The Freelancers' Show: LIVE Q&A #6 - March 24, 2015

Download MP3

04:07 - At what point does it make sense to register as a corporation? Apart from liability, I assume. If you have profits to reinvest in the business?

13:25 - Do you umbrella all your products, brands, DBAs, etc. under a main corp?

18:32 - What was the comical, but legit contract you mentioned on a show recently? (Contracts)

21:35 - Expensing Home Office for Tax Purposes

  • Tax Deductions
  • Tax Credits

31:12 - Errors and Omissions Insurance (Cont’d)

34:38 - Marketing to Launch

41:26 - Contract Resolution

43:29 - If expensing a home office, do you pay for bills, utilities, etc. out of a personal or business account?

45:44 - Prototyping Tools

50:20 - Partnerships and Investments: “My friend has an idea!! ... I actually like this one!!”

  • Even small-scale apps or services? Picks

Just Fucking Ship by Amy Hoy (Eric)The Brain Audit: Why Customers Buy (and Why They Don't) by Sean D'Souza (Jonathan)The Silkworm (A Cormoran Strike Novel) by Robert Galbraith (Jonathan)The Positioning Manual for Technical Firms by Philip Morgan (Reuven)WASD CODE 87-Key Illuminated Mechanical Keyboard with White LED Backlighting - Cherry MX Clear (Chuck)GrifitiFat Wrist Pad (Chuck)Ready Player One by Ernest Cline (Chuck)Mastery by Robert Greene (Chuck)

Join us for our next Live Q&A on Tuesday, May 26th 2015! Sign up and get The Ultimate Guide of Marketing Tools for Freelancers here


[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] **[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 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] **CHUCK: Alright. Welcome to the Freelancer’s Show Q&A. Looks like we have a few people in the chatroom, and we have Eric and Jonathan here. So you guys want to say hello real quick and maybe talk about what got going on and then we’ll start answering questions? CHUCK: Hello, real quick. JONATHAN: Hey, how’s it going? I just got back from Vegas, so I’m a little dazed and confused. CHUCK: What were you doing in Vegas? JONATHAN: I was speaking at a conference called Murtec, which stands for Multi-unit Restaurant Technology. I was speaking to people like Taco Bell and [inaudible] and McDonalds about how to do their mobile strategy. ERIC: Ahh, gotcha. CHUCK: Sounds like fun. JONATHAN: It was fun, actually. I haven’t been to Vegas in about 20 years. CHUCK: It’s just a few hours from here. JONATHAN: It’s the same way I left it. CHUCK: [Laughter] Nice. JONATHAN: Very smoky. Very smoky town. CHUCK: Yeah. I’m going to be down there in a couple of weeks. I think you're going to be there, too, aren’t you, Eric? For MicroConf? ERIC: Yeah, for MicroConf. I’m trying to – I don’t know my dates. I have travel to see family, have come back at home for two days, and then I fly back out. So I’m so lost with what today is and what’s going on. CHUCK: Gotcha. Yeah, [inaudible] the ticket, so I’m going to be there, too. So it should be good. ERIC: So I’ll disappoint you then. [Chuckle] CHUCK: Yeah, I smell like Utah, so you can find me a mile away. Anyway –. ERIC: What’s Utah smell like? CHUCK: Well, my neighborhood, there’s a mink farm up the road and you can smell it outside so that’s always pleasant. JONATHAN: Wow. CHUCK: So, should we start answering questions? Oh, we have Reuven here. RUEVEN: Yeah, yeah. Can you guys hear me? CHUCK: Yup. RUEVEN: Yey! Yeyeyey okay! CHUCK: You sound official. RUEVEN: Oh my god. Yeah, officially frustrated with our internet connection. CHUCK: Yeah, in Ruby Rogues, we talked to somebody from Ireland and their connection was bad too, so maybe it’s a whole trans-atlantic thing. RUEVEN: No, no, no. It’s just my house. CHUCK: Oh, okay. RUEVEN: [Inaudible] my wife and I were watching a movie on – we’re watching The Good Wife on Amazon streaming over the last few days. And each day, it became progressively worse. So this, of course, led us to take drastic measures, which is while I was out at a client’s office calling an electrician and randomly do things to the internet connection [laughter]. Needless to say, I return home and now things are [inaudible] and I’ve no idea what’s going on now. But fortunately, I have a neighbor with an unsecured network. Yey neighbor! [Laughter] So, I won. JONATHAN: Oh, there’s that. CHUCK: I can just see the neighbor –. RUEVEN: This episode of the Freelancers’ Show was brought to you by the [inaudible] family. [Laughter] CHUCK: Yeah, and the neighbors are like, ‘Honey, we’re trying to watch The Good Wife and it’s running slow’. JONATHAN: Get the electrician over here. RUEVEN: That's exactly – [crosstalk] CHUCK: There you go. Alright, let’s go ahead and answer some questions. So we got some questions beforehand. The first one is: At what point does it make sense to register a corporation? Apart from liability, I assume. If you have profits to reinvest in the business? RUEVEN: Well, do you guys have corporations? CHUCK: I have an LLC. JONATHAN: Yeah, I have an S-Corp. RUEVEN: I like the Equivalent – the equivalent of an S-Corp. It’s obviously very different in different countries, but that was mostly for tax reasons. Basically because if I were self-employed, registered self-employed with the government, then I have to pay American Social Security on top of what I pay in Israel, because there's no tax treaty for that. But I’m used to now on the idea of having separate business entity, and I like that separation. And I separate bank accounts, in separate banks, and I find it’s very convenient and useful, but it’s way more expensive; there’s no doubt about it. ERIC: We used to do that even if you don’t have a corporation or fearless sole proprietorship or anything else. You should have separate bank accounts and all that just because that’s oil and water – you shouldn’t mix it. IRS or taxing authority will get mad at that no matter how it’s classified. CHUCK: Yeah, my dad actually – [crosstalk] so he just keeps the two accounts separate. RUEVEN: I [inaudible] years ago where I had two separate accounts even for my business – a fully-incorporated business and me – personally – in the same bank branch, but there were two separate accounts. But if want to loan, they’d be like, ‘Well, we see your corporation is having some problems now’, or they basically – they saw it as the same, which is a hundred percent illegal, but they did it anyway. And so, I got advice saying ‘you must put your accounts in two separate banks, so they can’t see; they can’t know’. And I strongly advice that, as well, to everyone I know. JONATHAN: That’s interesting. CHUCK: Yeah. I’m going to assume that the person who is asking the question is in the United States. So, for me, I’ve had a corporation pretty much since I went freelance. I think I filed the paperwork and then my accountant and attorney figured it out so that it was somehow like retroactive for the two months that I was filling out the paperwork. And I know it varies from state to state, as well, but yeah, there are a few benefits that I’ve seen, and the main one is the liability question. Just make sure that you're careful so you don’t pierce the corporate veil. I knew once talked to an attorney to understand exactly the ways you can do that. ERIC: Just so people know, piercing the corporate veil means you do something in your business, in the name of your business, but you do it in such a way where instead of your business getting sued, you’re sued also. CHUCK: Right. ERIC: And we can get at that in a minute because that’s a sketchy thing for professional services. CHUCK: Yeah, right [chuckles]. But anyway, it made it possible for me to get a bank account of my business’ name and all of that stuff, but you can get a DBA or just open another account in your name. But anyway, it makes it a whole lot easier and a lot of ways for me to just keep track of things and understand this is the business’ and this is my personal stuff. But the other thing is it varies from state to state and country to country, so you probably want to talk to an accountant or attorney just to make sure that you understand how that works. One other benefit I get though is the tax benefit, and that is that because my wife owns 90% of the business, I only have to pay 10% of the self-employment tax, and there are some ways that I worked that out with my accountant, and he’s had the way that we managed things stand up to an audit. So just to put that out there, you can talk to your attorney or accountant and find ways of avoiding the tax penalty for being self-employed. JONATHAN: Bottom line is you have to talk to a lawyer. None of us can really give you advice. You have to figure out what your risk profile is and how much it makes sense to pay for – it can be expensive. It’s an expense that you could skip, but then you have increased risk. So when I first started, the first two things I did when I went solo was to find a lawyer that friends recommended and find a financial planner and I had them hash it out and just told me, basically, what are my options and I picked one. CHUCK: Yup. JONATHAN: If you have to pay him a couple of hundred bucks for an hour of time, it’s completely worth it. CHUCK: Yeah, that’s what I did, and it cost me a few hundred dollars. ERIC: Everything set up. CHUCK: You have to understand how it works and what you can and can’t do with it, but yeah, they should be able to explain it to you. RUEVEN: Right. I just want to say that in terms of piercing the corporate veil, one of my fun stories from when I set up my bank account for my company here in Israel was they give you, of course, a whole bunch of forms to sign. And one of them was that if the bank ever wants to get money from the company, and the company doesn’t have – can’t pay up, they can come get it from me personally. And I was like, ‘Wait a second [chuckles]. The whole point of a company is that doesn’t happen’. [Crosstalk] ERIC: You’re the co-signing the loan, or you're personally guaranteeing the loan. Piercing the corporate veil is liability-wise, like could you be sued? Because the whole point of a corporation is you people can put in money, but put in assets into a group, and then you can go and do things that are supposed to be higher risk than what you would do normally as a person and the idea is that the only finances and assets that you have at risk are what you put in. Say you put in a million dollars in this corporation, it does stuff. If the corporation tanks, you dissolve the corporation and you're only at risk for a million dollars; that’s your liability. The problem is if you also work in the corporation, then you, as a professional or as a person, can also be sued or be held liable. If you're a solo freelancer or something like that, it gets really, really sketchy. You might have a corporation, but if you did the work, they might sue your corporation and you, and basically, pierce the corporate veil that way. So that’s where – what’s it called, the insurance – errors and omissions and all that stuff comes in and that’s where your personal risk profile comes in. If you’re single, you're renting, you don’t have any assets other than your business and the cash in your business, it’s not as big of a deal if you're on your – compared to you own your own house. You have a second business; maybe have some rental property, that’s everything. And that’s why talking to a financial planner and a tax attorney, and an attorney and – sorry, tax accountant and a normal accountant, and maybe your bookkeeper; having a cult-like mastermind group is probably a good thing to do. CHUCK: Alright. Anything else on that one before we go to the next question? ERIC: I think I mentioned in the past; you have to do a lot of paperwork like annual minutes or organizational meetings and all that stuff. I bought a – trying to look for it – but I bought a kit that has all that. It comes with the stock certificate, a little official [chuckle] seal for the company; you can get all that stuff pretty cheap online. It takes a bit of work to go through and do it all, but that makes it more legit and helps prevent companies from piercing the corporate veil. If you're doing – you all have all your [inaudible], you have all your paperwork right, then you are a corporation; you're acting as a corporation. I think I paid maybe a hundred – maybe 200 bucks for all that ship, so it’s really not that expensive. JONATHAN: My lawyer does that for – it takes him about half an hour a year, which amounts to about a hundred bucks. He just sends me the stuff, and I sign it, and that’s it. ERIC: Yeah, but this comes with a cool little seal that you can punch things randomly. [Laughter][crosstalk] RUEVEN: Actually, in what I think must be a throwback to the British mandate, Israeli companies need to have the stamp and you need to actually ‘this is where a signature’s not enough, you have to stamp things’. And technically, you have to put a stamp on every check or [inaudible], but my bank has been pleasantly ignoring that for a few years now already. But in terms of minutes, in terms of company minutes, the only times that I actually need to do minutes are basically when my accountant tells me to, and he says, ‘you need to have a company meeting that says x’. I’ll have my secretary type it up and then I’ll just sign it, and I say, ‘ok, sounds great’. [Crosstalk] JONATHAN: I feel like we’re making it sound harder than it really is. You just write a couple checks and get some professionals to advise you. Maybe a year I spend 750 dollars or maybe a thousand bucks to keep all my docs in a row, but I don’t – it doesn’t take me 15 minutes. ERIC: For me, I have an LLC; I think it’s a hundred bucks, but a lot of that is because I have a LLC, I also have a DBA for the LLC, which is just stupid – whatever. And I think it might take me half an hour – maybe half an hour to an hour a year because Oregon has all the electronic filing to do – have a meeting with myself just to write down what happened last year, print it out, sign it to Oregon ‘yes I did this’, and move on. It’s just [inaudible] in my calendar. It’s pretty easy to do especially you’re keeping a schedule around on tax time and just know it as a habit,  around tax time, you have to do this meeting or file stuff, and it’s pretty easy; pretty straightforward now. JONATHAN: Yeah. Of course, we have a house and kids and stuff, so it’s worth it to me to have that sort of barrier between basically, the liability courage, and I also have errors and omissions insurance because a lot of big companies just insist that you have it and they won’t even consider hiring you. CHUCK: Yup. JONATHAN: And again, that’s easy. You can just apply for it online. I think I paid – I don’t even know how much I paid; it’s like 50 bucks a month or something for a million or 2 million dollars in coverage. CHUCK: Yup. ERIC: Wow. CHUCK: Yeah. It was something like that when I was looking at it but I never got it because it’s not been an issue, of course. I won’t know that it wasn’t an issue until it’s an issue. [Chuckles] Alright, next question: Do you umbrella all your products, brands, product brands, DBAs under the main corp? I don’t. My corporation just owns all of it and all tiny [inaudible] goes the same place. My bookkeeper keeps it all straight. JONATHAN: That’s a good question. I’m about – [crosstalk] and I’m not sure which I want to do. RUEVEN: I don’t understand what the difference is. Are you talking about having different corporations versus different public faces to the same corporation? CHUCK: A DBA is ‘Doing Business As’, so it’s essentially just another name on the same corporation, but what it allows you to do is open a bank account under that name and stuff like that. So for example, my dad has a DBA for his business, and it’s Dr. Max S. Wood, DDS, but he is a person. All of his personal stuff it’s just Max Wood, so he can then open a bank account under his business name and act as that entity or as himself, but all of the liability, profits, et cetera are all counted under the main corporation. RUEVEN: I can understand doing that for yourself, but why would you if you have corporation then use the DBA, in addition to that? Or did I misunderstand the question? JONATHAN: It’s like a marketing thing, isn't it? CHUCK: Yeah. JONATHAN: So, it’s a question of how you want to split up the marketing; how you want to split up the liability. I’m starting a straight-up coaching thing for dev shops, which is very different than my core business which is mobile strategy for consumer brands. It’s a completely different thing, so the question right now is I’m definitely going to have – I’m definitely splitting it off my main website so there's going to be a clear marketing differentiation. The question is, ‘do I also go and make a separate corporation and’ – I guess the determining factor is if one of them got sued into oblivion, I wouldn’t want it to affect the other one. CHUCK: Yeah, but I don’t think the DBA shields you from that. JONATHAN: No, a DBA sure won’t. I would have to – [crosstalk] – separate corps. ERIC: The way I see it is you got– I’m trying to make sure I have my hands in it – you got liability on one side, and the other side you have like ‘I just own stuff’. Most people own 20 different websites, and the websites have different names; it might be marketed differently, but they are all owned by one thing. And the other side is liability like six corporations; maybe you have a corporation per website, and then in the middle, it’s the DBA. The DBA would let you talk about yourself as whatever the DBA is like –whatever, just small marketing. The difference is with the DBA, you can then go and open a bank account for that branch of your business, that department or division –whatever –but as far as liability is concerned, it’s still just targets your corporation or whatever you have. I’ve seen or I’ve heard people doing multiple corporations when they're doing really funky asset stuff. In real estate, it happens a lot: someone might own the building and have the mortgage on the building; the person has a second corporation. That second corporation does maintenance for the building that the first corporation pays in there. So it’s this weird way the assets [inaudible] comes allocated, and most of that is just to get into lower tax rates or have expenses categorized differently and also to isolate liability like. If you have workers in the maintenance side, but you don’t want them to get hurt and actually be able to sue your building, you have it split up. [Crosstalk] ERIC: Yeah, I think for most people and people who are listening, that’s overkill [chuckles]. You need zero to one corporations for most things unless you're doing something high-risk. CHUCK: Yeah. So the DBA is mostly just an accounting tool. It’s just, ‘ok, which bucket do I want to put this stuff in’ and – at least the way I see it. And so, unless I have a large number of expenses and income transactions coming in from multiple streams and it was impossible to untangle on my single bank account, then that’s where I’d be looking. But even then, you can open multiple accounts under the same corp. ERIC: Yeah. One guy I know – he has – I think their corporations [inaudible] is a corporation for consulting and corporation for his product stuff he has – he had them separate, so if he’s doing on-site stuff for a company and loses their production database and his consulting stuff gets sued, it doesn’t destroy his product business. So he had that big isolation there. That, I think, the highest [inaudible] people would have for this if you're actually trying to transition or have multiple businesses that are separate. RUEVEN: I think, given my ineptitude at bookkeeping and everything already, and the number of times my calendar calls me every month saying, ‘you’re missing this paperwork and  that paperwork’, I think that if I were to have another corporation, [chuckles] they would come over here with pitchforks and torches. So I’m glad to know that you think most people need between zero and one. That's quite a relief. ERIC: Yeah. And this goes back to the advisors. Talk to your attorney and your tax advisors and all that. They’ll tell you, ‘yeah, you don’t need this’, or it might be like, ‘yeah, actually you're at such a level that you could save 40,000 dollars a year if you split this into two corporations’. And there's the benefit right there is you can actually say, ‘ok, well, I’ll deal with the extra paperwork for that extra income’. CHUCK: Hmm hmm. Yeah, but most of the time when you're saying in another corporation, what you're usually talking about is something more along the line of setting up another LLC or something that’s owned in part or whole by yourself or by your other corporation. Alright, next question. Does this ring a bell? What was the comical, but legit contract you mentioned on a show recently? Curtis mentioned it. I’m trying to find the contract killer. Here we go. I got a link. I’ll put it in the chat. But what it is it’s a simple readable contract that apparently holds up in court. Anyway, it’s not all legal [inaudible] blah blah blah blah. RUEVEN: I don’t remember much about the contract, and certainly, I think a funny contract would stand out. CHUCK: Yeah. I worked for a company that in their Terms of Service, they have all kinds of references like Saturday Night Live and stuff; those are pretty funny. [Chuckles] But as long as it covers all of the important stuff and the funny stuff doesn’t compromise that in any way, then yeah. JONATHAN: I never used what you’d consider a legal contract with any of my clients. I never have. ERIC: So you use an illegal contract? JONATHAN: That’s exactly right. CHUCK: [Chuckles] Well, we talked to you about the – [crosstalk 19:28]. JONATHAN: And I only take cash. CHUCK: Yeah, there you go. JONATHAN: I just give them their money back. Eric just said if you deleted some its production database, you’re going to get sued. And I’ve got insurance for that, but we just never sue someone. I know it makes no sense to me; I would just give them their money back. ERIC: The thing is I actually just had this conversation – actually, they brought in their legal department. A lot of – not a lot – some companies, just giving them their money back isn't enough. In this case, the person’s talking about if I – because I’m doing software development, so if I did something and it actually exposed them to liability and have them have lost the business, they would want to get their money back and sue me for damages; sue me for a bunch of stuff. I might –. JONATHAN: A contract’s not going to protect you, really. It’s going to put you out of business. The lawsuit will put you out of business. ERIC: Well, the thing is a contract would at least specify terms, so if it did go to court, it might be a bit different or they might not take it to court because it might be like, ‘oh, we got – there’s a strong contract preventing it’. But like you said, anyone can sue anyone for anything even if it’s wrong. You just drag, get out, and kill it that way, but – I don’t know – it’s scary as a software developer to think about having a very basic contract because of all the liability in the work I do. JONATHAN: Yeah. I've done it before, and I worked at a firm before that did get sued wrongly, and it put him out of business basically; and they were right; and they won. But still, it just basically destroyed the company. So if somebody sued me, I just fold. CHUCK: Yeah. JONATHAN: I wouldn’t even want the 3 years of worrying about it. I’ll just be like, ‘if you're really that unhappy, you can put me out of business if you want, but I don’t see how that gets anybody anything. Let’s work this out. Let me give you your money back, but I’m not going to court’. ERIC: That might actually be a good reason to have a corporation or something there to make sure it’s completely shielded and not – they can’t get through us. If they do, close out your – this corporation. You would just do another one. It’s a bit of work and you have to do it the right way but that gives you the throw away high-risk ability of it. JONATHAN: Yeah. That's exactly my thinking. CHUCK: Alright. We got us another text question here. We went into that with the liability in corporation stuff, but what are your thoughts on expensing home office for tax purposes? ‘I’ve been working in a coffee shop, and the tax documentation clearly states that you can only expense the percentage of time you use your home office for work. In my case, it’s only about 40% of the time.’ JONATHAN: I have a home office, as you can see behind me – I’m in the basement – and after talking to financial professionals, they were like, ‘you can expense that if you want, but’ – and this is just what they told me; I’m not saying this is going to be true for everyone, but they were like, ‘you can expense this if you want, but it’s a red flag to have a home office’, and that the IRS, in my case, would be much more interested in going over my stuff  of the fine tooth comb and when we looked at how much I would actually be saving, I don’t expense anything from my house. You got to look at the real dollars, I think, when you think about ‘is it really worth it to come’ – even just to complicate my taxes, is it worth – if it’s a hundred bucks a year I’m going to save to complicate my taxes, I’ll probably end up losing that just from paying my accountant to do the more complicated taxes. If it’s 10,000 dollars, ok maybe, but in my case – I don’t remember the number – but in my case, if I expense my home office as it was something like 25% of my house, then ok, it was some low amount of money – 500 bucks a year or something that I would potentially save – I don’t even want to deal with thinking about that. CHUCK: I didn’t even talked to them about the risk of getting audited because they started asking all the questions, and I was just like, ‘you know what, how much do you think this is going to get me in?’ and yeah, they gave me a figure pretty close to the 5 – 600 dollars, and I was like, ‘just don’t ring a bell’, because that has been sitting there for another hour. [Chuckles] I have to go back over my bills and – oh geez. JONATHAN: Now you're saving receipts and stuff like that and it’s just like, ‘oh man’. [Crosstalk] ERIC: We had talked to that with my accountant because we – I already had the business. We were renting at first, and then we bought a house, and just the size of my office and how much I’m in here and all that – it actually is a benefit to us, but it is like, ‘yeah, I’m taking on potential audit risk’, but I’m meticulous with all my receipts personal and business, so it’s not that much more effort for me. Actually, last week I compiled it all; put it all in there like how much internet did I use, power, all that stuff. And it does add up, but it is a risk. Is it worth having all that? I think once you have it established, once you [inaudible] IRS, ‘here’s how I’m deducting everything’, the next few years it gets easier and easier. Once it’s [inaudible], ‘hey it’s just someone who started up trying to get tax deduction, it’s not really a business, it’s more of a hobby’. RUEVEN: So we have – I have a home office and my wife also works from home. And so, for years now, I guess we moved into this house in ’99, and from that time we’ve been expensing about 25 – I guess 25% is what my accountant says we can use for the office, and saves actually a ton of money because it means 25% of electricity, gas, water – things that if we fix it in the house and it has to do with the business, then – one of the rooms that we use for the business, the newspaper that we get delivered – we actually can expense it in addition to real estate taxes. [Crosstalk] JONATHAN: But you're not saving the 25%. It’s 25% that you're not taxed on. RUEVEN: Fair enough. Fair enough. It’s coming out of the business as opposed to it’s coming up to me personally. Although it does become a business expense which reduces my taxes. So my impression is – maybe I’m just being foolish here, but my impression is we’re actually saving a fair amount of money by doing that. But again, it’s different countries working different ways, and I know that the IRS is also crazy red flags – not crazy if you're coming after me, not crazy – but in Israel, they have other red flags, and that’s definitely not one of them, as far as I know, as long as we’re reasonable about it. JONATHAN: For me, my personality type is just not – I just want to outsource all that stuff, and I just [chuckles] know of my personality type. I just won’t deal with that. I’m not meticulous like Eric. CHUCK: Last one. JONATHAN: Yeah. The other thing about that is that I’ve been thinking about getting an actual office, and if I had to go meet with my accountant and my lawyer to be like, ‘ok, now, for one quarter of the year I work from home, and three quarters of the year I work from an actual office. So how is that break down?’ I don’t know – it’s this cognitive load to it that is distasteful to me personally. So because it wasn’t like a massive amount of money for us, I was like, ‘I’d really rather just not have this on my mind’. CHUCK: On that same topic, [inaudible] says, on that topic, I know you're not tax people, but today one of my business mentors writes off a hundred percent of all of his vehicles, and [inaudible] because he says there were where he goes; he talks business, he also claims cable TV is research for commercials as market research, et cetera. Yeah. I'm not a tax professional, so I just don’t know, but if you can get away with it, I guess. JONATHAN: I’ve seen dudes pull receipts out of the garbage at the deli I go to because they're obviously – they're going to claim it as some business expense because they were having a business meeting. I’m just not that type of person personally. If you know you're that type of person, you're probably not asking this question, you know what I mean? You're not going to save a million dollars. It’s a percentage of a percentage that you actually save, so it’s [crosstalk] no money, but I’d rather see people put their energy into developing killer products, in increase of income, than worry about spending half of their time doing accounting and saving receipts and stuff like that. RUEVEN: Oh, that front fortunately, I do not – I spend no time [chuckles] doing accounting or planning, and any receipt that comes in just goes directly into the accountant or so. On that front, I’m doing ok. Whether I’m actually using my time wisely, that's I think [inaudible] question. CHUCK: Right. I think people get it in their head, though, that a tax deduction means ‘if I spend 5 dollars on the business, I don’t have to spend 5 dollars on taxes’; and that’s not the case. It’s ‘if I spend 5 dollars on the business, I don’t have to pay taxes on that 5 dollars’. So if your tax rate is 20%, then you're saving a dollar on that 5 dollars. JONATHAN: Yeah. And you hear people all the time say, ‘oh, but I can rate it up’ – people say it to me because I have a million phones – ‘oh yeah, but you can write it off’. I’m like, ‘I still have to pay for them’. CHUCK: Yeah. JONATHAN: They think it  means it’s free, but really, it’s just less money that I have to pay tax on, which is not insignificant but it’s also not significant. CHUCK: Right. ERIC: Some of the idea of income versus expenses – even if you do everything possible and invent new ways in accounting and all that, the lowest you can get your expenses is zero. If you do the same thing on your income side, the most your income will be is – who knows – whatever there is in the world right now plus another 20,000%. So it’s best to focus on income side if you can, but for me, my habit is I’m already taking care of – I’m already doing all the accounting from my bills, so it’s maybe two minutes of time to call it like that and give it to my accountant and get – whatever – 200 dollars back this next year. So, for me, the level of effort there is, ‘ok, that's worth it’. And also, it centers into ‘look at the big picture’. ‘My business actually use this much, so I should have an estimate if I want to buy an office. How does an actual standalone office compare to a home office financial-wise, and is that a good investment decision?’ So that's what I use finances for; it’s decisions too. Yeah, deductions are nice to have, but people put a lot of weight in them. Tax credits are good, but they’re not really good enough for many things anymore. CHUCK: Yeah, but again, go talk to you tax person. Make sure that he thinks that he can get it to stand up to an IRS audit, and understand the risk behind it because I have had other friends that they wind up going to business lunches 2 or 3 times a week, and so they got told, ‘look, you’ve got to document everything that you're doing at these lunches so that you don’t get flagged’. And so, even if it’s legitimate stuff, even if it’s not this borderline risky sounding thing, you still have to keep track of what it’s about. ERIC: Yeah, and even lunches – if it’s local lunches, I think you can claim 30-50%. So if you spend a hundred bucks at a lunch, even if you're courting a client, where it’s like, ‘yes, this is business’, you might only get 20 bucks of a deduction, and based on your tax rate, you might only save 4 dollars in the end. And so most of the time I was on travelling, I don’t count out meals. Meals are just too much of a hassle and IRS – they don’t red flag it, but they watch it a lot because they're abused. And so for me, it’s not worth it even for my highly-detailed personality. CHUCK: Yup. Yeah, I do it, but I’m pretty careful about it. I write down I was at this thing, or I was with these people, or whatever. I just make sure that it’s covered. And then, my accountant and bookkeeper can sort that out because I give them profit loss statement at the end of the year and it says in there what it’s all for, and then you have all the receipts that they can go back to and say, ‘ok, so you're having lunch with this person talking about this thing’; but yeah, it’s a lot of hassle to save 3 dollars in taxes, so it makes me think about it too. Alright, next question: Do you guys purchase errors and omissions insurance and how much? ERIC: I need to. I keep putting it off. I can convince clients that I don’t need it,so I haven’t had to do it, but I think I think it’s something I’m going to probably get this year. I’ve had enough – I’m working of enough larger project that it’s just – the coverage of it, not the client requirements, but actually having the safety net underneath feels like it might be a good thing. JONATHAN: Yeah. To me, I had to get it for a particular proposal I was submitting; they just required it; they wouldn’t consider the proposal if you didn’t have it. So I got it. It was cheap; it was easy. It took me no time at all. And I think the company is called Hiscox and you can apply right online. It’s so cheap that I don’t remember how much it is. It was around 50 bucks at the most per month for a million or 2 million dollars in coverage. CHUCK: Yeah. I've had a few clients request it in my case, but I’ve always talked them out of it. I haven’t been sued yet, so it was money saved at this point [chuckles]. That could change, I guess. RUEVEN: Yeah. I’ve never had that insurance, and I've never, never really needed to. I never thought about it very much. There was one case, there was one client where I was terribly sick and I was finishing up the project, and I accidentally sent 80,000, 90,000 SMS, which – they're only 2 or 3 cents a piece, but you send enough of them and it adds up. And basically, at first they were like, ‘do you have any insurance?’ and I said no, and I said, ‘ok fine’. We just agreed to some amount in the middle of they had paid and what they needed to still pay me and we just walked away like that. It was the end of the project anyway. [Crosstalk] but it’s a different story. ERIC: Oh, that's the other thing [chuckles]. This is probably going to get really deep, but say you have a million in insurance, and you have this [inaudible] business and you have stuff; you are more likely people would want to see you because you have things to take away. If you don’t have insurance and you don’t have a lot of business assets – it’s like 25,000 dollars in cash in bank – no one’s going to really want to see you because you can’t pay for anything. That's going to cost them too much to get it. And there’s this idea if you have insurance, you actually are more likely to get sued than if you didn’t have insurance. And it’s really weird; I wouldn’t use it as advice, but that’s just something to think about of how the legal mentality works sometimes. CHUCK: I’ve had a few clients mention that they would like it and that’s more or less the reason they site is that then if they have to come after me for damages, they know that they’ll get their money. JONATHAN: That is such a turn-off to me. If somebody say that to me [crosstalk][chuckles] ERIC: Well, it’s like dating someone only if they're rich. JONATHAN: Yeah. It’s like a prenup. It’s a prenup. It’s like, ‘oh, we’re looking to sue somebody, do you have insurance?’ CHUCK: Yeah. [Chuckles] JONATHAN: It’s like I said, I wouldn’t have it if it wasn’t – I had a done deal; it was a slam dunk. They contacted me, ‘we want to hire you for this, and here are some idiosyncrasies of our billing system and yada-yada, and also, you have to have errors and omissions insurance’. I wouldn’t have it if it wasn’t for that. Like I said earlier, I would just fold my business if somebody sued me. CHUCK: Yup. Alright, another question on the contract which we linked to in the chat: If I’m starting my SaaS business, I plan to get up a landing page and click emails and start the buildup. I plan to invite close alpha and then go to invite beta, start creating blog content, what else should I do to buildup to launch? Of course I’m building the actual SaaS product at the same time. Just trying to make sure at launch time, it’s ready to go. ERIC: Do we have a couple 20 hours to get into the basics of that or –? [Laughter] It can be as simple as you want it to be, or it could be as advanced. There’s – what’s it – Jeff Walker has made – I don’t know how many millions on his product teaching people how to launch and basically launch businesses and products; and then I take another class – I think I paid 2,500 or something for that one; there’s a lot in there. Basically, I guess it comes down to you need to build something people are going to actually value and it actually solves the problem for them or make some more money or something of value. And you just need to tell people about it. It could be your writing blog, like you said, or it could be your collecting email and marketing to them, or on social media. There's thousands upon thousands of different ways you can do to do it and it’s going to depend on what you like to do. Do you like writing? Do you like producing video? Do you like going to conferences and talking to people one-on-one? And also, you got to account for your time. I heard some advice and I laughed at it because I thought she was being silly that said that for every hour you spend building your product, like development, you're going to spend about 10 hours marketing. A couple of years later, I’m actually thinking that’s actually a pretty close estimate. Making a product is actually the easy part. It’s marketing that is the hard part, and that’s where your time is spent. JONATHAN: Yeah. I totally agree with that. It seems impossible that that could be true at the outset because that’s where a lot of the work is, a lot of the initial build is. It’s super time consuming and that's the thing that you’ve focused on, but the difference between a successful SaaS and an unsuccessful SaaS that might even have better features can have a lot to do with things like content marketing, like Eric said, and also education for the user groups or your existing user base on-boarding. There's a million things that can make something that doesn’t have feature parody with something else much more successful. I think it’s a no-brainer that yes, you should be collecting emails. If I've learned nothing else from being on this podcast, it’s the importance of getting emails. Everybody who’s started a list, which is they were collecting emails earlier – so I think that it’s good that this person who asked the question is – got landing pages collecting emails. And then, you're going to do some content marketing to get the word out there, and there's about a dozen different ways you can do that. You can guess on podcast, you can guess blog, you can blog on your own blog, you can do your own podcast, you can speak at live conferences, or whatever – meet-ups and live events. You can write a book about the problem that your SaaS solves. There’s a ton of things, like Eric said. It’s like whichever one is the most – you're not going to them all; you going to do the ones that are most comfortable for you. It could be webinars, writing books, [inaudible], blah blahblah. ERIC: And one thing. I just looked – I’m “launching a product,” but it’s basically a productized consulting where it’s – I’m still doing the work and I just looked; I spent  50 hours on it in about 3 months. And I just – a week ago or 2 weeks ago – made a landing page for it. All of my marketing, all that has been one-on-one. I've been emailing people I know, talking to my network, and basically getting on the phone or on Skype with people and going through what their problems are involving that, and that’s 50-something hours, and the service is like – building the service – close to have writing software. I think I might have spent maybe 5 or 10 hours. That, I think, actually help products sell, especially in the beginning. You just got to do a lot of that – all of that marketing, a lot of the finding out who’s going for, what’s the audience like. I did this on purpose; I wanted to frontload it because I didn’t want to do a lot of marketing at first, not know who I’m actually targeting, and not know what they're wanting. And so, doing the sales, find out who it is, it’s going to save me time later on when if I had to change it or like, ‘oh, this is – this isn’t actually a painful problem for people’. JONATHAN: I’m actually the – on a retainer gig, I’m the CTO of a startup – that’s a SaaS startup called Sticky [inaudible]. And there – right now, I think there are 10 employees; two of them do development, and the rest of them are either customer service, marketing, social media; the actual development part is as important as it is. If it was just us doing development, there’d be no product. There needs to be education in marketing and outreach on social media stuff – everything. You can’t skip it. Maybe at the beginning you won’t have it, but I think you will have a better launch if you do have some kind of content marketing plan in place. ERIC: Yeah. Especially that it’s a SaaS, and I think the person who asked is talking about they're going to do a beta and alpha and stuff like that. If you have something people can use, you can market it like crazy before the launch and let people in one-on-one and work with them one-on-one, and you're going to get a lot of good feedback from that. And if you're using marketing in a way where it’s building your list, you might not even need to do launch; you might just be able to, in beta or in alpha, get enough people where it’s successful and then launch. It’s just like, ‘yeah, we’re letting anyone in now’, and you don’t have to have a full on event for it. CHUCK: I’m just taking mental notes because I’m going through the same thing right now. A couple of ideas I've got. RUEVEN: I must say I found the marketing challenge to be a combination of frustrating and fascinating and rewarding. I’ve got my e-book that I put out, I guess, 3 months ago at this point, maybe a little more. On the one hand, I’m like, ‘wow, I've gotten people from around the world to buy this book’. I’ve no idea who these people are. I’m sure there are many more people who would benefit from it; how do I reach them? And I’ve been trying a bunch of different things, and some work well, and some work poorly. As I said, it’s a combination of frustration and fascination and see what works, and then try to learn from other people and get better at it. I’m sure that as with everything in life, you learn as you go along, and each one will improve as you learn more lessons. So I would say, in some ways, [inaudible] think about it, but to some degree, the sooner you start, the sooner you're going to make mistakes, and you learn from those mistakes, and you’ll get feedback. I must say the feedback actually has been – I think I mentioned it at some previous podcast – has been also a very pleasant surprise that if you have a mailing list, and if you're writing to it, people will write back to you if you ask them to. And you're going to get unbelievable feedback that will improve your product dramatically. So release early and often, and ask for people’s feedback, and you’ll get it, and it’ll only be to everyone’s benefit. CHUCK: Ok, next question: Contract resolution. Do you guys put a clause in about all disputes to be resolved through binding arbitration and contracts? Can that really hold up? No, and I don’t know. ERIC: I think I don’t know [chuckles] if arbitration – it might be mediation – I've had something like that. I don’t think it can hold up if you force it. I think people can go through that and then they can actually say, ‘this isn't working. We’re checking it to the full legal system’. Basically, take it to the – a new bust someone’s head. But it’s always good to at least try arbitration, and at least mediation, just because that’s going to be a lot less expense on you; but like Jonathan said, it might just be like if it gets to that point, you’re screwed, walk away. JONATHAN: Having been on the inside of a lawsuit at a software development firm, it dragged on for years. As soon as I was sure it was serious, I would just be like, ‘what does it say?’ All disputes can resolve by suing me out of existence basically [chuckles]. I would just say, ‘here’s the contents of my bank account. I’ll start a new business’. It’s a life-sucking, soul-sucking, family-destroying process. There's no contract – even if you win, I just can’t – we’re not doing the kinds of businesses that defending a lawsuit makes sense. Maybe Eric is – I don’t know, but I’m not doing the kind of business that defending a lawsuit makes any sense at all. CHUCK: Yeah. RUEVEN: Look, I’ve seen that. I was called in to potentially be an expert witness for a company that was going through a lawsuit. I've seen that my family had – there were a few lawsuits as well, but this is – I guess it’s about 8 months ago. In the end, it didn’t work [inaudible], it was family-owned, it grew quite a bit, they had a dispute with some of their original contractors, and you could see –I think this has been dragging on for 3 years or something. It was, as Jonathan said, soul-sucking. They were just completely – just completely despondent over the fact that this thing have been going on and on and on. It was [inaudible] time, not enough to hire me as an expert witness, it would seem, but [inaudible] wanted it to be over. CHUCK: Alright. Returning the house expense – Reuven, your business pays you and you expense a share of it? ERIC: I can restate that. Are you paying for your mortgage and your utilities and all that other personal – and business then gives you money, or does your business have paying directly to the utility company or something else? And for me, I pay for my personal stuff; business doesn’t reimburse me or anything tax-wise, I get a little bit of a ride off because it’s a shared expense. RUEVEN: The way we do it is– now you're going to find out how little I know – is we pay it personally, and then we pass the [inaudible] to the accountant for [inaudible] money that we pay as if the business had paid it. In the end, it’s not refunding money.  Because it just means my salary and my taxes are adjusted. CHUCK: Yeah, it’s more or less what I do. I pay my mortgage and then I give the information to my accountant, but then I've never really gone through the trouble of actually expensing that out. RUEVEN: Oh, the mortgage – the mortgage, we definitely – the business does not pay for the mortgage at all, and I remember raising this with the accountant when we bought our house. He said, ‘you do not want to do that’. Again, this might be a national thing, but he said, ‘you don’t want your business to own the house, or even part of it, because first of all, zoning issues; second of all, do you really want it if your business gets solved or goes bankrupt or whatever to lose your house or part of it?’ ERIC: Yeah. That’s the reason why people say don’t take out a second mortgage to start a business because if your business fails, you lose your business and you potentially lose your house, too. JONATHAN: Everything about my business when I first set it up was oriented around minimizing the risk of threatening my personal life, even though I don’t think anything I do is really risky. I didn’t want to have that conversation with my wife, basically. I wanted her to be able to be like, ‘whatever, you can do any crazy thing you want’, it’s like marketing-wise – your new products, whatever crazy clients, and it just never have any emotional impact on our feeling a personal security. So even if I – actually now that I think of it, that was a factor when I was deciding whether or not to [inaudible] the home office. I didn’t want to have anything with my business to have anything to do with the house. CHUCK: Ok. Next on. What are your favorite prototyping tools when marketing [inaudible] your new product? Words [chuckles]. [Crosstalk] ERIC: Build an MVP and have software people try it. Done the – what is it - [inaudible] mockups; having mockups for people to look at. I found it – if people can understand that just the idea that you get in a conversation about it, they don’t care about the problem that you're trying to solve enough to make it into a product. If they’re like, ‘oh, that sounds nice. Let me see some screenshots’, they’re not interested. If they're like, ‘oh my god, let’s talk for 3 hours about the problem and how much it annoys me and makes my business a headache’, that means you have something you can work on. At that point, they should just want to talk to you, and jump at you, and try to get as much attention from you as they can because it’s such a big painful thing. So I don’t really use prototyping tools anymore. I might mock something up in HTML and send a screenshot to someone if it’s like a very detail thing, and like, ‘do you like it looking this way or this way?’ but not for actually a building a new product or that type of idea. JONATHAN: I totally second that. It’s all about the problem you're solving. You should be able to say to somebody in a sentence – 2 sentences maximum – what the thing does, and if they don’t immediately say, ‘how do you do that?’ then you got to keep looking. ERIC: Or the meme, Shut up and take my money. JONATHAN: Yes, right. If they’re like, ‘huh, that’s interesting’, you got to keep working on your pitch or your idea. I’m sure everyone – RUEVEN: I'm about to say that’s really interesting, but [chuckles]. JONATHAN: I’m sure everyone listening, like, ‘oh, but nobody would’ve said that about Twitter or a million other things’. And yeah, I’m not saying you can’t make it happen, you can’t get lucky, but it’s way easier if you just are solving an expensive problem, and you tell it to someone who has that problem, and they're just like, ‘take my money’. Once, they're going to be like, ‘done, can’t wait’. It’s so much easier. Something like Twitter or – it’s just like such a lucky homerun, if you ask me. I dig Twitter and everything, but I don’t think anybody felt like they had a problem that Twitter solves. So I'm not saying you can’t make the next Twitter, that's definitely not what I’m saying, but you can certainly make your life a lot easier if you keep zeroing in on what that expensive problem is that you're solving; and better yet, who you're solving it for specifically. [Inaudible] then is you're solving it for whatever. I solved this expensive problem for this particular group of people, it’s really easy then to get in front of that group of people and say, ‘hey, is this actually a problem that – this is a problem that I recognize in your business, Do you recognize it? Do you think it’s a problem?’ I’m sure anybody out there that’s a developer had the experience of seeing a massive inefficiency in a market or in a vertical, and being like, ‘I can solve that with software; no problem’, and then you do it, and no one cares because they don’t think it’s a problem. Paper’s fine, Excel’s fine, it’s not – you don’t care. [Crosstalk] nuts. ERIC: Well, for myself, I've done Ruby on Rails for over 10 years now, so I obviously know how to throw data in a database. My customer database that has all of my clients’ – all of my people by e-book, all that stuff – newsletter subscribers – that is just a bunch of scripts that makes a CSV file.  It’s because that – I just care about seeing who’s looking at what and doing what. The CSV and all of the stuff in Excel is good enough for me, and it’s not a huge pain versus actually creating software and going through all that process. I've done that before and it’s just so painful that having the least bad option is fine for me, unless we move on and actually do something to actually improve my business or do things like that. So someone came to me like, ‘we can digitize this to make it completely database and all of the fun stuff in [inaudible] like I used to have’, I’ll be like, ‘that's interesting, but I really don’t care. I’m fine with what I have’. JONATHAN: I’m totally there with you. I've written enough software where I’m like I don’t want to be debugging my personal systems. I want it to be brain-dead simple and I’m happy to do manual effort to keep them up to date, as long as I can do that without disconnect – the word I’m thinking of is de-normalizing my own data, which is where I have dependencies between two different spreadsheets that would – I would be incapable of keeping them up tidy in two places, so I’m – my personal situation is a mismatch a little that too where it’s like I just have a bunch of – every time I do a new proposal, I grab the last proposal and I change it. So anyway, make sure you're solving an expensive problem before you build – you spend a hundred dollars building on an MVP. CHUCK: Yup, alright. ‘If I have a friend coming to you with an idea for an app or service, of course everyone has these ideas, yes, but I actually like this one; they have the idea, they will do the marketing, but if I’m going to partner with them, what’s the fair percentage? I thought maybe frontload initial income to repay my investment, then do 51-49 split. Is that reasonable? Have you guys done any of these types of arrangements? I wouldn’t normally, but building MRRs are smart if it’s something they will run longer term.’ What is MRR? ERIC: Monthly recurring revenue. CHUCK: Ah, gotcha. ERIC: There is a lot to unpacking that. Basically, it’s like techno-founder versus a non-techno-founder. My question up front is: Is this person going to be doing marketing beforehand ? how good are they at marketing? Are they guaranteeing that they can get results? Have they had past results that you can say, ‘oh, they’ve done this before as exact same space’. What kind of return are you looking at? Do you have savings, or is this going to actually eat into your actual income levels? After it’s built, are you going to maintain it or they are going to maintain it, or are they going to do marketing after it’s launched? Basically, in any kind of partnership, especially for business stuff, like ‘would you marry this person?’ is basically what you're coming down to. Would you spend 20, 30 years with them? I think ownerhood is [inaudible] but I have one people – one person who is saying he actually spends more time with his business partner than his actual life partner because it’s that deep of a relationship. So I think you need to think about it like that. In my own [crosstalk]. Yeah, I almost never do partnerships. I've done it once, and then I almost did it a second time; we were very clear on the second time up front like, ‘this is how it works’, and the partnership didn’t work out and so we just walked away still friends. The first time, it’s just [inaudible] out because people were – they committed to more than what they could do and the business didn’t turn out to what they had thought. CHUCK: I have to say that I've never done this just because I've never run into a situation where I felt like it was worth it, so you can take that for what it’s worth. I didn’t get to really specific combinations of things in order to make it worth it, and I haven’t found that yet. ERIC: Yeah. You have to be careful like, ‘this, it seems a bit better’, but I've heard of people, and I've had a couple come to me where they have an idea and they want half the business for coming to someone with the idea – that’s – ‘I’ll pay you five bucks for your idea and then I get the whole business’ if you really want to get down to it. The building of the product, we talked about earlier the marketing of the product, and then keeping it going, especially through the first – is it a SaaS? I think it’s a SaaS – so the first 3 to 10 years, that’s the critical part, and if you can’t get through that, then maybe look somewhere else. I would even recommend starting with a smaller product. JONATHAN: Yeah, and the [inaudible] back into what we’re talking about before, it sounds like no big deal when someone comes to you and says, ‘hey’ – because I was well known for mobile apps – ‘hey, I got this great idea for an app’. Everybody I’m related to has a great idea for an app; everybody that they're friends with has a great idea for an app; and so every month, I get a half a dozen ideas for an amazing app. ‘There’s not one in the Appstore. It’s obvious; I can’t believe it’. And the guy that I worked on our house was like, ‘oh, I've got an idea for an app’. So the thing that’s – it seems like, ‘ahh, it’s no big deal’, and sometimes the apps are really easy, like, ‘oh, this old simple’ – it’s essentially a calculator. And I think two occasions where I've entertained the idea – in one occasion, it was so easy that I just built it for the dude and gave it to him because he was so cute about it. He was just like so, ‘oh, this is going to be so great’. It’s a funny idea, I built it in a day, maybe, and I just gave it to him. And months after, years after, ‘oh, I want to update the app. Oh, something’s wrong; it’s not downloading. Oh, it’s not been submitted to the –’; there’s ongoing [chuckles] issues with this thing that I gave for the guy. And then the other situation where we didn’t go through with it, the thing you don’t realize is that – in that first initial thing – is that it is like a marriage. You're hooked together and speaking – we’re talking about taxes earlier, I partnered with somebody, they set up a corporation, then they had me associated with it in some way, now all of a sudden, I’m getting ten 99s for stuff they wanted to write off turn into – it complicated my personal tax – not my personal tax – my business taxes. I guess what I’m saying is it’s not something I’d enter into lightly, and if you're going to actually do something and deliver something, it’s not going to go away. So it’s not like, ‘oh, it’s just 10 hours, one weekend’. It’s going to keep coming up, so you got to really be into it and you need to be with someone that – it can’t be a one-sided relationship – it’s got to be someone who actually has – if I’m a developer and someone comes to me and they needed to be a mad marketer, as crazy – they got the idea great, but they need to do all the marketing, all the sales, and they need to have, just like I do, they need to have proof that they’ve done this in the past and that they have successfully done this in the past the way I successfully built apps in the past. So if they're just coming to you and it’s your brother-in-law, and like, ‘oh, I've got a great idea; we’re going to be rich’, no; start a band. [Chuckles] The odds of getting rich with a band are higher than with an iOS app. RUEVEN: But if you have to remember, if you're working on – if you're partnering with someone, you're basically investing in this; all of your time. So the question is, ‘would you, as an investor, put in 5,000, 10,000, 20,000 dollars to this business?’ If the answer is yes, then well yeah, maybe it’s worth it. But don’t see it as – [crosstalk]. JONATHAN: If they have – if the idea is that great, go get VC, go get an angel investor and pay me. CHUCK: Yup. ERIC: Yeah. The person who asked [inaudible] question, even if it’s not a small-scale app or service, like a side app or whatever, a lot of it still applies – even if it only takes 20 hours of your time, is it 20 hours now and then a few hours here and there? And we’re talking about corporation liability stuff earlier, so it’s in my head; I don’t remember how it works, but if you don’t set up a specific LLC, LLP corporation – whatever, you might fall into a partnership thing, which means even if you write the code now and you walk away from it, if they put in proprietary code into it later on, you might be able to be sued on a lawsuit, or your business might be dragged – maybe even your personal stuff. It is a marriage; it is a long-term thing. Make sure all that stuff’s up front. We said about make sure you trust this person if you're going to be – you don’t get into business with them – make sure that they're not some crazy person, or they're not going to do weird stuff because it’s also going to reflect on you and on your brand. There’s a lot to think about here. JONATHAN: Yeah. It’s easy to take it lightly, especially if you look at it and you can tell that the scope of work is very, very small; might as well do this. It’s either this or I’m going to go watch the game on Sunday; I might as well just do this. You're opening yourself up to all sorts of opportunities, but also liability. CHUCK: Yeah. Every client I've had has come back and said, ‘I want more than just this’. ERIC: I think you might be able to do a – in context of a software developer, if you really want to do – you think it’s going to be a fun app, like what Jonathan did, maybe you create the app on your own, open source it, put it out there and tell the guy, ‘here’s the whole app. If you want to use it and make a business out of it, feel free. I’m not liable; I’m not on the hook. If you want to do something later on, we can talk about it paid engagement’, and that way you get the fun experience, but you’re more off the hook than anything else. All businesses, I think, would be mad if you – suppose, ‘I’m going to put all your code out there in public’, but that might put it – shine a little light on the amount of effort you're going to put into it. JONATHAN: That’s a really interesting idea. It’s never [inaudible], but I can tell you that in my particular situations, everybody who comes to me with these ideas wants you to sign an NDA first because they think that [inaudible] and this is a million-dollar idea and if you just do this, you can get in on the ground floor. So the idea of an open source – it’s actually kind of hilarious because you don’t need their permission. They just came to you with this idea and you’re like, ‘yeah, we wrote a code this weekend and here’s a link to it’. The funny thing is there a way to open source something that's not on your Github account, like a generic public repo, maybe a patchy software foundation or something. They wouldn’t take it. ERIC: You probably could – you could just create an anonymous one; developer 101, and [inaudible] owner. CHUCK: Yeah. Developer Joe. [Crosstalk] JONATHAN: [Inaudible] open source software at CHUCK: Alright. Well, I think, we’ve talked for a while. Should we do some picks and then wrap up the show? ERIC: Sure. CHUCK: Alright. Eric, you’re on the left; you can go first. ERIC: I’m on the right on my screen; what are you talking about? [Chuckles] I don’t know if I might have picked this earlier, but I recently reread it. It’s a book from Amy Hoy; it’s called Just Fucking Ship. It’s a short book, but it basically outlands a lot of this process of 35500 as far as getting over yourself and actually focusing on stuff. I reread it I think last – this last weekend, and I think a lot of the concept in it is actually really good to apply to the questions we got now, like launching, start with something small, make sure it’s actually something people care about and can solve their pain. It’s a great book; I’d recommend it if you're even considering building products. I think Alex helped it, but this is basically Amy Hoy’s philosophy on how to build products and she’s – I remember how much her and her students have done, but they’ve done quite a bit of business just for being small, and not venture back and all that. CHUCK: Awesome. Jonathan, what are your picks? JONATHAN: Also a book – well, two books actually. First I’ll say Complete Plus One on JFS. It’s a short read and really good. A good companion read for that would be The Brain Audit by Sean D’Souza, which also focuses on making sure you're solving a problem, but the crooks of The Brain Audit is around – he basically has this metaphor of seven bags on the conveyor belt at the airport and the customer’s not going to leave the airport until they pick up all seven of their bags. If they only pick up six, they're just going to stand there while the bags go round and round and round until they pick up the last bag; the last bag shows up. And so the seven bags are basically seven different things that you need to answer in the prospect’s mind to get down to, say, to pull the trigger, basically; to say, ‘oh, you know what, this is the problem that I have, this is a feasible solution, the price is reasonable, it’s urgent, my wife or husband will not make fun of me for doing it, et cetera, et cetera’. There's all these things that it’s fabulous and also short, so I highly recommend The Brain Audit. On a non-business note, I’m reading The Silkworm, which is a book by J.K. Rowling, which she wrote under a penname – that is just amazing. It’s an amazing detective novel. It’s actually the second book; the first one is called The Cuckoo’s Calling, but if anybody’s into hard-boiled detective fiction, it’s great. So those are my two. CHUCK: Awesome. Reuven. RUEVEN: I just have one pick this week, and one of you – maybe more – picked it recently; it’s called The Positioning Manual for Technical Firms by Philip Morgan. I’m about halfway two-thirds away through it. Oh my goodness. I’m maybe known for trainings, in terms of services, in terms of products, and I would say that as good as the advice is and it is excellent, he has incredible empathy for the pain of doing the positioning. And he says, ‘yes, this is going to hurt. Yes, this is turning away business. Yes, it’s ok; that’s normal’, and having him say that multiple times in the book was refreshing. So I definitely recommend people going to get it. It’s not expensive at all, and I think it’s going to more than pay for itself in the very, very near future. CHUCK: Nice. Alright, I’ve got a few picks. The first one’s I got a new keyboard – and the camera’s [inaudible] hold it up; isn't it beautiful? – It’s the WASD Code Keyboard. It does awesome stuff like you can make the keys – they're LED backlit – so I just turn the lights on in my keys, but it has a mechanical switch is in it. I know people will get all [inaudible] about those. It’s the Cherry MX Clear. Once and I like them. So yeah, that's been really nice. I was using just the Apple aluminum keyboard before and this one’s just a little more comfortable and I feel like I type a little faster on it. I don’t know if that’s the case, but it feels like it. And then I had to get this fat foam wrist rest for it, and I’m liking it too. I’ve also read a couple of books lately. One of them is called Ready Player One by Ernest Cline – I think it’s his name. It’s a fun book; if you play games in the 80’s – computer games or arcade games. Anyway, it’s a lot of fun. It’s an adventure book in a virtual reality, and it’s right up people’s alley if they're technical, and I think it’s an adventure that other people would enjoy maybe [inaudible] not like that identify quite as much. The other book I’ve been reading is Mastery by Robert Greene. And I have to say that the first part of the book, I didn’t really enjoy – the first. I’m listening to it on Audible, so [inaudible] first half hour, but anyway, after that it’s been really good; lots of stories about people who master their fields and people that we consider to be people who are up there in the higher echelon of famous scientists and stuff. So anyway, awesome, awesome, awesome book. So those are my picks. And I guess that's it. Thank you all for listening and we will back again doing this in another month, and we’re on every week; just go listen to us. Go find us on iTunes: The Freelancers’ Show.[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 or on Twitter @MadGlory.]**[Hosting and bandwidth provided by the Blue Box Group. Check them out at]**[Bandwidth for this segment is provided by CacheFly, the world’s fastest CDN.  Deliver your content fast with CacheFly. Visit 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]**

Sign up for the Newsletter

Join our newsletter and get updates in your inbox. We won’t spam you and we respect your privacy.