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How I learned to charge my customers

idiallo.com

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Re: How I learned to charge my customers

#61

Post by mechEpleb »

CyberDildonics wrote: post #43
simonswords82 wrote: post #35

Earlier quoted context omitted.

I could write a book on it because there's a lot to it but I'll try to summarise. Success = Connections x (Niche knowledge + Skills) For connections: Given the current state of the world networking is hard but not impossible. However you go about it, you need to build trust with people rather than hard sell them which doesn't work in 2020 (unless what you are selling is a commodity). Note that I said people, you're s…

Why wouldn't you just sell one program as a service at that point instead of making custom software for each client? Also everything you said here is extremely generic, it doesn't address the initial problem of finding a problem that a company needs solved and will pay for, but wouldn't solve themselves internally.

>it doesn't address the initial problem of finding a problem that a company needs solved and will pay for, but wouldn't solve themselves internally.

Duh. If a general way to find such problems existed, everybody would be using it - meaning every problem would already have people on it. Which means no problems for you.

Welcome to the market.

Re: How I learned to charge my customers

#62

Post by rileytg »

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.

billing weekly for things like this i’ve found works nicely. they basically get everything you got for a week. still requires some level of trust, and understanding of the work by the client.

Re: How I learned to charge my customers

#63

Post by komon »

lsorber wrote: post #40
simonswords82 wrote: post #24

Earlier quoted context omitted.

By understanding their business really really well. For example, if I know that an automation that I can create for a client is going to take me 100 hours to setup and save them £20,000 per month I can either: Charge 100 x £100 per hour - so a one off income of £10,000. Seems like I'm earning good money right?? OR I can charge them £100,000. They'll make that back in just five months. A BARGAIN. Most businesses would…

Sounds great until the client realises they can hire someone else who does charge by the hour, saving them a massive 100k - 10k = 90k compared to your proposition.

Yeah, your ability to charge more scales with your proven ability to deliver. That's where referrals/portfolios/testimonials/case studies come in.

Basically, you want to charge a percentage of the value you're promising to provide for them. And then that's going to get multiplied by their confidence in you.

If I'm bidding on a project that I think can make $1MM/yr for my client, and I normally charge 10% of the first year's worth of value, then I'm looking at $100K. If the business I'm working with only has a 50% confidence that I'm a safe bet to produce that value, or an 80% confidence, that's going to get reflected in what price we negotiate to. Probably more like $50k in the 50% confidence bucket.

But the more proven you are, the more you can say, "I said this thing would make $2MM and by gum it actually made $5MM" the more you're going to be able to charge.

N.B. That 50% isn't "It's a coin toss whether or not they'll complete the project", it's more like "When they complete the project, we're confident that we're going to get at least 50% of the value they're selling us on"

Re: How I learned to charge my customers

#64

Post by zerr »

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.

Re: How I learned to charge my customers

#65

Post by cvhashim »

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!

I’m a software consultant at a large software firm. I make a reasonable amount of money per hour for my region and is around the going rate of a developer of 2-3 years of experience (Im only 2 years out of school). But my firm charges clients around 4x what they pay me hourly.

Re: How I learned to charge my customers

#66

Post by shamano »

ibudiallo wrote: post #29

Hey everyone, author here. My experience is that customers will always want more features than they initially ask for. That's why I make sure to tell them my hourly rate, then give them an estimate. For example, I can say $5000 for a 1 month project. Here I'll break down the average time I will work a week as a courtesy. This helps me justify charging them again when we are at month 3 and the project is not done. I l…

Nice write up!

fyi Your humans.txt page is broken

Re: How I learned to charge my customers

#67

Post by emilecantin »

Swizec wrote: post #5
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…

I hire freelancers sometimes and this is exactly right. We agree on scope, price, and timeline. Helps me budget, helps you know when the project is done. Hourly fills me with dread as a client. I have no idea how much this is gonna cost or when you’ll be done and I can use it. Retainers work well for ongoing work. Like when you need someone to do X, Y, and Z misc tasks every week. Fundamentally I pay for results, tim…

As a freelancer, I honestly prefer charging hourly / daily / weekly. The type of project I do tends to have an ever-expanding scope.

Charging by project would put me in an adversarial position with my client; I'd be forced to always push back when the scope / situation changes.

By contrast, charging by the hour lets me say yes much more often.

Of course, if I were to do more "turn-key" projects, scope would be much more predictable so it'd probably make a lot more sense to charge per-project.

Re: How I learned to charge my customers

#68

Post by exolymph »

superhuzza wrote: post #7
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…

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?

You have to be willing to lose clients is the real answer. They try to get you to do some extra bullshit not in the brief, you say no / offer a quote. If that doesn't sit well with them, so be it.

BATNA is everything.

Re: How I learned to charge my customers

#69

Post by ibudiallo »

shamano wrote: post #66
ibudiallo wrote: post #29

Hey everyone, author here. My experience is that customers will always want more features than they initially ask for. That's why I make sure to tell them my hourly rate, then give them an estimate. For example, I can say $5000 for a 1 month project. Here I'll break down the average time I will work a week as a courtesy. This helps me justify charging them again when we are at month 3 and the project is not done. I l…

Nice write up! fyi Your humans.txt page is broken

Thanks, I'll update it right away.

Re: How I learned to charge my customers

#70

Post by JamesSwift »

mechEpleb wrote: post #55
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…

Isn't the incentive structure for hourly completely ass-backwards? If you're a consultant there is an implied information assymetry - the client doesn't know what you are doing and has a hard time judging the amount of work required/being done. How do you handle the inherent and justified suspicion of padding billable hours? I just can't charge hourly because I just can't imagine trusting someone who charges hourly.

Thats what I mean when I say "as long as the trust is there on both sides". They trust that I'm honest and don't sandbag work, and I trust that they aren't going to ask for an itemized breakdown of my time. I keep a very coarse ledger of time and what I worked on, but the invoices are generally just a line item of

"Development: 30 hours"

Again, nothing is a surprise in my relationships because we constantly are in communication, and I've raised issues with them beforehand if anything comes up / diverges.

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