Info (2006/09/18)
Contracting Model for South African Designers
Intro
How many times have you sat down in the evenings and weekends and decided to just do something? Then you get the familiar: "...but you have to have money to make money" speech from a family member. You spend thousands on the newest PC only to have it turn into your son's game machine. At work your skills are very important but you just cannot make money from it when doing work at home. How many half completed projects do you have somewhere in a box or cupboard? But somehow at work the company is making money and needs you to the point where you cannot take leave. At some stage your partner thinks you are nuts and cannot understand why you are buying this development kit or that word processing package. Your partner rather wants you to spend more quality time at home and save that money for a vacation. Your reasoning is that if you can just get project-X going that you will have enough money to retire and then vacation is not a problem. Problem is that you are not getting there, are you?
One guy in France has a web site with slogan: "The quest for over unity". It has to do with free energy in that you put in less than a unit of energy and getting out more than a unit. No matter if you believe in free energy you must agree that we as humans operate in the same way. Some people just get out a lot less than they put in. Others rate their lives by the gain they made over the last year. I know about a paralyzed man than makes 40%+ profit per year playing the stock exchange. But unfortunately most people are nothing more than inefficient heater elements. Most people never goes over unity. That is probably the reason why you don't get your salary paid out a year in advance...because you are probably going to be broke after 3 months. Some people are so bad with money (and unreliable) that they are paid rather weekly and some even daily. Someone shocked me the other day telling me that about half of the people that have won the National Lotto in SA are dead. Why? Well, they are like heater elements that originally worked inefficiently at 220V that were now driven by 10 000V. They just go poof. The easier way for these people to lose money is to get money.
So are we all lost? No, but those with dreams are all swimming in the same pool of trouble. You probably have already blown your dreams 2 days after you received your salary. Your partner needs this and that, plus you also need to spoil yourself sometimes. So whatever you get in extra, be it time or money, you spend without really thinking about it. The over unity people don't. They re-invest and they only live and splash on a small part (which is normally huge compared to the heater elements out there).
If you got to this web page you are probably technically minded. You probably are reasonably computer literate. You have probably spent a fair amount of your time (measure in years) and money to educate yourself. You are probably working for a boss. You probably have very little spend-able cash in the bank, if so it might be revolving credit or overdraft. You are probably irritated like hell to go: "Yes sir, right sir" everyday. Even if you have just done a Word for Windows course or like me just finished another "£$%& degree you might feel a little upset by ending up being a below unity person.
Reality check: You cannot do everything yourself. You might die a very successful person but you won't live as a very successful person. You can do only so much. There are certain industries where you are already doomed when you start alone.10 years ago I designed my own circuits, made my own PCBs, moulded my own boxes and negotiated my own deals and ended up having no spare time, very few sales (or money for that is worth) and health problems. Then I realized the less I do and the more I chat with people the more money I made, the more time I had and less worries to trouble me. Then I ended up in a partnership where I gave up the chatting, losing control over the finances and ending up working 3 times as hard as my body could take. So where the hell did the formula fail?
Realization time:
You need people. (as in co-workers, partners and in general) You will either have to talk to them to make them like you, get business from them, get return business as well, get information, calm them, make them work for you and many other things that surrounds the topic of people. But not everybody is equal!! You need to balance things, set boundaries and make general rules. Most people's best friends will blood suck them dry if allowed so. You will need to learn how to deal with people. If you are not yet good enough to deal with people (because there is nothing like a company-only people) then you should align yourself with someone (you can trust !!) that is good with people.
You will need to know money. It is like electricity. When applied properly to a circuit it can do wonderful things. When misused it can cause a short circuit or shock you to death. Money is always a problem either not having enough or too much. The more money is involved the more the stress. You need to figure out how much stress you want and then in relation to that how much money. Over unity poor (well, not really poor) people are much happier than over unity rich people. Money brings out the real person in you. Some people cannot wait to feed the poor and some other bastards cannot wait to evict the poor. You will only really know someone well if that person gets really rich. A person's inhibitions disappears. Your best friend might turn out to become your worst enemy. You, yourself, might turn into the bastard your mother would be ashamed of when you become rich. The first thing to do with money is to know how it flows. If you do not know all about money management then you must align with someone that knows.
You will need to know the law. Without the law you own nothing. The main problem you will face is that all the big entities will know the law. It will be like travelling forward in time a playing a new form of rugby 200 years from now. You will be causing penalty kicks and will be eventually be sent off the field. Many people in business know about the basics of law like simple contracts, not to steal etc... But the lack of knowledge in general is the cause of major stress in our lives. People work overtime, pay too much tax and are exploited to the nth degree. The law becomes something that is to be feared. Many times you will find somebody working his fingers to the bone because he is scared to be taken to court, meanwhile him client is already taking him to the cleaners. If you don't know the law then align yourself with someone that does.
You need to present a full package: Without a full package you will not make a profit. The other day I went to buy a new laptop and saw several fancy models at a fraction of the retail price on sale. People did not want to buy them, nor did I, because there was no guarantee available on the demo models. Car manufacturers provides service centres with motor plans, certain PC suppliers supplies on site servicing. If you sell e.g. PC software then you need to add so much more than just the software. Just think of manuals, boxes and other packaging, support, upgrades, sorting out compatibility problems, credit card sales etc... At the end of months worth of work you could end up with only one aspect of your product and end up with no money with no future sales in sight. Big companies have all these things and that is why they are growing bigger. They operate at over unity. When you work at a company that is making money, maybe designing circuits, you can't understand why you can't make money at home. Maybe you do sometimes but not regularly. Thing is that you are just a part of the process. The thing you think is the core of the product only appears so to you. The lady in finance also thinks she is important...and she is. So if you are not capable of presenting the full package then align yourself with someone that does.
You need clients: Without clients you will get no money. There are many different kinds of clients. In my electronics field I have found that I could sell an ugly but sturdy metal box for military applications for 10 times more than a circuit in a cheap plastic box with 10 times the components. You need to know who your target market is and what you can charge. You also need to know what the customer expects for that extra 9x of the base price. Clients are people and people write the cheques. You need to know what appeals to them. Would you sell your product to your mother via a sales person? How would you go about finding out what they want? How do you convince them to buy from you? What type of personality do you need to sell? Tip: You cannot please everybody, but then you must at least try to please some. You could write a number 1 hit song and still the majority of the world will hate it, but you will have obviously impressed a few million out of the 6 billion people. If you do not know what the client wants (lack of marketing) or cannot sell to clients (sales) then align yourself with someone than can.
No where did I mention the requirements for technical skills, money or resources. The above only covers the basic knowledge needed. In fact I know a few people that made money off me without any technical skill, money or resources. In fact I was the resource...but I didn't realize it until it was too late.
10 years ago I tried to make money with just technical skills and I failed. 5 years ago I tried to make money by finding people to manage my financials, presented a fuller package and found people who got me more business and I made lots of money. After that I partnered with a man with no technical skill, money or resources. He claimed to know how to handle money, obtain clients and did not care about a full product package. We made lots but lost it just as quickly. Bottom line: You need people, but you also need the right people.
So how can you take your skills and apply them effectively? (1) Partner with a trustworthy person or organization (2) If you do not know the latest tax laws and financial planning then get someone to help you (3) Get someone to tell you your rights and compile contracts for you (4) If your circuit requires a box, books, CDs etc... then get the right people to help you. (5)Market and sell effectively.
This sounds all wonderful but normally you would need heaps of money. In fact this looks like getting a partner (50% cut), getting an accountant, getting a lawyer, contracting more engineers and manufacturers and even more marketing and sales personnel. This could cost you millions a year before you even sell the first unit.
But imagine you were part of a group of experts. We ask you to lay out a small PCB. There might be a small NRE contract. Imagine your cut in the production deal is R10 and the group sells a 1000 units. That is R10 000. Later on we sell some more and because you are part of the group you are eligible for more R10 payouts. You did not have to get a plastic mould made, write software or anything else. Plus you cannot get fired or be late for this job. The only requirement is that you are available for upgrades when required. If you refuse then someone else will get the job and your production profit goes down, but would you want to?
In effect it will be like being part of a company, with all the required departments, without any capital outlay required from your side. You will be working from home choosing your own hours and getting paid for past work. If you get a good idea or a client, that is beyond your capability level, then you can still tender for a contract knowing that you have the backing of the group. You will be making less per unit but you will probably see more sales and have a greater chance of success.
Solution?
I had a meeting with a good friend over the weekend on how to involve designers over the country (and even the rest of the world- if the deliverable is email-able). Almost all the people I know owns a PC, most of the electronics guys have oscilloscopes, mechanical guys lathes etc... But 99% don't seem to be able to make money with their skills. Eventually these people just say that they are doing it for fun. I guess if you tell yourself that for long enough you start to believe it.
We discussed, in depth, the problems people face 'getting there'. These include:
How can I sell my skills?
How to setup contracts and boundaries with a client?
How do I get my money?
How do I guarantee my work and where do my liabilities start and stop?
etc...
After a few hours it became evident that most of the problems are not the technical but rather the financial and legal side. It would be fairly obvious that if a designer got a R50 000 deal and finished it in 30 days and then received his money, in full, after another 30 days would be able to survive indefinitely. But most designed don't get that far. They spent countless hours learning new tricks and then basically hand it over to a shark for free and never see their money. Many things that are quite natural to me, like get the client, sign the official order, do the work and get the money, is not that obvious to other people (and even I get screwed over occationally by fast talking crooks).
Now why spend years of suffering to learn the tricks of the trade?
I get lots of emails to info@zerksus.com with CVs. This site only serves a few people and gets about 200 to 400 regular (unique) visitors per month. The new visitors all send me CVs because they think I know people (which I do). But helping them does not necessarily help me. Why try and get someone with skills into a paying job of which I see nothing?
Where am I going with all of this?
The basic idea we were discussing was to offer contract work to people out there... 'there' being you, capable of doing something but never getting the chance. Also in reverse... if you get a contract or client and you don't know where to start then you approach them with our company front. Before you read this a go: "Oh, no! you are going to steal my money and customer, no way", then just stop and realize that you might only have a 20% chance or less to make a success. Big business out there does not want to talk to individuals. You are either not BEE or too small or to this or that. Even if you get the contract for whatever then you still need to do the work and invoice, get the money and hope you never get help liable for future damages. Most of the time your multi-million Rand/Dollar scheme is lost right in the beginning... and you wouldn't even notice it until it is way too late.
The question you need to ask yourself is if you would settle for a fair percentage of a lot of money compared to 100% of nothing?
We have not officially started with this project, although I regularly contract to a bigger company that does exactly the same, but we are willing to listen to a few suggestions and would like to know who might be interested.
Business opportunities present themselves in many different ways. You might have an idea, someone might approach you etc... Here is something to remember: You will only make as much as you ask for. If a client asks you to design a door bell and you have this mental picture of R10 per unit then your profit will come out of that R10. Eventually you will find your client selling it for R199 and you will be upset. So you will be getting your 100% of the small profit (if any) in the R10 product. If you approached the client with a better proposal it might have been a large percentage of the R199.
If a client isn't really prepared to pay anything for development but you are scared to drop the project then you have a problem. Many times you don't know your legal rights. So many times have I been held hostage because the idiotic, 2 cell brain leech claims that something as simple as the door bell was his genius idea (and by utilizing my years of experience and extensive tool base). And in addition these lame brains then actually think they can take legal action when you try to salvage your costs by improving and selling something you basically did for free.
What we are planning:
We will front the company.
You will either be a resource that we will make available OR you will be a person with an idea or client.
In both cases in 2 we will setup the legal documents in place to protect both parties. Also at this stage we will weigh any ideas presented to us. Many times people have approached me with ideas that I already had in product form claiming it is the 8th wonder. Thus, we would protect you from making a fool out of yourself in front of your prospective client. Keep in mind that most things you can think up already exists somewhere. Things, that will be seen as new, will be the cure for HIV/AIDS, cheap free energy and the like. The product or technology is not the focus but rather the market. During these negotiations we will assess your level of qualification as well as hourly rate.
The board of the company will approach the client and negotiate terms. We will decide if it is a worthwhile venture or not. We will obtain the required funds from the client. If you brokered the initial deal or idea you are allowed to come along but will have limited say. During the initial meeting we will assess if the project will be development only, production, warranty/guarantee required, royalty generating etc... Will the client pay for development, where will the the IP reside etc... We will also negotiate the 'divorce' procedure when one or more parties decide to leave as well as what will happen when a party passes away.
We will handle all financial transactions negotiating for quicker payment from the client and facilitate payment to the contract workers.
We will handle all aspects of the project regardless of the skills of the idea generator. Each software design, as example, requires a circuit board and a mechanical box, packaging, documentation, shipping, serial number database, helpdesk and a zillion other things that you normally do not think of. It will be these things that will kill off your genius idea or hamper you if you are only skilled in a few things and attempt to do it on your own.
Contractors will be awarded points. The better you perform (quality and on-time) the better the chances of getting a follow-up contract.
The idea is to get a higher probability than 10% to 20% to get money from a client or deal (and sustained business) rather that doing a fly-by-night operation and getting nothing. Our job is to broker the best deal and to sift out the scum that would have cost you all you had. There will be no offices apart from the headquarters of the directors. Each person must have his/her own facilities, including PCs with own software, internet connection, tools of the trade and spare time (we will provide an email account and business cards). We are basically interested in your spare time (e.g. 2 hours in the evenings and 8 hours over the weekend).
Areas we are currently interested in:
Embedded design (PICs, 8051, etc...)
Windows/Linux programming. (all fields)
Mechanical design and manufacture (or the overseeing of manufactured parts). For electronic manufacturing we already have several suppliers, but we might need people to occasionally build up and debug a circuit.
Documentation. Help files, user manual, datapacks etc...
Legal assistance and documentation.
Financial expertise
Project managers. We currently do most of our own project management and systems engineering but you never know.
Procurement. Yes, we many times need someone to go and buy the right type of transistor.
Why would you join a scheme like this?
Instead of spending countless hours, tinkering away at some genius idea, we propose that you make something worthwhile and get connected to a bigger group of geniuses.
Joining such a group cost very little or no money. You only contribute when you work and earn money.
You get paid when you work and you only work when you are contracted or in the mood.
You use your time more effectively. (thus less TV, booze etc..)
If you only have limited skills then you can think bigger because the group, you belong to, will have more skills available to produce a rounded off product.
The chance of actually getting money is increased significantly compared to doing things on your own.
Yes, I still know people. I regularly get called by head hunters for job placements. Somewhere in the future I might land you a dream job just by having you on my list.
This is still a concept idea. Please email me for further questions.
Please email me at victor@zerksus.com or info@zerksus.com for more information.