Pricing Models

Dennis was asking what pricing models people adopt

Price model:
Do You agree to ship solutions to one price no matter of the number of users or is the price related to a price / copy in use?

Do You offer a price all in for a solution or is it related to a hourly rate?
If related to hourly rate, does it exist any maximum top price or is it a running price?



For smallish stuff (say under 10k GBP (20k USD)) I tend to go for a fixed price, which I modify based on number of users (ie potential ongoing support) . That would be paid part on proof of concept (POC), part on start of user acceptance testing (UAT) and the rest on live release. I haven’t tried to go for a separate support deal, but I probably will start.

For bigger or less clear stuff I tend to go for a day rate, I have also done a few support only deals recently, based on 3 or 5 days per month or whatever, on a retainer basis. These deals seem pretty hard to get though. Shame, as it seems to make sense for everyone.

I tend to base costs on a mix of the day rate I need to earn to feed the family, what the client is likely to pay, how critical the product is, likely support burden, and how busy I am. I wouldn’t normally go for a maximum cost number.

I tend to develop the high risk, complex and big win parts of a system first, which means I can hack out nice-to-haves if total cost or delivery date becomes an issue.

What about you?

If you are employed I bet you still go through the same process with your internal customers, so how do you play that?



3 Responses to “Pricing Models”

  1. Marcus Says:

    Hi Simon,

    For solutions I custom develop I don’t factor in the number of users per se. It does enter the equation though if I have to set all these users up, particularly when they’re geographically dispersed or in different time zones.

    I’m about to start a project which the client and I expect to take about 10 to 12 weeks but the specifics are still hazy. For this kind of work I have a daily rate.

    For smaller or set projects I break it down into two components. First I charge an hourly rate to prepare a requirements doc and/or proof-of-concept or prototype. This includes time spent in formal meetings or dealing with end users. This can then be used to prepare a fixed quote. I try to prepare the quote on a combination of my expected effort, plus the value to the business, plus what it would cost them to go elsewhere. I want to charge as much as I can get away with but not so much to convince the client to go elsewhere or leave them with a bad taste in their mouth.

    I don’t revise the quote for cosmetic changes (“can we make this report heading blue rather than black?”).

    And while I state up front that the quote will be revised if requirements change, I’m usually too nice for my own good and make minor changes at no cost. When changes are requested that I will charge for, I often bill by the hour and provide the client with a range (e.g. between 4 and 6 hours). Basically I hate paperwork and find this faster than updating the requirements doc and revising the quote every time the client changes their mind.

    The other aspect I’ve learned (the hard way) is to package the quote with installed payments upon delivery of agreed milestones, even for smaller projects. Some of the banks I deal with move like molasses. Even a small project may stretch for 6 months from first meeting to hand-over.

    Meanwhile, as you’re aware, I’m developing an Excel add-in. There will (eventually) be 3 separate editions Standard, Professional and Enterprise where the price is affected by the number of users.

    Regards – Marcus

  2. Marcus Says:

    Hmmm. Is it something I said?

  3. Simon Says:

    not from my pov – maybe no one else want to discuss this?
    we should maybe discuss the add-in(s) a bit further off line

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