[pauletienney]

I spent 10 years freelancing. If i can give an humble advice: you don't cost your customer some money, you produce some extra value for him. Charge between 10% and 30% of the extra value you provide to your customer. Charging per hour is a trap. It is nice to start, it is easy to read, easy to calculate but it makes you a commodity. Don't be a commodity, be an expert.

[zerr]

Finding out about that extra value is trickier than it sounds, unless the accountant is willing to share the classified info with you.

[edouard-harris]

There's certainly a knack to it, but it has nothing to do with accountants or classified information. If one has experience in this sort of thing, it's generally possible to ballpark likely value-adds based on a single 30-minute conversation. Experienced consultants in this tier often offer a free initial call with prospective clients partly for this reason.

[hackerman123469]

You also don't need to match the profit entirely.

You just need to match it so it's worth more than what anything else would be.

[gadders]

Brennan Dunn used to post on here on that topic as well: http://doubleyourfreelancing.com/category/pricing/

[CyberDildonics]

How do you estimate that and sell someone on it?

[simonswords82]

By understanding their business really really well.

For example, if I know that an automation that I can create for a client is going to take me 100 hours to setup and save them £20,000 per month I can either:

Charge 100 x £100 per hour - so a one off income of £10,000. Seems like I'm earning good money right??

OR

I can charge them £100,000. They'll make that back in just five months. A BARGAIN. Most businesses would bite your hand off.

The catch for achieving number two is knowing the value I'm providing. I can only do that when I know their business really really well.

[lsorber]

Sounds great until the client realises they can hire someone else who does charge by the hour, saving them a massive 100k - 10k = 90k compared to your proposition.

[bavell]

Or they look at your proposal for $100k and say, "Mmmmm... maybe next year" and the project never happens.

Really depends on the client and your reputation though, you can definitely pull it off with the right pitch to the right people at the right time.

[komon]

Yeah, your ability to charge more scales with your proven ability to deliver. That's where referrals/portfolios/testimonials/case studies come in.

Basically, you want to charge a percentage of the value you're promising to provide for them. And then that's going to get multiplied by their confidence in you.

If I'm bidding on a project that I think can make $1MM/yr for my client, and I normally charge 10% of the first year's worth of value, then I'm looking at $100K. If the business I'm working with only has a 50% confidence that I'm a safe bet to produce that value, or an 80% confidence, that's going to get reflected in what price we negotiate to. Probably more like $50k in the 50% confidence bucket.

But the more proven you are, the more you can say, "I said this thing would make $2MM and by gum it actually made $5MM" the more you're going to be able to charge.

N.B. That 50% isn't "It's a coin toss whether or not they'll complete the project", it's more like "When they complete the project, we're confident that we're going to get at least 50% of the value they're selling us on"

[emteycz]

The catch for me is looking for businesses interested in this kind of arrangement. How do you approach that?

[simonswords82]

I could write a book on it because there's a lot to it but I'll try to summarise.

Success = Connections x (Niche knowledge + Skills)

For connections:

Given the current state of the world networking is hard but not impossible. However you go about it, you need to build trust with people rather than hard sell them which doesn't work in 2020 (unless what you are selling is a commodity). Note that I said people, you're selling to people - not businesses.

You can shortcut this by leveraging existing contacts, ideally in a niche that you already have knowledge in because you worked in it.

For niche knowledge + skills:

With your connections at first you might need to find ways to cheaply provide value. Build up trust. Grow relationships. Get referred.

You'll make your life easier by specialising in a niche. So for example mine is financial services. A niche in a niche is even better. Again, for example mine is asset management, which sits within financial services.

So now you have your niche in a niche and detailed knowledge of that niche. You know what problems they have (the knowledge), and you can add your skills to solve their problems.

It's not easy, it takes years - but it's possible. Once you have all the elements of the above formula, you can switch your pricing from by the hour to by value.

[CyberDildonics]

Why wouldn't you just sell one program as a service at that point instead of making custom software for each client?

Also everything you said here is extremely generic, it doesn't address the initial problem of finding a problem that a company needs solved and will pay for, but wouldn't solve themselves internally.

[bavell]

IMO for smaller markets, it's oftentimes easier to build a one-off custom solution than to make a generic one-size-fits-all solution. Custom software is high margin but low volume so there aren't as many opportunities to scale up.

I'm working with a client right now at a 30h/wk retainer. I solve problems for them and communicate with the team regularly as if I were an employee. In my experience it's easier to sell your value to the C-suite because they focus more on outcomes than line items or specific tasks. Relationships, reputation and positioning are key.

[mechEpleb]

>it doesn't address the initial problem of finding a problem that a company needs solved and will pay for, but wouldn't solve themselves internally.

Duh. If a general way to find such problems existed, everybody would be using it - meaning every problem would already have people on it. Which means no problems for you.

Welcome to the market.