Hi! This is the Daily Overpass! My name is Eric and I make apps! Now today, I want to
talk about "how much you should charge your clients?"
Alright, so, I've been asked by a couple of people now about pricing for clients, so, they- at least
one of these people used to be a permanent employee. They're trying to
strike out on their own and get and do a little bit of client work. But
they're not quite sure what to charge, so they they had a bunch of
questions about this. It's kind of trying to help answer some of those,
and for me pricing- when doing a client project- pricing is probably one
of the trickiest parts. You don't want to go too high, you don't want
to go- you definitely don't want to go too low. And there's a lot of things to
think about that you might not even consider. First of all, like one of the
big mistakes you can make is to just do it completely based on
time. So, let's say as a permanent employee you were making this, but
let's say you were making like fifty thousand dollars a year. You think,
well, you know, I was making fifty thousand dollars a year, if I said
divide that by 45 weeks in the year, divide that by five days
in the week, so what, two hundred twenty two dollars a day. Divide
that by eight to get the hour, so, that's how much I'm going to charge. I think
it's gonna be- I think the project will take me ten days. That's how much it's
gonna cost. If that's what you're doing- fixed price - otherwise, you
know, time and material. By the way, I've never charged on time and material for
client projects and I'll tell you why. It's, you know, it
would be a lot- it would make my life a lot easier if I did, but it would also be
harder to get like clients that way. So, if you did that just
completely based on time, based on the mentality of "I was
a permanent employee, that's how much they paid me, that's how much I'm gonna
charge this client." You basically say you're
their employee, for like ten days or whatever, alright? That's
usually like a really bad strategy and if everything goes wrong, because it
doesn't take into consideration a lot of other things that you
think about. First of all, if you do client work even if you work from
home, even if you have your own computer, your Internet's paid for all that kind
of stuff. Even if you have no overhead expenses, you still have to think about
finding your next client project .You have to think about marketing and
other types of things. And how long you're gonna be out of work, all
that comes about afterwards which is perfectly normal. It's like
normal in business like if I hire like an attorney to work on a contract or I'll
hire my accountants like I'm under no illusion that I'm only hiring their time.
I'm also hiring, you know, they're- my pay-
there's markup that helps pay for their lights and computers
and offices and all that kind of stuff. That's not- that stuff's not just free, so
I know that part of what I pay them goes to that and it's the same with
you. They're not hiring you as an employee. You're not their
employee temporarily. They're hiring you, you're providing them a service. You're
providing them to work and also when it comes to doing that, you
have to think about the risks involved. And again with fixed price projects, you
have to think about scope creep, you have to think about whether or not
everything's gonna be like how well documented is in the beginning. I have
never had anybody come to me with like a fully fully mapped out plan of what
everything should do. A lot of it was interpretation. Most of the time, they
don't have any documentation at all to be honest with you. But you know,
sometimes they'll come with some some WireFrames and what we'll talk through
out some things will work, how should this working, but there's always gonna be
a little bit of wiggle room at the end where they say, "Actually, you know, this
moves over here, this moves over here.." you know, that kind of stuff. You just- scope
creep is a fact of life. Death, taxes and scope creep, just the way it is.
You know, if you do time and material, great. Because every time they
bother you, they know that they're on the clock. But I've never been able
to do a project like that. Yeah, I just- I suppose I could, but it's just- you
know, I'd like to give a fixed price. I like to remove the risk from the
equation because risk is something that's involved in every software
project and the less risk that your client has, the more likely they are
to buy them. Or you can assure them that things are
going to work out fine. You don't have to worry about that. So,
anyway, when it goes back to the pricing, I think back to when I was at
my- one of my first contracts. Um, so like my last permanent job was like- as a
permanent employee, it was like 14 or 15 years ago.
I can't believe it has been that long and I was making 38,000 a year. And you
know, so, I worked that out, to me I think, it was like a
hundred and forty seven pounds a day. I know some of you, guys, that
sounds like a lot of money. To me, at the time, it was- it was just enough.
Then I took out a contract which was significantly more it was like
238 and then I took out another contract which was like 350. And then, that
was like- I thought I'm just making loads of money now. I
can't believe they were paying me. I felt guilty for how much they were paying me.
In fact, if they'd ask me how much do you want to be paid, I'm so glad they didn't.
But if they'd asked me, I probably would have said, "Oh.. Oh..
160?" (laughs!) Yeah, but they didn't. So, I was at 350 and that was like -
in years to come that was a low rate. That was, you know, that was like- I
wouldn't work for that now, if I was to go back to contracting. But you know,
we had this- so I was in this team and we had a new manager to come in and he was like,
you know, ride the ship and all this kinda stuff. He needs- he got a lot
of us contractors together. He said, "You know, I've seen how much you, guys, are in
it. I think it's criminal how much this place is paying you, guys."
I was like the first one to speak up and I said, "I know you're right. Yeah, I
know we didn't get paid a lot. I don't understand it, you know. If you feel
guilty about it actually, right?" Yeah. And then somebody else cut me off right
there. We probably- he should have said, "No, no. We have other expenses that
you don't have to think about. We we're not always working. We have to
think about what we're gonna be doing after this contract. We're gonna have
to- we have down periods. We have- we have to do our own training, we have to keep
our skills sharp, all of you." And he started rattling off all these things,
which were absolutely true. But I have never even considered. I just
thought, you know, I'm getting paid more than I was before.
And then I started- it was from that moment on I started thinking differently.
Being a contractor has to be an employee. It wasn't just providing my time. I
wasn't just, you know, they weren't- the company was not taking care of me. I was
taking care of myself and I was providing them a service. This is
something to think about when you're charging your clients too.
You're not just giving them time and they're paying you for
your time. You're giving them a service. You're
giving them your knowledge and your years of experience so that they can
pay you. Now, there's always gonna be somebody who will charge less than you. I
mean, I suppose there's one guy who won't be charged less than I
somewhere, but you know, one thing that you have to make sure that the clients
understand is that, if they hire you, it's less risky than hiring them. And you do
that by having a good portfolio, having testimonials, all that kind of
stuff. In every project, somebody's
taking the risk. Somebody's taking more risk than others. If they want to
take on more risks, they can hire somebody who's less skilled, less
experienced, all that kind of stuff.
But you know, they will pay you more if you can take some of that risk away. You
say that look, "We always finish our projects. We always finish on budgets. We
never- we've never overcharged, you know, all that kinds of stuff.
This price is the price that we're gonna charge you and the only reason
we will change it if there's significant changes in your plan, all that
kind of stuff." So that they know even though the price may seem a little
bit high to them, it's not- it's it's worth that risk because they know
that it's a sure thing- sure thing to be done. I hope that
helps a little bit. I know it's kind of- it's such a complicated, you
know, prospect. And if you're outsourcing, there's a whole bunch of
other things to consider. Like how reliable are your developers, you
know, what could go wrong , are you gonna have to
step in in the twelfth hour and just fix everything yourself. I mean, it
happens sometimes, right? And there's lots of other things to consider. You want
to come up with a good price that's good for the client. Now,
you guys, probably know I never say how much I charge clients . And I know
you, guys, have asked. I have like one video I did a few years ago where
the title was "How much does it cost to do an app?"
And I got so many thumbs down on that one because in people complains
that you never answer the question. This is because it's it's different in each
case. One of the things that I don't want to do is publicly say, "Oh
I charge this much and then something more complex comes along,
and then I have no wiggle room there to to add to the scope of that because it's
you have to consider lots of different factors that come into it. So,
it's not just time, when you're charging for your first client. The odds are,
your first client- you're gonna under charge. It just is, you know, I've
done it. I've under charged on far too many projects that I know better.
But I also know how to have all those objections when they start saying, "Oh, I
don't know. That's a bit much." The biggest thing is to have your pipeline full.
You're not gonna be able to serve everybody and some people are
gonna say no. But this guy over here, he charge does a lot less. You think, yeah,
that's your prerogative to go with them. Anyway- anyway, yeah- that's it for today.
I'll talk to you, guys, tomorrow.