I was going to title this post Covering Your Assets, but technically we're not talking about assets today. We're talking about expenses—business expenses. The kind you have to pay to run a small business. I'd like to tell you that I have the secret for covering all of your business expenses if you're a small, service-oriented business. The secret is simple. The secret is almost obvious. But sometimes we find the secret hard to justify.

The secret is: Raise your rates.

Our clients understand that our rates are a good value for the work we provide. Our clients also run businesses and understand that they in turn must make a profit. Raising your prices does not mean scalping. Raising prices ensures stability, excellence-in-work, and profitability for the future.

Firewheel turned five a few months back. We're now fortunate and blessed to have a nice office above a Starbucks. But it wasn't always this way. We started in our spare bedrooms and basements. Heck, Brian still works from his basement, but that's because we chain him to his desk there constrain his relentless creativity. There were, however, some steps that got us from the bedroom to 181 Grand Avenue.

Growing any small business is extremely dependent on managing your cashflow and expenses. If you're just starting out, it's important to spend as little as possible and avoid debt like the plague. However, just because you keep your expenses low doesn't mean your billing rates should be low as well. Selling yourself cheap to get work is not a recipe for long-term success.

If you're starting out on your own, and you need help arriving at a billable rate, here's a good formula: Add up all your expenses (equipment, software, phone, DSL, rent, taxes, etc.). Then add to that what you need (or would like) to get paid over a years time. If your expenses come to $20,000 and you'd like to get paid $80,000, you need to be able to foot the bill for $100,000 in a year's time. On top of that you want a profit. 15 percent is a good place to start. So $115,000 is your magic figure.

Now let's assume you want four weeks of vacation and/or sick time. This leaves you with 48 weeks or working time. While it may sound like a pipe dream (it is), let's say you only want to work 40 hours a week. Of those 40 hours, you can chock up 16 hours (or two days a week) to non-client work. Plan on this. You'll need to market yourself, design your own website, chase down leads, and pay the bills.

This leaves you with 24 "billable" hours in a week, or just over 1150 billable hours in a year. So what do you need to bill per hour to pull your $115,000? Well, dividing your $115,000 by 1150 tells you $100 an hour is your billable rate. It's that simple. That may sound like a lot to you, but if you do quality work, your clients will not see this as an expense. They'll see it as an investment.

About once or twice a year it's good to reevaluate your expenses and see if you need to raise your rates (presenting your new rates to your clients is a topic for another discussion though).

When you're hit with unforeseen expenses or additional overhead, the logic stays the same. A few years ago we were hit with a lawsuit (more on that another time as well, perhaps in a book). The legal bills that came out of the successful defense of that suit ran well into the five-figure range. A figure like that can send a small business into panic mode quite quickly. But here's the deal... Don't treat that as a one time killer expense. Factor it out over a year's time, and it won't seem that bad.

Let's say you're hit with an unexpected $10,000 expense (our lawsuit was worse). While the initial shock might be hard to stomach, take a deep breath and divide that additional expense out over a year's worth of billable time. $10,000 divided by 1150 hours is a little over $8 per hour. Adding $8 per hour to your hourly rate isn't that scary now is it? Not scary to you. Not scary to your clients. It covers the crises, and more importantly, positions you to handle a future crises even better. This also is a good example of why its important to have some cash in reserve so you can float yourself while you adjust your rates.

We receive emails every now and then from folks who'd like us to charge less for our Blinksale invoicing service. They write things like, "If it only cost $3 instead of $6, I'd sign up." Well, the reality is that we cannot cover our expenses at $3 a month. So we charge $6. If you're a small business and want to add Blinksale to your expenses (it's well worth the $6 per month, trust me), there's a simple solution. Raise your rates. The cost of subscribing to Blinksale over a year's time is $0.06 per billable hour using our formulas above. Six cents. Plus Blinksale will save you time on your non-billable hours. It's a win win.

So the next time you're unsure how you're going to grow your small business, remember the secret. Raise your rates.

Happy day! On April 8, we'll be graced by the addition of an Apple Store about 100 yards from our front door. The facade went up a couple days ago, as did the DWR signs next door. We're also getting a Cheesecake Factory and a 14-screen theatre within walking distance. And once again, productivity drops around the office.

Sometimes I wonder if we'd be hipper and trendier if our office was in Mountain View or Palo Alto, but then I'm reminded that we enjoy some wonderful perks here as we labor away in the obscurity of Southlake, Texas. Like really kick-bootie Mexican food. And the Starbucks downstairs. It's funny, because we're the only business in our building that's not retail, or a mortgage, real estate, insurance, or financial-planning company. And every day when I walk down the hallway past the suits, they give me this stare as if to say, "Who let the hooligans in, and just what exactly do they do in that office painted green at the end of the hall?" It's a lot of fun actually. In fact, we have tons more fun than they do.

The other day a friend from a (really slick) web start-up stopped by to chat, and he pondered openly about their current company discussion on where they'd like to locate their business. Dallas / Fort Worth may not be the coolest, most cultural place in the world, but it's got a lot going for it. And in two weeks, we'll be the proud neighbors of Steve's Wonderful World of High-Tech Goodness.

Alright, at the risk of further ruffling more feathers, we'd like to know your favorite—and least favorite—icons from IconBuffet Free Delivery. Additionally, weigh in on what icons you're more likely, or less likely, to use in a project. This could be fun... and controversial. Oooooh! Hey, if anything, it'll help us know what you'd like to see more of in the future. We release at least four new free collections each month, so that's a chunk of icons waiting to be designed.

We've been using 37signals' Campfire for our office chat client for a couple weeks now. Needless to say, we're all hooked. It allows us to collaborate, share files, and have a record of all things said (er, typed) for down the road. It also allows us to stay off the AIM channel, and avoid unnecessary distractions while we're trying to make headway on projects.

But earlier this week we all noticed something new: Here we are, chatting along, when all of a sudden a text-ad for another 37signals' product slides up into our chat window along with the latest comment. And then, about 50 or 60 comments later, another ad slides by, this time for their Getting Real book.

I should note that we're still using Campfire's free plan and that ads only appear on free plans. That said, it's freaking genius. The ads are tasteful, unobtrusive, and perhaps even something we'd be interested in. I'm curious to see whether the 37s plan to open up the ads to third-parties, or if they'll opt to simply market their own products within the engine. Time will tell.

Until then, its important to note the feature, because if you're building a product and looking for potential ad-revenue model, this is a poster child. If you think you can build a webapp, slap up some Google ads, and call it a business, think again. That may get you some pizza money, but it won't sustain a business.

Thoughtful advertising, woven into the fabric of an application is much more valuable to you and your advertisers. If 37signals decides to expand their advertising to third-parties, we might be one of the first on-board. And if you know of any other ad-models to note, we'd love to know. Advertising is changing, is this is certainly best-of-breed.

We're adding so many new free icons to IconBuffet these days that, honestly, I often don't even realize how awesome some of the freebies are. Well, earlier this month we added Modena Simbolo to the mix.

The free collection has 15 icons in three colors, three sizes, and a boatload of file formats. And you're free to use the icons commercially however you will. Pretty slick deal. And this is just one of 20 free collections currently offered at IconBuffet. We add at least four new collections each month.

We've also rounded out the Modena stock collection in the last week with the addition of Modena Vectors and Modena CMS (great for blogs). Each again comes with three color variants. These collections (unlike Modena Simbolo) are not free, but are a great value if you're building a commercial website.

All that said, if you haven't tried out IconBuffet's Free Delivery yet, you're missing some extraordinary free icons.

Wow. In the last two weeks I've received a couple email from disgruntled individuals who don't seem to care for our IconBuffet Free Delivery service. I am always amused by these emails, as we never get complaints from people who actually pay for our stock icons. We just get the occasional complaint about the free stuff.

For instance, an individual (we'll call him Ben) emailed last week wondering how he could pay for the free icons we offer through Free Delivery. I replied, and shared with Ben the good news: "They're free! You simply have to become an IconBuffet member, visit our forum, and someone will send the icons you want to you." It's really that simple, and a lot of fun. Probably would take about 5-10 minutes of your time.

However, to my surprise Ben replied and said he did not have the "time or the inclination to play that game," and more-or-less insinuated that our "marketing people" were out of touch. I replied and told Ben I'd be happy to even send him the icons he wanted personally... uhh, for free. That's why we called it "Free Delivery."

After this time, Ben replied and let me know "I don't have a current project that would need any of the free icons, but I think you can see that if I did, I couldn't start that design until I was sure I could get all the icons in hand."

Thanks. Glad I could help. How 'bout next time we not spout off unless we actually have a real need that doesn't involve something you can get for free for the cost of an email?

Today, I get another one, this time from a fellow we'll call Frank. Frank had this to say:

I signed up to gat a taste of what services your have to offer, play with icons, etc... What I got from you is a pack of chinese icons I don't know who can have use of. Excuse me if I sound harsh again but it's how I felt it. I receive once in a while an email that sounds promising but that each time is more disappointing. You tell people you give them something nice and they get something of absolutely no use. And it suffice to compare what you send me drop by drop to the whole amazing icon pack I got in one click and for free from famfamfam (I still can't describe how much it's nice of them to make it free).

Then, I ask to be deleted from your maling list, I receive a confirmation email, and nothing happens. I still get another email for a s*$~id icon pack. I guess something doesn't work the way it's supposed to... Then my choice is done, I will buy icons from famfamfam or another good icon artist, not iconbuffet.

What I want to tell you, because I liked mush [sic] iconbuffet before all this happened, and because I think you are making big mistakes and losing much credit (credit you deserve BTW), is that in the user experience era, we've come to expect more and better. It couldn't be iconbuffet that reminds me of that telemarketer that bugs me with supid offers.

Thanks. Your account has been deleted. Personally, if you don't care for our freebies, we'd rather not spend the bandwidth to send them to you. Tens of thousands of others seem to love them just the same. I guess these emails are just part of the cost of running a free service.

Hey hey! Been a while since a rootkit post. Looks like its time for all of us who purchased malware last year from Sony BMG to cash in. Behold: The Sony BMG Rootkit Settlement. Oooooooh... If you, or someone you know purchased any of these CDs last year, you're eligible for a replacement CD as well as one of the following:

1) $7.50 cash plus one free iTunes album download
- or -
2) Three free iTunes album downloads

Yes folks, it's time to cash in. Personally, I'm opting to go with the "three album downloads from iTunes" just to force Sony to give me something via the iTunes Music Store. How's that for poetic justice? However, if you opt to go with the cash, just remember that we still have I Heart Rootkit t-shirts on sale.

So, what is Sony going to send you?

SXSW has officially begun, and I've gotta run home and pack. Gratefully Austin is just a quick drive south from Fort Worth. We'll be there in time for the real fun that starts tomorrow. I'm pretty stoked this year. Rumor has it, IconBuffet will have a place in everyone's minds this weekend, if but for a moment. Also, if you're around on Monday night, I'll be offering my two cents (er, minutes) at 20x2. This year, the question "What is the secret?" promises some provocative answers. I have a lot of secrets. Deciding which one to tell is the tough part.

If you're going to be in Austin, look forward to seeing you there. If not, maybe next year. If you're a client, no worries. The home office is still manned. You will not be left in the cold. Somebody will be here to keep the light on. Of course, the internet being what it is and all, I really won't be away either. Later!

Aside from dealing with AVS issues this week, we're still moving forward strong with the new Blinksale. I hate calling it "new" or "2.0" as I though the nature of web-apps implied a constance evolution, however the upgrades in the works are more revolutionary the evolutionary. It is safe to say I'm drinking our own kool-aid at this point. Which is a good thing.

If you're going to build a product—like a Blinksale, Skobee, or Sproutit's Mailroom—you'd better be ready to drink your own kool-aid (or clean your own crap off your shoes). There's really no point to building it otherwise. The key to success here is being able to strike the balance of being your app's biggest fan and at the same time playing the role of a moderate critic. You don't want to be the biggest critic though because somebody else is bound to fill that void. Trust me. That person probably deals with chronic anger issues as well.

Why do I say all this? Well, like the boys at Skobee and Sproutit, we use our product. Quite a bit. We love Blinksale, and are quick to sing its praises. However, we're also aware of its current limitations. That, coupled with feedback from our customers, allows us to quickly see where Blinksale can use some improvement. To be honest, there was a lot of thing that we wanted to do with Blinksale last fall, but the timing simply was not right. But now it is.

Six months of feedback and product use has gelled our thoughts, and the results are quickly coming into place with Blinksale 2.0. The new product is going to revolutionize the idea of online sales, billing, and invoicing. Am I drinking our own kool-aid? Sure I am. But I also believe that Blinksale is about to turn online invoicing on its head. We still have a little bit more to do to polish this fella' up, but it will be worth the wait. By the way, if you're a paid subscriber to Blinksale before we roll out 2.0, we'll have a special surprise for you to say thanks when we launch. Stay tuned.

I was still out of town when this hit the wire last week, so for some it may be old news. However, if you haven't taken a look at Getting Real by 37signals, you're missing a wonderful must-read for anyone who designs or develops software for the web. It fact, it may be the best $19 you'll spend this year (except, of course, for those icon you picked up from IconBuffet, right?).

37signals markets the book the book as a "book of ideas," and I believe that's important to note. Getting Real is not a how-to manual for app design so much as it is a creative stimulation for the mind. Getting Real also includes a handful of guest essays from friends of 37signals including a couple blurbs about our own Blinksale. You won't be disappointed.

Back in January we had the opportunity to work with the great guys at Skobee on their unbelievable new social event planning app. The easiest way to learn what Skobee is about is to simply create an account (it's free) and start using the service. Skobee helps you plan casual events like "Dinner with the Guys at Mi Cocina" or "Poker at My House", then sync them up with your friends' plans. It's totally easy, and actually a ton of fun as well.

What'll really wet your noodle is the ability to search for a venue or restaurant or whatever in your area, and then check to see how popular that venue is going to be on a given night. They've really outdone themselves on this one, and we were thrilled to play our part.

Firewheel was privileged to be involved with much of the UI design work that has gone into Skobee (if you couldn't already tell from the colors), and we even pitched our two cents when it came to forms, flow, and the good ol' IA stuff as well. Of course, there are plenty of Firewheel-designed icons in Skobee to boot. If you haven't already, you should really check Skobee out today.

This is a dual-purpose memorandum and rant regarding AVS for credit card processing. AVS (Address Verification System for the uninitiated) is a standard developed by Mastercard and Visa to help fight fraudulent credit card purchases over the internet. By and large, I think we'd all agree that this is a good thing. Unfortunately, this system is unbelievably flawed.

Over the weekend we tightened down the AVS for both our Blinksale and IconBuffet credit card processing code, and ever since our life here has been a royal headache. In theory, AVS is great. A billing address entered by a customer is cross-checked with the billing address on supply from the card-issuing bank to ensure the card is in the right hands.

Unfortunately if you, the customer, say that you live at "123 Blueberry Street" and the bank says that you live at "123 Blueberry St", your card will choke. What's worse, if you live in an apartment and enter your unit number as "#212"—while your bank is looking for "Apt 212"—the card will choke. But wait, that's still not my favorite:

Let's say you live at "135 18th Street", AVS will tell your bank that you live at "13518 Th Steet". This of course is most definitely a recipe for failure. And don't get me started on international addresses or PO Boxes (or is it P.O. Boxes?).

AVS is supposed to be this great thing to protect merchants from fraud. I applaud that. But whoever created the system really messed the sucker up. About a third of all legitimate charges that have been attempted at Blinksale or IconBuffet over the last 48 hours have been declined due to false-negative responses. We've lost sleep, sanity, time, and sales.

Now we're frantically working to reverse engineer the whole thing to find an acceptable medium between keeping out the bad guys and letting in the good guys. If this is what AVS has to offer, the folks at Visa and Mastercard need to go back to the drawing board.

Wow! After a few weeks away from the helm here, it's nice to be back pushing the pixels. Okay, so that's kinda a lie. I'd really like to be back in Hawaii. But the show must go on, at least for now. Google hasn't called back yet about their offer to buy us out for $300 million. So until then, we now resume our regularly scheduled Sparkplug programming.

Today we pushed out a few updates to IconBuffet, including a new $5 sale on our starter collection, Durango. Also included in the updates is the surprise addition of Dresden, a full-on stock icon collection by John Marstall specially tailored for dark user-interface designs. It's simple, slick, and looks good with dark gray.

As you may have noticed, last month included the roll-out of four new IconBuffet Free Deliveries, and with the number of IconBuffet subscribers growing astronomically, it's a great time to find some friends and start swapping icons. Our forum is a great place to start, but if you search the web, you'll find hundreds swapping Free Deliveries.