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There are pros and cons for each method. Perceptionally, charging hourly is safer or you. But clients always think that you will pad the bills and take more ti

There are pros and cons for each method. Perceptionally, charging hourly is safer or you. But clients always think that you will pad the bills and take more time to do things than it should. It's in your best interest to take as much time as possible. That's just the way it is. Now, fixed bids. There's a risk doing for a fixed price. What happens if it goes longer, and you spend more time than you planned? You take it in the shorts. But, the customer knows that you are going to do your damnedess to get it done on time and under budget. But for comparison, look at public works construction companies. Those that build airports, highways, etc. All the companies give a fixed bid, and the lowest fixed bid wins. Adding a $5 billion wing to a major metro airport Like LAX or SFO is incredibly complex. They key is to be super careful on your bid. And, like construction companies that do bids on complex projects, you have to be super vigelent about change orders. Meaning, the person you are working for wants changes to their original proposal. Because then it changes your bid. And, in construction and in programming, there are ALWAYS changes. So if they change their specifications in the slightest bit, you have to be 100% sure to charge them more. This is how construction companies actually make money. On the change orders. Here is what the ABA says about construction change orders: https://www.americanbar.org/groups/construction_industry/publications/under_construction/2018/fall/construction-101/ https://www.americanbar.org/groups/construction_industry/pub... This is just general information for you. I am not a lawyer. But, after you make a bid, and the person that you are doing the work for decides to make a change, that's on them, so they can't really accuse you of trying to "pad the charges." Fixed bids are actually really great if you get super good at doing one thing, and get it done under the time you bid. If you work super fast and efficiently at an hourly rate, you won't get paid as much. For instance, if you do a bid to do create a software powered toenail clippers for $4,000, and you've done it before and can do it in 2 hours, you get paid $2,000 per hour. But if you do an hourly rate at $150 per hour, you only get a total of $300. So doing a fixed bid, as long as you actually know how much time it will take you, is the best of all possible worlds. The only thing to be 100% on point about is that any changes make a change to the fixed price, and you can either go hourly or fixed price on the changes, depending on the situation that you can do. For sure you need to make progress payments as you go along, and make sure you charge a hefty amount before you even start. Whether it is 25% or 33%, whatever the situation demands, but you want to get some cash flow going right away. Cash is king. Money talks, bullshit walks. Never take someone’s word on it. Never take any job where you don’t get paid a portion up front. Before you walk in the door. And make sure you watch the definitive video on getting paid: https://www.youtube.com/watch?v=jVkLVRt6c1U https://www.youtube.com/watch?v=jVkLVRt6c1U

cambaceres 6y ago
Thanks for a great answer! After reading this, I will continue to charge per project (because that's what I really want) and just be smart about it.
- France_is_bacon 6y ago
  Glad to help. And one other thing I'd like to say. Someone else mentioned that your client will make changes and expect you to accommodate the changes. What you want to make sure is that you are very crisp and clean about it when you are in the negotiation stages. Be clear and up front and tell them in advance. Repeat yourself on that point. Repeat yourself on that point. Because that is a real sticking point for many companies. Almost, but not quite, to the point of belaboring the point. Explain to them why it is so. If you do a google search, you'll find a lot of articles about how changes effect programming time. Well, here: https://www.google.com/search?q=changes+to+programming+specifications https://www.google.com/search?q=changes+to+programming+speci... Create a summary of these points of why you have to charge extra for changes on a fixed bid, and show them. Tell them that it is the same exact thing that happens in construction, use that exact example. A construction company is not going to move a wall for free, it can take a lot of extra work. Tell them that a seemingly minor change might take a lot of work. Maybe document some specific examples of something that looks easy, and show what you did, and how much time it took - that to add 3 other it took you 40 hours of time. Show the code and everything, maybe even make a video making a "simple" change so that they can see exactly what work that goes into it. This is all a marketing expense, ok? Marketing. To show the client the reality of changes. So you won't get shit from them later, when you charge them extra. Also, depending on what it is that you are doing, I would bill separately on change order changes, right then and there, that week. Do not incorporate it into the total cost. For sure don't do that. Make sure they understand and you tell them abut it. For you, cash is king, cash flow is king. Do not back down on this point. Changes and extras are billed immediately, that week. And you should always bill them weekly on everything, even if it is a fixed price, if it is a 2 month project for example. Bill weekly. If the fixed price is $10,000 and it is a 2 month deal, then they pay $2,000 up front, and $1,000 every week thereafter, or whatever you decide the upfront and payments are going to be. Obviously if it is a one week project, that does not hold true. Additionally, another thing I didn't mention, is if you can get the whole thing up front, even better. Let them pay $9,500 if they pay upfront. Get the cash fast as you can. If their terms are that they pay monthly, then tell them that your terms are weekly, and be hard core negotiation on that. But if push comes to shove, you do monthly. Just try to negotiate hard on weekly payments. Or, you can say something like, if you want $10,000 for the project, you offer to do it for $11,000, then tell them that if they pay weekly, you will charge them $10,000. But those are just negotiating techniques. Maybe if you are working for a Fortune 500, they will never change their billing for your $10,000 bill, so you just have to accept it. Everything depends. But if it is a small 8 person company, you can negotiate that, because you will be talking to the owners directly, more than likely. What I wrote above is mainly for change orders but it applies to everything. Read the American Bar Association link that I gave you again, it is very informative on minor changes, and cardinal changes.

cambaceres 6y ago

Thanks for a great answer! After reading this, I will continue to charge per project (because that's what I really want) and just be smart about it.

France_is_bacon 6y ago
Glad to help. And one other thing I'd like to say. Someone else mentioned that your client will make changes and expect you to accommodate the changes. What you want to make sure is that you are very crisp and clean about it when you are in the negotiation stages. Be clear and up front and tell them in advance. Repeat yourself on that point. Repeat yourself on that point. Because that is a real sticking point for many companies. Almost, but not quite, to the point of belaboring the point. Explain to them why it is so. If you do a google search, you'll find a lot of articles about how changes effect programming time. Well, here: https://www.google.com/search?q=changes+to+programming+specifications https://www.google.com/search?q=changes+to+programming+speci... Create a summary of these points of why you have to charge extra for changes on a fixed bid, and show them. Tell them that it is the same exact thing that happens in construction, use that exact example. A construction company is not going to move a wall for free, it can take a lot of extra work. Tell them that a seemingly minor change might take a lot of work. Maybe document some specific examples of something that looks easy, and show what you did, and how much time it took - that to add 3 other it took you 40 hours of time. Show the code and everything, maybe even make a video making a "simple" change so that they can see exactly what work that goes into it. This is all a marketing expense, ok? Marketing. To show the client the reality of changes. So you won't get shit from them later, when you charge them extra. Also, depending on what it is that you are doing, I would bill separately on change order changes, right then and there, that week. Do not incorporate it into the total cost. For sure don't do that. Make sure they understand and you tell them abut it. For you, cash is king, cash flow is king. Do not back down on this point. Changes and extras are billed immediately, that week. And you should always bill them weekly on everything, even if it is a fixed price, if it is a 2 month project for example. Bill weekly. If the fixed price is $10,000 and it is a 2 month deal, then they pay $2,000 up front, and $1,000 every week thereafter, or whatever you decide the upfront and payments are going to be. Obviously if it is a one week project, that does not hold true. Additionally, another thing I didn't mention, is if you can get the whole thing up front, even better. Let them pay $9,500 if they pay upfront. Get the cash fast as you can. If their terms are that they pay monthly, then tell them that your terms are weekly, and be hard core negotiation on that. But if push comes to shove, you do monthly. Just try to negotiate hard on weekly payments. Or, you can say something like, if you want $10,000 for the project, you offer to do it for $11,000, then tell them that if they pay weekly, you will charge them $10,000. But those are just negotiating techniques. Maybe if you are working for a Fortune 500, they will never change their billing for your $10,000 bill, so you just have to accept it. Everything depends. But if it is a small 8 person company, you can negotiate that, because you will be talking to the owners directly, more than likely. What I wrote above is mainly for change orders but it applies to everything. Read the American Bar Association link that I gave you again, it is very informative on minor changes, and cardinal changes.