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How I Earned A Lot More on Projects by Changing My Pricing Strategy

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Re: How I Earned A Lot More on Projects by Changing My Pricing Strategy

#41

Post by rdouble »

larrys wrote: post #38
kohanz wrote: post #32

Earlier quoted context omitted.

I have to respectfully disagree. While I think the ideas have merit, the book reads like "the secret" or some other motivational junk. It feels simplified or dumbed-down to the point where it doesn't feel authentic anymore. He got the wrong person to write his story, IMHO.

I don't read things like this (pricing and getting the most money is a specialty of mine so I don't have much need to mess with what is already working for me) but your comment piqued my interest so I took a look at a bit of the beginning of the pdf. It's essentially an advertisement for freshbooks and agree with the "motivational" aspects complete with the obligatory testimonials (which I'm sure will or have been re…

The PDF doesn't actually go into detail about how the author made over $200K in 19 days. In fact, the rest of the story doesn't mention anything else about that claim at all. It's a discussion between a fictional "Steve" and "Karen" about how Steve should not charge by the hour.

Re: How I Earned A Lot More on Projects by Changing My Pricing Strategy

#42

Post by fieryeagle »

rdouble wrote: post #41
larrys wrote: post #38

Earlier quoted context omitted.

I don't read things like this (pricing and getting the most money is a specialty of mine so I don't have much need to mess with what is already working for me) but your comment piqued my interest so I took a look at a bit of the beginning of the pdf. It's essentially an advertisement for freshbooks and agree with the "motivational" aspects complete with the obligatory testimonials (which I'm sure will or have been re…

The PDF doesn't actually go into detail about how the author made over $200K in 19 days. In fact, the rest of the story doesn't mention anything else about that claim at all. It's a discussion between a fictional "Steve" and "Karen" about how Steve should not charge by the hour.

Sounds like I could give this one a miss. Too many motivational fluffs out there already.

Re: How I Earned A Lot More on Projects by Changing My Pricing Strategy

#43

Post by reedlaw »

badclient wrote: post #34

Smart customers have their own method of pricing to compete with the value-based pricing suggested in the post. It's called market-based pricing. Even if my programming work will make the client $100,000, if the client is convinced he can get that programming work done for $5,000, he will pick that over my $20,000 quote. I've read these several posts along these lines. The one huge assumption they make is that you ha…

Can a smart customer really get the job done for $5,000? Of course, because this customer will have clearly defined his requirements up-front. The average client will not have clear goals or requirements thus forcing the programmer to iteratively come up with a solution that meets the client's unwritten expectations. This overhead will generally add up to the amount of the higher asking price. So in the case of a poorly defined project, a $5,000 job will be woefully inadequate and will require the client to start over from scratch.

Re: How I Earned A Lot More on Projects by Changing My Pricing Strategy

#45

Post by lifeisstillgood »

dreamfactory wrote: post #24
chatmasta wrote: post #23

Earlier quoted context omitted.

Not sure what you mean? I'm saying the buyer has a project, and either the buyer or freelancer chops it up into milestones (in my case, I'm an engineer as well as a buyer so I can do this). Each milestone has a set price paid after completion. If the freelancer completes 3 milestones, he gets paid for each. If he completes 4, he gets paid for each. etc. Not sure what you're saying?

Depends whether your milestones are measured in time, features, business outcomes. First would still be t&m - just be a larger unit than days; second would be classic fixed price billing (which incentivises low quality hackily bolted together solutions which will be a pain to maintain and extend); third would be value-based consultancy.

This is a fair insight - there are always milestones - the ones you agree to get paid by affect the project as a whole

I would suggest talking in terms of features / business outcomes.

Re: How I Earned A Lot More on Projects by Changing My Pricing Strategy

#46

Post by tonyedgecombe »

tocomment wrote: post #28
edanm wrote: post #10

Earlier quoted context omitted.

I'm completely on board with the "bill by the day, not the hour" idea. Having implemented it in our own consultancy, it's done wonders. But it hasn't gotten us to the stage you're talking about - we're definitely making headway in establishing ourselves as (Python) experts, but I don't think we're really at the stage where we can sell based solely on the customer's value - building software is simply too replaceable…

What didn't you like with fixed price billing?

The problem with fixed price work is you create a conflict of interests from the start. It's in your interest to do as little as possible for the price and it's in your customers interest to get as much as possible for the price.

That and all the issues of requirements gathering up front.

Re: How I Earned A Lot More on Projects by Changing My Pricing Strategy

#47

Post by ProblemFactory »

larrys wrote: post #37
badclient wrote: post #34

Smart customers have their own method of pricing to compete with the value-based pricing suggested in the post. It's called market-based pricing. Even if my programming work will make the client $100,000, if the client is convinced he can get that programming work done for $5,000, he will pick that over my $20,000 quote. I've read these several posts along these lines. The one huge assumption they make is that you ha…

"The one huge assumption they make is that you have good clients who aren't on a budget and won't go shopping. Those clients are much harder to find as a freelancer." Agree. And it's not even so much budget as "not a schmuck" (sorry not a better way to put that). When I saw this, I laughed: "As an example, if I was proposing to build a website capable of creating an additional $100,000 of profit annually, I would ask…

> That said you will have to find the type of customers who will fall for something like this.

I don't think customers that who accept (and find value in) this proposal are necessarily fools. Writing code is a cheap commodity. Making business decisions is not, and development cost is inversely proportional to how precisely you know what you want.

A business owner who has made all the business and technical decisions, and approaches developers with extremely detailed photoshop mockups and specs can probably successfully get an app or website made for $10/hour on elance.com, and keep all the extra value.

A client who has made all the business decisions and knows what development they want on an approximate "outline" level needs to hire a 10x more expensive local developer who is willing to meet and push back on any technical assumptions. They are paying 90% for the decision-making expertise on understanding what they want, and writing code is a tiny part of the service.

A client who may see value in a $40000 website offer is one who has not or cannot make the business decisions themselves. They are paying primarily for the business or marketing strategy consulting, and the entire development side is a tiny part of the service. Perhaps the client should make these themselves to be able to use a cheaper developer, and keep more of the value - but if they can't, then an expensive offer may still be profitable.

Re: How I Earned A Lot More on Projects by Changing My Pricing Strategy

#48

Post by skore »

badclient wrote: post #40
larrys wrote: post #37

Earlier quoted context omitted.

"The one huge assumption they make is that you have good clients who aren't on a budget and won't go shopping. Those clients are much harder to find as a freelancer." Agree. And it's not even so much budget as "not a schmuck" (sorry not a better way to put that). When I saw this, I laughed: "As an example, if I was proposing to build a website capable of creating an additional $100,000 of profit annually, I would ask…

Speaking of schmucks, here's one that got me to give up on consulting from couple years ago: http://cliffkaplanfraud.com/

Sorry for being a bit tangential, but I'm always astonished how people are still using checks for business. Especially in the US, where it seems standard industry practice of assholes to bounce checks.

(I read about France still being in love with checks as well, although they have basically your standing with banks depend on you handling checks well. So even if they're still using a horribly outdated method of payment, at least they attach the right consequences to fraud.)

Re: How I Earned A Lot More on Projects by Changing My Pricing Strategy

#49

Post by chrischen »

"As an example, if I was proposing to build a website capable of creating an additional $100,000 of profit annually, I would ask the client to make an investment of $40,000 in their website."

You can only do this if what you offer is not a commodity. Otherwise, what you charge is the minimum of expected value and the market rate for the work you do.

Re: How I Earned A Lot More on Projects by Changing My Pricing Strategy

#50

Post by gabemart »

tonyedgecombe wrote: post #46
tocomment wrote: post #28

Earlier quoted context omitted.

What didn't you like with fixed price billing?

The problem with fixed price work is you create a conflict of interests from the start. It's in your interest to do as little as possible for the price and it's in your customers interest to get as much as possible for the price. That and all the issues of requirements gathering up front.

Isn't it also true that hourly or daily billing creates a conflict of interests from the start, because it's in the customer's interests for you to finish as fast as possible and in your interests to finish as slowly as possible?
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