From the other side, how to charge a start-up

By Fiona Boyd |

EA from Brisbane sent in this guest post as a response to an earlier piece on Niche Content Millionaire. If funds for your startup, invention or early growth business have dried up, maybe it’s time to look at another avenue – government grants. EA explains the difficulties of working out a fee agreement when advising start-ups and inventors on which government grants could apply to them.

This is a response to the earlier post Stop over-focussing on the money. In the article reference is made to the trials and tribulations of Col Redmond trying to get some professional advice for an invention of his that he’s been working on for five years and has a final prototype about to go to production.

As a consultant I am often approached by entrepreneurs looking to get some government funding. Often they have exhausted all their own finances and the finances from family, friends and fools – what is known in the funding industry as the three Fs. Contact is usually by way of referral from somebody that I previously have been able to help and is normally on the basis of a free initial consultation. After this initial meeting I can usually see whether I will be able to be able to be of any assistance.

The help you need may be government money

Government funding can be broken into two broad categories. The first one is reimbursive funding. This is essentially funding where you spend the money first and through an application process, a percentage of the funds spent will be reimbursed to the applicant usually after an audit process.

The second category is a competitive funding process. These programs usually follow an application process where the applications are submitted to a central department either at a state or federal level. Here all the applications are considered and depending on the amount of funding available, funding to the most deserving applications is made.

The first category is usually easy to be of assistance. The second one is a bit harder as you could submit a very good application but as you may be unaware of other applications, you could potentially be competing with a submission that proposes a cure, for example, for the Hendra Virus.

When it comes to fees, I am fairly confident that with respect to the first category I can work on an at risk basis. The only upfront expenses that I would expect to be covered would be any out-of-pocket expenses directly relating to the application. This process has however led to the occasions where I have provided the information up front and my client has then gone and submitted the application themselves.

With the second of application because I have no way of knowing what other applications are going to be submitted, I usually ask for an upfront fee with the balance of the fee dependent on whether the application is successful.

This type of work has its ups and downs. I have seen some incredibly clever inventions. One involved the recharging of non-rechargeable batteries. I was taken to a house in Brisbane where the inventor demonstrated a normal torch running on a non-rechargable battery. As the light started dimming and then eventually died, I confirmed that it was a non-rechargable battery. A contraption then was wheeled out from which wires were connected to the battery and after about 30 minutes the battery was charged enough to provide light from the torch. Unfortunately I could not come to an amicable financial arrangement to take this grant application any further. This was going to be a very involved application and would have involved a considerable amount of my time upfront on what could have been a fruitless application.

I have also worked with some passionate individuals. One that comes to mind has been working on a project for the last 12 years. I have been to numerous launches over the last number of years of his product but there is always something that stops the full commercial deployment of his product. I have also taken some of my fees as a share in the project. The perceived unwillingness of supporters and associates to fully believe in his ideas has led to many an unpleasant email which sometimes makes you think whether it is worthwhile to get so closely involved with a client or whether maintaining an arms-length professional relationship where you charge a market related fee for services supplied would be the preferred option.

It is a difficult decision to make on how to bill for your services when trying to assist an entrepreneur. You obviously hope that every client is the next Google/Wiggles/Cochlear and that you will share in their success. The reality is that most aren’t and will never be and that you have to find the equitable compromise to make it financially worthwhile for both you and your client.

EA from Brisbane is a consultant who works with businesses to secure government grants and funding. Please contact fiona@collectzing.com if you would like an introduction.

Image: Flickr D3San

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