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Ask HN: How do custom software dev firms make money?

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Re: Ask HN: How do custom software dev firms make money?

#81

Post by FpUser »

g00gler wrote: post #26
FpUser wrote: post #20

Earlier quoted context omitted.

I had projects like this. We define the whole project with the client first and agree on overall price. I then split it into few stages and upon completion of each stage I would sit with the client show the work and client signs off the stage as done and pays for said stage. With this type of work I would also always charge non refundable initial deposit as sometimes the client will have the contractor started and th…

That’s really interesting. I’m coming at this from 2 angles —- I run a small “shop”, me and 1 or 2 other guys part time; I also work for a company who has contracted an agency for creating a design system for us. Do you estimate there will be X hours of bug fixing and add that to the price of billable hours? How do you take into account client requests after a billing period is complete or during a billing period? IM…

>"Do you estimate there will be X hours of bug fixing and add that to the price of billable hours?"

I'll give you an example of particular product I made for a client:

The agreement I had stated that I would support (fix bugs, no feature change) for 3 month. After that it was $X per hour with $XX minimum charge. Alternatively client could always sign for a year of support at $xxx per year.

Currently I have a contract where they simply pay me flat fee per year with the clause that each side can terminate it with 1 month advance notice.

But in my long career I've had all kinds of contracts. Including getting licensing fee while I maintained and own product (I paid for development myself)

Re: Ask HN: How do custom software dev firms make money?

#82

Post by gist »

chairmanwow1 wrote: post #37

>> “Hey HN, I'm working on a project for school and need to learn a bit more about the revenue model of custom software dev firms.” I used this trick A LOT in college to get secrets from companies. My friends and I would call some people and tell them we were trying to understand something for a report. It was amazing how much secret information people were willing to share. One of the most powerful assets you have a…

It's also a predictably lazy and obvious way to do this. No creativity at all. I can think of better ways to social engineer the HN community to spend time 'delivering the goods'.

> One of the most powerful assets you have as a student is that .edu email address.

I don't feel an .edu is even needed at all. I have an .edu as an alumni even and I graduated a long long long time ago.

Fwiw I did this also pre internet yes people do reveal all sorts of things to students. Old school though it's a bit more difficult.

Re: Ask HN: How do custom software dev firms make money?

#83

Post by ilaksh »

I recommend that you have very clearly defined budgets for the full project but absolutely avoid fixed bids.

Start with a small increment of a day or two and gradually increase the billing increments to a week or two. Don't continue work until you have gone over deliverables with the person who is "writing the checks" at the end of each stage (every few days at first). Agree on a fee for that upcoming period after discussing the work for that time frame. Make sure they are comfortable and if not stay with the smaller periods.

Re: Ask HN: How do custom software dev firms make money?

#84

Post by FpUser »

tootie wrote: post #78
FpUser wrote: post #45

Earlier quoted context omitted.

I actually meant milestone. I do not do Sprints as in Agile. Normally I design and develop new products from a scratch and there is no use of Agile propaganda in it.

Funny because I do product dev from scratch and wouldn't dream of doing it without agile being explicitly bought into by the client. How you do a non-trivial project setting fixed milestones upfront?

Being very experienced product designer/developer after few talks with the client I could fairly accurately split big project in few comprehensible stages with the price for each. I do not remember ever being off by any significant margin. I've done way too many of projects either directly or as a director during the course of my life so it is mostly an autopilot at this stage for me. Also my clients tend to be real business people with real business needs. They do not really like to go into methodology level. they just look at my resume, and check references. They are much more interested in how I can solve their problem on conceptual levels before really engaging.

Re: Ask HN: How do custom software dev firms make money?

#85

Post by xwdv »

roel_v wrote: post #55
xwdv wrote: post #54

How much cash should someone accumulate before they have a decent runway to start a software dev firm with full time employees?

That's the wrong way around. You start small, part time if possible, and grow (and hire) as you get more steady work. Do not save up 2mm, hire 5 guys, then the next Monday morning say "ok guys let's find some customers".

But at some point you must be saving up profits right? Eventually you will have to hire people that do not have billable hours, you can’t rely on just cash flow from work to cover salary expenses.

Re: Ask HN: How do custom software dev firms make money?

#86

Post by sirspacey »

tootie wrote: post #18

I was a director for digital agencies for a long time. There's no real fixed model for any of it. Like others have said, contract-wise you can bill as fixed fee, time and materials or some hybrid. Customers are more apt to sign a fixed fee, but it's a huge risk to put a fixed scope, budget and timing unless you know exactly what you're doing. Any level of ambiguity could lead to costly overruns and missed expectation…

Along these lines it is important to recognize:

1) the larger the client, the more it is an intentional practice to leverage any gaps in the contract to extract whatever value the company wants at that moment, regardless of what was agreed to

2) what the client “remembers” the agreement to make is usually whatever they first proposed. While many agencies seek to define agreements as a defense, larger clients happily believe you cannot afford to disappoint them and it’s entirely up to you as to whether you will play that game of chicken. Spoiler alert: you won’t.

Fortune 500s especially are very risky clients on these two points.

Re: Ask HN: How do custom software dev firms make money?

#87

Post by sirspacey »

PopeDotNinja wrote: post #34

One thing to point out is that there are varying degrees of customs. Every client project is custom in the sense that they all have different pics, layouts, colors, et., but the underlying technology may be the same (e.g. Wordpress). The more you can use off the self components and just tweak them, the more predictable a project will be. This type of work tends to be very competitive & you’ll often hear that it’s a r…

The profit window is where clients see the work as custom while the implementation is off-the-shelf.

Twitter Bootstrap was a great example for a few years. Clients got “custom” apps/websites and front-end devs could stitch together libraries pretty fast.

Re: Ask HN: How do custom software dev firms make money?

#88

Post by mlvljr »

quickthrower2 wrote: post #76
an_opabinia wrote: post #29

> the revenue model of custom software dev firms Taking a cut of the economics of the transaction, just like giant software firms do. For example, the seller is an HBS grad whose buddy is a PM at Microsoft with permission to pay vendors - the buyer. Seller can't program but he can find young people who can. He knows there's a $400k budget for a Sharepoint search plugin, he pays 3x young people $66k each, pays out $50…

Ha ha want to see the look on the teachers face when this answer is handed in!

https://youtu.be/uSLscJ2cY04

Re: Ask HN: How do custom software dev firms make money?

#89

Post by user5994461 »

FpUser wrote: post #84
tootie wrote: post #78

Earlier quoted context omitted.

Funny because I do product dev from scratch and wouldn't dream of doing it without agile being explicitly bought into by the client. How you do a non-trivial project setting fixed milestones upfront?

Being very experienced product designer/developer after few talks with the client I could fairly accurately split big project in few comprehensible stages with the price for each. I do not remember ever being off by any significant margin. I've done way too many of projects either directly or as a director during the course of my life so it is mostly an autopilot at this stage for me. Also my clients tend to be real…

I concur. Milestones are comically similar from project to project.

Software in internal development, software available in testing, beta deployment on the customer site with real customers/data, go live in production, first user, first thousand users, etc...

For hardware projects (I did a lot of joint software/hardware) hardware design, ready to manufacture, first prototype, second prototype, first production series, first delivery to customers, etc...

Last but not least, the primary use cases are major milestones, the software allows to do A then B then C. Gotta determine the main use cases of the project as early as possible.

Large projects (10+ people over years) are split into components, each component has its own milestones and should stand on its own as a deliverable. Add major milestones for integrations, as soon as any 2 dependent pieces are in a working state, they need to be integrated together and tested.

Re: Ask HN: How do custom software dev firms make money?

#90

Post by tootie »

FpUser wrote: post #84
tootie wrote: post #78

Earlier quoted context omitted.

Funny because I do product dev from scratch and wouldn't dream of doing it without agile being explicitly bought into by the client. How you do a non-trivial project setting fixed milestones upfront?

Being very experienced product designer/developer after few talks with the client I could fairly accurately split big project in few comprehensible stages with the price for each. I do not remember ever being off by any significant margin. I've done way too many of projects either directly or as a director during the course of my life so it is mostly an autopilot at this stage for me. Also my clients tend to be real…

I mean, I've worked on plenty 7-8 figure programs for Fortune 50 companies of all kinds and that has not been my experience at all. I've even worked for FAANG clients who didn't know what they wanted until we tell them. The kind of work I did (I am exiting the consulting world as of this week) was very consumer-facing and creative driven. I can estimate tech work as well as anyone, but there's always too many moving parts to a big project to know how everything will fall into place.
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