[pmjordan]

I've been trying to work this out for some months now, so apologies for piggy-backing onto this question:

How do you actually achieve market prices?

I'm aware that there are massive differences in how much you can charge based on location, but I still feel I'm hitting more resistance to my asking prices than I should be. As far as I can tell, it's not a quality issue. I've had repeat business from almost all my past customers and none of the others were unhappy as far as I can tell, and I've had zero downtime for over 6 months now after starting 15 months ago.

Yet, if I give a straight hourly figure, 90% of the time I'm either told it's too much or I never hear back at all. I do a little better when quoting a fixed price based on the same hourly rate (plus buffers, etc), but many times the work is too ill-defined to come up with a definite offer, so it comes down to giving an hourly rate, with the usual result.

I've had the most success and repeat business with extremely time-sensitive projects, or projects that have gone off the rails and need turning around. I charge about 50% more if I'm basically being asked to work day and night. Once the work is done and done well (and it always is), I can generally get future projects at the standard rate with no major trouble.

I've reluctantly tried the loss-leader strategy of charging less on the first project, and as expected it's not terribly effective.

So as far as I can tell, the issue isn't so much the price as proving I'm worth it. How do you guys handle referrals, references, etc.?

A lot of my work involves NDAs (as it's often subcontracted), which makes referring to existing work and customers extremely difficult. I have a few customers who are brilliant and who I can use as references, but as far as I know, nobody has ever followed them up. Other than literally becoming known by everyone in the area, what other options do I have? Am I expecting a higher conversion rate than I should be? How do I go about finding more well-paying customers?

Maybe I'm tending to the wrong niches, too. My background is mainly in high performance computing, game tech and web apps.

- I've had zero HPC freelance work, and no leads either. No clue where to find them.

- I've had a sizeable amount of game tech programming, but getting reasonable money from game devs seems to be like squeezing blood from a stone.

- The web app business can yield better results, but there's a sea of awful programmers (who seem to exclusively know PHP for whatever reason) out there who call themselves web developers. Their hourly rates are dirt cheap, but their efficiency is lower still. I still can't reliably get this through to potential customers.

- The easiest money is in business-y/enterprise-y development. Except the only way I seem to be able to do this is via subcontracting, which is suboptimal because it's the middle man getting the reputation.

I'm not sure what other areas are more lucrative. Embedded stuff seems like a good fit to my skill set (game console development isn't far off) but I have no clue how to even find potential customers. I'm not sure how or where best to sell myself to enterprise-y businesses.

[tptacek]

Short answer: by turning down projects that are below your threshold.

Intermediate tactics:

* No matter how your SOW/MSA is structured, don't quote prices in terms of $/hour.

* When you get rate pushback, follow up with a bid for a smaller or more constrained project. Slip scope. Never slip your rate. You'll never get it back.

* Include a support retainer or annual/quarterly maintenance price, instead of giving that away for free.

[pmjordan]

Thanks for the advice, Thomas!

Short answer: by turning down projects that are below your threshold

I'm slowly getting to the stage where I can afford this, but I've only built up about 6 months of runway, and it seems nobody starts projects in winter, which meant I came this >< close to running out of cash in February. I'm trying to avoid a repeat performance. Is it adviseable to turn down below-threshold projects purely for reputation's sake?

No matter how your SOW/MSA is structured, don't quote prices in terms of $/hour.

Easier said than done. I keep doing this dance where I'm avoiding giving an hourly figure, but end up going nowhere. Do you have a more specific suggestion for how to go about doing this? Also, what does 'MSA' stand for in this context? Too many meanings for google to be useful.

When you get rate pushback, follow up with a bid for a smaller or more constrained project. Slip scope.

Thanks, that's useful. Thinking back, that's happened by accident a few times, but I'll consciously encourage this in future. Some customers seem to fear this though: it seems they're afraid I'll build something only I can maintain and then charge them crazy money later. Maybe this happens. I don't know.

Never slip your rate. You'll never get it back.

Yep. I expected that, had to do it once or twice anyway. No fun at all.

Include a support retainer or annual/quarterly maintenance price, instead of giving that away for free.

So far, I've just billed individually for any but the most trivial maintenance. (e.g. 15-minute fixes to bugs that were blatantly my fault) How do I avoid scope creep on flat fees without it seeming like a raw deal to the customer?

[tptacek]

An SOW is a statement of work. An MSA is a master agreement. Together, they're your contract.

If your BATNA is "lose house, live in box", the bill rate discussion is academic. Steadily raise your rate with new clients. Many consultants will advise you to build a steady pipeline and then raise your rates until you're turning away enough work to be 50+(Nx10)% utilized.

You can quote prices in fixed project dollar amounts (or by the milestone), and then cap your hours in an SOW. If you're working with procurements departments, it doesn't matter, since they're doing the math automatically. But don't offer up a $/hour amount.

I have less development consulting experience than many of the other commenters here do, but what I'd probaby do with regards to bugfix support is:

* Have a formal acceptance process, at the end of which the customer is responsible for signing off on the deliverable. Most large projects I've worked on are QA'd by the customer as well as the vendor.

* Have an escalation ladder for bugs, from cosmetic to data-loss, and have SLA time frames for free fixes on anything other than "cosmetic".

* Offer an up-front retainer contract for rapid (=better than SLA) bugfixes, changes, or feature requests, pointing out that if the customer does not opt for the retainer, feature additions and subsequent revisions will be full-on new projects subject to whatever your current rate and scheduling terms are.

Something I've learned in the past 4 years: scheduling risk is something many customers will pay to mitigate.

[hackeronymous]

Brilliant advice.

[steveplace]

How do you actually achieve market prices?

You get a good model that helps to answer that question, and you've got a sellable market product.