Investment For Web Developer

[ukwebdev1984]

Hi

I am not sure if i am posting in the correct form here.

I have been a web developer for 8 years commercially. I have contracted directly for a number of different companies and also worked on a lot of freelance projects.

The issue is, being on my own makes it very difficult to be able to build a business with enough funds to employ some more people. Without the man power i am never going to get anywhere. I can only really take on enough work to pay my own living...not really what i am looking to do!

Right now i want to have another developer and a designer work with me full time while i focus on bringing in the work. However I need money to be able to pay their wages.

What would, if any possibility, be the best way to find investment to allow me to expand the business like mentioned above? I would only need to have available enough cash to purchase equipment for the two new staff and enough to cover their salaries for a year. With these involved i can bring in at least twice as much work , hence making twice, if not more money without having to worry about running out of funds to keep the business running.

Ideas?

Thanks guys

 

[Alan]

Have you thought about rather than employing people, find some sub contractors that you can trust and outsource to them. That way you are only committed to the projects you bring in, not risking having staff on the bench.

Covering two staff for a year, office and equipment is what £80-100k?

 

[ukwebdev1984]

Thanks for the reply.

I am not too fond of outsourcing, especially to off-shore developers. No intention to be racist here, although from experience I have never had a positive outcome from outsourcing. It would be more preferable to have the team in the same office to monitor and manage everything easily.

£80k would be a little steep, maybe looking around the £55k mark.

Chees

 

[ukwebdev1984]

Thanks for the reply.

I am not too fond of outsourcing, especially to off-shore developers. No intention to be racist here, although from experience I have never had a positive outcome from outsourcing. It would be more preferable to have the team in the same office to monitor and manage everything easily.

£80k would be a little steep, maybe looking around the £55k mark.

Chees

I apologize, with myself on top of the cost it would be more like £80k

I haven't worked out my final figure yet, but in 2012 the business brought in roughly 25k on my own. Seperating tasks would allow for more turnover of work in shorter periods.

 

[Alan]

Yes outsourcing offshore is a risky business especially for smaller businesses without experience, however there are lots of UK businesses that provide specialist work that are of high quality. The profit margin may not be as high as using your own staff but it is still a relatively risk free way of expanding.

 

[S-Marketing]

The beauty of small service based businesses is that they can be started with next to no investment. Needing to find 50 k plus for a business like this is just daft. Get your marketing right and you can get to where you want to be with no more than 2k to play with.

 

[ukwebdev1984]

The beauty of small service based businesses is that they can be started with next to no investment. Needing to find 50 k plus for a business like this is just daft. Get your marketing right and you can get to where you want to be with no more than 2k to play with.

Now this is interesting! I am a web developer (programmer etc) and my marketing skills are not exactly brilliant. I usually find work by simply contacting people that post around the web needing work doing. I would prefer to have some proper marketing setup...however budget would be very low and adwords baffles me.

As far as 50k plus, it would be more of a fact of financial security rather than having to worry about paying the bills every month, i would rather focus on bringing the work in constantly. Obviously the team would again need to expand, but the extra initial help would make things much easier and quicker.

As far as outsourcing, i also tried sending off the marketing as an outsourced task and ended up seeing irrelevant results. I paid the guy to do seo. Sure the traffic was coming in, but it wasn't targeted properly.

 

[Alan]

Maybe I should make up some rules-
"never outsource what you don't undertand"
"never outsource what you can't measure"
"never outsource without properly evaluating and doing due diligence on the provider"

I'm sure there are some more.

Maybe I shouldn't have suggested it

 

[ITsoldUK]

8 years ago did you not write a marketing plan?

If not, then stop looking for investors now would be my advice and write one...you will be amazed at what you discover about yourself and your business direction from this plan.

As for investment for this type of business, really? Forget it. It is NOT going to happen in this lifetime or the next.

A saturated market with too much global competition and no discernible USP to prevent competition overlap...no investor is going to touch it.

Regards
Daren

 

[S-Marketing]

Now this is interesting! I am a web developer (programmer etc) and my marketing skills are not exactly brilliant. I usually find work by simply contacting people that post around the web needing work doing. I would prefer to have some proper marketing setup...however budget would be very low and adwords baffles me.

As far as 50k plus, it would be more of a fact of financial security rather than having to worry about paying the bills every month, i would rather focus on bringing the work in constantly. Obviously the team would again need to expand, but the extra initial help would make things much easier and quicker.

As far as outsourcing, i also tried sending off the marketing as an outsourced task and ended up seeing irrelevant results. I paid the guy to do seo. Sure the traffic was coming in, but it wasn't targeted properly.

If financial security and no risk are at the top of your wish list get a job and forget the idea of building a business.

Sounds to me like you have outsourced your marketing to the wrong person. Marketing a business like yours is fairly straight forward, and is the key to expanding with minimal outlay and risk.

You seem to be of the opinion that you need to be able to cover your costs for a whole year to be financially risk free. This would only be true if neither you nor the employees did any paid work for the entire year.

As ITSoldUK said, you need a proper marketing plan in place.

 

[businessfunding]

You are probably getting the drift now, but just to clarify, this is not I viable investment proposition for either party.

In the unlikely event that you found a benefactor you would end up with a small portion of your business and £55K which would almost certainly be wasted.

The big step you need to make is to understand the difference between doing your job on a self-employed basis and running a business.

Step one is to create a coherent business plan, taking account of both marketing and financial aspects of your business

This business should be scaleable either organically or with a small amount of debt finance

 

[Deleted member 27344]

Why do you need full time staff at around £80k?
Why only think of outsourcing as an offshore item?
There are plenty of UK based freelancers.

And - presuming someone invested £50k in your business, what would they get in return?

Have a read of this article - I know you're not a start-up but I think there's some relevant points for you to ponder.

 

[PDRD]

What you need to do is save some cash up and get a business loan. Use the loan to buy equipment and cover 2-3 months wages. After these 3 months if your employees have not completed any fee paying work then you are on the wrong track. They should be earning you enough money to at least cover their own costs plus the loan.

Sent from my GT-I9305 using UK Business Forums

 

[ukwebdev1984]

Thank you for all the tips so far. I now realise that it is me who has been conducting things wrong. Rather than working solely on projects and having to use the entire business income just to live i think the outsourcing idea may work if i do it correctly.

As far as a business/marketing plan, i think i should take the time to do one. However, as said the market is so saturated it is not entirely going to work as the business i get is not always from the same business sectors or anything like each other.

Ok now I have some questions to get along with outsourcing. I quite like the idea of peopleperhour as this site is mostly Uk based, bonus for a start! And these freelancers will do the work for next to nothing!

So i am wondering how I would proceed with that. Should I continue to take on work based on my experience and my costs and add say 30% markup for my business...then use the main quoted amount to potentially employ a freelancer? I am sure on people per hour I can get the work done for at least 50% that i charge so that's quite a profit! Uk developers are always good for a) Meetings b) Phone calls c) They speak and understand English properly so i don't have to work out how to explain things. A friend of mine is a designer so i have no worries when it comes to graphics and he is usually pretty cheap for me.

Everything can be managed through some free project management software, and Amazon provide a free tier on their servers, which would be a great start for a project development server.

I think a reasonable year profit goal for 2013 would be £3000 which would of covered all my expenses, including my own wage leaving £3k at the end of the year...maybe ill make more but this amount should be easily done and expandable for 2014.

Any other advice would be greatly appreciated!!

 

[S-Marketing]

How much are you planning to take from the business to cover your own personal expenses? I hope a fair chunk if you only expect profit after this to be 3 k.

 

[PDRD]

I always wonder why so many people on pph are so cheap. If they charge so little why can they not get their own work through the usual channels?

Make sure you check them and their work out properly. Too late if they do a bad job for you and you have to redo or compensate a client.

I outsource some work to an old collegue who I worked with for 10 years so I know what I am getting. Unfortunatly I am now paying him £17 per hour so am thinking of getting an employee.

 

[ukwebdev1984]

How much are you planning to take from the business to cover your own personal expenses? I hope a fair chunk if you only expect profit after this to be 3 k.

At the moment i only expect to take £600 per month personally, i can live off that until things build. My business will need normal expense of around £600 per month so in total the business needs to make roughly £1200 before making any profit give or take a couple hundred.

I have no idea where i got that £3000 from lol I just worked it all out and average project will bring in roughly £1000. My aim is to bring 10 per month (maybe split with 5 reliable freelancers) so that's £10,000 + 30% markup £13,000. So i have there £3000 - £1200 expenses leaves the business with £1800 in profit every month. Thats going to make around £20,000+ per year in profit...where did i get this 3k from lol

 

[ITsoldUK]

Have you managed to bring in 10 per month at any stage during the last 8 years?

 

[Alan]

Unfortunatly I am now paying him £17 per hour so am thinking of getting an employee.

Where I live you have to pay £17/hour for an unskilled person to push a lawnmover up and down the garden!

 

[ITsoldUK]

Where I live you have to pay £17/hour for an unskilled person to push a lawnmover up and down the garden!

Bit harsh...gardening is a skill!

 

[Alan]

I didn't say anything about gardening. I'm talking about a bloke that pushes a lawn mower up and down the garden. Gardeners start at £20/hour.

 

[ukwebdev1984]

Where I live you have to pay £17/hour for an unskilled person to push a lawnmover up and down the garden!

Web developers (freelancers) are paid between £10 and £25 per hour usually. If i can grab some good ones for £15 per hour i can easily charge £20 - £25 for the first year and increase as the client base does.

 

[ukwebdev1984]

Have you managed to bring in 10 per month at any stage during the last 8 years?

Of course! I just stopped doing it because it was far too much work for me to manage on my own, hence why i want to go from being a freelancer to having a business that has the capacity to take on this much work.

 

[Alan]

Where I live you have to pay £17/hour for an unskilled person to push a lawnmover up and down the garden!

My main point is if you got a UK developer at £17 per hour, that you know and trust, that is a pretty good in my opinion. To get a better rate from an employee you would need to pay them less than £35,000 (approx) p.a. and utilise them 35 hour per week.

According to CW jobs the UK average HTML developer salary is £42,500 with a range of £37,500 to £52,500.

So the concultion is you would need to get a pretty junior, or underpaid (and hence risk of them moving on quickly) developer to replace your reliable, trusted £17 per hour guy.


Then this data begs the question why ukwebdev1984 can get freelance developers for £10 - £25 / per hour?

Especially as a contractor (rather than a jobbing freelancer) the UK Average is £40/hour. Even taking regional variations, this only drops to £35/hour.

The economics here is rather strange, as you would anticipate a jobbing freelance to charge a premium (as they have to cover 'bench time' and the additional cost of marketting that winning small jobs involves), this is true in other professions.

I have a theory that these 'unnaturally low rates' for jobbing freelancers is mainly driven by the fact that UK freelancers advertising in this range generally are
1. doing it for life style reasons, trying to avoid being commuters / wage slaves and having flexibility in when and how they work
and/or
2. trying to establish their credibility
and/or
3. having to compete with low offshore rates (where in the UK £5/gour is not a living wage, in India, for instance, it is the wage of a highly paid professional), as many of developer jobs can be done remotely, global economics come into play, ably assisted by the job boards such as elance, people per hour, freelance, odesk etc.

I would argue that creating a business that relies on subcontracting to UK developers at 'unaturally low rates' may not be as good an idea in the long term than subcontracting offshore and making use of global economic differences. (accepted that there are management issues subcontracting off shore, but in volume, these extra management costs are more than covered by savings)

Please don't shoot me down for any errors in my facts, or my theories, it only makes me grumpy but would welcome constructive debate

 

[PDRD]

Maybe I should have added that the £17per hour I pay a freelancer for is not a developer. It is a completly different market. I was just making the comparison to the OP that having a 30% mark up on sub let work is sometimes not worth the effort and risk. The average wage for a draughtsman like I sub to is about 25-30k.

Sent from my GT-I9305 using UK Business Forums

 

[ukwebdev1984]

My main point is if you got a UK developer at £17 per hour, that you know and trust, that is a pretty good in my opinion. To get a better rate from an employee you would need to pay them less than £35,000 (approx) p.a. and utilise them 35 hour per week.

According to CW jobs the UK average HTML developer salary is £42,500 with a range of £37,500 to £52,500.

So the concultion is you would need to get a pretty junior, or underpaid (and hence risk of them moving on quickly) developer to replace your reliable, trusted £17 per hour guy.


Then this data begs the question why ukwebdev1984 can get freelance developers for £10 - £25 / per hour?

Especially as a contractor (rather than a jobbing freelancer) the UK Average is £40/hour. Even taking regional variations, this only drops to £35/hour.

The economics here is rather strange, as you would anticipate a jobbing freelance to charge a premium (as they have to cover 'bench time' and the additional cost of marketting that winning small jobs involves), this is true in other professions.

I have a theory that these 'unnaturally low rates' for jobbing freelancers is mainly driven by the fact that UK freelancers advertising in this range generally are
1. doing it for life style reasons, trying to avoid being commuters / wage slaves and having flexibility in when and how they work
and/or
2. trying to establish their credibility
and/or
3. having to compete with low offshore rates (where in the UK £5/gour is not a living wage, in India, for instance, it is the wage of a highly paid professional), as many of developer jobs can be done remotely, global economics come into play, ably assisted by the job boards such as elance, people per hour, freelance, odesk etc.

I would argue that creating a business that relies on subcontracting to UK developers at 'unaturally low rates' may not be as good an idea in the long term than subcontracting offshore and making use of global economic differences. (accepted that there are management issues subcontracting off shore, but in volume, these extra management costs are more than covered by savings)

Please don't shoot me down for any errors in my facts, or my theories, it only makes me grumpy but would welcome constructive debate

I am affraid £35+ per hour is completely off. If you look at most jobs for a developer in my area (Middlesbrough) you will find that the usual salary is no more than £25k for an experienced developer. Some bigger companies do offer up to £35k but that is going to require some kind of degree plus experience, where as I am limited to self taught experience. I never wanted to attend university!

The offshore thing is too much hassle and has always ended up costing me dearly. Especially noticed are Indian developers. The are something like 5-10 years behind on the technology and produce shabby work that never truely is completed to the supplied specifications..never mind their programming skills lol. They code poorly to say the least.

 

[ITsoldUK]

I am a developer and you wouldn't get my services freelance or employed for £17 per hour...

 

[ukwebdev1984]

I am a developer and you wouldn't get my services freelance or employed for £17 per hour...

I agree, but a lot of people will work for less than that! Not sure why, perhaps they are dumb. I have a lot of experience and I am yet to be employed for more than £25k... maybe i was working for the wrong companies. For this money i never went beyond the call of duty as i do personally believe an experienced developer should be over £30k, it's not like it's a simple job.

But saying that i think people who serve food in a restaurant should be paid more than £7 an hour which is all most of them get, they are then treated like **** and fired whenever the boss is in a bad mood...and that job certainly isnt easy work!

 

[ukwebdev1984]

you also have to consider what is a good developer? Someone who can code and build a website is not necessarily good at programming! There are many ways to write software.

A good developer should always understand the fundamentals of programming. They should also if possible understand how the system they are pramming for working. It is not so important these days, but understanding for example how memory allocation works should be important. Back in the day writing C you had full control over everything...these days it all gets done for you behind the scenes...essentially making lazy developers!

 

[PDRD]

I agree, but a lot of people will work for less than that! Not sure why, perhaps they are dumb. I have a lot of experience and I am yet to be employed for more than £25k... maybe i was working for the wrong companies. For this money i never went beyond the call of duty as i do personally believe an experienced developer should be over £30k, it's not like it's a simple job.

But saying that i think people who serve food in a restaurant should be paid more than £7 an hour which is all most of them get, they are then treated like **** and fired whenever the boss is in a bad mood...and that job certainly isnt easy work!

So are you calling yourself dumb? :| You think people who work for a lot less are dumb yet you have not had a job over 25k which is about £13 per hour :| Am I reading this wrong?

 

[ukwebdev1984]

So are you calling yourself dumb? :| You think people who work for a lot less are dumb yet you have not had a job over 25k which is about £13 per hour :| Am I reading this wrong?

Lol no. As working for myself i charge a lot more than that. But every company i have ever worked for full time has never offered more than £25,000 in the first place, in their adverts. Maybe its the area of the country I am in, in the North the cost of living isnt really that high and salaries reflect this. On my own i charg £25 per hour...not brilliant but it helps to win the business after proving myself over someone else charging £40. £25 is not too low and not too high in my opinion.

I believe I have found out that i don't like working for a company on their books because they expect too much and are not willing to pay for it. I worked for 2 years for a local media/print company as their lead developer and when i asked for a pay rise they said they couldn't afford it...which was ********... Qdos Entertainment was the owner of the company and they make millions every year.