Brett Miller is the president of Custom Software by Preston (CSP). For more than 10 years, CSP has impressed clients with highly effective software solutions and teams of multi-talented software engineers.

A software development client should complete a thorough “due diligence” before selecting a developer for his critical project. Then, he must complete the finalization process by drafting and executing the legal contract/agreement.

Contracts attempt to define the responsibilities and duties of each party; however, people often overlook whether a contract covers certain risks associated with non-performance.

Take a look at the eight scenarios below. These tips can help your company cover its legal bases when contracting a software developer, or vice versa.


1. Time & Material (T&M) or Fixed-Price Contracts


In a “time and materials” contract, the client assumes the burden of cost overruns, whereas in a “fixed-price” scenario, the developer assumes this risk. Weighing the two, many clients assume they are ahead of the game by passing the potential for cost overruns to the developer. However, they but fail to consider that the developer must add that cost-potential into their fixed-bid up front. So in a fixed-price contract, the client pays the extra cost, even if it proves to be unnecessary.

Fixed-price contracts also have the potential to create disputes. Often, deliverables that were implicitly intended might not be included in the original project scope. Both parties should be very aware of what exactly is included in the project. Fixed-price means there is a fixed scope of work, unless additional moneys are paid.

In a time and materials contract, the developer gets paid on an hourly basis. The motivation to finish quickly may be diminished by the opportunity to bill more hours. In this case, the client takes the risk that the developer will prioritize his own desire to profit on the project.


2. General Note on Contracts and Non-Disclosures (NDAs)


Contracts and NDAs are legal instruments which establish the rights, duties and privileges of those who are a party to the agreement. These instruments protect both parties to the extent that they are willing to pursue them in a court of law.

Here is a simple rule of thumb, although I encourage you to also check with legal counsel. Unless the dispute is over $10,000, most attorneys won’t take the case. And even if they do, they usually keep one-third of any money they collect. It can take several years to win in court, and the problem is further exacerbated by the fact that the losing party may no longer be in business or have assets from which to pay. One last note, many contracts call for the losing party to pay the legal costs for the winning party, which can save you money if you win, but cost dearly if you don’t.


3. Advanced Payment – The Industry Standard


Many contracts call for advanced payments or retainers. Essentially that means the developer works on the client’s money, and therefore, the client bears the risk for the developer’s potential lack of performance. This is the norm in the information technology field. Very few developers will take money out of their own pockets to build a client projects (in the hopes that the client will pay).

An improvement to this model would be to limit the retainer to two week’s worth (or less) of development time/labor (weighing the progress of deliverables). Upon client acceptance, the retainer can be replenished for the next cycle. Sending a wire or paying via credit card allows for instantaneous payment. Client risk is bit more limited when using this approach.


4. Phased Payments – The Other Industry Standard


Some projects are divided into three or more segments. The first phase is paid up-front (client risk); the second is paid at some pre-arranged interval (equal risk); and the last payment is made upon project “completion and acceptance” (developer’s risk). In this scenario the last payment can be problematic to collect, as subjective issues can arise regarding quality and scope.

One minor modification to the phased payment method specifies that the developer finish the final deliverable in their own environment, to which the client has access for testing. Upon client acceptance, the final payment is made and the vendor transfers ownership of the application and all code to the client. This is a very solid, technique balancing risk.


5. Warning! Warning! Kill Switches


Some unscrupulous software vendors build a kill switch into their applications. In the event of a dispute (and the client refuses to pay), the vendor can remotely shut down the application. I recommend that your contract include language that prohibits this “extortion like” practice.


6. Disappearing Freelancers


Many IT Professionals have heard this story before: A company finds what appears to be a knowledgeable (and affordable) freelancer on the Internet. Initial contacts with the individual indicate great responsiveness. Payment is made, a few conversations take place, some small progress is shown — then all communication goes dark and the freelancer disappears.

I believe this most often occurs when, with the best of intentions, a freelancer takes on a project and finds out he bit off more than he could chew. He believe his efforts were substantial, but things just didn’t work out (in other words, “not their fault”). Even more important, as a freelancer he is simply not in a position to refund any money. It’s easier to disappear than to deal with the conflict, so he runs.

Freelance software developers do offer expertise, experience and cheaper rates due to lower overhead, but the clear risk is a lack of any substantial backing. Therefore, this model does have more risk for the end client.


7. Payment via PayPal or Credit Card Carriers


Many developers accept payment via PayPal, and some even accept credit cards. These credit carriers offer “dispute” mechanisms that allow the payee to challenge any charge which was not delivered as promised or described. This method should be encouraged by the client (even if they need to pay the credit card processing fees), as it provides additional protection.

Vendors have an opportunity to respond to any dispute. Carriers to a certain degree are arbitrators and if they receive enough complaints, a vendor’s account can be canceled.


8. Risk Assessment


Software development projects carry financial risk factors for both parties. These risk factors need to be considered seriously and should be discussed with an attorney. Clients and developers alike need to know what they are getting into and prepare for scenarios that don’t work out as planned.

Image courtesy of iStockphoto, OtmarW, Flickr, quaziefoto, slimmer_jimmer

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Why would you become a freelancer?

Is it the allure of working in your PJs? Of not having any supervisor? Is it working from home or a nearby cafe?

Whatever the reason may be for you, the freelance life appeals to many folks.

In fact, according to the U.S. Bureau of Labor, 10.3 million workers in the U.S. (around 7.4% of the U.S. workforce) are freelancers, and companies have increased their use of freelance talent by 22% in the past three years, largely due to the influence of the Internet.

SEE ALSO: Designers: Try This Gorgeous Project Management App for Freelancers

In fact, one aspect of freelancing is so attractive that companies are incorporating it into full-time work: the ability to work from home.

Yet another trend supporting the rise of freelancing is the coworking space, a relatively recent innovation that gives freelancers and others a comfortable, convenient and collaborative shared office space without the associated pressures and mundanity of, well, Office Space.

Here’s a look at some survey data showing just why many folks are choosing to freelance, either in addition to full-time employment or as their sole source of income.

Click image to see full-size version.

Top image courtesy of iStockphoto, alvarez

More About: freelance, freelancer

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paper-people

Have you ever had a prospect tell he doesn’t need to market his business because he has more business than he can handle? Did you believe him?

“I already have more business than I can handle” is one of the most common blow-offs you’ll hear when prospecting. The trouble is discerning if it’s really a blow-off or whether it’s true. Some businesses do have more business than they can handle. But why? It’s been exactly two years that the Great Recession was “officially” declared to be over.

Unfortunately, many businesses didn’t get that memo. Most are still struggling. So who are these fortunate few with more business than they can handle, and how do I get a piece of that pie?

People who truly have more business than they can handle fall into one of two categories:

Complacent

These are business owners who provide quality work for a fair price. They are happy with the amount of business they’re getting. They’re making money and paying the bills. They may be in demand because of the quality of their work and are usually booked weeks (or months) in advance. If more people want to hire them than they’re able to service, they have no problem turning them away or recommending them to a competitor.

(I know of a local painting contractor who fits this description. Yet, ironically, he still markets heavily during the off-season to stay busy all year around.)

Overwhelmed

These are business owners who get so much business because they charge so little, yet feel obligated to serve every customer or client who knocks on their door. Hiring extra help is out of the question, because they aren’t making enough money.

For these overwhelmed business owners, the solution is surprisingly simple: raise your prices.

(Of course, telling them that often elicits a blank stare back in response.)

What these overwhelmed business owners don’t realize is that the reason sooo many people want to do business with them is not because they’re so good. It’s because they’re so cheap. What’s more, being the low-cost leader means you attract the price-driven buyer. (You know, the cheapskate who grinds you down to the lowest price, yet demands the best service, who complains every chance he gets, then asks for a refund when you can’t satisfy his unreasonable demands. But I digress.)

Perhaps you’re one of those overwhelmed by too much business. FreelanceSwitch has compiled a list of the Top Ten Signs You May Be Charging Too Little:

10. Your clients mistake your daily rate for an hourly one.

9. You’ve won every job you’ve ever bid on.

8. Even though you work 80-hour weeks, your income level qualifies you for welfare payments.

7. New clients are always asking what “the catch” is.

6. Clients pay your invoices in cash from their wallet.

(You can read the rest here.)

Most people believe that raising prices equals less business because fewer people will want to do business with them—when the exact opposite may be true. What about you? What do you think?

We’ve just come across Solo, a beautiful new app for freelance designers — and considering the app is intended for use in the design community, the attention to details such as color, typography, animations and texture couldn’t have been used on a better project.

Solo is a project management application for designers of all stripes, both traditional and digital. Right now, designers can try it free for 10 days; afterward, it costs £5 per month.

The experience starts with a dashboard, a snapshot of all the projects, clients and deadlines you’re juggling at the moment. From this big-picture view, you can zoom in on timesheets, invoices, client contacts, and your own personal journal.

Perhaps best of all, the app is really, really pretty. When viewed at full-size, the pages show a stunning depth of nuance rarely seen in web apps. You’ll need to sign up for yourself to get a true feel for the app’s UI, but you can take a look at these sample screenshots to get a rough idea:

Click to see larger versions.

The downside is the app is still in a very early stage, hence the low introductory price. You’re likely to find a couple bugs lurking here and there in the software; and many features, such as client logins, document uploads, messaging and design blog feeds are still “coming soon.” Still, it’s definitely worth a try while it’s fresh.

Solo is the freshman release from UK software shop Thrive. A company rep wrote in an email, “We’ve been beavering away for the last nine months creating a new online management tool for freelancers… Being designers ourselves, we love the creative input and critical eye of our peers. At the end of the day, Solo is for us and you.”

Sign up for the app’s 10-day free trial, and let us know what you think in the comments. Is this something you’d use as a freelance designer? What other features would be useful?

More About: design, design app, freelance, freelancers, so1o, solo, web design

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