A challenge that we all face in our service offering is setting the development pricing. We know what our salary is and what we would like to earn. However, we also want to be fair in our pricing to both our customers and ourselves. In this episode, we look at the factors to consider in setting your rate as well as fixed bid factors.
Rule Of Thumb For Rate
It helps to start with a baseline. That is easy math. Take your salary and divide by 2000. That is roughly the hours we are expected to work each year (fifty weeks and two weeks of vacation) even though a salaried developer always works more in my experience. Thus, if we make $50,000 as a salary, our hourly rate is $25. That should be your minimum unless you want to do the extra work. This is a side-hustle and not needed to pay the bills. However, it is never a good idea to devalue your time.
Fixed vs. Hourly
You will come across projects that ask for a fixed rate. This puts more risk on you and takes it away from the customer. That should lead to a higher price per hour for you. Therefore, the hours you estimate for the project should be billed more than your standard rate. If all goes well, you should make more money on these projects, but it is sporadic for that to be the case.
Receiving The Money
At some point, you will invoice your customer and expect payment for work done. This process should be made clear from the start. Let your customer know when to expect an invoice, what it will cover, and when payment is expected. You should also define any discounts or additional (late) fees that they can expect. Once you have set that schedule in place, make sure you meet it on your end. If your customer lags in response to invoices then the sooner you bug them, the better. When you let things slide for a while, you can end up in a situation where you are doing extra work just to convince your customer to pay you what you are due. This is never good.
Some Useful Links
There is no chart I can provide that is a perfect way to set pricing. However, we have looked at some common project pricing challenges in the past and links to those articles are provided below. Finally, you can adjust pricing from project to project. Thus, start with small projects, learn your lessons, and then you will be confident in your pricing as you move to larger projects.
