
Ask HN: Failed Startup, unreasonable clients, where do I go from here? - blitzen
I put it all on the line on a startup that had good traction, but very low revenue per user, and ended up selling it for a pittance when I couldn't meet obligations. In the end I was dead broke.<p>I know many would say I didn't manage my finances properly, but at the start I was fresh out of college with no marketable skills and at the end I was a competent developer. Importantly I was so frugal I lived under the poverty level the entire time.<p>I went into consulting, and worked for a client that despite promises always managed to maneuver into only paying subsistence wages.<p>I got more jobs, but only from more unreasonable clients, and I made the rookie mistake of charging a flat rate for projects. The scope always expands with these clients.<p>I got smarter and changed the structure of my business after watching this video called F*ck you Pay Me: http://vimeo.com/22053820<p>It has been working, the response I get from clients is much better, but I still have not been able to break into the $100+ hour market.<p>I thought I had found the job that would allow me to break out from this cycle of desperation around rent due dates, pay off the debt I accrued with my startup etc... And start running a serious and professional consultancy.<p>I did a phone interview, and they were excited and I went in to speak to four people, and at that meeting they said they were ready to go and that we could get started right away.<p>And then nothing. No response to email. Nothing. I feel sort of crushed by the flakiness. I know I am only one good client away from all of this changing, but it feels right now like it's never going to happen.<p>I was wondering if other developers have had similar experiences. I'm competent at what I do, it gets better, right?
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tptacek
Maybe you could go into a little more detail about how your previous clients
managed to weasel out of paying.

Maybe you could tell us a little bit more about how you scoped those projects
and how you handled contracts and payment terms.

It would definitely help if you told us how you sourced those clients. Did you
network your way into them, or get them off outsourcing sites?

How big were the clients?

You're not one good client away from all your problems changing; you're
several business model changes away from having a sustainable business that
will generate fewer abusive relationships, and, over the long term, the luxury
of being picky about your clients.

~~~
blitzen
> Maybe you could go into a little more detail about how your previous clients
> managed to weasel out of paying.

Expanding scope and holding final payment hostage.

> Maybe you could tell us a little bit more about how you scoped those
> projects and how you handled contracts and payment terms.

List of requirements, with 50% before and 50% when done. This was my #1
mistake and I have stopped this.

> It would definitely help if you told us how you sourced those clients. Did
> you network your way into them, or get them off outsourcing sites?

Networking.

> How big were the clients?

Larger side of small business scale.

> You're not one good client away from all your problems changing; you're
> several business model changes away from having a sustainable business that
> will generate fewer abusive relationships, and, over the long term, the
> luxury of being picky about your clients.

One month at $100+ an hour would take care of all debts, allow me to purchase
needed medicine and provide enough runway to only accept quality clients. That
is what I meant by that.

~~~
tptacek
First suggestion: any client that plays games with payment is a client you
can't afford to keep. It's a bit of a judgement call; maybe they saw their
scope extension as reasonable and in the spirit of the original engagement.

Second suggestion: split your contracts up; your first contract is your
"Master", and your second a "Statement of Work" (SOW). Both require execution
by both sides before you proceed. Don't work without an explicit SOW again.
The SOW should list in bullets the whole scope of the project and the
acceptance criteria, and list the payment schedule.

You need to be able to tell you client "OK, but to do that we'll need to put
in place a new SOW" when they try to extend scope.

We don't ask for up-front payment at all, and I'm not wild about it (if you
really need it, you have crappy clients, and should fix that instead of coming
up with ways to mitigate crappy clients). But since you do:

Next suggestion: by the time a client has paid you 50% for a project, you now
hold all the cards. They can't afford to have you walk away with an incomplete
deliverable and write off the cost of the engagement. So next time this
happens, just say "no" to scope extensions (politely!) and see what happens.

You might be surprised at how much more effective you are at negotiating if
you go into these things knowing you have the leverage and not them.

~~~
jaz
What is typically contained in the master contract? Things such as payment
terms?

------
hbien
I was in the exact same boat.

I've charged project fees and ended up making under $10/hour. I've also
undercharged ($30/hour), have agreed to work weekends on some contracts, and
have collected payments that are MONTHS late or never even arrive.

It got better. All of the above problems happened because I let it happen
(charged too low, not use contracts, always saying yes for fear of losing
money).

Here's what I did: play the ladder game by increasing your rate slowly after
every client/contract, try daily/weekly rates, avoid clients with red flags,
use referrals. Read Brennan Dunn's "Double Your Freelancing Rate" and "The
Wealthy Freelancer".

For me, it wasn't an overnight switch to a new client that made it better. It
was a lot of slow changes that built up momentum.

