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This article hits hard in a lot of ways. Have any of you who work as a freelance programmer managed to get off the hours-based billing treadmill, and onto a va

This article hits hard in a lot of ways. Have any of you who work as a freelance programmer managed to get off the hours-based billing treadmill, and onto a value-based system? How do you determine value? When your clients need constant maintenance or small incremental work, do you end up spending a lot of time with estimates? I'm really struggling with this in my own work.

PSNapier 4y ago
Chris Do's work was my introduction to this concept, perhaps you might find it equally helpful. This is one of his lectures on value based pricing, but he has a number of them that are informative on the concept in different ways: https://www.youtube.com/watch?v=ivKnj9ffcmE https://www.youtube.com/watch?v=ivKnj9ffcmE
PragmaticPulp 4y ago
You shouldn’t realistically expect to charge customers according to value delivered to their company. You’re still selling services on an open market, competing against other contractors and their pricing. Nobody is really interested in handing a services provider more money than necessary to get the job done at market rates, so even value-based bidding ends up coming back around to market rate pricing. You can always ask, of course, but at the end of the day any rational company is still going to evaluate your proposal against their other bids from other contractors.
- TheNewsIsHere 4y ago
  This mirrors my thinking. At the end of the day you have to charge a price reasonable to the customer and sustainable to you for whatever you’re delivering and that’s going to fall somewhere relative to other bids and whatever Google tells them the average hours spent * rate “is”. For several of my company’s customers they don’t really want to discuss ambiguous ideals of value for cash or negotiate fixed deliverable costs. They ask “so what’s the rate, bottom line?” and we have had a LOT better results estimating and billing hourly than with fixed rate, retainers, and so forth. Not because we are bad at estimating but because there are too many variables on the SMB side that no customer will pay to hash out fully before a project begins, and even if they did, ours tend to value the flexibility provided by hourly billing.
- cascom 4y ago
  The key to being able to transition to value based pricing is having a differentiated skill set
jackcosgrove 4y ago
Fixed bid contracts are riskier than per hour contracts. There is the risk that you underestimate the project and have to work for free. There is also the reward when you overestimate the effort, the client accepts the bid, and then you get paid for doing nothing. The key for being successful with fixed bid contracts is responsible estimation and communicating that to the client. For maintenance work it's almost always per hour unless you can negotiate a retainer policy. Back when I worked on contracts a not uncommon arrangement was a hybrid approach with the fixed bid deliverable and a pool of maintenance hours on the back end that were essentially options for the client.
em-bee 4y ago
for maintenance or incremental work i'd offer a retainer. i did that with one client. i started hourly and eventually once we had a good working relationship suggested to switch to a retainer. i actually let the client pick the fee. he picked the same amount that he had paid in hourly rates before. i figured that if there was more work then i'd renegotiate. but what happened was that my work went down, yet the retainer stayed. that's the big advantage of a retainer. with hourly you get more if you work more and less if the work is reduced. with a retainer you don't work more than the limit of the retainer allows, but the less you work, the more you make for the time worked.

PSNapier 4y ago

Chris Do's work was my introduction to this concept, perhaps you might find it equally helpful. This is one of his lectures on value based pricing, but he has a number of them that are informative on the concept in different ways: https://www.youtube.com/watch?v=ivKnj9ffcmE https://www.youtube.com/watch?v=ivKnj9ffcmE

PragmaticPulp 4y ago

You shouldn’t realistically expect to charge customers according to value delivered to their company. You’re still selling services on an open market, competing against other contractors and their pricing. Nobody is really interested in handing a services provider more money than necessary to get the job done at market rates, so even value-based bidding ends up coming back around to market rate pricing. You can always ask, of course, but at the end of the day any rational company is still going to evaluate your proposal against their other bids from other contractors.

TheNewsIsHere 4y ago
This mirrors my thinking. At the end of the day you have to charge a price reasonable to the customer and sustainable to you for whatever you’re delivering and that’s going to fall somewhere relative to other bids and whatever Google tells them the average hours spent * rate “is”. For several of my company’s customers they don’t really want to discuss ambiguous ideals of value for cash or negotiate fixed deliverable costs. They ask “so what’s the rate, bottom line?” and we have had a LOT better results estimating and billing hourly than with fixed rate, retainers, and so forth. Not because we are bad at estimating but because there are too many variables on the SMB side that no customer will pay to hash out fully before a project begins, and even if they did, ours tend to value the flexibility provided by hourly billing.
cascom 4y ago
The key to being able to transition to value based pricing is having a differentiated skill set

jackcosgrove 4y ago

Fixed bid contracts are riskier than per hour contracts. There is the risk that you underestimate the project and have to work for free. There is also the reward when you overestimate the effort, the client accepts the bid, and then you get paid for doing nothing. The key for being successful with fixed bid contracts is responsible estimation and communicating that to the client. For maintenance work it's almost always per hour unless you can negotiate a retainer policy. Back when I worked on contracts a not uncommon arrangement was a hybrid approach with the fixed bid deliverable and a pool of maintenance hours on the back end that were essentially options for the client.

em-bee 4y ago

for maintenance or incremental work i'd offer a retainer. i did that with one client. i started hourly and eventually once we had a good working relationship suggested to switch to a retainer. i actually let the client pick the fee. he picked the same amount that he had paid in hourly rates before. i figured that if there was more work then i'd renegotiate. but what happened was that my work went down, yet the retainer stayed. that's the big advantage of a retainer. with hourly you get more if you work more and less if the work is reduced. with a retainer you don't work more than the limit of the retainer allows, but the less you work, the more you make for the time worked.