What happens when clients don’t pay

I love clients. That is, clients who pay their bills. Admittedly, I once accidentally sent an invoice, even before the project started. Of course the client didn’t pay. I like to call this an exception. If the invoice is justified, then the client must pay. The full amount, on time.

In my years as an entrepreneur, I luckily had few clients who didn’t pay. Two times a client went bankrupt. I lost a few hundred euros. They lost their business, their house and everything they own. I feel sorry for them, and wish them well.

Grimmer, I will never forget a client who ordered a project, fully aware of the costs. And upon delivery, he simply did not pay. There were months of battle. We even went to court. But by then, his business was bankrupt. And so were we, almost. He started a new business as if nothing happened. It made me angry and sad, to have worked hard and with passion for him. In hindsight, he was nothing more than a thief. Not paying bills is a disgusting practice.

I have clients who do pay their bills, but always late. To me, this behavior is plain weird. I offer software as a service, on a subscription model, billed every single month. What reason could there be to stretch the 14 days payment term? Are you that strapped on cash? And if you’re doing that bad… you’re at the wrong address. I develop software, I am not a bank.

I have a client who actually negotiated a longer payment term. And he pays. Always. The full amount, on time. I love him. I like to emphasize negotiated. He asked for a longer payment term. He didn’t just take. Taking without asking is stealing, or at best, impolite.

When clients don’t pay, they need to be chased. I don’t like that. In the past I used to make phone calls and ask clients when they would pay. When it comes to excuses, companies can be as inventive as the average sixteen year old. Calls always end with some false promise. So I stopped calling. It’s not helpful, and it drains my energy.

Luckily, with a subscription model, there is a solution. For example, when I don’t pay my phone bill, the phone company disconnects me. I think that’s fair. So, I do the same. I disconnect clients who don’t pay their bill. In this way, they cannot use my software until they start paying again. I find it awful to disconnect clients, but at least the pain is shared.

Now, I have one client who doesn’t mind being disconnected. They don’t use the software, they don’t pay for it, and that’s exactly what they want. This seems clever, but to me, life doesn’t work that way. The monthly subscription fee is based on an agreed contract period. And that contract period must be served.

I feel that giving a client financial slack (e.g. letting them out of a contract or allowing longer payment terms) would be unfair. As self-serving as it may sound, this feeling of fairness is exactly the reason why I will not simply cancel a contract, and will to go to court. Especially when I see that other clients do make a effort to play by the agreed rules.

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Why I quote fixed-price

When I propose a project to a client, I like to quote fixed-price. Whether it is for implementation services, or for software development.

There are exceptions of course. last week, I did some work that I billed by the hour. It was completely unsure how long I would need to complete the project. I promised the client to work with her for a day, and then we would see how far we got. Billing by the hour was the only way to go.

There are benefits to billing by the hour. There is no risk for me, since all hours are paid. And there is more flexibility for the client. From a sales point of view, It is also easier to ‘milk’ the client. Which is a tactic consultants use liberally. Luckily, I am not a consultant.

When a client asks me to do some work, it’s up to me to make an estimation. Rarely does a client have any idea how long a project will take. After doing the work I do for years, I at least had some practice estimating projects. Being the more experienced party, I feel responsible for making estimations, and setting predictions.

Apart from the soft touchy-feely moral reasons, I have a few practical reasons for quoting fixed-price. First of all, the client doesn’t care about hours, he wants his problem solved. And as long as the problem gets solved, the client is happy. This gives me the freedom to execute the task as I see fit. This is especially important when clients ask me to create enhancements to my software. This freedom, allows me to make additional product changes in the project’s slipstream, or implement the requirements in such a way that I can build on it later. This costs me more time, but the client doesn’t care.

When quoting fixed-price, I also set a fixed delivery date. This gives me complete freedom to work when I want, where I want. The client couldn’t care less if I work during the day or at night. From my office, my house, or a mountain cabin in Switzerland (yes, this happened).

Obviously, when the quote is fixed-price, the specifications should also be fixed. There are three pitfalls with fixed specifications. First it is hard to be strict, but you must. Whenever the client wants to change the specifications, tell him it is not possible, or will costs more. This is hard to do, but an absolute necessity. Doing this serves your benefit, the relationship, and thus the client herself.

The second pitfall is the client’s (professional) maturity. When quoting fixed-price the risk is with me. Which is fine if I have a reasonable control over all the variables. The client is a big variable that I have very little control over. So it is best to eliminate the client by not having to rely on him. If the client has to give input, then facilitate for this in the quote. By raising the amount, that is.

The final pitfall can be easily circumvented. I have rarely seen a fixed-price quote work out well for large projects. Quoting fixed-price only works for a maximum of four days work. If the project is larger, quoting fixed-price is akin to Russian roulette. The solution is simple: break up the project in smaller chunks.

I am very happy with fixed-price quotes (as are my clients). Luckily for me the conditions are right. I have been doing this work for a while. Compared to the client I am the expert. I am fairly good at estimating. And the projects are always small.

Why I climb mountains

My hobby is mountaineering. In my spare time, I climb mountains.

The classic answer to why people climb mountains is a quote from the famous mountaineer George Mallory: “because they are there.”

I don’t climb mountains just because they are there. To me mountaineering gives a sense of accomplishment and mountaineering is fun.

Not everyone understands my hobby. Some only see suffering. And these skeptics are partially right. Suffering is an essential component of mountaineering.

To me, the challenge in mountaineering is to strike a balance between fun and suffering. Fun should outweigh suffering, and suffering should be temporary.

Like anyone, I don’t want to get injured, permanently disabled or killed. That is more suffering than fun. So much that suffering turns into harm.

Luckily our bodies and minds have evolved to protect us from harm. It lets us experience fear. Fear is a clever evolutionarily trick to keep us safe and alive.

Not all fear is justified. The main challenge in mountaineering is assessing whether the experienced fear is rational or not.

Irrational fear makes life boring. Or worse, it paradoxically instigates panic, which is downright dangerous.

Rational fear is helpful. It prompts us to lower risks or take precautions in case things go wrong. For example, by being extra careful, or adjusting our plans.

Distinguishing between rational and irrational fears is a skill that requires practice, but when mastered it is a life skill that transcends mountaineering.

I find that mountaineering makes life more fun in general. Whether it is in the mountains, in my private life or in business. That’s why I climb mountains.

I think Edmund Hillary, another famous mountaineer, was spot on when he said: “It is not the mountain we conquer, but ourselves.”

Do you dare to join me?

The six hurdles to having fun while running

Running is great. But! It took me three years from zero to running half marathons. These were my hurdles and how I overcame them.

Pain

Running hurts. No surprise here. When running, your legs endure more pressure than they are used to. Knees hurt, ankles hurt, pelvis hurt. Pain galore. One option is to give up, and conclude running is not for you. The good news is, that this pain is temporary. I’m not advocating to push through. Listen to your body, run less, walk more, run slower.

Everyone can run a few kilometers. You can even run a few times a week. The problem is, that your body can’t handle this stress a for weeks in a row. During running your body breaks down, and without enough time to recuperate, there comes a moment when your body has had enough. Without warning, all of a sudden something snaps, and you’re injured. Running is for the patient people. That’s probably why it took me a long time to get into it.

How I did it: I joined a running club. They had an excellent group for newbies like me. With proper warm-up & cool-down, training schedules, a fun trainer and to top it off: a masseuse.

Endurance

My first run was an embarrassing 1.5 kilometer. Half way, I walked twice. Not good, not fun. Especially in comparison to a friend of mine who ran 5 kilometers out of the blue. I was not a couch potato. I would even say I was sporty.

People who play soccer, or other running related sports have an advantage. I played recreational volleyball with some 50 year olds, and went to the climbing gym twice a week. Getting to 5 kilometer took me three whole months. I am actually fine with that. Not being able to run far is ok. Running is an endurance sport. You need to build up endurance slowly. If you have never played chess before, you will lose every game too. Same principle.

How I did it: I got a copy of Evy’s Start to Run (similar to C25K). This running program has audio motivation and music at the right pace. I printed the training schedule and taped it to the refrigerator door.

Shoes

There is a lot of debate about shoes. Some even promote run bare foot. Although the consensus is, that bare-foot-running is only for the more experienced runners. And even they need to start over again: taking it slow, like a beginner.

So many people, so many feet, so many running styles. The right shoes supports you the right way. And this can only be tested by actually running. Not in the store. If you buy one pair a year, it is virtually impossible to buy the right shoes without expert advice. The difference between the right and the sort-of right shoe can be the difference between pain and no pain. Trust the experts and keep in mind that the experts know everything about the average feet, but nothing about your particular feet.

How I did it: I always go to a proper running store with experts and have my running analyzed on video. I had my feet measured, and got a special inner sole. Since then, I run injury free.

Motivation

Once you get to that magical 5 kilometers, it’s time to go further and faster. This however takes practice. And a boat load of it. Some people only run one 10 kilometer per week. Others need more practice, like two or three runs a week. Certainly when getting to 10k, or going for 15k. Running consumes a lot of time. Three to five hours a week, easily. Apart from that, running for 1,5 hours can be really boring.

Running needs to fit your schedule. For parents with young children, or worker bees with demanding jobs, training can be hard to fit in. The great thing however is, that running is very flexible. You only need yourself, your running shoes, and a shower afterwards. If you want, you can make it work!

How I did it: I use RunKeeper to track my runs. I compare them with previous runs, and get motivated by my friends. Fortunately my girlfriend is a runner too, so in the weekend we do the long runs together.

Hunger

I have friends who run more than an hour on merely a cup of coffee. I can’t. When running long distances I meet the man with the hammer. And he hits me hard. I get cranky, want to stop running, go home, and eat hamburgers for the remainder of the day. For proof, ask my girlfriend. While running, the body consumes energy. So you need to stock up before the run. And replenish: after, but also during. The effects of adding energy while running can be dramatic.

Eating something fat before running can also be dramatic. Shoot me an email if you wish to hear some gore stories. To cut a long story short: no fat right before of after a run. They giving you pain in the side of your body.

How I did it: I am experimenting a lot with food: pre, during and post. During long runs, I bring supplements from a brand called SIS. I plan long runs along water taps.

Gear

In my grandfather’s days, running was easy. You just ran. Perhaps you looked at the church clock to check your time, but that’s it. Nowadays, that’s hopelessly detached from our digital life. We ‘need’ to bring a phone, headset, water belts, supplements, heart rate monitor, watch, reflective clothing, and what more. All this gear is not necessary of course. And as a matter of fact, it gets in your way.

That being said, it is great fun to track your run on a GPS, and add the measurements of a heart rate monitor to RunKeeper. The reflective shirt is a must when running in the dark. And here we go. We turned our run into a happening.

How I did it: I got a good tight fitting pair of running pants (long and short), with pockets to hold my phone and supplements, and a reflective t-shirt to wear over my running sweater. I don’t wear a vest.

Work when I am most productive

This blog post is also posted on lisettesutherland.com as a guest post. Lisette specializes in work-life fusion.

Some days I am super productive. I can work for 12 hours straight, whilst keeping quality and spirit up. Yes, I will be dog tired, but I consider these days to be good days.

Today is not a good day. Today I can’t get anything done. I’m looking at my computer and all I see is a blur of characters, lines and rectangles. Apart from efficiency, I know the quality of my work will suck. Today, I give up.

Some days are more productive than others. In the past, when I worked 9 to 5, I pushed through. Those were my productive hours. Dictated and enforced by the organization that I was part of. Today, I accept that not all days are good days. Productivity can only be summoned to a certain degree.

There are 168 hours in a week, and I choose to work 45 of them. I could work 9 to 6, and hope that these will be my most productive moments. I think this approach is dogmatic and just not good enough. My drive and passion forbids me to work when I cannot be efficient and effective.

As a business owner, nobody cares when I work. I am paid for the value I produce, not the hours I put in. I know I am most productive in the morning and the evening, on Mondays and on Sundays. These are the hours I should work, and maximize flexibility during the remainder of the week.

I realize that I am in a fortunate position. I have the opportunity to design my work around my lifestyle and peak productive moments. I like it. It’s liberating and recommended.

Epilog: after writing this, I went for a reinvigorating bike ride. A change of scenery worked wonders. Today became a good day.

Selling software products for “free”

Every software product needs a sales price: the amount of money the customer pays for its use. Which price is right obviously depends on the product and the market. Customers are willing to pay good money for decent products and services. Good products can therefore be ridiculously expensive. But maybe “free of charge” is the right price for your product in your market.

Having a sales price of zero is admittedly weird. But offering your product for free, removes a great hurdle for prospective customer. Zero takes the costs out of the equation. Making your product free to use, is the single best way to grow your customer base. Free may even be the best sales price you could have.

There are three reason why software companies offer their products free of charge: land grabs, multi sided business model and freemium.

Companies undertake a land grab when there is a significant benefit to being the largest vendor in the market. Time to market is priority number one. Twitter is a good example. Twitter rather raises money from shareholders than charging customers. By making the Twitter service free and showing only a limited number of ads, they remove friction for the users, and grow their user base fast. Charging users would inhibit growth of the network, thus lowering the net worth of the company. Companies that attempt a land grab assume that once they have won the land grab, they will somehow find a way to monetize their accumulated user base.

Google is an example of the multisided business model. The company does not charge users for the use of their products. Google’s argumentation is the same as Twitter’s. Asking money for every search would quickly lead users to alternative search engines (maybe even to Microsoft’s Bing). Instead, Google makes money from third parties who sell services and products to the primary users. They do this through sponsored search results. Facebook, another typical example, bluntly sells the customer data at its back door. In the multisided business model the user is not the customer, it’s the product being sold.

Lastly freemium is a popular model, with LinkedIn as a famous example. Anyone can join the professional networking site for free. For heavy users, LinkedIn offers a paid premium version. Hence the name: free + premium = freemium. The freemium model operates on the assumption that a portion of the users will upgrade to a paid version. This is also the model’s pitfall: failing to get users to upgrade. Getting the model right is tricky. On the one hand you want to offer useful features for free, while still having even more useful features available that users will pay for.

In a B2B market, free may not be the right price at all. Land grabs are not common, and companies obviously hate it when you sell their information. The freemium model is most suitable. Perhaps selling a small product for an extremely low price, while promoting your more profitable flagship product may work very well for you.

Software is dead, long live software

The software industry is a dynamic industry. Even the definition of software is dynamic. The software that we know today is different from the software of 15 years ago. In the past years a number of events happened that have changed the industry, like the definitive fall of Windows PC software, open source software, and the cloud. It is my opinion that these events have lead us, software developers, to the start of a very prosperous time.

Software on the Windows PC is dead

At the start of my programming career in 1997, I developed software that runs on a desktop PC. Needless to say that Microsoft dominated that market, and as such I quickly became part of the Microsoft eco system. My alignment with Microsoft did not last long. Towards the end of the millennium, everyone who could, moved to the internet, as fast as their legs could carry them. Java was the coolest kid on the block, and almost unavoidably I got sucked into the slipstream as well. The dot-com bubble ended the internet party too soon. But one prediction was clear: Windows PC software would become a thing of the past. There was only one problem. No one had a viable alternative to Windows, yet.

Unbelievably, it would take another seven years before the Windows PC got it’s final blow. In 2007, Apple introduced the iPhone. Soon after, different companies jumped in and created smart phones and tablet in all forms and sizes. Being fed up with Microsoft Windows, these companies developed their own operating systems, most notably iOS and Android. The new operating systems on tablets and smart phones clearly mark the end of the Windows PC monopoly.

Microsoft’s stubborn belief in the PC is illustrated by Microsoft CEO Steve Ballmer who could not refrain from making snarly remarks on the now wildly popular iPhone. Microsoft maybe arrogant, and slow, but I would never call them stupid. They too realize that the days of the Windows PC are over.

Nowadays even Microsoft, the archetype software company, is moving away from software to products and services. The Windows PC may never die, but Microsoft’s move is a clear statement. Locally installed software, the kind that I started with, the kind that traditionally comes to mind when thinking of ‘software’, is dead.

Open source hype has halted

After the dot-com bubble I skeptically witnessed the rise of open source software. This is software created by developers who, upon completion, freely share the software’s source code. By doing so they reduce the monetary value of the software to zero. As a result, open source business models completely rely on the sales of complementary services, like installation and support.

Open source software was hyped and demanded until (roughly) 2009, when the popularity rather abruptly halted. Again, it was the smart phone that changed the landscape.

Apple’s introduction of the iPhone and the AppStore was revolutionary. People camped in front of Apple’s store for days, literally. As amazing as these product are, there is one caveat. The iPhone and AppStore exist in an extremely closed eco system, but no one cared. Open source was no longer everyone’s darling, apps were the next big thing.

Apart from a decline in demand for open source software, the economic recession did not help the open source movement. In less prosperous times, developers seem less altruistic and less willing to spend time for free. It is also hard to find enthusiastic programmers to develop software for a particular niche market. Open source is great for developing platforms or libraries that other developers can use, but fails to deliver specific value to end users.

Open source software will always remain relevant, but the hype is over.

Long live software in the cloud

The future of software is neither the Windows PC nor open source. As concluded during the dot-com bubble, the future of software is in the internet. SalesForce was one of the first software companies that successfully offered their product exclusively via the internet, in the cloud. Their slogan ‘No software’ summarizes the proposition brilliantly. No installation, no updates, no management and no worries. This new era in software is extremely good news for software vendors.

Software is delivered in a web browser and via apps on multiple devices. Vendors are no longer locked into a certain eco system, like I started with Windows in the 90’s. Even better, with the decline of Windows, the file system has disappeared. This means that the user’s data is stored (and sometimes even owned) by the vendor. Software vendors are in an excellent position to bind users to their eco systems. As a side note: the irony of this particular vendor lock in is absolutely not lost on me.

The role of open source software has also changed. Software vendors, who create software for a particular niche, have no incentive to make their software open source. Open source is no longer a threat, but actually useful. Underlying platforms are all open source, meaning free to use however anyone wants without any costs.

Last but not least, vendors finally have a way to immediately stops software piracy. They can tightly regulate who can and cannot use their software. This allows for a fair and steady stream of subscription revenue.

Users as well as businesses don’t mind, they love it.