Thread by @svpino

I've been in leadership positions for over a decade, and during that time, I've helped sell millions of dollars in software services.

Here are some of the things that I've learned about charging money for your skills. 🧵👇

First, we need to talk about hourly pricing.

Everyone will tell you to get away from hourly pricing and more into value-based pricing.

I agree.

But here is the thing: value-based pricing doesn't work a lot of the time. Hourly pricing always works.

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A lot of clients don't fall for the "I'm increasing your sales by $50,000 a year, so my website is worth $20,000" strategy.

That $50,000 is —most of the time— a bad guesstimate. You can't pretend to understand a business that well in a few days. And clients will call BS.

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So don't be afraid to charge by the hour, especially when:

▫️You are starting out
▫️You can't estimate what you want to deliver
▫️You want to avoid the risks

Hourly pricing is not the most profitable but it's usually the less risky.

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Fixed-pricing a project is riskier but potentially more profitable.

It only works when you understand the scope of work. The less you know about it, the more likely it is you'll lose money on it.

Adding a padding percentage is not a substitute for understanding scope.

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Some people think you need to get a very detailed scope.

I disagree.

The more detailed your scope is the less room for making simplification decisions you are going to have.

Keep the scope at a high level. Focus on what's needed and not how it will be done.

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Once the project starts and the price is fixed, you always deal in scope.

Since your scope only explains where you are going, you have a lot of maneuverability to make simplification decisions. The more you spend on certain features, the less you'll spend on the rest.

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The key to a successful fixed-price project is communication.

Give clients control, and explain the impact of every one of their decisions on the agreed scope: "We can certainly do A and deprioritize B."

I have never found a client that doesn't understand this.

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If you are selling a product and not just your services, you'll probably have a better feeling about the value you'll provide to a client.

Value-based pricing is the king here. This is the best position to be at.

(But don't feel bad if you can't start here. Most don't)

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If you are consulting, you will be selling your time at a price.

It's hard to get away from this because, most of the time, you will not know enough to understand the value you are bringing until you can actually measure it.

This is OK. You can still make a ton of money.

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Competition is a real thing.

▫️Underpricing your services doesn't work
▫️Overpricing your services doesn't work

You need to compete in substance:

▫️Your qualifications
▫️The quality of your proposal
▫️Your references

Invest in these three areas. Charge accordingly.

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The best way to increase the benefits you get from every hour of work is to decrease the effort you have to spend to make the same amount of money.

In other words: productization of your services is key.

(Or you can just go and charge more. But there's a ceiling to this.)

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If the client is looking for guarantees that you aren't comfortable giving, charge for a discovery session.

It's better to let a deal go than to get into an unprofitable project.

I've had a lot of success getting paid to come up with a plan.

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For large projects, make sure you include a way out in the contract (for both you and the client.)

For example, split a large project into milestones, and add language allowing both parties to walk away after each one.

Clients like this. It's good protection for you.

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Charge 25% upfront, 25% when half the project is done, and 50% at the end.

If it's a small project, 50% upfront, and 50% at the end works.

You can find other invoicing arrangements that work for you but always charge some money upfront.

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Final thoughts and summary:

▫️Invest in your salesmanship
▫️Communication is key
▫️The more you spend the more you get
▫️Experiment
▫️Nobody got rich by giving away their work
▫️Productize your offering
▫️Delivering is the most important thing ever.