Understanding commercial issues for an IT consultancy business

Leeds Source-IT

Alison Marshall

4 November 2009

Workshop overview

Understanding the market and marketing issues – how to get customers.

The economics of consultancy – how do people make money?

Contracts and legal issues – how to make sure you get paid for what you agreed

Working with clients – do’s and don’ts

Section 1

Understanding the market and marketing issues – how to get customers.

The economics of consultancy – how do people make money?

Contracts and legal issues – how to make sure you get paid for what you agreed

Working with clients – do’s and don’ts

Core competence

Strengths

What can we do better/faster/cheaper than the competition?

What specialist equipment, contacts, know-how, intellectual property do we have?

Weaknesses

What is going to limit what we can offer to our customers/

Source-IT core competence

Strengths

Weaknesses

The competition

Who are our main competitors?

• Think about solutions that solve the problem in a different way, not just direct competition.

How do we differentiate ourselves from them?

SWOT Analysis

Strengths

Internal - core competence, brand, relationships etc.

Weaknesses

Internal - limitations

Opportunities

External – factors that create new or grow existing markets

Threats

External – competitors or changes in the external environment

Our brand?

What does it signify to a customer of Source-IT?

http://www.leeds.ac.uk/identitymanagement/

Targeting

Who are our target market?

How do we reach them?

Which of the ways of communicating are right for Source-IT?

Do we need different plans for different market segments?

Section 2

Understanding the market and marketing issues – how to get customers.

The economics of consultancy – how do people make money?

Contracts and legal issues – how to make sure you get paid for what you agreed

Working with clients – do’s and don’ts

How do IT consultants make money?

I want to earn an equivalent of £30,000 per year.

I want to have 5 weeks holidays.

I will work 5 days per week, 8 hours per day on average.

Costs

My costs will be:

Salary = £30,000 + 11% NI = £33,300Premises, heat and light etc. = £8000Travel to customers, stationery, advertising, marketing literature, telephone etc. = £3000*Computer – hardware and software (per year) = £2000*

TOTAL COSTS = £46,300

*sometimes businesses separate out ‘start up’ costs to cover initial set up costs, which reduces the ongoing annual costs you need to cover. In this case, you need to think how and when you are going to get a ‘return on the investment’.

Daily rate

After deducting 25 days holidays, 8 days public holidays, I will work a total of 227 days.

I expect to need to spend 0.5 days per week doing business admin and 0.5 days per week on sales and contract negotiation.

Hence I have 182 ‘fee earning days’.

So I need to charge £46,300/182

= £254 per day.

Variations

Start up and operational costs

Companies with several employees – eg. 2 consultants, plus an administrator, plus a sales person.

Work from home (or the beach?), earn less/more, work longer/shorter hours? Think about your marketing strategy, who your customers are etc.

Source-IT daily rate

We will operate a daily rate of £295 for costing purposes (but will charge on a task basis, payable on satisfactory delivery).

This is made up as follows:

Consultant fee = 7.5 x £17 = £127.50NI = £14.03Legal fees to Consulting Leeds = £29.50Space and other charges to SoC = £15.98Branding fee to University = £14.24Support costs = £15.00Marketing costs = £28.85Management time (including sales and negotiation) = £64.90

We have some margin for negotiation – eg. can offer a discount to internal clients as we don’t need to pay the Consulting Leeds costs.

Section 3

Understanding the market and marketing issues – how to get customers.

The economics of consultancy – how do people make money?

Contracts and legal issues – how to make sure you get paid for what you agreed

Working with clients – do’s and don’ts

Intellectual property and confidentiality

Simple messages -

The customer is going to make money from the software we provide.

They cannot do this if their competitors can see the code or know the algorithms used etc.

However, we have some ‘background IP’ which we may want to use on other contracts.

We protect them and us by agreeing terms.

Legal and contracts

A contract states what each person is going to do (eg. consultant does work, customer pays).

It is legally binding – if either party breaks the agreement, they can be sued.

Professional indemnity insurance – protects the consultant if something goes wrong as a result of their work

Legal fees – if the customer defaults on paying

We use Consulting Leeds to cover all the above (see http://campus.leeds.ac.uk/kt/consulting.htm)

Further work – look at the Consulting Leeds customer terms and conditions and the Leeds Source-IT consultant agreement – look at how these cover the above.

Section 4

Understanding the market and marketing issues – how to get customers.

The economics of consultancy – how do people make money?

Contracts and legal issues – how to make sure you get paid for what you agreed

Working with clients – do’s and don’ts

Contractual relationship

The Client

User requirements discussed with Royce

The ContractSigned agreement of tasks, pricing and schedule

Source-IT team

Delivering the work

Key points

The relationship is with Source-IT, not with any individual

The person who is responsible for negotiating terms with the client is Royce

The client is the person who is paying your fees

So….

• Act in a professional manner to reflect and represent Source-IT’s reputation

• Be polite and courteous at all times to the client and to your team colleagues

• Don’t agree to do any task for the client that has not been agreed with Royce

• All communications need to go through Royce.

Golden rules for client meetings

Preparation• Check what you had agreed to do for the meeting!• Get any demo ready in advance, set up on your laptop or on the

computer in the meeting room• Bring pen and paper to take notes

The meeting• Turn up on time• Be professional and business like• You are there to answer technical questions• Make sure you understand what you have been asked to do – ask

questions to clarify if you need to

After the meeting• Check you know what actions you have been given• Update Redmine

Client demonstrations

Set up in advance and then DON’T DO ANY MORE WORK ON THE CODE

Show only what you know is working

Have your questions for the client ready

Be honest if you are behind, but don’t draw attention to problems unnecessarily.

Mission statement

Leeds Source-IT’s mission is to provide robust, reliable and quality assured software engineering solutions to external SMEs, other organisations and to University research groups.

Source-IT Objectives

Profit – To be self sustaining and cover all direct and indirect staffing costs, including those payable to University of Consulting Leeds Ltd space and support services.

Growth - To grow the business to a level that it will support a full time manager within 2-3 years.

Strategy - To meet the University’s strategic objectives to increase enterprise activity (Theme 9 of the Leeds Strategy Map), to increase the number of staff involved in enterprise and to enhance the student experience (Theme 10) and provide an exceptional learning experience (Theme 8).

Key factors for success

Quality and excellent project management at all stages.

Clarity and shared understanding of client requirements.

Full documentation and a commented code repository for all projects to ensure that follow on work can be effectively undertaken, if necessary by different consultants.

Task based pricing and payments to consultants and clear agreements on timescales.

Clear marketing messages to differentiate ourselves from the competition.

Final thoughts

Do you agree with our business strategy for Source-IT?

Do you have any ideas to help get business for us?

Would you want to set up your own consultancy one day?