that’s a shame. JONATHAN: But I was like, ‘ok’. They said, ‘we only paid 50% in advance’, so I was like, ‘alright, then I’ll just double my fee’. [Chuckles] ERIC: Yeah. Make the math work for you. REUVEN: Reasonably, in terms of similar red flags, I think one of you guys mentioned companies being cheap earlier saying, ‘well, we don’t have the budget’. I recently spoke to a company – and I’ve done a few hours of work for them – and I met with them, and they're on the top floor of a skyscraper in [inaudible], they are selling systems to Wall Street traders, they're showing off their fancy, fancy, fanciest special machine, I asked them how important is this project they want me to help them with, they said, ‘oh my god, our clients need it yesterday’, and I’m thinking to myself, ‘Kaching! These guys are totally in the right place for that’. So we had a fantastic meeting, I helped them out with their daily basis; they called me to say, ‘wow, you really made them run so much faster. This is fantastic. So what is your rate?’ And I quote them my rate, and they were like, ‘oh, wow. We weren’t expecting that. Wow. How much of a discount would you give us if we hire you every month for a day?’ I said, ‘nothing’. [Chuckle] ‘Let’s go for 3 days, 4 days’, and so they said, ‘well, no, no, not like that. We don’t really have the budget for that’. I’m thinking, ‘you have the budget for – I don’t know, maybe 10% of your rent per month’. Basically the next day, I get an email from a friend of mine saying, ‘so there's this place in Tel Aviv that’s looking for someone who does PostgreSQL in Python. What’s your rate for that?’ Anyway, long story short, they called me last week and said, ‘so, can you come in?’ and fortunately, as one of you mentioned, having a calendar also helps. I said, ‘well, go to my calendar and find some free time because I don’t have a lot of it’, and it was the whole scarcity thing working in my favor, as well. It’s still not going to be a lot of time. I was there for 5 hours total – two and a half the first time, two and a half the second. I don’t think it will turn into a long-term gig. But even the companies that are cheap, at the end of the day, they do need to get business done. And if you just roll over and do whatever they want, that won’t necessarily work to your advantage, and there are places that will come back to you because they realize that they need help. JONATHAN: On this topic [inaudible] would say that money is not a resource, it’s a priority. There's money, you just need to have it prioritized to you. They probably spend more on coffee machines than they spend on you. ERIC: Yeah, there’s a story of any large company; how much do they spend on toilet paper for a day, and what do you do with toilet paper? [Laughter] JONATHAN: There’s a joke in there somewhere, but I’m not going to say it. REUVEN: The joke is [crosstalk] exercise to the listener. ERIC: Yeah, that's the thing. And the same thing goes for time. If you complain about ‘I don’t have time to do x, y, or z’, it’s not really time, or it’s not really money, it’s a priority. Doing something or getting this new project started was a priority for your business, you would find the time, you would find the money, or you would find some way to make it work. Maybe you would do some bartering thing, but if they came down to that, most people, when they know they actually can’t get access to it, they're a lot more open and they're a lot more willing to compromise, and so you might get concessions on other parts of the contract or other parts of – maybe we’ll pay you every month for 6 months until we built up enough of a pre-payment that we can get started on the seventh month or some oddball thing, but yeah, I think a lot of companies just like to push back to see what they are able to get, and that’s just standard negotiation. REUVEN: We should probably wrap up soon, so you guys have any more advice, stories, major red flags people should watch out for? JONATHAN: I think we’ve covered all the big ones. ERIC: Yeah, I think one thing I – because I have some [inaudible] I talk about when you're doing your ideal client profile, one thing is watch for things in a project that piss you off or cause any kind of strong emotional response, one way or the other, because that is a good red flag or that's a good opposite of a red flag. If there's a client that delights you, why are they delighting you? Flip that around to the opposite and that's probably a red flag to watch for. Have a list or some kind of document to keep in mind of ‘here’s all the red flags I have. Here’s why I don’t like it, and here’s why I get in trouble with it’, and regularly update and curate that list just because you're going to change the types of clients you work with, it’s going to change the projects, you're going to change – I think that kind of process is more important than having, ‘here’s the top 10 red flags to watch out for’. REUVEN: That makes a lot of sense. Should we do picks guys? JONATHAN: Sure. REUVEN: Jonathan, go for it. What are your picks for this week? JONATHAN: I am reading an excellent book on pricing right now called Pricing with Confidence by Reed Holden. I would be actually shocked if it hadn’t been a pick previously on the show, but it’s a great book that synthesizes a bunch of really theoretical techniques from another book called Strategy and Tactics of Pricing, which is really dense and hard to – I feel like it’s kind of hard to apply, but this Pricing with Confidence book synthesizes all of that into examples and things you can actually do that apply the principles; and it’s just chockfull of great ideas. It’s definitely primarily geared toward [inaudible] global multinational companies that sell stuff like filaments, like GE selling – I don’t know – core headlights to Ford – it’s for a big, huge company pricing, but there are a bunch of examples there that relate to software. Even though they're at the SAP and Oracle level, they're still really, really applicable to – even if you're running a SaaS, or if you're even just dealing with different kinds of buyers and how to deal with buyers in the service business. It’s amazingly good. It’s long and there's some stuff that doesn’t necessarily apply, but I would definitely put it on my must-read list if you're thinking about different ways to price your services or how to deal with different kinds of buyers like what we were just talking about – there's price-buyers, there’s value-buyers, and there's this poker player type buyer who’s actually a value-buyer, but isn't afraid to try and negotiate because that’s just their personality. And those are the ones that generally – those are usually the ones that you can get to – you can push through to push back. So that's my pick. REUVEN: Excellent. Eric, any picks for this week? ERIC: Yeah. Last week, I was at MicroConf and Kai Davis has put together this – I have been [inaudible] from the site with some book of list from all the talks, you can go to microconfrecap.com and it will actually redirect you to the page. He has notes on every talk – all the attendee talks, all that stuff. Even if you didn’t go to go to MicroConf, it’s probably a good idea to scan through this, get some stuff out of it. There was two sessions that basically all the information you can apply to a consulting business, but there's a lot of the other ones that were product-y in a way, but they're actually would also be – they would also work for consulting stuff. So I recommend going through – there's a lot of stuff in there. My note, I think I went through and I had about 47 to-do items just from the two days at the conference, and then going through Kai’s notes, I found another 5 or 10 that I missed, so I highly recommend that. If you can, I would recommend going to next year. It’s probably going to be in Vegas again around March or April. REUVEN: Doesn’t MicroConf sell out with two hours of [inaudible] or something? ERIC: Yeah, but they haven’t really launched, so if you are in the MicroConf Academy, or you went to a previous one, or you’re on the early bird list, you can get access before the general public. I don’t know if it’s sold out for an hour or minutes. I think there's 220 people at this conference, so it’s a very small conference and very high demand. So if you're interested at the very least, go on that waiting list. I think it’s on microconf.com – the signup link for it. REUVEN: Right. I’m thinking one of these days, I’d love to go to it, but it might be easier and certainly closer for me to go to one in Europe. ERIC: Yeah, the Europe one, from what I hear, is just as good. I guess the different – a little bit different speakers, but it’s still really high quality. You're still going to get a lot of the good networking stuff, and so if you're doing business in Europe, it’s actually a good idea to go to that one because it might be a bit more relevant than a US-centered one. REUVEN: Great. I’ve got one pick for this week, as well. I've been using CleanMyMac for a few years now to keep track of and removals – it’s a junk for my disk – and they just upgraded this week to CleanMyMac 3, and I must say, overall, it’s very nice upgrade, certainly good UI. They’ve added also [inaudible] but they give you nice stats of your memory and battery, and that sort of stuff. I’m not overwhelmingly excited, I think, but certainly one that helps me in my daily life and make sure that my disk’s – one of the nice things is they tell you how much space you have free to overtime. And I think overtime, I’d like save 3 times my actual disk size, which makes sense given how much I download and upload and create and so forth. Anyway, that’s my pick for this week. So thanks everyone for listening, and we will see you next week.[This episode is sponsored by MadGlory. You've been building software for a long time and sometimes it gets a little overwhelming. Work piles up, hiring sucks and it's hard to get projects out the door. Check out MadGlory. They're a small shop with experience shipping big products. They're smart, dedicated, will augment your team and work as hard as you do. Find them online at MadGlory.com or on Twitter @MadGlory.]**[Hosting and bandwidth provided by the Blue Box Group. Check them out at BlueBox.net]**[Bandwidth for this segment is provided by CacheFly, the world’s fastest CDN.  Deliver your content fast with CacheFly. Visit cachefly.com to learn more]**[Would you like to join a conversation with the Freelancers’ Show panelists and their guests? Wanna support the show? We have a forum that allows you to join the conversation and support the show at the same time. Sign up at freelancersshow.com/forum]**

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