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How to Work Out What to Charge Clients

388 points by charlysl 9y ago

benjohnson 9y ago
I couldn't handle the emotional issues of pricing - I like my customers so I made my rates low. One of my employees saw the problem and started to handle the pricing - he quotes stupid high rates that leave a lot of wiggle room to delight our customers by going above what was expected. Both we and the customer are happier. TLDR: Perhaps let someone else price for you because they're not emotionally attached to the number.
- scaryclam 9y ago
  It seems to be a strange thing, that when charged enough, customers seem to be less fussy, less demanding and happier with the results. The worst customers I've seen, everywhere I've worked, are the ones being under charged.
  - bald 9y ago
    > The worst customers I've seen, everywhere I've worked, are the ones being under charged. Totally agree, saw it over and over again. Worst customers are those that get something for free. They are also the most illoyal (not really surprising). I made the following observations across multiple B2B startups: - Paying a high price triggered a behavior à la "we're paying dearly for it, so we better use it properly and frequently", which meant that stickiness (# of seats, hours of daily use) increased. - Down the line, the customers who paid the highest price were the most loyal (in terms of churn & avg. contract period signed during renewal -- often signing for 5 years with a small discount when minimum was 1 year). - Customers paying high prices had less support inquiries. - Customers paying high prices were overall friendlier on the phone (don't have hard evidence for that). Question -- in which direction is the causality working? E.g., when we assume that less support inquiries means that the users are more knowledgeable: - Do high prices overall attract more knowledgeable people? - OR are knowledgeable people better in estimating the true value of a product for their business, and thus are willing to pay a higher price? - OR do knowledgeable people rather work in businesses that have higher margins, and thus are able to afford a higher priced product? It seems for me that charging premium pricing had overall pretty positive effects on all businesses I've been working in.
    - JoeAltmaier 9y ago
      We charge for the project fixed cost and hours. Anything over that by the hour. So if the customer wants to keep making changes, they are free to do so - for a price.
  - lucb1e 9y ago
    I am not sure it's because they are charged more, but because they are willing to pay more to have it done properly. In my experience, those coming to you looking for a minimum price to get something done, will always be the ones who end up screaming at you and making demands.
    - scaryclam 9y ago
      I'd completely agree with you, except that some of the customers were actually the same people. As soon as we upped the ongoing costs on a couple of the accounts, both clients changed their behavour and the relationship became a whole lot better for both sides. It's a truly bizarre thing to watch.
      - lucb1e 9y ago
        Interesting! I am still (scientifically) curious what the explanation for this is. Perhaps paying more indeed does something in their minds, or perhaps it does something in yours and you deliver slightly more or go the extra mile. Or some of both.
  - freehunter 9y ago
    Funny enough my worst experience with selling stuff on Craigslist is the items I've tried to give away for free. I had a nightstand once, it had some damage and I didn't think it was worth anything so I put it on Craigslist for free. First response I got asked if I had the second nightstand, because it was a pair and it doesn't make sense to have just one nightstand. I did not. They weren't happy about it. Second response asked if I could deliver it because it wouldn't fit in their car. It's free. No, I'm not delivering it. Third response complained about the damage and said they would take it if I sanded it and refinished it. I offered to cut the price by 50% (from $0 to $0) to account for the damage, which they were not amused by. Finally I just put the nightstand on the sidewalk and someone came by and took it away. I think part of it is what others have said, cheapskates are just worse people to deal with in general. But also I think you run into the issue of people get really suspicious when they're getting a too-good-to-be-true deal and are on the lookout for any sign they might be getting scammed. If they're paying premium, they're willing to let down their guard and wait for the results to prove themselves. No one wants to drive to your apartment only to find out it's a bait-and-switch or (even worse), that they're going to get mugged.
    - the-dude 9y ago
      Why didn't you price it at a 100 bucks? People do not value things that are free or cheap. I once provided some services to guys who were a kind of marketplace for low grade e-books. An e-book sells better at $27 than at $9. At $9 people think "can't be much".
      - LanceH 9y ago
        I put "free" things at $20 for this reason. It's one bill, if someone is really cheap, they can negotiate it down to $5 if they want. The free crowd is the worst, though. I put a tv up, got multiple responses in the first hour, and took the first one. More than one other complained (very rudely complained) that I should have removed the posting. It was only up for 2 hours total.
- neltnerb 9y ago
  This is a great idea. I haven't done it myself, but a friend who is an artist got an agent for exactly this reason. You always undervalue the work you do because to you it's easier than to everyone else.
- bowlich 9y ago
  Worked in the Park Service for four years. Worst days for most visitor conflicts was always, always, the free entrance days. Everyone dreaded having to work on one because everyone was super expecting.
- gowld 9y ago
  Exactly. You hire a sales rep to sell for you, and a lawyer to negotiate deals for you. You need to separate the emotional investment.
oddlyaromatic 9y ago
"It's your time, and if people are willing to pay, you can charge whatever you like." Yep! It also helps, for those of us who feel bad charging "high" prices for work we like to do, to not think of ourselves as being paid for "the work". I know a lot of artists who are lovely people and could sometimes be persuaded to do an event for a low fee because they are doing something they love. Then one of them got the advice to think of what they are being paid for - it's not that you get paid to spend an hour on stage in Utah one Saturday. It's all the BS around doing that - traveling their, committing in advance no matter what comes up you will be there and do a good job, having to ignore your family and other responsibilities to get good at your craft. The general disruption and unevenness that it brings to your life to be a freelance anything. If people value your work enough to pay you what you will accept for ALL THAT BS just to have you there, great, you have a career now. But, as they say, the performance is free. It's all the other stuff they have to pay you for.
- SyneRyder 9y ago
  That's very similar to something Derek Sivers wrote last week. His post was very short, so I hope he'll forgive me posting it here (but his entire blog is worth the read, and his book Anything You Want is one of my all-time favorites): One time a college far away in Ohio, about a 12-hour drive, asked what I would charge to do a two-hour show. I said, “$1500”. She said, “Oh, that’s a bit too much. What would you charge to do just a one-hour show?” I said, “$2000”. She said, “No, wait, you’ll be performing less, not more!” I said, “Yeah! Exactly! What you’re paying me for is to get there! Once I’m there, playing music is the fun part! If you tell me I have to get back in the van after only an hour, and drive home, then I’m going to charge you more than if you let me play for a couple hours first.” She liked that so much she came up with the $1500. https://sivers.org/pp https://sivers.org/pp
  - chatmasta 9y ago
    Similar to the story of “how do we build this?” “I push this button.” How much does it cost? “$10,000” What?! “$1 for my time, $9,999 for knowing which button to press.”
wingerlang 9y ago
This page has a very odd layout.
- justherefortart 9y ago
  Agreed, reminds me of those stupid Head First books. I like clear and concise information laid out in a consistent and logical manner, not LOOK OVER HERE every 3 paragraphs.
  - freehunter 9y ago
    Blech. You just described what I hate about most tech books. The constant cutouts or inserts or sidebars or whatever you call them. You know, the ones where they have a table at the beginning that says "If you see the (!), it means it's a warning! If you see (#), it's gotcha!" and every other paragraph you have to stop to read another box. If it's just text and it's important enough to mention it right now, put it in the paragraph with the rest of the text.
have_faith 9y ago
Skip to the end for the only relevant piece of information. > Also at the end of the day, pricing is about supply and demand Charge what the market can afford and is willing to pay for your services.
- taneq 9y ago
  That's genius! Why didn't I think of that?!
  - rhizome 9y ago
    Someone should write a book about it.
- croon 9y ago
  > Charge what the market can afford and is willing to pay for your services. The concept isn't complicated, it's obtaining the information on what the market can afford and what someone specific is willing to pay for your services. Markets aren't magically adjusted to the one true price. It reflects a collective information distribution, and can consequently be manipulated through information asymmetry.
dewey 9y ago
For a site that has a category called "Design and Development" and an author that wrote "The User Experience Revolution" that's a very weird way to show an article. I almost closed the page because I thought the article is already over but it was some huge "Check the speakers" banners that took up the full height of my screen...
- overcast 9y ago
  You're not kidding, that was horrific. I thought I was reading a full page ad. I wish we could go back to a time of formatted plain text websites.
  - pymai 9y ago
    http://links.twibright.com/features.php http://links.twibright.com/features.php
    - overcast 9y ago
      I should amend my statement, beautifully formatted text. Typography is everything.
    - prewett 9y ago
      I like how their screenshots are available in both PNG and JPG (and labelled), presumably in case your software is so ancient that it only supports one of those. Reminds me of the days when loading a JPEG had a scrollbar associated with it.
- NightlyDev 9y ago
  Yeah, I agree, that page was terrible.
- zodPod 9y ago
  Man you're not kidding! I thought the article ended at least 3 different times. Yikes!
- ng-user 9y ago
adamcharnock 9y ago
The (related) advice that has always worked well for me: "You know you're charging the right amount when a client complains about the price but still pays you." Or, to put it another way, if no one complains about your prices then you're not charging enough. YMMV.
- marklgr 9y ago
  Reminds me of the ol' poker advice: "If you're almost never caught bluffing, then you're just not bluffing often enough".
- fencepost 9y ago
  The part that often gets missed with "raise your prices" is that for a lot of that price increase range you may lose customers but you'll make more money for less time commitment. Cheap clients have a cost.
  - LanceH 9y ago
    I find cheap clients have the most unrealistic expectations as well.
    - koolba 9y ago
      That holds true when you take it to the extreme. The most unrealistic expectations come from those that aren't paying you at all.
      - LanceH 9y ago
        Thank goodness the cloud came along. When friends/family ask me about computer problems I now explain that I work on computers that nobody sees.
- baby 9y ago
  Interestingly this was my approach to haggling. If the vendor is smiling when you leave the store, you badly bargained.
rossdavidh 9y ago
To be honest, I just charge an hourly rate, and am completely honest about not knowing how long it will take, and committing to nothing in that regard. Some customers walk, the others I do work for. There is little more common than a software project that had an unexpected complication which greatly increased the time it took.
- williamdclt 9y ago
  That's what our company do: we charge per week (we do 1-week sprints). Works exceptionally well!
ollerac 9y ago
I wrote a similar post [1] in which I suggest charging at least 4x the rate you'd charge working full-time at a company. So, if you normally make $60/hr working full-time (converts to $120k/year), then as a freelancer I'd suggest charging at least $240/hr if you plan on having anywhere near a similar lifestyle. This is because 50% of your working time goes towards marketing, self-promotion, and other things clients don't pay you for. And 50% of your revenue goes towards taxes, office space, and buying products and services to support your business. It's a rough calculation, but I think it explains why a lot of freelancers massively undercharge when first starting out. 4x your normal rate just seems so high until you think of the real costs. [1] https://blog.artisfy.com/2017/04/13/charge-at-least-this-much-to-make-your-freelance-business-sustainable/ https://blog.artisfy.com/2017/04/13/charge-at-least-this-muc...
- ghaff 9y ago
  Plus you’re not being paid for time off or sick time and you’ll also just have downtime; you can fill that with other necessary activities to some degree but probably not completely.
- deleted 9y ago
  [deleted]
- ebendogan 9y ago
  At the beginning of my contracting career I neglected to think about all the time I'd spend on non-coding tasks. It wasn't insignificant. I also found that the 4x full-time hourly wage is about right. A few other things I learned: Almost never take a fixed bid contract. They're pretty much always a net negative. Give clients discounts for paying early. Everyone loves a discount. Never discount your hourly rate though, because once you do that once for a client they'll never stop arguing with you about it. There's a line on Schedule C for recording discounts. If you turn over raw source code to a client, stress (in written, contractual form) that if any other contractor/employee changes the code, then you will charge them a premium rate for any changes or fixes.
  - kod 9y ago
turc1656 9y ago
The author writes this: "I don't charge less if I need the work and neither do I charge more if I am busy." and then concludes with this in the final paragraph: "Also at the end of the day, pricing is about supply and demand." These statements cannot both be true - charging more because you are busy is the very definition of your work being in heavier demand.
- JoeAltmaier 9y ago
  Not about your demand - about the market's? You can be busy with 2 jobs overlapping, yet the market can be soft for lots of people and you underbid to get those jobs.
  - turc1656 9y ago
    I get what you're saying but that's when we talk about averages and generalizations. It doesn't necessarily apply to an individual. For example, the average lawyer makes about 120k a year. A really good lawyer with a great local (and perhaps state-wide or country-wide) reputation will charge a lot more for their time since their time is a limited commodity. It doesn't matter that the average lawyer can still only charge ~120k per year. They can personally charge much more than that so the supply and demand aspect of the market a whole is meaningless to them specifically. Similarly, if this programmer/developer has a ton of skills and experience and can crank out code, they can conceivably charge a lot more for their time.
- francisofascii 9y ago
  The way I read that is....as a general rule, set prices that are consistent and not based on your availability ...but if a client is desperate, and willing to pay you more to work over a weekend, then sure, make an exception to the rule.
- draw_down 9y ago
  They can both be true, actually! Wow!
dawhizkid 9y ago
Pricing as a Service? Does this exist?
baby 9y ago
Can someone make a form that calculates that for you?
matte_black 9y ago
For me, it was more helpful to determine what my minimum rate should be rather than the maximum. My calculation is basically whatever the average equivalent full time employee in my area makes multiplied by two (and that should be any average dev’s minimum). At this rate I only have to put out an easy average effort, there is no need to over-deliver, though sometimes it just happens anyway and the client is unexpectedly delighted. And some clients think my average effort is over delivered. I find that charging more and forcing myself to overdeliver for every client adds to stress, and makes me less likely to take work. I don’t like quoting a super high rate because it comes with extra value-add promises. Also, quoting high means I probably only have energy for that one client, instead of maybe 3 average clients. I like having more sources of revenue as opposed to just one big one. Knowing my minimum rate makes it easy and straight forward to give my client an idea what I will cost on the spot, eliminating any drawn out negotiation or having to feel them out to see what their budget is, and barely any need for me to “prove” my worth. If they can’t accept my minimum, the conversation is over.
praxis23 9y ago
It's fairly easy to price against perceived worth of labor, but it isn't really helpful neither in competitive, nor in emerging markets to base pricing decisions solely on it. Concepts behind all pricing models are fairly simple and don't require overly sophisticated math. Instead, they require sober look into 4 variables: - Replacement cost: what would it cost to replace your service/product with something else? - Market price: what others are charing, charge around their price. - Cashflow/Net present value: if something you're producing has long-term economic impact, you may price not only based on actual value of your offering, but on long-term profit your offering will generate. And, in some cases in enterprise industries, this is the only way to reasonably justify your prices. - Value-based pricing: this is fine adjustment mechanism for everything you've figured during previous three stages. Think who's target audience for your product, and if there's something which makes your product more valuable for them than the rest of the market - price it accordingly. Simple example - luxury DSLRs (whose sensors, firmware and lenses are just as good as professional ones, yet luxury casing and a good brand name makes them significantly more expensive). (I'm not a salesman, I'm an engineer, yet I had to sit through decisionmaking sessions about pricing services in 2 different companies over last decade, and found them very amusing - if you get to the core, the ideas are very simple, they're just surrounded by plenty of bullshit bingo and lingo).
lerie82 9y ago
I find it hard to figure out what to charge people for my services. I personally think most computer services charge way more than they should.
wordpressdev 9y ago
I like the notion of charging my clients more but obviously the clients are from this world and they know the market rate. I need to be exceptional to charge 4x and get away with it. That, or the client has some pretty free money to burn.
- troels 9y ago
  > That, or the client has some pretty free money to burn. You say that as an aside, but it's actually quite relevant. Esp. larger clients will have budgets where the one hiring you isn't directly responsible for the cost -- or doesn't care as much as if it was their own money -- In this scenario, other factors are more important to them than your price.
chrisbennet 9y ago
I think a lot of first time freelancers/consultants think like employees instead of a business person. Your customer is going to sell what you do for them for whatever the market will bear. Here is the thought exercise that I've used to explain the difference to a friend that didn't want to charge enough. Suppose you make unbelievably delicious apple pies and sell them for $10 each at your roadside stand. Along comes a businessman that offers to buy them from you for $10 each and resell them for $40 each in the city if you only sell to him exclusively. Do you: (a) Sell them to him for $10 ("An honest days pay for an honest days work.") (b) Tell him "I'll split the profit with you and we'll both win." Thus earning say $20 a pie.
gk1 9y ago
If you are charging by the hour then you've already lost. Contracting/consulting, like any business, is about exchanging value. You want to be fairly compensated for the value you're providing to a client. > Start with the minimum wage you would like to take out of the business. How much do you want to earn a year? Remember, this is the minimum figure you could survive on. We will increase that number later. Your lifestyle or annual expenses have little to do with the value you're providing, so why in the world would you peg your rates (and cap your income) based on it? If you ever move from SF to Idaho are you going to halve your rates just because your living expenses did? And why limit yourself to $240k/year (what the current top thread is suggesting)? That's not even a crazy number and already you're forced to defend the $240/hr rate. Is that an argument you want to have every time you pitch a project? I highly recommend reading the book Value Based Fees by Alan Weiss.[1] [1](https://www.amazon.com/Value-Based-Fees-Charge-Youre-Worth-ebook/dp/B0062O8UBY/ https://www.amazon.com/Value-Based-Fees-Charge-Youre-Worth-e...)
- honest_george 9y ago
  This also means that if you're working for small company, you should charge small amounts of money. Or just reject the project entirely. Because anyone claiming he can bring 500k a year in value for a local small butchershop is either a liar or fooling himself.
  - kfcm 9y ago
    You have to determine who your market is. Some potential clients may not be in your market--whether too small or too big--and you pass on them. If there's a demand from those market segments, someone will pick up on it.
devj 9y ago
We are in touch with a prospective client who is planning to outsource their product development. As a company, we decided to give it a try so that we can fund our own product which is under active development. Having said that, we are unaware of the economics of project development as we all have background in SaaS product companies. I have come to the conclusion that we should charge them on manpower basis i.e $x per developer per month + $y where x is subjective to skills and experience and y = cloud infrastructure cost. The reason being that this is a long term project and therefore, we didn't want to get slowed down. This is in contrast to the hourly task/project based approach. Please advise. Ive already asked the question here: https://news.ycombinator.com/item?id=16262865 https://news.ycombinator.com/item?id=16262865
j45 9y ago
I've been self-employed since I was a student and have walked the spectrum from $50 to 500/hr and then back down to find the sweet spot. I have exclusively worked on my own the entire time and had staff, contractors as well as product teams. I've found 3x to be a closer number to aim for based on two key things: 1) Know what kind of help client is looking for and whether you are that in the form of a freelancer, contractor, consultant and specialist. The gaps in those expectations cause a lot of friction when you're trying to be a consultant who's opinion matters, and they just want a freelancer to help with something already under way. 2) We create value through 3 main activities. Every dollar earned pays for 3 things. 1/3 of each dollar to get work (sales, marketing, speaking, networking) 1/3 of each dollar to manage work (scope & project management, resource management, status updates, support, qa, testing, warranty work, taxes, fees, infrastructure) 1/3 of each dollar to do the work (development, creation, innovation, etc) For every $125/hr, you can allocate about $43/hr to each 1/3rd. Our mind thinks we are splitting 1/3 of our time between each, but the trick is to see how efficient each can be for each team member (or yourself), and at what. If you are, or find someone who is more responsible at doing one more category than the other, they are increasing efficiency, and profitability and therefore can have a bigger hourly chunk. If you write horrible code but are great with clients.. you can quite literally see where that balances out, or not. The 1/3 model has helped me hire and retain a lot of talent when they knew what their value was, how they were adding value, and how they could improve it. It also helps weed out people who think they are worth a lot more than the value they actually provide due to attitude/entitlement/insecurity getting in the way of delivering ongoing skills/knowledge. Hourly work, however, ultimately poisons most relationships because clients focus on your time instead of your result. I have learned to estimate with hours, but provide a fixed number. You do get better at this with the things you are good at. Creating long term relationships are much more preferable - many customers will pre-purchase blocks of time/attention in the form of a working retainer that is good for both parties. The good side for you is you can take on additional resources if you need to do some of the work. If you're interested in learning more about ditching hourly work, an unaffiliated nod for podcasts like Ditching Hourly is worthwhile. https://www.ditchinghourly.com/ https://www.ditchinghourly.com/
- jackgolding 9y ago
scarface74 9y ago
I agree with most of the article, but no one cares how much you can live on to be comfortable. The market decides that. If you do all of the calculations and you still can't meet your lifestyle requirements you have to either change your lifestyle or change your market.
z3t4 9y ago
You figure out how much to charge by picking the right market. Pick something worthwhile! Customers doesn't care how much you think your time is worth. It's all about what your customers think it's worth.
jim_combinator 9y ago
I have been doing freelance development for 17 years and I've found myself generally bidding from the largest time increment downward for myself and any subs. I.E. Monthly, weekly and daily. Never hourly.
- imhoguy 9y ago
  Does your contract specify a daily hour limit and number of days in month? Just curious how you handle overtime and time off etc.
omginternets 9y ago
I once heard a particular turn of phrase that really stuck with me: > Price is not really a function of supply and demand; it's a function of how much the market will bear. (Note to pedants: yes, this is a function of supply and demand, but this is about framing the concept a bit differently)

388 points by charlysl 9y ago

I couldn't handle the emotional issues of pricing - I like my customers so I made my rates low. One of my employees saw the problem and started to handle the pricing - he quotes stupid high rates that leave a lot of wiggle room to delight our customers by going above what was expected. Both we and the customer are happier. TLDR: Perhaps let someone else price for you because they're not emotionally attached to the number.

scaryclam 9y ago
It seems to be a strange thing, that when charged enough, customers seem to be less fussy, less demanding and happier with the results. The worst customers I've seen, everywhere I've worked, are the ones being under charged.
- bald 9y ago
  > The worst customers I've seen, everywhere I've worked, are the ones being under charged. Totally agree, saw it over and over again. Worst customers are those that get something for free. They are also the most illoyal (not really surprising). I made the following observations across multiple B2B startups: - Paying a high price triggered a behavior à la "we're paying dearly for it, so we better use it properly and frequently", which meant that stickiness (# of seats, hours of daily use) increased. - Down the line, the customers who paid the highest price were the most loyal (in terms of churn & avg. contract period signed during renewal -- often signing for 5 years with a small discount when minimum was 1 year). - Customers paying high prices had less support inquiries. - Customers paying high prices were overall friendlier on the phone (don't have hard evidence for that). Question -- in which direction is the causality working? E.g., when we assume that less support inquiries means that the users are more knowledgeable: - Do high prices overall attract more knowledgeable people? - OR are knowledgeable people better in estimating the true value of a product for their business, and thus are willing to pay a higher price? - OR do knowledgeable people rather work in businesses that have higher margins, and thus are able to afford a higher priced product? It seems for me that charging premium pricing had overall pretty positive effects on all businesses I've been working in.
  - JoeAltmaier 9y ago
    We charge for the project fixed cost and hours. Anything over that by the hour. So if the customer wants to keep making changes, they are free to do so - for a price.
- lucb1e 9y ago
  I am not sure it's because they are charged more, but because they are willing to pay more to have it done properly. In my experience, those coming to you looking for a minimum price to get something done, will always be the ones who end up screaming at you and making demands.
  - scaryclam 9y ago
    I'd completely agree with you, except that some of the customers were actually the same people. As soon as we upped the ongoing costs on a couple of the accounts, both clients changed their behavour and the relationship became a whole lot better for both sides. It's a truly bizarre thing to watch.
    - lucb1e 9y ago
      Interesting! I am still (scientifically) curious what the explanation for this is. Perhaps paying more indeed does something in their minds, or perhaps it does something in yours and you deliver slightly more or go the extra mile. Or some of both.
- freehunter 9y ago
  Funny enough my worst experience with selling stuff on Craigslist is the items I've tried to give away for free. I had a nightstand once, it had some damage and I didn't think it was worth anything so I put it on Craigslist for free. First response I got asked if I had the second nightstand, because it was a pair and it doesn't make sense to have just one nightstand. I did not. They weren't happy about it. Second response asked if I could deliver it because it wouldn't fit in their car. It's free. No, I'm not delivering it. Third response complained about the damage and said they would take it if I sanded it and refinished it. I offered to cut the price by 50% (from $0 to $0) to account for the damage, which they were not amused by. Finally I just put the nightstand on the sidewalk and someone came by and took it away. I think part of it is what others have said, cheapskates are just worse people to deal with in general. But also I think you run into the issue of people get really suspicious when they're getting a too-good-to-be-true deal and are on the lookout for any sign they might be getting scammed. If they're paying premium, they're willing to let down their guard and wait for the results to prove themselves. No one wants to drive to your apartment only to find out it's a bait-and-switch or (even worse), that they're going to get mugged.
  - the-dude 9y ago
    Why didn't you price it at a 100 bucks? People do not value things that are free or cheap. I once provided some services to guys who were a kind of marketplace for low grade e-books. An e-book sells better at $27 than at $9. At $9 people think "can't be much".
    - LanceH 9y ago
      I put "free" things at $20 for this reason. It's one bill, if someone is really cheap, they can negotiate it down to $5 if they want. The free crowd is the worst, though. I put a tv up, got multiple responses in the first hour, and took the first one. More than one other complained (very rudely complained) that I should have removed the posting. It was only up for 2 hours total.
neltnerb 9y ago
This is a great idea. I haven't done it myself, but a friend who is an artist got an agent for exactly this reason. You always undervalue the work you do because to you it's easier than to everyone else.
bowlich 9y ago
Worked in the Park Service for four years. Worst days for most visitor conflicts was always, always, the free entrance days. Everyone dreaded having to work on one because everyone was super expecting.
gowld 9y ago
Exactly. You hire a sales rep to sell for you, and a lawyer to negotiate deals for you. You need to separate the emotional investment.

oddlyaromatic 9y ago

"It's your time, and if people are willing to pay, you can charge whatever you like." Yep! It also helps, for those of us who feel bad charging "high" prices for work we like to do, to not think of ourselves as being paid for "the work". I know a lot of artists who are lovely people and could sometimes be persuaded to do an event for a low fee because they are doing something they love. Then one of them got the advice to think of what they are being paid for - it's not that you get paid to spend an hour on stage in Utah one Saturday. It's all the BS around doing that - traveling their, committing in advance no matter what comes up you will be there and do a good job, having to ignore your family and other responsibilities to get good at your craft. The general disruption and unevenness that it brings to your life to be a freelance anything. If people value your work enough to pay you what you will accept for ALL THAT BS just to have you there, great, you have a career now. But, as they say, the performance is free. It's all the other stuff they have to pay you for.

SyneRyder 9y ago
That's very similar to something Derek Sivers wrote last week. His post was very short, so I hope he'll forgive me posting it here (but his entire blog is worth the read, and his book Anything You Want is one of my all-time favorites): One time a college far away in Ohio, about a 12-hour drive, asked what I would charge to do a two-hour show. I said, “$1500”. She said, “Oh, that’s a bit too much. What would you charge to do just a one-hour show?” I said, “$2000”. She said, “No, wait, you’ll be performing less, not more!” I said, “Yeah! Exactly! What you’re paying me for is to get there! Once I’m there, playing music is the fun part! If you tell me I have to get back in the van after only an hour, and drive home, then I’m going to charge you more than if you let me play for a couple hours first.” She liked that so much she came up with the $1500. https://sivers.org/pp https://sivers.org/pp
- chatmasta 9y ago
  Similar to the story of “how do we build this?” “I push this button.” How much does it cost? “$10,000” What?! “$1 for my time, $9,999 for knowing which button to press.”

wingerlang 9y ago

This page has a very odd layout.

justherefortart 9y ago
Agreed, reminds me of those stupid Head First books. I like clear and concise information laid out in a consistent and logical manner, not LOOK OVER HERE every 3 paragraphs.
- freehunter 9y ago
  Blech. You just described what I hate about most tech books. The constant cutouts or inserts or sidebars or whatever you call them. You know, the ones where they have a table at the beginning that says "If you see the (!), it means it's a warning! If you see (#), it's gotcha!" and every other paragraph you have to stop to read another box. If it's just text and it's important enough to mention it right now, put it in the paragraph with the rest of the text.

have_faith 9y ago

Skip to the end for the only relevant piece of information. > Also at the end of the day, pricing is about supply and demand Charge what the market can afford and is willing to pay for your services.

taneq 9y ago
That's genius! Why didn't I think of that?!
- rhizome 9y ago
  Someone should write a book about it.
croon 9y ago
> Charge what the market can afford and is willing to pay for your services. The concept isn't complicated, it's obtaining the information on what the market can afford and what someone specific is willing to pay for your services. Markets aren't magically adjusted to the one true price. It reflects a collective information distribution, and can consequently be manipulated through information asymmetry.

dewey 9y ago

For a site that has a category called "Design and Development" and an author that wrote "The User Experience Revolution" that's a very weird way to show an article. I almost closed the page because I thought the article is already over but it was some huge "Check the speakers" banners that took up the full height of my screen...

overcast 9y ago
You're not kidding, that was horrific. I thought I was reading a full page ad. I wish we could go back to a time of formatted plain text websites.
- pymai 9y ago
  http://links.twibright.com/features.php http://links.twibright.com/features.php
  - overcast 9y ago
    I should amend my statement, beautifully formatted text. Typography is everything.
  - prewett 9y ago
    I like how their screenshots are available in both PNG and JPG (and labelled), presumably in case your software is so ancient that it only supports one of those. Reminds me of the days when loading a JPEG had a scrollbar associated with it.
NightlyDev 9y ago
Yeah, I agree, that page was terrible.
zodPod 9y ago
Man you're not kidding! I thought the article ended at least 3 different times. Yikes!
ng-user 9y ago

adamcharnock 9y ago

The (related) advice that has always worked well for me: "You know you're charging the right amount when a client complains about the price but still pays you." Or, to put it another way, if no one complains about your prices then you're not charging enough. YMMV.

marklgr 9y ago
Reminds me of the ol' poker advice: "If you're almost never caught bluffing, then you're just not bluffing often enough".
fencepost 9y ago
The part that often gets missed with "raise your prices" is that for a lot of that price increase range you may lose customers but you'll make more money for less time commitment. Cheap clients have a cost.
- LanceH 9y ago
  I find cheap clients have the most unrealistic expectations as well.
  - koolba 9y ago
    That holds true when you take it to the extreme. The most unrealistic expectations come from those that aren't paying you at all.
    - LanceH 9y ago
      Thank goodness the cloud came along. When friends/family ask me about computer problems I now explain that I work on computers that nobody sees.
baby 9y ago
Interestingly this was my approach to haggling. If the vendor is smiling when you leave the store, you badly bargained.

rossdavidh 9y ago

To be honest, I just charge an hourly rate, and am completely honest about not knowing how long it will take, and committing to nothing in that regard. Some customers walk, the others I do work for. There is little more common than a software project that had an unexpected complication which greatly increased the time it took.

williamdclt 9y ago
That's what our company do: we charge per week (we do 1-week sprints). Works exceptionally well!

ollerac 9y ago

I wrote a similar post [1] in which I suggest charging at least 4x the rate you'd charge working full-time at a company. So, if you normally make $60/hr working full-time (converts to $120k/year), then as a freelancer I'd suggest charging at least $240/hr if you plan on having anywhere near a similar lifestyle. This is because 50% of your working time goes towards marketing, self-promotion, and other things clients don't pay you for. And 50% of your revenue goes towards taxes, office space, and buying products and services to support your business. It's a rough calculation, but I think it explains why a lot of freelancers massively undercharge when first starting out. 4x your normal rate just seems so high until you think of the real costs. [1] https://blog.artisfy.com/2017/04/13/charge-at-least-this-much-to-make-your-freelance-business-sustainable/ https://blog.artisfy.com/2017/04/13/charge-at-least-this-muc...

ghaff 9y ago
Plus you’re not being paid for time off or sick time and you’ll also just have downtime; you can fill that with other necessary activities to some degree but probably not completely.
deleted 9y ago
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ebendogan 9y ago
At the beginning of my contracting career I neglected to think about all the time I'd spend on non-coding tasks. It wasn't insignificant. I also found that the 4x full-time hourly wage is about right. A few other things I learned: Almost never take a fixed bid contract. They're pretty much always a net negative. Give clients discounts for paying early. Everyone loves a discount. Never discount your hourly rate though, because once you do that once for a client they'll never stop arguing with you about it. There's a line on Schedule C for recording discounts. If you turn over raw source code to a client, stress (in written, contractual form) that if any other contractor/employee changes the code, then you will charge them a premium rate for any changes or fixes.
- kod 9y ago

turc1656 9y ago

The author writes this: "I don't charge less if I need the work and neither do I charge more if I am busy." and then concludes with this in the final paragraph: "Also at the end of the day, pricing is about supply and demand." These statements cannot both be true - charging more because you are busy is the very definition of your work being in heavier demand.

JoeAltmaier 9y ago
Not about your demand - about the market's? You can be busy with 2 jobs overlapping, yet the market can be soft for lots of people and you underbid to get those jobs.
- turc1656 9y ago
  I get what you're saying but that's when we talk about averages and generalizations. It doesn't necessarily apply to an individual. For example, the average lawyer makes about 120k a year. A really good lawyer with a great local (and perhaps state-wide or country-wide) reputation will charge a lot more for their time since their time is a limited commodity. It doesn't matter that the average lawyer can still only charge ~120k per year. They can personally charge much more than that so the supply and demand aspect of the market a whole is meaningless to them specifically. Similarly, if this programmer/developer has a ton of skills and experience and can crank out code, they can conceivably charge a lot more for their time.
francisofascii 9y ago
The way I read that is....as a general rule, set prices that are consistent and not based on your availability ...but if a client is desperate, and willing to pay you more to work over a weekend, then sure, make an exception to the rule.
draw_down 9y ago
They can both be true, actually! Wow!

dawhizkid 9y ago

Pricing as a Service? Does this exist?

baby 9y ago

Can someone make a form that calculates that for you?

matte_black 9y ago

For me, it was more helpful to determine what my minimum rate should be rather than the maximum. My calculation is basically whatever the average equivalent full time employee in my area makes multiplied by two (and that should be any average dev’s minimum). At this rate I only have to put out an easy average effort, there is no need to over-deliver, though sometimes it just happens anyway and the client is unexpectedly delighted. And some clients think my average effort is over delivered. I find that charging more and forcing myself to overdeliver for every client adds to stress, and makes me less likely to take work. I don’t like quoting a super high rate because it comes with extra value-add promises. Also, quoting high means I probably only have energy for that one client, instead of maybe 3 average clients. I like having more sources of revenue as opposed to just one big one. Knowing my minimum rate makes it easy and straight forward to give my client an idea what I will cost on the spot, eliminating any drawn out negotiation or having to feel them out to see what their budget is, and barely any need for me to “prove” my worth. If they can’t accept my minimum, the conversation is over.

praxis23 9y ago

It's fairly easy to price against perceived worth of labor, but it isn't really helpful neither in competitive, nor in emerging markets to base pricing decisions solely on it. Concepts behind all pricing models are fairly simple and don't require overly sophisticated math. Instead, they require sober look into 4 variables: - Replacement cost: what would it cost to replace your service/product with something else? - Market price: what others are charing, charge around their price. - Cashflow/Net present value: if something you're producing has long-term economic impact, you may price not only based on actual value of your offering, but on long-term profit your offering will generate. And, in some cases in enterprise industries, this is the only way to reasonably justify your prices. - Value-based pricing: this is fine adjustment mechanism for everything you've figured during previous three stages. Think who's target audience for your product, and if there's something which makes your product more valuable for them than the rest of the market - price it accordingly. Simple example - luxury DSLRs (whose sensors, firmware and lenses are just as good as professional ones, yet luxury casing and a good brand name makes them significantly more expensive). (I'm not a salesman, I'm an engineer, yet I had to sit through decisionmaking sessions about pricing services in 2 different companies over last decade, and found them very amusing - if you get to the core, the ideas are very simple, they're just surrounded by plenty of bullshit bingo and lingo).

lerie82 9y ago

I find it hard to figure out what to charge people for my services. I personally think most computer services charge way more than they should.

wordpressdev 9y ago

I like the notion of charging my clients more but obviously the clients are from this world and they know the market rate. I need to be exceptional to charge 4x and get away with it. That, or the client has some pretty free money to burn.

troels 9y ago
> That, or the client has some pretty free money to burn. You say that as an aside, but it's actually quite relevant. Esp. larger clients will have budgets where the one hiring you isn't directly responsible for the cost -- or doesn't care as much as if it was their own money -- In this scenario, other factors are more important to them than your price.

chrisbennet 9y ago

I think a lot of first time freelancers/consultants think like employees instead of a business person. Your customer is going to sell what you do for them for whatever the market will bear. Here is the thought exercise that I've used to explain the difference to a friend that didn't want to charge enough. Suppose you make unbelievably delicious apple pies and sell them for $10 each at your roadside stand. Along comes a businessman that offers to buy them from you for $10 each and resell them for $40 each in the city if you only sell to him exclusively. Do you: (a) Sell them to him for $10 ("An honest days pay for an honest days work.") (b) Tell him "I'll split the profit with you and we'll both win." Thus earning say $20 a pie.

gk1 9y ago

If you are charging by the hour then you've already lost. Contracting/consulting, like any business, is about exchanging value. You want to be fairly compensated for the value you're providing to a client. > Start with the minimum wage you would like to take out of the business. How much do you want to earn a year? Remember, this is the minimum figure you could survive on. We will increase that number later. Your lifestyle or annual expenses have little to do with the value you're providing, so why in the world would you peg your rates (and cap your income) based on it? If you ever move from SF to Idaho are you going to halve your rates just because your living expenses did? And why limit yourself to $240k/year (what the current top thread is suggesting)? That's not even a crazy number and already you're forced to defend the $240/hr rate. Is that an argument you want to have every time you pitch a project? I highly recommend reading the book Value Based Fees by Alan Weiss.[1] [1](https://www.amazon.com/Value-Based-Fees-Charge-Youre-Worth-ebook/dp/B0062O8UBY/ https://www.amazon.com/Value-Based-Fees-Charge-Youre-Worth-e...)

honest_george 9y ago
This also means that if you're working for small company, you should charge small amounts of money. Or just reject the project entirely. Because anyone claiming he can bring 500k a year in value for a local small butchershop is either a liar or fooling himself.
- kfcm 9y ago
  You have to determine who your market is. Some potential clients may not be in your market--whether too small or too big--and you pass on them. If there's a demand from those market segments, someone will pick up on it.

devj 9y ago

We are in touch with a prospective client who is planning to outsource their product development. As a company, we decided to give it a try so that we can fund our own product which is under active development. Having said that, we are unaware of the economics of project development as we all have background in SaaS product companies. I have come to the conclusion that we should charge them on manpower basis i.e $x per developer per month + $y where x is subjective to skills and experience and y = cloud infrastructure cost. The reason being that this is a long term project and therefore, we didn't want to get slowed down. This is in contrast to the hourly task/project based approach. Please advise. Ive already asked the question here: https://news.ycombinator.com/item?id=16262865 https://news.ycombinator.com/item?id=16262865

j45 9y ago

I've been self-employed since I was a student and have walked the spectrum from $50 to 500/hr and then back down to find the sweet spot. I have exclusively worked on my own the entire time and had staff, contractors as well as product teams. I've found 3x to be a closer number to aim for based on two key things: 1) Know what kind of help client is looking for and whether you are that in the form of a freelancer, contractor, consultant and specialist. The gaps in those expectations cause a lot of friction when you're trying to be a consultant who's opinion matters, and they just want a freelancer to help with something already under way. 2) We create value through 3 main activities. Every dollar earned pays for 3 things. 1/3 of each dollar to get work (sales, marketing, speaking, networking) 1/3 of each dollar to manage work (scope & project management, resource management, status updates, support, qa, testing, warranty work, taxes, fees, infrastructure) 1/3 of each dollar to do the work (development, creation, innovation, etc) For every $125/hr, you can allocate about $43/hr to each 1/3rd. Our mind thinks we are splitting 1/3 of our time between each, but the trick is to see how efficient each can be for each team member (or yourself), and at what. If you are, or find someone who is more responsible at doing one more category than the other, they are increasing efficiency, and profitability and therefore can have a bigger hourly chunk. If you write horrible code but are great with clients.. you can quite literally see where that balances out, or not. The 1/3 model has helped me hire and retain a lot of talent when they knew what their value was, how they were adding value, and how they could improve it. It also helps weed out people who think they are worth a lot more than the value they actually provide due to attitude/entitlement/insecurity getting in the way of delivering ongoing skills/knowledge. Hourly work, however, ultimately poisons most relationships because clients focus on your time instead of your result. I have learned to estimate with hours, but provide a fixed number. You do get better at this with the things you are good at. Creating long term relationships are much more preferable - many customers will pre-purchase blocks of time/attention in the form of a working retainer that is good for both parties. The good side for you is you can take on additional resources if you need to do some of the work. If you're interested in learning more about ditching hourly work, an unaffiliated nod for podcasts like Ditching Hourly is worthwhile. https://www.ditchinghourly.com/ https://www.ditchinghourly.com/

jackgolding 9y ago

scarface74 9y ago

I agree with most of the article, but no one cares how much you can live on to be comfortable. The market decides that. If you do all of the calculations and you still can't meet your lifestyle requirements you have to either change your lifestyle or change your market.

z3t4 9y ago

You figure out how much to charge by picking the right market. Pick something worthwhile! Customers doesn't care how much you think your time is worth. It's all about what your customers think it's worth.

jim_combinator 9y ago

I have been doing freelance development for 17 years and I've found myself generally bidding from the largest time increment downward for myself and any subs. I.E. Monthly, weekly and daily. Never hourly.

imhoguy 9y ago
Does your contract specify a daily hour limit and number of days in month? Just curious how you handle overtime and time off etc.

omginternets 9y ago

I once heard a particular turn of phrase that really stuck with me: > Price is not really a function of supply and demand; it's a function of how much the market will bear. (Note to pedants: yes, this is a function of supply and demand, but this is about framing the concept a bit differently)