diff --git a/.envrc b/.envrc
index 1530103c..18a7568f 100644
--- a/.envrc
+++ b/.envrc
@@ -2,7 +2,7 @@ if ! has nix_direnv_version || ! nix_direnv_version 3.0.4; then
   source_url "https://raw.githubusercontent.com/nix-community/nix-direnv/3.0.4/direnvrc" "sha256-DzlYZ33mWF/Gs8DDeyjr8mnVmQGx7ASYqA5WlxwvBG4="
 fi
 
-watch_file .direnv/selected-shell
+watch_file .direnv/selected-shell 
 
 if [ -e .direnv/selected-shell ]; then
   use flake .#$(cat .direnv/selected-shell)
diff --git a/formatter.nix b/formatter.nix
index ac96744c..1e2e1c35 100644
--- a/formatter.nix
+++ b/formatter.nix
@@ -10,7 +10,8 @@
       treefmt.programs.mypy.enable = true;
       treefmt.programs.mypy.directories = {
         "pkgs/clan-cli".extraPythonPackages = self'.packages.clan-cli.testDependencies;
-        "pkgs/clan-vm-manager".extraPythonPackages = self'.packages.clan-vm-manager.testDependencies;
+        "pkgs/clan-vm-manager".extraPythonPackages =
+          self'.packages.clan-vm-manager.externalTestDeps ++ self'.packages.clan-cli.testDependencies;
       };
 
       treefmt.settings.formatter.nix = {
diff --git a/pkgs/clan-cli/.envrc b/pkgs/clan-cli/.envrc
index c7f80b55..24d9f311 100644
--- a/pkgs/clan-cli/.envrc
+++ b/pkgs/clan-cli/.envrc
@@ -1,5 +1,4 @@
-# BUG: If this is enabled the devshell depends on clan_cli building successfully
-# source_up
+source_up
 
 watch_file flake-module.nix shell.nix default.nix
 
diff --git a/pkgs/clan-cli/shell.nix b/pkgs/clan-cli/shell.nix
index 1009e002..1daef3e6 100644
--- a/pkgs/clan-cli/shell.nix
+++ b/pkgs/clan-cli/shell.nix
@@ -22,9 +22,13 @@ mkShell {
   ] ++ devshellTestDeps;
 
   shellHook = ''
-    export PATH=$(pwd)/bin:$PATH
+    export GIT_ROOT="$(git rev-parse --show-toplevel)"
+    export PKG_ROOT="$GIT_ROOT/pkgs/clan-cli"
+
+    # Add clan command to PATH
+    export PATH="$PKG_ROOT/bin":"$PATH"
 
     # Needed for impure tests
-    ln -sfT ${clan-cli.nixpkgs} clan_cli/nixpkgs
+    ln -sfT ${clan-cli.nixpkgs} "$PKG_ROOT/clan_cli/nixpkgs"
   '';
 }
diff --git a/pkgs/clan-vm-manager/.envrc b/pkgs/clan-vm-manager/.envrc
index af1ef143..329a5f07 100644
--- a/pkgs/clan-vm-manager/.envrc
+++ b/pkgs/clan-vm-manager/.envrc
@@ -1,5 +1,4 @@
-# See comment in clan-cli/.envrc
-# source_up
+source_up
 
 watch_file flake-module.nix shell.nix default.nix
 
diff --git a/pkgs/clan-vm-manager/default.nix b/pkgs/clan-vm-manager/default.nix
index 1fe26b46..30ca3a52 100644
--- a/pkgs/clan-vm-manager/default.nix
+++ b/pkgs/clan-vm-manager/default.nix
@@ -45,13 +45,16 @@ let
   runtimeDependencies = [ ];
 
   # Dependencies required for running tests
-  externalTestDeps = [
-    pytest # Testing framework
-    pytest-cov # Generate coverage reports
-    pytest-subprocess # fake the real subprocess behavior to make your tests more independent.
-    pytest-xdist # Run tests in parallel on multiple cores
-    pytest-timeout # Add timeouts to your tests
-  ];
+  externalTestDeps =
+    externalPythonDeps
+    ++ runtimeDependencies
+    ++ [
+      pytest # Testing framework
+      pytest-cov # Generate coverage reports
+      pytest-subprocess # fake the real subprocess behavior to make your tests more independent.
+      pytest-xdist # Run tests in parallel on multiple cores
+      pytest-timeout # Add timeouts to your tests
+    ];
 
   # Dependencies required for running tests
   testDependencies = runtimeDependencies ++ allPythonDeps ++ externalTestDeps;
diff --git a/pkgs/clan-vm-manager/pyproject.toml b/pkgs/clan-vm-manager/pyproject.toml
index aea2ba47..bdacae4c 100644
--- a/pkgs/clan-vm-manager/pyproject.toml
+++ b/pkgs/clan-vm-manager/pyproject.toml
@@ -30,6 +30,10 @@ disallow_untyped_calls = true
 disallow_untyped_defs = true
 no_implicit_optional = true
 
+[[tool.mypy.overrides]]
+module = "clan_cli.*"
+ignore_missing_imports = true
+
 [tool.ruff]
 target-version = "py311"
 line-length = 88
diff --git a/pkgs/clan-vm-manager/shell.nix b/pkgs/clan-vm-manager/shell.nix
index 50a7665a..758b06eb 100644
--- a/pkgs/clan-vm-manager/shell.nix
+++ b/pkgs/clan-vm-manager/shell.nix
@@ -14,9 +14,7 @@
 
 let
   devshellTestDeps =
-    clan-vm-manager.externalPythonDeps
-    ++ clan-vm-manager.externalTestDeps
-    ++ clan-vm-manager.runtimeDependencies
+    clan-vm-manager.externalTestDeps
     ++ (with python3.pkgs; [
       rope
       mypy
@@ -43,9 +41,13 @@ mkShell {
     ]);
 
   shellHook = ''
-    export PATH=$(pwd)/bin:$PATH
+    export GIT_ROOT=$(git rev-parse --show-toplevel)
+    export PKG_ROOT=$GIT_ROOT/pkgs/clan-vm-manager
+
+    # Add clan-vm-manager command to PATH
+    export PATH="$PKG_ROOT/bin":"$PATH"
 
     # Add clan-cli to the python path so that we can import it without building it in nix first
-    export PYTHONPATH=$(pwd)/../clan-cli:$PYTHONPATH
+    export PYTHONPATH="$GIT_ROOT/pkgs/clan-cli":"$PYTHONPATH"
   '';
 }