How would you handle this?

[davidjmedlock]

Okay, so I'm moving to a new job starting next week. It's a great job with a small company. I'll be telecommuting and making more cash than where I'm at. Right now, I'm working for a very very large publicly traded company (billions per year...) and believe it or not, I'm the only dedicated web developer. They've got tons of projects and work that they will need help maintaining until they can get a solid team of developers built and when they do have a team together, they will need me to do a knowledge transfer as well.

I'm leaving this company on excellent terms. I've been told that if things don't work out, I can come back. I've also told them that I'd do contract work for them as well. So, here's what I'm thinking of doing:

Contract on an hourly basis, with a maximum number of hours per week that I'm available to work. (This other gig is full time and I don't want two full time jobs.) I'm thinking of giving them two options:

1) Pay on an as-needed basis $XX per hour. I invoice twice per month or weekly, at their option, and they pay within XX business days. This gives me more cash, but none up front necessarily. (I'm not worried about them not paying, it's a very good company that takes care of their people.)
2) They can pre-pay for time in 10 hour increments at a discounted rate of $NN per hour. Pre-payments would be due by the first of the month in which the hours will be used. Hours not used that month will be carried over to the next month but will expire within 60 days. This has the advantage for me of having cash in hand up front and it saves them money on the total development.

I know that they've got several large things that they'll need done and the knowledge transfer will take quite a bit of time as well, so I'm sure they'll be utilizing my services.

Also, if I need to travel to their offices at any point, would you recommend charging for travel time? (It's about a 20 minute drive up here...)

TIA

[realestate]

I guess employer decides on all these.

[davidjmedlock]

I guess employer decides on all these.

Well, as an independent contractor, I do have some leverage here to work out the terms. These are the options that I'm considering offering to them. My question is: Which one of these would you all prefer to work with as a developer? (If you were in my situation...)

[ses5909]

I would do option one. If you know how much help they would need, you can make more money this way. With the incremented hours, you might run into the problem that these hours are going to expire in 14 days, and they have 40 hours of work they want to have done before the hours expire. You may have something going on during that time that you cannot focus that amount of time to the job.

[fumbler]

i would go with option 1 as well. I would ask them about them paying for your travel time or atleast paying for your milieage. you do have the right to charge for your time which includes travel time - a lot of ppl do it. it is an expense of both time and money to you.

i would ask them what feel comfortable in paying. have you thought about saying, you will work and bill on an hourly basis up to XX hours and anything past that would be more (such as 1.5x)? it might deter them from abusing your wishes of not wanting to work two full-time jobs while still being available as a resource in "emergency situations" where you'd make more cash.

you may want to even bill them in 15 minute increments. you said they're creating a team that you need to do the knowledge transfer and i'm sure you'll get a few calls for support that you should be charging for as well. if the company is as respectable as you're making them to be, i dont think what you ask for should be unreasonable provided they understand that your time is limited and valueable. good luck!

[DougBTX]

2) They can pre-pay for time in 10 hour increments at a discounted rate of $NN per hour. Pre-payments would be due by the first of the month in which the hours will be used. Hours not used that month will be carried over to the next month but will expire within 60 days. This has the advantage for me of having cash in hand up front and it saves them money on the total development.

Too much time keeping... KISS etc.

[WealthStream]

I perfer option #1. You make more money, and it's less complicated for everyone involved.

[WDM]

Certainly bill for your travel time and certainly do it in 15 minute increments or if you want to be like an accountant bill them for every 6 minutes

Also seeing as its just one client I would go with option 1 as well.

Your in a great position to be in. Congrats.

[davidjmedlock]

Thanks for the feedback, guys. I think that the second option came up because I figured that if they prepaid for an entire month then didn't use all the hours then it would result in a little extra here and there, but you're right, it is too much work to keep track of it all. It was intended to be somewhat of a retainer, but I'll just work on an hourly basis. I definitely plan on billing in 15 minute increments to account for the odd phone calls here and there.

Thanks again!

[ses5909]

Having the second option s a good way to do make extra money if they don't use it all. I've run into clients who get upset when the hours are about to expire and I don't remind them. But you could do option one for say 5 hours a month, that way if they come to you at the last minutes, it is something that is managable for you.

[LiquidReflex]

Since you already have a good reputation with this company and they are willing to work with you (without you giving them any incentives), I would go with the straight hourly.

The pre-pay option with the discount can help make you a little money if they don't use you much, but this is usually only the case for smaller clients. The key to option 2 working is the fact that they want the security of knowing that they can call you to do work (since it's already paid) and that they get a deal on the time. However, most "everyday" clients don't need 10 hours of work done a month ... so you end up ahead.

As for travel (and other oddities like phone calls, trips to Kinkos, etc) I would include a basic fee which covers X number of items. For example, each month there is an $X fee for 4 trips to the office (once a week), 4 hours of phone support, etc. Anything over that is billed at $Y per trip and $Z per hour of phone. I have experienced a client that hired me as a contractor but always wanted me to be working at their office (maybe it was a control thing or just so they could easily throw more work at me). It took more time out of my day (travel) and actually made my time less productive because of extra interruptions by the client. Either way, I told them I could visit their office twice a month to have a meeting and go over any projects, but other visits would be extra. They didn't like it, but that extra time is billable hours that you are losing out on (40 minutes a day at least) so to expect that is "free" is a bit naive.

How much ... now that's a tough one. I do believe that a couple should be included at "no cost" (I put that in quotes because I figure you're hourly fee should have a buffer on it anyway so it is sort of covered). I'd figure out mileage you get for your car, figure in a gas average and see what that amounts too. You don't want something real high because you'll look like you're trying to screw them, just a little to make it a little less costly for you to be working with them.

Sounds like a good deal you got worked out though. Anytime you can keep work from a business you trust is a good thing!

[Grademedia]

The decision has to be based on whether you expect the company will need your services for the full X hours of allotted pre-paid time if you choose option 2. If they only use some of it then you get paid at a higher hourly rate (and can still convince them that they're getting a deal because this way you guarantee to set aside X amount of hours out of your busy life to work for them as required). If they use all the pre-paid hours every month then you're being paid a lower rate. Only your judgement based on your knowledge of the company's needs can tell you which scenario is more likely.

[davidjmedlock]

Excellent advice, Kevin. That's a good way to look at the additional expenses.

Grademedia, I know that at first I will be needed quite a bit. Within two or three months, maybe four, it will be down to incidentals. I fully expect that my role here will be phased out well within 6 months, which is fine with me, really. I'll probably try to get one other consulting client lined up between now and then anyway, just to keep that bit of extra income on the side. So, maybe I will look at a flat monthly fee or retainer type of compensation schedule later on down the line.

Gratze!