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How I learned to charge my customers

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Re: How I learned to charge my customers

#71

Post by JamesSwift »

thaumasiotes wrote: post #52
JamesSwift wrote: post #16

Earlier quoted context omitted.

I explicitly do hourly when working on the side because of the lower overhead on my end to manage the process. As long as the trust is there on both sides, its a much more pleasant relationship to manage. The client is never going to be surprised by my hours (because I've given a gut estimate and am communicating as we go), and we never have to worry about horse trading for scope. If requirements change we just do th…

> "we are growing and need a hired gun to handle a broad spectrum of miscellaneous requests" I have difficulty seeing how you could charge for this other than by units of time.

As the other commenter says, a retainer agreement for a "block" of time is common, but again for simplicity sake I just do it on the fly and we keep each other in the loop. They keep me informed of current/future things that are coming up and I keep them informed of sizing estimates (e.g. "thats simple", "thats pretty involved", "we should hold off on that and have a discussion to see if we can solve it with a hack then reevaluate")

Re: How I learned to charge my customers

#72

Post by narwally »

rgbrenner wrote: post #22
chadash wrote: post #4

I do some consulting on the side and I won't charge by the hour if I can avoid it because: 1) I hate keeping track of time. 2) hourly rates aren't how my customers think of the issue. They think: "this product will make (or save) me $20,000/year" (making up numbers here). If I tell them that I can do the job for $5,000, that sounds like a great deal to them. But if I tell them I can do it for $200/hour, and I estimat…

Yes, I've noticed this too... Many people have a visceral reaction to high hourly rates and never actually compare it to the value delivered. I think it's for a couple of reasons: 1) The average person gets paid $27/hour. Even the average software dev gets only ~$50/hour. Since many people interact with people getting paid around this amount, they see high rates as greedy/outrageous. Less likely to get this reaction…

I had this argument with the CTO of a startup I worked for a while back. We had previous experience with a contractor that did great work, but charged the going rate for great work. We had a new job that required the same skill set, and the CTO wanted to shop around for a 'better value'. It blew my mind that he didn't see the previous guy as a good value. Instead he wanted to risk going with someone unknown, not the guy we knew did quality work. Luckily all of the development team was in agreement, and we convinced him that the guy actually was worth what he charged.

Re: How I learned to charge my customers

#73

Post by __sisyphus__ »

johnward wrote: post #30
projektfu wrote: post #3

Those rates seem low. 20 years ago consultancies were charging $150/hr + materials. Their employees might see $30-50 depending on how much unallocated time they had. For a solo, the average including down time (sales) could reach $80-100, charging that same $150 to the clients. Have rates fallen so far?

Some anecdotal stats from my experience being a consultant with both megacorps and smaller gov contractor. The hourly rate is about $200 an hour on average. This is for a senior, highly specialized, engineer type role. Megacorp paid me about $60 per hour where the smaller firms paid me closer to $80. Both as an employee with benefits. When I first joined a startup we would go as low as $120 per hour and pay $30 an ho…

having been employed by agencies directly, and having worked as a freelancer working with agencies as well as other businesses directly, these rates are right in line with my experience.

Re: How I learned to charge my customers

#74

Post by neolog »

shrutipathak wrote: post #18
superhuzza wrote: post #7

Earlier quoted context omitted.

Genuinely curious, how do you mitigate scope creep when you charge by product? What stops the client from pushing back when there's a bug in the future or feature request they think should have been included?

In the past, I have always only charged for the entire project all at once instead of by the hour. Main trick to mitigating feature crap I have used is by first I add extra padding to cost. Second i tell my clients that I provide free maintenance for 2 weeks after the project si delivered. Mostly this helps because clients want speed over reliability. So we push and the next two weeks is bug fixing - sometimes it's t…

How many weeks are these projects, including the 2 free weeks?

Re: How I learned to charge my customers

#75

Post by keithnz »

I've done by the hour, fixed price, and with a friend of mine recently I just said pay me what you think its worth when you want. All of them have worked out pretty reasonable. Only time I haven't thought it was worth it if the job was too small.

Re: How I learned to charge my customers

#76

Post by aronpye »

Companies tend to internally budget using hourly rates and time cards, so I can’t see how charging an hourly rate like most consultancies and professions, such as law, would not sit well with client companies. Also, charging a fixed price makes you very vulnerable to having to absorb additional costs if the project takes longer than anticipated. An hourly rate removes this risk as you amortise your costs into your hourly rate.

As an individual going up against an entire company you want to protect yourself as best you can, charging by the hour helps ensure that. Also make sure you get yourself liability insurance.

Re: How I learned to charge my customers

#77

Post by edouard-harris »

zerr wrote: post #64
pauletienney wrote: post #21

I spent 10 years freelancing. If i can give an humble advice: you don't cost your customer some money, you produce some extra value for him. Charge between 10% and 30% of the extra value you provide to your customer. Charging per hour is a trap. It is nice to start, it is easy to read, easy to calculate but it makes you a commodity. Don't be a commodity, be an expert.

Finding out about that extra value is trickier than it sounds, unless the accountant is willing to share the classified info with you.

There's certainly a knack to it, but it has nothing to do with accountants or classified information. If one has experience in this sort of thing, it's generally possible to ballpark likely value-adds based on a single 30-minute conversation. Experienced consultants in this tier often offer a free initial call with prospective clients partly for this reason.

Re: How I learned to charge my customers

#78

Post by sokoloff »

justaguyhere wrote: post #47
kova12 wrote: post #19

That explains why all the recruiters on LinkedIn are trying to low-ball me so much. The actual rate they charge is double!

This makes me soooooooo mad. Instead of LAMP, I spelled out Linux/Apache... etc in my resume. One recruiter spent 10 minutes arguing with me that LAMP is not the same as Linux... Why do they deserve 50% of the billing rate (they can't even bother spending 30 seconds to google and note down what these terms mean)? Is their service that valuable? Heck, compared to them even the freelance websites that take 20% (Fiverr…

> One recruiter spent 10 minutes arguing with me that LAMP is not the same as Linux

8 of those minutes are partly/mostly on you. (I’d give ‘em 1-2 minutes and then just hang up.)

Re: How I learned to charge my customers

#79

Post by edmundsauto »

logicOnly wrote: post #2

Ahh yes I've charged $100/hr and I have gotten almost no work despite being both an engineer and programmer. I can make half that with employment. If I have a sales team, maybe we can split the $100/hr labor once I find a company willing.

Your $50/hr with employment is more like $75/hr with overhead accounted for.

Re: How I learned to charge my customers

#80

Post by bhandziuk »

rgbrenner wrote: post #22
chadash wrote: post #4

I do some consulting on the side and I won't charge by the hour if I can avoid it because: 1) I hate keeping track of time. 2) hourly rates aren't how my customers think of the issue. They think: "this product will make (or save) me $20,000/year" (making up numbers here). If I tell them that I can do the job for $5,000, that sounds like a great deal to them. But if I tell them I can do it for $200/hour, and I estimat…

Yes, I've noticed this too... Many people have a visceral reaction to high hourly rates and never actually compare it to the value delivered. I think it's for a couple of reasons: 1) The average person gets paid $27/hour. Even the average software dev gets only ~$50/hour. Since many people interact with people getting paid around this amount, they see high rates as greedy/outrageous. Less likely to get this reaction…

I think charging a $27/hour is quite low. That might be what an employee gets but they're going to get billed out at 3x that. A client sees like 75/hr for that 27/hr employee and doesn't have any idea of what their take home pay is.

200/hr for an independent consultant is someone making ~130k annually. It's a lot but not insane.

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