[thelist] Price help!

Martin martin at lists.evolt.org
Sat Sep 2 10:21:32 CDT 2000

Frank wrote on 30/8/00 1:21 am

>Hours of work * what you think you're worth per hour.
Slight sophistication to this (may not apply in your case):
Hours spent on the project * hourly cost of running your business *
* %age Markup

Working out the hourly cost is a tricky one - remember that most
overheads are fixed (ie cost you the same whether you're working
or not).

This should be the *lowest* sum you can quote.

>Generally, when deciding what I'm worth on a project, I find out that 
>they are willing to pay (Guestinmating: It's an experience thing), 
>and figure out my rate backwards.  (If you know they were willing to 
>pay $1000, would you quote them $500?)
Again, an added sophistication - what value will this add to their
business? (which will be somewhat above what they tell you they're
willing to pay)

This should be the *highest* sum you can quote.

As long as your quote is between these two figures, everyone's

>I usually find that it's better to charge per job. If your time comes 
>under, you increase your profit. If it come over, they benefit from 
>your low price.
Fixed price jobs are actually very problematic - unless you get the
estimate *spot* on, either you or the client will get screwed by it.

What I've done very successfully is do something in between fixed
price and time and materials: the capped variable price.

This means you work out how long you're going to take if everything's
smurfy, and add a large (as much as 50%) margin for unexpected
problems. This is the maximum you will ever bill for this job -
if you go over, then you've *really* screwed up and probably deserve
to lose the money. However, if you get done faster, you bill the client
accordingly less.

This means that the client won't ever get a nasty surprise. They're
probably mentally visualising the capped price as what they're
*actually* going to pay, and will 90% of the time get a nice
one instead. Clients like this.

On the other hand, you'll be paid for the time you spend to do the
work unless you seriously get it wrong in estimation or performance.
You'll like this.

Hey, guess what, a good price for a good job and everyone's happy.

Isn't this what business is about?


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