Forum Moderators: LifeinAsia
here is my example.
a bridal shop in the area wants me to make them a site similar to <snip>, now to me this looks like a pretty well built site. I tried to explain to him that since he runs a special order buisness where every single order will be difrent because his dresses come in many difrent sizes, colors, length's, etc... that none of the existing shopping cart and ecommerce solutions would work for him. I tried to explain that i would have to completely build it from the ground up (which im perfectly capable of doing). not only that but i would have to create a system for mining data from his instore databases which use a foxpro/dbase format into the MySQL database that the websever would use.
thats just some of it, needless to say i estimated that it would take about 4-5 months before the site would be live and ready to accept orders. am i wrong?
now we are discussing price. i originaly thought he was willing to sink some good money into this project as it would no doubt create a large return (assuming the average order alone would be over $1000), and since he was already an established buisness with 2 retail stores which were very nice. anyways im done ranting. sorry about that :P
My questions is
1. How much do YOU think that the <snip> site cost to produce.
2. How do you personaly decide on how much to charge people.
3. How much do you think i should charge for something like this?
[edited by: stuntdubl at 4:35 pm (utc) on June 28, 2005]
[edit reason] removed site specifics [/edit]
If you remember that, everything else will be golden. Be open and honest with your clients and you will like them much better (and vice versa).
1. This is kinda like asking "what does a car cost to produce". It is relative to a multitude of things including your margins, what you value your time at, value to the consumer, their potential for profit, etc. etc.
2. I double my rates for new customers every time I have too much work to do. It has worked incredibly well for me in the past actually. Old clients get the old rate for being loyal customers for the most part.
3. More than it's worth to you, less than what it's worth to them.
Here's a bit more assistance on the subject:
i originaly thought he was willing to sink some good money into this project as it would no doubt create a large return
And he may be if he sees it as a value proposition. You mention how much you explained to him about the programming, data handling and so on. Maybe that's all needed but it would not speak to a small business about profit - where is the new buisness that makes profit he would not otherwise make coming from? How will it be positioned in the market? What market, where? What will be his ROI? How fast will he see a return? I suspect he would understand and respond to things like that more positively.
Prgramming something and making it available, no matter how beautifully and well, will not necessarily create a large return, or even any return. And it tends to make a lot of clients' eyes glaze over in my experience.
He may look at this and think that a nice simple site with minimal bells and whistles for a bargain price that ends up with someone calling him on the phone or filling in a very basic form may suffice - with all the money spent on marketing instead of programming. And for lots of businesses that would be the right choice.
You have to tell him - in specifics - how what you will do will make him money, and when.
Time-based billing is simply calculating how many hours you estimate the project will take and charging accordingly. (If you give a fixed cost, I highly recommend adding 10-15% for the "optimism" factor.) Determining an hourly rate is difficult, but don't just charge what you'd get paid as an employee, because you have overhead, equipment, etc. Personally, I charge more than twice what I was paid an an employee doing the same work.
Value pricing is where you determine the project's value and charge a portion of that value. You mentioned that you expect the site to create a large return. Sit down with him and come up with some projections of expected ROI. (Let him tell you what ROI he'd like to see, then help him determine if that's realistic.) Suppose he's looking at a potential $24k in additional revenues. Is that worth investing $12k into a site?
I'd caution you about going into too much technical detail with the prospect. What often happens is you end up creating a detailed project plan just to come up with a price, and the prospect walks away with all of your good ideas to take to another, cheaper developer. If you focus the discussion on what the prospect wants to achieve (i.e. how much he wants sales to increase, return on investment, etc.), you can reach an agreement to do business together without disclosing the technical details of the site you'll be building.
Hope that helps.
Ill give a little more info to put it in perspective. This guy's day job is as a sales rep for IBM, and before that as a some kind of consultant. The bridal shop is more of his wifes business. So the only reason i explained it to him in so much detail was because he was interested, and for the most part, understood what i was saying. He didn't just come to me and say “i would like you to build me an eCommerce site that will bring in extra money”, it was more like “I want you to build me a site with the exact same functionality, and to compete with this site”. He knew pretty much everything he wanted to be part of the site and almost made it seem like he could do it himself, but he just didn't have the time. He said that he was sick of women coming into his retail stores and trying on 10 different dresses, only to go home and order it from somewhere else off line. He never wanted to talk about how much he hoped to make off the site or possibly doing it any other way. He basically laid out exactly what he wanted the end product to be. I was fine with that, being new into the field, id much rather work with someone that knows what they want than someone who just wants a site and doesn't know anything.
I guess where i went wrong was assuming that he fully understood the scope and size of the project, and that this wouldn't just be a run of the mill eCommerce site built with some pre made application. In the end it seems he is not happy with with the amount of time it would take, and since time = money, how much it would end up costing. He thought it would be easy and something that could be done in 3 weeks for less than a thousand dollars and that if i could not do it in that time frame that i was probably in the wrong business. That left me with a bad taste in my mouth feeling very insulted, and will more than likely be the end of my dealing with him.
I really don't think i was wrong, for all the things he wanted, it would be a very complex project.
So here's a new questions, how should i go about looking for new clients who will be interested in what i have to offer, and how can i ensure they have realistic expectations about what they want, and how much it will cost?
So here's a new questions, how should i go about looking for new clients who will be interested in what i have to offer, and how can i ensure they have realistic expectations about what they want, and how much it will cost?
First, be clear on exactly what you're offering. Are you selling your time or the results of your service? If you're content to sell your time, then "time = money" is always going to be an issue.
I find it best to focus on value (what the client is going to get) instead of budget (what the client has to pay). A results-focused approach works with a particular type of buyer, the value buyer. A commodity buyer, on the other hand, is primarily interested in getting the lowest possible price. A good indication that someone's a commodity buyer is when the first question they ask is, "How much?"
In order to sell your services, a prospect must want, need, and be able to afford what you're selling; so beware of wasting time with people who are "interested." A important selling principle is the concept of "dis-qualifying" people - that is, actively looking for reasons why they might not buy from you. This process will allow you to weed out tire-kickers and people who have an unrealistic view of how much things cost - and to do it as early in the sales process as possible.
