6 ms·

Productivity and Price

9 points by mattm 17y ago

_delirium 17y ago
It's a somewhat controversial practice, but one solution many people use is to quote a lower hourly rate, but bill hours based more on a guess of what "normal" hours for the work would be (minus a percentage to make yourself look extra fast), instead of how long it actually took you. So if the customer thinks some job will take 10 hours, but you can actually do it in 1 hour, instead of trying to convince them that $5X/hr is a great rate given your productivity, just bill them for 5 hours at $X/hr. They'll still feel like they got a great deal, because they were expecting to pay for 10 hrs for the job.
- jackowayed 17y ago
  I was under the impression that that was fraud.
  - techiferous 17y ago
    Yes, you want to keep things open and honest at all times. In the case mentioned above, either quote a fixed price or quote an hourly rate and bill for actual hours worked.
  - _delirium 17y ago
    It is, but impossible-to-police fraud, as long as you actually are delivering a reasonable amount of work for the claimed hours. It's essentially using a fixed-price-per-project model disguised as an hourly rate: promising to do it in 5 hours at $50/hr is equivalent to charging $250 for the project, and the purchaser can decide in either case if $250 is worth it.
gte910h 17y ago
We do fixed fee work at my iPhone/embedded dev shop. One reason why is: Hourly rates tell you nothing about cost. Programmers vary unbelievably much per hour. We'll do hourly after the first contract, but in general, not for the first one.
tptacek 17y ago
Your freelance rate should generally be drastically higher than your salary rate expressed hourly even if you aren't especially productive. You're covering self-employment tax, you pay all your own benefits, and you offer scheduling flexibility full-timers don't and, in exchange, shoulder a huge amount of risk. You don't need to be a technical person to understand why a former employee would charge 2x their salary freelance. Paying the original straight salary rate would be a total rip-off.
- MaysonL 17y ago
  Rule of thumb: take the annual income you would like to get as a full-time freelance, divide by 100 for a daily rate.
jackowayed 17y ago
>I don’t blame non-technical managers for not knowing this stuff. So if you hire an electrician, and he also doesn't know how to do his job and ends up starting a fire and burning your house down, do you not blame him either? A manager's job is to manage programmers. If he doesn't understand important principles like, "there's so much variation in programmer productivity that, if you know this guy is really good, it might be worth it to pay him 5x as much as the other guy we're considering", he doesn't know how to do his job effectively. Blame him.
- fnid2 17y ago
  In the case you describe, I think the author of the post would say he wouldn't blame you for not knowing the electrician would burn your house down, because in your case, you, the home owner, would be equivalent to the programmer manager and the electrician would be the programmer.
  - mattm 17y ago
    Great analogy! I wish I had thought of that.
postfuturist 17y ago
I don't understand the whole "well known" idea of a 10x productivity difference between best and worst programmers. It gets even more confusing when he claims that some developers have negative productivity. Maybe the productivity difference is -10x. One really great programmer can overcome the damage done by 10 awful programmers. Or maybe we can just not pretend that programmer productivity can be described with numbers at all.
ct 17y ago
Not all freelancers are 2x better than employees. Most contractors we get can't cut code if their life depended on it, and usually make a mess of things and then leave. I've really yet to meet a good contractor. Also this isn't to say all employees are better than the contractors/freelancers we get as obviously there are some duds that get through. But in general that's how it is. Maybe it's because they better understand how things work than a newer person coming in does, and perhaps overtime the freelancer/contractor might do better...

9 points by mattm 17y ago

It's a somewhat controversial practice, but one solution many people use is to quote a lower hourly rate, but bill hours based more on a guess of what "normal" hours for the work would be (minus a percentage to make yourself look extra fast), instead of how long it actually took you. So if the customer thinks some job will take 10 hours, but you can actually do it in 1 hour, instead of trying to convince them that $5X/hr is a great rate given your productivity, just bill them for 5 hours at $X/hr. They'll still feel like they got a great deal, because they were expecting to pay for 10 hrs for the job.

jackowayed 17y ago
I was under the impression that that was fraud.
- techiferous 17y ago
  Yes, you want to keep things open and honest at all times. In the case mentioned above, either quote a fixed price or quote an hourly rate and bill for actual hours worked.
- _delirium 17y ago
  It is, but impossible-to-police fraud, as long as you actually are delivering a reasonable amount of work for the claimed hours. It's essentially using a fixed-price-per-project model disguised as an hourly rate: promising to do it in 5 hours at $50/hr is equivalent to charging $250 for the project, and the purchaser can decide in either case if $250 is worth it.

gte910h 17y ago

We do fixed fee work at my iPhone/embedded dev shop. One reason why is: Hourly rates tell you nothing about cost. Programmers vary unbelievably much per hour. We'll do hourly after the first contract, but in general, not for the first one.

tptacek 17y ago

Your freelance rate should generally be drastically higher than your salary rate expressed hourly even if you aren't especially productive. You're covering self-employment tax, you pay all your own benefits, and you offer scheduling flexibility full-timers don't and, in exchange, shoulder a huge amount of risk. You don't need to be a technical person to understand why a former employee would charge 2x their salary freelance. Paying the original straight salary rate would be a total rip-off.

MaysonL 17y ago
Rule of thumb: take the annual income you would like to get as a full-time freelance, divide by 100 for a daily rate.

jackowayed 17y ago

>I don’t blame non-technical managers for not knowing this stuff. So if you hire an electrician, and he also doesn't know how to do his job and ends up starting a fire and burning your house down, do you not blame him either? A manager's job is to manage programmers. If he doesn't understand important principles like, "there's so much variation in programmer productivity that, if you know this guy is really good, it might be worth it to pay him 5x as much as the other guy we're considering", he doesn't know how to do his job effectively. Blame him.

fnid2 17y ago
In the case you describe, I think the author of the post would say he wouldn't blame you for not knowing the electrician would burn your house down, because in your case, you, the home owner, would be equivalent to the programmer manager and the electrician would be the programmer.
- mattm 17y ago
  Great analogy! I wish I had thought of that.

postfuturist 17y ago

I don't understand the whole "well known" idea of a 10x productivity difference between best and worst programmers. It gets even more confusing when he claims that some developers have negative productivity. Maybe the productivity difference is -10x. One really great programmer can overcome the damage done by 10 awful programmers. Or maybe we can just not pretend that programmer productivity can be described with numbers at all.

ct 17y ago

Not all freelancers are 2x better than employees. Most contractors we get can't cut code if their life depended on it, and usually make a mess of things and then leave. I've really yet to meet a good contractor. Also this isn't to say all employees are better than the contractors/freelancers we get as obviously there are some duds that get through. But in general that's how it is. Maybe it's because they better understand how things work than a newer person coming in does, and perhaps overtime the freelancer/contractor might do better...