Skip to main content

Why not to take full payment before completing job

This weekend I finally rid myself of a headache I’ve been dragging around for the last one month. I learnt something (which I already knew but had chosen to de-learn), and that is to never accept full payment for a job before you begin. Here’s the story:

About one month ago I was giving free consultation to one of my GEC members. In the course of our consultation he inquired about SoftLaw’s data entry services. Apparently he had to populate a database daily with about three hundred records each with more than ten different columns. He was concerned about how much his part-time employee was costing him to do the job. Another problem was that he had a huge archive of data which he wanted entered into the database as well.

On further enquiry I discovered his problem had parallels to one I faced while doing some work for the Judiciary. My member was OCR scanning the property classifieds of the dailies and entering the information into an excel sheet with different columns for price, bedrooms, location, telephone contacts, description, agent etc. After formatting the scanned document he had each classified on a separate line of a text document. His employee was manually copying and pasting the data from the text document to the excel file.

Since he was a computer science graduate I asked him if he had considered automating the procedure. I found out that he even tried developing an application but each classified ad had a different format resulting in countless permutations. After programming the 14th rule for the first data type (price) he gave up on the automation angle. I asked him to send me a sample copy of one of the text file to see whether I could offer a better way of doing it.

I’m not a professional programmer, but I love the logic involved and have a particular fondness for pattern matching and string manipulation. Looking at the sample text and his requirements I figured it was a three-day job at most for me. The rules involved were complex, but I had plenty of source material to use from the previous application I developed called “Abstractor”.

Although the market price for the software should have been in the K.Shs. 50,000 – K.Shs. 100,000 (US$ 685 – 1,370) I decided to charge him a nominal K.Shs. 5,000 (US$ 68) for the job since he was a GEC member. The fee was high enough to make him appreciate the work but low enough not to be a strain to his young business. In a continent where software piracy hovers at 80%, $68 spent on software (even where it is customized) is a decent amount. I also asked him to pay in full and upfront as I did not want a situation where I’d have to chase him for the balance.

Now here is perhaps where the trouble began. What was supposed to be a three-day job took a whole month to complete, and I’ve narrowed down the reasons to:

1. Taking the full payment upfront;
As a businessman you appreciate the value of promptly paying customers. At GEC it’s slightly better since all payments are pre-payments. For software development and related types of supplies (where delivery of goods or services is required) most payments are made in parts. Usually customers will pay 50% on start and 50% on finish. Sometimes some customers will only make payment on full delivery. And even then rarely will customers pay on time; a supplier might undergo many frustrating delays before she receivers her pay.

This foreknowledge prompted me to require the full payment before I began. However coupled with reason number 2 the outcome was disastrous.

2. Charging less than the real value for a job;

What I had promised would take three days took a whole month to complete. On review of the development process though I actually realized that I had not spent more than 24 working hours on the software. With an 8-hour day this translates to 3 days. My greatest mistake though was underestimating how valuable those 24 hours were to me. Although I did not want to charge more than the nominal K.Shs. 5,000 for developing the software the opportunity cost was almost ten times what I was charging. Finding a compromise proved extraordinarily difficult as I had to prioritize my time. I also had very little motivation as the entire price had been paid. This had a much greater effect than I imagined. I was trying to find time to do something for which inadequate consideration had already been satisfied.

All in all though, it was not too bad of an experience. I learnt a lot, got insights for my future consultation with other clients, and enjoyed the programming.


Anonymous said…
I can't agree with you more Harry, as a business consultant myself, I have been in the same stuation before. by the way i like you blog, we have a similar blog, maybe we could work out something, our blog is
radicallysaved said…
I agree...underestimating the amount of time can be very costly since developing the app is only about 20%. 80% goes into planning the logic.

Popular posts from this blog

Cyber Cafe with an EDGE

Followed up from Laying the Groundwork for a rural cyber I've finally got around to writing this. Thanks for you all who patiently waited. Although I approached the project as an "internet consultant", I soon realised I would need to implement the whole spectrum of tasks required to get the cyber running. I spent almost a week laying the structured cabling, installing the software, and configuring the network. Most of the work I was doing for the first time (e.g. drilling holes in concrete to fix the trunking screws) and most of it was hard, but all of it was enjoyable. I needed to prove the project was implementable with minimal human resources (if it was going to work elsewhere). With an eye on both troubleshooting by the owner and future projects I prepared detailed How To manuals for most of the tasks. So the day finally arrived, November 17th I connected all the PCs to the internet. The results were incredible, the speeds were nearly as good as my 256K broadband conn

Differences between a Business Name (Sole-Proprietorship / Partnership) and a Limited Liability Company

While consulting for our online company registration service, Incorporator I find myself answering the question "What is the difference between a sole-proprietorship and a company?" Anybody who is considering starting a business must consider what type of business structure is needed for his or her particular situation. In Kenya there are three types of structures that one can use to start their business. 1. An LLC, or Limited Liability Company 2. A sole proprietorship 3. A Partnership A Sole-proprietorship and a Partnership are registered through the same manner (Form BN/2) with the exception that a partnership has more than one owner and although not necessary, entrepreneurs are advised to register a partnership deed as well. In this article all references to sole-proprietorship also include partnership. Understanding the advantages and disadvantages of each structure is important when deciding which one you want to use for your company.

Selling stuff online to Kenyans

You might not know this but my love of entrepreneurship is fuelled majorly by my love of computer programming. My first exposure to computers was in 1988 when I played shuffleboard on an Atari. Having been raised in the boondocks I was utterly spellbound with the concept of a video game. In 'shags' we hardly ever got toys from the shops; instead we would create our own toys using locally available material. For toy cars we twisted and shaped wire coat hangers and cut out rubber tires from old (and sometimes mom's new) bathroom slippers. For planes, we stuck a stalk of grass through a dried maize leaf and made our 'propellers' rotate by holding them out in front and running into the wind (incidentally this was my all-time favourite). For marbles we hunted for used and discarded bottle-tops (beer bottle-tops were coveted). In fact we had so many toys that our game time never felt inadequate. That was until I discovered video games. Hard as I thought I didn't see