Digital Analog – 2010 Year End Review

Ben

I’ve been making a living as a Flex consultant for a number of years, but in 2010 I made it official by starting a company called Digital Analog, LLC. In honor of that achievement and in the spirit of being open with the development community, I’m “open-sourcing” my revenue numbers for 2010. I can’t give you the full line-by-line details of course (client confidentiality), but I am posting summaries of a few key areas below. If you find this post useful, educational or at least entertaining please consider recommending Digital Analog for any projects that pass your way in 2011.

$109,959 Dollars Later

This isn’t a very big number for a company, but rest assured I enjoy putting six figures on my tax forms each year. To my friends and family who might now expect better gifts, see the 2010 costs below. To the fellow consultants and business owners who expected me to be making more, see the Hours series in the 2010 Revenue by Week graph in the next section.

In this chart Taxes include both personal and business (SE) taxes (as I don’t file the business separately yet). Travel costs are split almost evenly between conferences and client travel (which is reimbursed). Operational costs include office rent of about $600 per month, test hardware/device purchases, software, and service costs for hosting, version control and bug tracking. It’s also worth noting that since I file as a sole proprietorship I didn’t list salary as a cost. The full net income can be considered my take-home income (with no benefits), but to compare it with salary expectations you need to add about half of the taxes back in and take away any benefits I had to pay for personally (~$5,000). In other words my income is probably on par with a ~$75,000 salary, but if I see you at a reunion or something let’s just go with the first number.

20 Hour Work Weeks with 2 Months Off

It turns out there are a lot of tasks that are required to run a company that just aren’t billable – including emails, calls, quotes, estimates, invoices, software/IT issues, open-source development, product development, conferences, travel and general decompression time. I did try to take it easy on billable hours this year, but it’s hard to say how much non-billable time I “worked”. My best guess is that I put in an average of 30 to 40 hours a week at the office, but I did take two months off this year (which is a great advantage of owning your own business).

An interesting part of this chart is that it clearly shows the delay between billable hours and money in the bank. If you’re going to start a service based business, you need to have three or four months worth of income in the bank to float this gap.

$100 to $150 per Hour

I’ve had discussions with a number of other Flex developers about rates, how to set them, and why they are what they are. To the best of my knowledge Digital Analog is the first company to disclose rates directly, and I do plan to continue this practice in 2011. That’s because, in truth, developers don’t set rates. The market does. In my opinion these are mid to high level Flex development rates. These rates may go down when I have unused availability or they may go up as demand for work increases.

4 Clients Down, 1 to Go

I had 5 clients this year with projects ranging from 10 hours to more than 300 hours. The average project length was around 165 hours with an average cost of around $21,000. Out of those 5 clients I’m still actively working with only 1. All of my clients were found through third party (mostly developer) recommendations. This means that going to conferences and creating open-source projects doesn’t introduce me to many new clients, but it does introduce me to developers who are then willing to recommend me for projects. It’s clear to me that without this, I wouldn’t have the advertising or sales ability to land steady work on my own. Some effort will need to be given to improve my reach if I want to grow the business in 2011.

In my talks with other consultants I’ve also found the most diversity to be in clientele. Some developers have only a few large clients who exclusively send them work making/skinning video players, others work with dozens of clients each year making sites for advertising campaigns or media companies, and still others work exclusively with start-ups that need to create enterprise apps. In order to increase demand for services and grow my company in 2011, I’ll have to find a way to break into multiple verticals.

Summary

2010 was an average year in terms of the services business for Digital Analog. I succeeded at prioritizing my own time (something that was lacking in previous years), but failed to convert enough of that extra time into viable products or R&D. I did, however, have a few successful trial runs at managing sub-contractors which resulted in some of the best client relationships. Focusing on development goals and client relationships in the same breath is hard. Some separation in thought processes has to be given to do both well.

Along those lines I’ve come to realize that my ability to effect a client relationship is directly related to my control over a project. In projects where I have little control over the project as a whole, my focus is purely on development and I have little opportunity to build a strong client relationship. Although hourly work is probably a safer bet, taking control of whole projects (on estimate) may improve satisfaction on both sides. Adding developers in-house may also be required in 2011, although both would be done against the best advice of my peers. 2011 should make for an interesting year.


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