How to get contract work? - Page 1
Forum section: electronics / beginners

author: jmdejoanelli
author_rank: Contributor
timestamp: March 26, 2013, 11:12:17 am
content: Hi all,I have realised recently that Dave and Mike (mikeselecticstuff) seem to do/have done a lot of contract work from home. Seems to be normally low volume, sometimes obscure things.How do engineers come across this work? Is it something where one has to actively advertise ones services, effectively marketing as a one man design house?I am a graduate electronics engineer, and I want in. Granted, I do understand that it's unlikely that a greenhorn may find getting contract work more difficult. But I love the idea of working from my lab at home.Anyway, if anyone out there can shed some light on the topic that would be great!Cheers,Josef

author: David_AVD
author_rank: Super Contributor
timestamp: March 26, 2013, 11:35:04 am
content: A lot of the time you get new work (clients) via word-of-mouth from existing clients. The tricky bit can be getting those first clients to start the cycle.Doing custom work "on the side" for people you come into contact via your normal day job is a good way to get started.

author: Psi
author_rank: Super Contributor
timestamp: March 26, 2013, 11:37:01 am
content: Yep, what David said

author: jmdejoanelli
author_rank: Contributor
timestamp: March 26, 2013, 11:42:12 am
content: That makes sense.So, keep an ear out for work/requirements/projects at work, and offer to tackle the job for them.How effective is word of mouth in reality? I mean I know there can't be THAT many electronic engineers in Australia, let alone good ones. But does word actually travel around about good engineers?Thanks for the reply.Cheers,Josef

author: David_AVD
author_rank: Super Contributor
timestamp: March 26, 2013, 11:46:25 am
content: You'd be surprised at how effective word can travel, especially in this modern, "connected" world. You might do a job for someone involved in a car club for example. Next minute they can be sprouting off to their forum mates about the new cool gadget "this guy I know" made for them.

author: jmdejoanelli
author_rank: Contributor
timestamp: March 26, 2013, 11:53:27 am
content: Ah yes I see.And of course forums like this one obviously help tooThanks for the advice.

author: StevenB
author_rank: Contributor
timestamp: March 26, 2013, 12:27:39 pm
content: I've gotten contract work through past employers. Try to always leave employers on good terms. Never burn bridges. Let them know you'd be willing to do contract work for them.It also helps if you are familiar with a specialized area like medical or aerospace that require knowledge of standards and regulations, along with knowing how to document properly. Sometimes that's just as important as your electronics design skills.When you DO get that contract job, do a REALLY good job within the schedule and you WILL get more work.

author: digsys
author_rank: Unknown
timestamp: March 26, 2013, 12:47:03 pm
content: Not to put you off - but let me point out some dangers / pitfalls. Unless you're lucky right from the start, it can be a hard road.I've been doing this for 40yrs+, so I've pretty come across just about everything. A few notes -- IF you do R+D cheap to "get the job", it's a HIGH probability that there will be no future orders. Sometimes you think that ifyou do the right thing, you'll be rewarded. Experience shows that - IF they didn't pay much, they usually don't give a rats if theproject goes ahead ! The MORE they promise (without iron-clad contract) they'll purchase, the HIGHER the R+D you charge !!!You may decide to take the risk on "taking a bath" just to get a job, that's up to you. Sometimes it IS worth it, just to get yourname in a particular industry. 30-40 yrs ago, things were SOO much different, R+D life was awesome.Now, most the time they'll use the .. "that's kinda expensive, I don't want to go to *China/India/yadda" .. If they try that, saygood-riddance !! because it will ALWAYS be on their agenda. Often, companies won't deal with you, unless you can presentyourself as a LARGE entity (with shitloads of Insurance) - you'll need to partner up to get around that.Cold turkey is a damn hard act. Join some clubs, do some volunteer work at colleges / uni's etc. Get contacts.Just be always wary of the bullshit, there's heaps of that :-)Good luck

author: David_AVD
author_rank: Super Contributor
timestamp: March 26, 2013, 09:52:01 pm
content: Yes, there will be plenty of potential clients that will tell you their idea will be the next big thing. A lot of them have no idea of the work involved in getting their idea realised as a working prototype. They see a $49 DVD player in the shops and figure you can make their custom item in very low volumes for the same price - yeah right....I had one client recently who wanted a price to develop a system comprised of 2 different hardware units as well as firmware for them and Internet connectivity. I quoted him what I considered a more than fair development price, but he immediately tried to get me to "sharpen my pencil". Not by a small amount either. I told him that's what it will cost and I haven't heard back from him since. Would I have liked the job? Sure, but I wasn't about to do all that work for peanuts. When I first met that guy, he showed me stuff he had made by other companies, but "hadn't worked out". (The samples of their work looked fine to me) Seems like there's a common denominator in that story and it's not me!You have to judge each potential client and project as they present themselves. The same client may even have a mix of good and unrealistic ideas. As you do more design work you'll get a feel for ballpark figures and time lines. It can help if you start doing this sort of work as more of a hobby with no pressure to generate a supporting income.

author: jmdejoanelli
author_rank: Contributor
timestamp: March 27, 2013, 12:36:55 am
content: Very good advice guys, thank you.What do you think of situations where a client offers you a percentage of future profits or to form a partnership?I am doing some work for a guy who approached me recently, and I thought since I already had a full time 'day job', it might be worth the gamble. My reasoning is that a 1/1000 chance of making potentially millions is better than a guaranteed hourly contracting fee. This only really works when I already have a full time job I figure, since I can't really stock my fridge without an incomeCheers,Josef

author: David_AVD
author_rank: Super Contributor
timestamp: March 27, 2013, 01:40:06 am
content: I can't speak for others, but the clients who approach me with that spiel are usually trying to get a cheap job done and the chance of future profits is greatly exaggerated. Even if you did agree, you'd have to get a binding contract. Then you'd need to work out a way to make sure the unit sales were reported correctly and get paid.

author: digsys
author_rank: Unknown
timestamp: March 27, 2013, 05:35:09 am
content: Agree with Davo ... FORGET IT !! It's usually the same .. we'll sell millions scam !! IF he's SO confident that it will sell well,then he won't mind PAYING the R+D !! If he hasn't the funds for this gold-mine ... what do you think?There's a 1 in 200++ chance that he genuinely lucks on a great product. Get a BASE savings and income FIRST !!The ONLY time I make an exception to these deals, and I've had HEAPS!!! , is if they ALREADY have a history of manysuccessful products ... and I'd WANT to see proof !!

author: jmdejoanelli
author_rank: Contributor
timestamp: March 27, 2013, 08:17:07 am
content: I hear you digsys,I don't plan to make a habit of doing it. It would be much less stressful just working for an hourly rate.The guy actually gave me the choice to either contract for 20% of the profits OR charge him my preferred R&D development fee. I thought considering I have a job already, and thus a steady income, that it might be fun to take the 1 in 200+ gamble. Seen as I LOVE electronics design so much as it is, I also thought that it wouldn't be the end of the world if I came out having worked for free.One other thing I was wondering:How do people afford to buy equipment and software (e.g. DSOs, Spec. analysers, Altium etc.)? Is this something that is normally accounted for in the negotiated R&D rate?

author: David_AVD
author_rank: Super Contributor
timestamp: March 27, 2013, 08:36:42 am
content: QuoteYou could always counter-offer a fixed fee plus a smaller percentage of the profits I guess.QuoteDepending on the item in question, you may factor that cost into your R&D fee. It depends on the size of the job and whether that item is unique to the job.Originally I did this as a side business, so I started out small with just the bare essentials to get the work flow rolling. I then used some of the profit from each job to enhance my workshop facilities. I still don't have a ton of fancy gear mind you. I try to be realistic with what dividends the purchase will pay me back over time.

author: AndyC_772
author_rank: Super Contributor
timestamp: March 27, 2013, 09:14:48 am
content: Quote from: jmdejoanelli on March 27, 2013, 12:36:55 amI think that's a discussion the client should be having with a bank manager, not me. If it's a great idea, and has a demonstrably good chance of becoming profitable, then the client should have no trouble finding someone who will lend the money to pay for the R&D costs upfront.There's no ambiguity in how my business works. Potential clients come to me with a design requirement, we agree what needs doing and how long it's likely to take, and then I get to work. When the job is complete I hand it over and submit an invoice for my time and materials.If I were to forego the value of that invoice in favour of some promise of future earnings, I've effectively invested that amount of money in a speculative venture with someone I probably don't know well and in which I only have control of one small part. Some people may be able to judge whether or not that opportunity is a good one, and many make a decent living at it - but not me.On the subject of kit, like it or loathe it, Ebay is your friend. Keep a regular eye out for old but good quality kit, and snap it up when the opportunity presents itself. Stick to the well-known brand names, avoid anything that's sold as "untested", and bear in mind that dealers in s/h kit are often way overpriced. The best value generally comes from individual sellers with one or two items that they've finished with.Occasionally you'll get a job that requires a specific piece of kit you don't have, in which case you'll just have to bite the bullet and buy new. Provided the value of the job covers the cost of the tool, it's probably a good idea to do it and keep the tool for future jobs rather than turning the job down.

author: David_AVD
author_rank: Super Contributor
timestamp: March 27, 2013, 09:34:04 am
content: Quote from: AndyC_772 on March 27, 2013, 09:14:48 amI find that "do and charge" jobs are few and far between for me (maybe 5% of all jobs). It's mostly fixed price for the R&D. I can understand that as the client needs to know you're not going to string them out for some unknown amount of time and money.You get a feel for what's fair price wise. My accountant once told me that if nobody complains about your pricing, you're too cheap. He reckons it's about right when at least some people query it.

author: Alana
author_rank: Frequent Contributor
timestamp: March 27, 2013, 11:39:42 am
content: Quote from: jmdejoanelli on March 27, 2013, 12:36:55 amHad this kind of situation.Partner turned out to be bit out of this world if it comes to electronics - he did not understand the needs of EE R&D and eventually we parted our ways.My expenses - some electronics i bought for my own money and lots of stress dealing with an idiot.My gains - leftover parts from production batches and company owned tools that were misplaced at the time he was packing his stuff. And some experience - more in dealing with people than with electronics.Quote from: David_AVD on March 26, 2013, 11:46:25 amHave/had this experience too. I gained bunch of customers while i was working as ISP technician. Then when i left that company i still had customers - those who remembered that if i got my hands on their computer it started working properly and their friends.Until you find your way into some company as part time IT person its not big bucks but for someone who has some other income or does not need to pay for rent its more than to live.

author: digsys
author_rank: Unknown
timestamp: March 27, 2013, 01:38:24 pm
content: Quote from: jmdejoanelliAnd there's nothing wrong with that, even if it's JUST for the experience ! It's all valuable (until it happens 10 times in a row :-)).QuoteYou look at the job and ask - WHAT tools and equipment did I use in this job? Did I save a LOT of time by using "newer" test gear?Is the project a "high design value" one? Then charge a fair % .. Tools are ALWAYS a part of the quote. I have JUST completed a designusing a new MPU, they paid for ALL my development gear + a new Galaxy S3 ( I needed the NFC). That's what it costs !!!!!!DON'T start a bidding war negotiating that % .. Use your judgement, and be fair where fair is due.

author: AndyC_772
author_rank: Super Contributor
timestamp: March 27, 2013, 01:48:51 pm
content: Quote from: David_AVD on March 27, 2013, 09:34:04 amNo problem, of course people want an estimate or a firm quote ahead of time and I've no problem with doing that.My point was simply that I'm not looking to take on any risk over and above my own ability to judge how long a job is likely to take, and whether or not a potential client is actually able to pay. Unless I knew the people, the industry and the product very well indeed, I wouldn't want my compensation to be linked to the end product's commercial success. A bird in the hand, and all that...

author: StevenB
author_rank: Contributor
timestamp: March 27, 2013, 02:53:25 pm
content: One thing to keep in mind is to have a detailed (as possible) design specification when making the quote.I prefer to work hourly, with an estimate of how many hours I think it will take. This gives them the freedom to change features, testing requirements, etc., without having to go back and renegotiate. Obviously you don't want to grossly exceed your estimate unless you have sufficient justification.

author: jmdejoanelli
author_rank: Contributor
timestamp: March 27, 2013, 09:35:44 pm
content: Thanks again guys, all very good advice.Would you submit a professional quote separating tool and equipment costs, consumables costs, cost for components/materials, and then an estimated cost of hours? Or would you lump it all together into a single hourly rate? I guess it would depend on the job considering you might not know exactly what the requirements are until your halfway in, e.g. I thought I wouldn't need a spectrum analyser for this job, but turns out I do.Just as a curiosity can any of you disclose (very roughly) some example quotes you might have given? I.e. time vs price charged.Another thing: Do all of you have an ABN or equivalent and market yourselves to clients as a legitimate business entity? And would you recommend a website, business cards etc.?

author: Mike Warren
author_rank: Unknown
timestamp: March 27, 2013, 09:55:48 pm
content: Quote from: jmdejoanelli on March 27, 2013, 09:35:44 pmAre you going into this to make money?If so, then, yes, set it up as a business and claim deductions. Business cards are useful. A web site is, IMO, less useful for electronics design. If you do have one, keep it simple and don't try to come across as a large company.If it's just a hobby where you put any money you make back into it, then run it as a hobby. Just make sure you keep records to prove it to the tax office if they come calling.

author: Mike Warren
author_rank: Unknown
timestamp: March 27, 2013, 10:07:38 pm
content: Note: all this is IMHO.Quote from: jmdejoanelli on March 27, 2013, 09:35:44 pmThat depends on the client and the job. This is difficult until you have some experience, but you should be able to estimate quite accurately, the time, tools and materials required. To do this requires methodically going over everything you will need to do to get the job done. Experience helps with estimating potential pitfalls and overruns. In the beginning, you will need to be prepared to absorb most of your estimate overruns.QuoteIf you don't know in advance about such an expensive tool as a SA or similar, then you really did not properly think about the job when quoting, or the specification was badly lacking, but that's a red flag from the beginning.QuoteI charge roughly half way between what I get paid for my day job and what my time is billed out on my day job.

author: AndyC_772
author_rank: Super Contributor
timestamp: March 28, 2013, 07:41:48 am
content: Quote from: jmdejoanelli on March 27, 2013, 09:35:44 pmI'd break the price down into an hourly rate plus the cost of any components which I have to buy to fulfil the contract. I also charge a standard mileage rate for any travel expenses beyond the initial client meeting.Consumables such as solder, wires and similar low value items that any lab should keep in stock are included for free.I personally don't add a mark up on components or PCBs, though the time taken to actually prepare and place orders for these items is added to the total number of hours spent on the job.My hourly rate includes the use of the equipment in my lab, and if I need some piece of kit I don't already have, then I have to consider how useful it's likely to be in future. If it's something very specialised, and which you're unlikely to need to use again or for any other customers, then you might be justified in asking your client to provide it or pay for its rental. If it's likely to be more generally useful and you just don't have one yet, then it may be time to invest in a new piece of capital equipment for your business.QuotePart of the skill of the job is working out early on what you're likely to need further down the line. If the job looks like it might need a spectrum analyser, and you don't have one, you mention upfront that you might need to rent one and that the rental cost would be passed on.Put yourself in your customer's position; they've found someone to do a job they need, entrusted you with it, and they have a reasonable expectation that you'll complete that job while they go and do something else. They're not going to be impressed by someone calling up half way through a job to say they've not got the tools they need after all.It's a judgment call in each case, of course, but if you're charging a professional rate for a job, you should be able to afford the tools and equipment to do that job anyway. Don't be afraid to rent rather than buy.QuoteI *am* a legitimate business entity, there's no 'deception' involved. Business cards are essential, and a simple web site might be worthwhile too (though I don't yet have one). I also have a simple one page CV which lists my qualifications, skills and previous experience, so any potential client who doesn't already know my work can see that I ought to be capable of doing a good job.

author: Alana
author_rank: Frequent Contributor
timestamp: March 28, 2013, 08:40:04 am
content: How much does it cost to be a business entity in your countries? Does it include any taxes or payments for something like social security fund that you have to do whenever you earned money or not?

author: HackedFridgeMagnet
author_rank: Super Contributor
timestamp: March 28, 2013, 11:00:26 am
content: I am just going through the process of setting up, so from the Aussie point of view.I have an ABN that bit is easy and cheap.I had to register my trading name in the state, easy and cheap.I have Product and Public liability for 5 million which costs me about $450 per annum. I needed this to be a sparky anyway.I dont have Professional Indemnity insurance which normally you would need and it costs apparently $1000 to $2000 per year and you (might)need to keep it for 7 years after you finish. Basically lawyer tax. But hopefully the client is going to exclude me from any liability because otherwise they would be paying for my insurance anyway.I registered for GST, nice to get tools ex GST. But you don't have to if you earn less than $75K I think.Learn some double entry bookkeeping and fill in the spreadsheets as you go.I am not hiring a lawyer to read my design contract with me, maybe I should but I hate paying them.I managed to get an hourly rate and got $5 extra to go toward a half decent DSO.I must admit being an employee gives you a lot more time to think.

author: digsys
author_rank: Unknown
timestamp: March 28, 2013, 12:08:28 pm
content: Quote from: jmdejoanelliThis is my take on this: I break NOTHING down ! In reality, it generally turns out nothing like you may have thought. In reality, you'll spendmore hours than expected anyway. In reality, most customers will ask for changes, that technically weren't in the deal, but now you haveto decide how far you let them off. Look at the job and judge what level of knowledge would be needed for it. Price it on that.QuoteIf you're not charging AT LEAST ~$150.00 hr, you're just a hobby. Unless it is a simple design, I wouldn't start below $10K, especially ifit has Firmware / software / Interface to their "system". If I KNEW it was quick and easy, $5K. That goes part way to making it worthwhilefor ALL the times you'll lose or under-estimate. You're a business, not a charity. In the "good ol' days", the average amongst mycolleagues was ~$50K base. Those that quote "off-shore" pricing, have already gone (or got burnt). Don't compete with them.UNTIL you TRUST someone 99%, don't fall for "discounting". IME, MOST enquiries are a waste of time.Quote100% YES for ABN, business cards and a website (NOT a free google / MSN one either). You don't have to put anything "serious"on your site. At least a nice front and some descriptions / pix / stuff.As I've said before - sometimes you will do something for cheap or gratis, JUST to open a door (OR personal interest) - Just an Investment.

author: IanB
author_rank: Super Contributor
timestamp: March 28, 2013, 12:45:50 pm
content: Quote from: jmdejoanelli on March 27, 2013, 09:35:44 pmI think contractors are expected to pay for their own tools and equipment. It is part of the job. If I hire an electrician I don't expect to see "purchase of Fluke 87" as a line item on the invoice. You pay for the tools and equipment you need to stay in business and you spread the cost over the jobs you do as part of your operating budget. (You most likely can depreciate the cost against your tax liability too.)When you provide a quote you will prefer to submit a lump sum without a breakdown. However, clients may ask to see a breakdown of costs and then you will have to negotiate about how much information you are willing to share in order to win the job.It is common to propose separating out travel and living expenses (if needed) as separately invoiced costs against receipts, but by no means universal. Depending on who you are working for a client may find it much easier to get approval for a single lump sum purchase price (perhaps with phased payments) rather than having reimbursable costs to deal with. The accounting is much easier that way.