How We Learned to Price Ourselves
Originally published in blog.webscopeapp.com/
One of the first decisions a freelancer faces is the pricing decision. This is not a simple question. It not only determines how you will phrase your price quotes but also sets the tone to what kind of product you are selling. Are you selling a premium product? or are you offering a sweet deal no sane person would walk away from?. As important it is to decide how much you are going to charge, it is equally important to decide HOW you are going to charge. Most freelancers I know don’t think twice and price their services with a fixed price per project. This “Fixed Price” method is where the freelancer and the client agree on the final price before the beginning of the project. We too, when we were just getting started, used the Fixed Price method, and let me tell you, boy, is that a mistake.
Let’s follow a typical project that was priced with a Fixed Price method. Johnny the developer sends a price quote to David the client and David agrees. The project is moving along and Johnny presents David with an SRS, design, and finally, a working website. At this point, David has a new idea for the website and he shares it with Johnny with excitement. Johnny goes back to work and incorporates the new feature into the website. When he presents David with the result, David has more notes about the website. Johnny is getting frustrated. He argues that these notes were not a part of the original deal but David disagrees. He says the website would be a job half done if it did not include these new notes and fixes. The tension between the two is rising. On the one hand, David wants the website he paid for, and feels he deserves the best result. On the other hand, Johnny the programmer has spent way more time than he planned building the website and is at risk of losing money instead of making some. Johnny stops putting in extra time and effort into the product, he stops pitching new ideas and generally tries to finish the project as fast as he can. David now feels that Johnny is trying to shake him off and that he doesn’t care about the project. He wont recommend Johnny to his friends, and the final result is an unhappy client, an unhappy developer and a product non of them feel totally happy with.
There are a lot of different ways to avoid this situation, a complete prototype or SRS that the client signs on for is one of them. there isn’t a major problem with that except it goes against the natural process of creation in general and the creation of a website in particular. when we make a prototype (i’m talking about the Axure kind, you might call them SRS — the ones that come before the design process) that there will be no diverting from at all, we are basically limiting our creativity and our clients creativity. It is completely natural that during those building and designing stages that some other needs will pop or that things might look a bit different and there is no real reason to interfere with that process. Again, at the end of the day it merely damages the final product. Another way to protect yourself is limiting the client to a certain number of correction rounds that he can give (two rounds is a common number). Again, this requires a prototype that can not be diverted from, plus you will have to enforce that correction round thing on the client that probably wont really get it. It is important for me to state that i’m not against a clear and detailed prototype, I am only for the freedom to change it if needed.
Fear of Charging by the Hour
There is this hypothesis that clients don’t like being charged hourly. When we first started pricing ourselves by the hour we were very concerned about clients reaction. At the beginning we still stated all the good things that hourly pricing entails in a very apologetic tone before any of the clients even said anything.
It is true, Clients will prefer to know exactly how much they will have to pay at the end of the process, to that we answer with a very accurate estimation (if all goes well of course). That satisfies most clients and I personally think we have never lost a project because of the way we price ourselves. It is important to understand that when a client is paying to build his website/digital product he doesn’t tactually pays you for the website, he pay you for your time. Once that sinks in you go to charging by the hour immediately.
What’s Good About Charging by the Hour
Simply put, everything that doesn’t work with fixed pricing. Charging by the hour is dynamic and easy for both sides. The client want’s to change something? no problem, the developer always gets payed for his work and for most of us web developers it means you will keep doing your work with a smile and a lot of good will to make the best product you can. The Prototype/SRS goes back to being a stage in the process that doesn’t require back and forth negotiation. The client on their side understand that they are paying for changes or things that were not talked about and give much more respect to the process. Suddenly everybody is working together to make a better product and guess what… The product Comes out better.