How to calculate your hourly rate • Hacker News Board

Re: How to calculate your hourly rate

#61

Post by msutherl » Fri, Mar 01, 2013, 7:21 AM UTC

philiphodgen wrote: post #4

Note the inherent flaw in "by the hour" billing: if you want to increase your income you either must work more hours or raise your rates. In other words, hourly billing guarantees a built-in cap to your annual income. You have a maximum, but no minimum income. This is a world that I do not want to live in: a voluntary upper limit on my achievements. Hourly billing is a method of setting prices by looking at the cost…

This article provides an entertaining economic theory based on getting paid as much as you can cleverly manipulate somebody to pay you: http://www.ribbonfarm.com/2013/01/31/stone-soup-for-the-capi...

Re: How to calculate your hourly rate

#62

Post by makalumhenders » Fri, Mar 01, 2013, 12:23 PM UTC

runako wrote: post #36

_delirium wrote: post #22

Earlier quoted context omitted.

> but your client certainly is aware of the value you're bringing In a small company, probably, but in Enterprise contracting, I would be surprised if this is usually true.

Your point is fair, but they know order of magnitude. They know you're (likely) not bringing $10B annually of value, and they know it's more than your current billing rate (or they wouldn't waste time with you). The point is to talk with the client and try to pin the number down to bring your rate closer to the value. Somebody in the enterprise is responsible for ensuring that projects aren't run without any expectat…

The question I still don't see answered is — are you proposing to charge based on the value you might deliver, or the value you actually deliver?

If Apple ask you to bid on creating the iPhone, how would value that? (The world hasn't seen an iPhone.) If you're capable of designing the iPhone and the best your competitor is capable of is creating a Galaxy, would the two bids be equal under the assumption of ideal value pricing?

Re: How to calculate your hourly rate

#63

Post by gregpilling » Fri, Mar 01, 2013, 2:21 PM UTC

philiphodgen wrote: post #12

bguthrie wrote: post #8

Earlier quoted context omitted.

Measuring value in software development is difficult. If you can tie your activities directly to either higher revenue or lower cost, that's great. As an international tax lawyer, I'd think you have a relatively straightforward way to demonstrate value: it's proportional to the money your clients save on their taxes. patio11 has the same advantage: consulting time spent optimizing conversions through A/B testing can…

The value to my clients comes in two forms: (1) amount of tax saved and (2) stress and fear eliminated. The first is easy to quantify. It also means there is an upper cap on your income. The upper cap is the amount of tax saved. As your price approaches that number, the likelihood of a "yes" decreases. Do not set your pricing based on easily quantifiable criteria, unless you're working on huge deals where you can tak…

> A business owner is willing to throw money at a problem to not have to think about the problem at all. This frees up the owner's brain to think about stuff that really matters and will make money.

Yes I am. As a business owner, I completely agree with this statement. After a while of running a business, one day you will calculate how many dollars per minute your expenses are and it will scare the hell out of you. Then you will understand why you throw money at problem X to make it go away, because you need to focus on opportunity Y to bring in more revenue.

Re: How to calculate your hourly rate

#64

Post by ahoyhere » Fri, Mar 01, 2013, 9:02 PM UTC

drewcrawford wrote: post #52

ahoyhere wrote: post #45

Earlier quoted context omitted.

"But what if you end up working on a product for a company that never makes them any money at all?" This isn't something that happens to you, this is something you choose. It's your responsibility as a consultant to pick your clients carefully. If you're talking about a project that everyone expects to have an enormous upside, but doesn't, and it's not your fault, you base your rates from the outset on the client's e…

> It's your responsibility as a consultant to pick your clients carefully. In the mobile industry, (and the web dev industry as well), the market functions on the basis that 90% or so of projects won't make the return, and the industry is carried by the 10%. In some sectors (consumer) this is higher, in others (B2B) it's lower, but it's about the right frame of reference give or take for most projects that ordinary p…

"So what you are saying is nice in theory but for the average mobile/web developer thinking about contracting they don't have the volume necessary to assume the risk that the market ordinarily bears for development projects."

I know VERY "average" mobile web / mobile app developers who can charge well in excess of $100/hr. People without a single major hit. Seeing the quality of their output, I would never pay that much, and yet somehow they have all the work they need. (Note: they're not marketing geniuses either.)

Just look at the rates people ask for, and get. They're way up there. Because there are so few of these people around, relative to demand, and because every Joe Schmo who wants to do a mobile app expects to strike it big, they can charge anything they want.

Re: How to calculate your hourly rate

#65

Post by fyi80 » Sat, Mar 02, 2013, 7:06 AM UTC

TamDenholm wrote: post #10

Like others have mentioned, charge by the value you provide. I know a few parables that illustrate my point that i often tell people, this is one, excuse my terrible paraphrasing. "Guy walks along and sees Pablo Picasso chilling in a cafe watching the world go by, the man goes up to him and asks, 'Wow nice to meet you, can you draw me a sketch on this napkin? I'll pay you for your time!' Picasso scribbles on the napk…

That was a Saturday Night Live sketch starring Jon Lovitz yelling, "I'm Picasso!" and trying to pay his tab with a scribble on a napkin. I think Kevin Nealon played the waiter.

Re: How to calculate your hourly rate

#66

Post by driverdan » Sat, Mar 02, 2013, 5:24 PM UTC

juanpdelat wrote: post #5

Please correct me if I'm wrong. So, in order to make the same $75k/year the employee makes in the example, the manager would have to hire around 6 employees with the same structure and have at least 6 projects per year.

Operating a dev company on a 15% margin would be crazy. 30% is more realistic.