Thread by @QuinnyPig

As threatened, today I'm going to talk about pricing. This one will likely result in... feedback.

https://twitter.com/QuinnyPig/status/1366578799274381313

So, as you've probably heard if you've worked with, met, passed on a street, been in the same coffee shop as, or just had a dream about @jonathanstark, "hourly billing is nuts."

I used to disagree vehemently. I no longer do.

Unless you're an attorney, people are going to cap out in terms of what they pay you somewhere around $250-$300 an hour.

That's good money, right? $600K a year assuming 40 hours a week. Let's start there.

First, you're not going to be billing 40 hours a week unless you're working ~90 hours a week. Finding new clients, handling paperwork, and other "non-billable" work eats up your time.

It's easier and a lot less work to just get a job that's within that ballpark.

"You think it's easy to get a job that pays half a million bucks?!" If you've got a skillset you can reliably bill out at $300 an hour? Absolutely.

The first problem here is one of psychology. Every time you want to go play with your kid, or talk to your partner, or even play video games, there's that "you could be making $300 an hour right now instead" at the back of your mind.

It also changes how your customers see you. Instead of asking you your advice before they, for example, drop a database table? They're going to weigh your hourly rate.

Every interaction with you becomes an investment decision.

It's also hard to capture reasonable (and I mean REASONABLE to you or I, not rando VCs) value for what you provide.

If you save a company from a $10 million a year blunder, how do you bill for that reasonably?

Instead of quoting a rate to a customer, dig in. "Why do you care about this thing?" "Why not do X instead? What about Y?" Trust me--they've already considered doing these things. They won't vanish because you asked.

Find out why they care. The answer might surprise you.

You're trying to scope the value of solving the problem as perceived by them. "So improving the latency on this app will make you folks $20 million a year in additional revenue?" If they agree, you now know what the real value of what you're doing for them looks like.

You've got a few options here. I like the "quote different options" model of giving three paths. The first is exactly what they asked for. The second is what you would recommend as The Expert. And the third is the "bells and whistles" version.

All are flat rate.

"Wait! I'm a technical person! Scope creep / risk / I don't know how big of a project this is going to be!"

Start small with a paid discovery project. Timebox it to a day or two, possibly with the fee as a credit towards the actual big project you propose afterwards.

After the big project is done, I'm a fan of retainer projects. Within certain bounds, "unlimited access to me" is what that includes for a fixed monthly fee. That's the closest I ever get to charging for time.

The good clients, the clients you want? They're not going to abuse that.

The folks who will are likely to get sussed out earlier in the process. I'd never open with a retainer offering unless there were extenuating circumstances.

And the benefits of this model are massive. I spent two years independent doing exactly this.

That's how I had time to fix the @awscloud bills, write @LastWeekinAWS, and spend time with @Quinnypiglet.

There wasn't a constant tradeoff around "billable work."

I can predict some responses.

"We charge by the hour." Okay. There are multiple paths.
"You can't scale like that!" Maybe. Maybe not. It continues to work for us.

"Did you ever consider charging by--" yes. I'm going to stop you there. I've spent four years delving deeply into my business. I assure you, I have considered what you're about to suggest and discounted it for one reason or another.

"I can't charge tens of thousands of dollars for a project where 'I show up to be a DBA' is the deliverable!"

That's right, you can't. See yesterday's thread about positioning.

Done correctly, the payoff is massive. My "effective hourly rate" for the time I spent working on client projects was in the thousands. And I didn't have to burn myself out to do it.

Yup! This is why aligning yourself with a *specific* expensive problem is so valuable. It takes WEEKS to get these right the first few times. Once you do, it becomes a standard, almost "productized" offering.

https://twitter.com/chrishuntwalker/status/1366877262121996291?s=20

Neither do I. But I sure know how to do a series of smaller fixed-scope projects consecutively for a client!

https://twitter.com/twasink/status/1366877962977439752?s=20

"This couldn't possibly work!"

*points at the Duckbill Group*

Are you sure about that?

I'll even take it a step further: the @awscloud bill is very far from the only expensive problem in our space that lends itself to this kind of treatment.

Customers prefer it too.

"That flat fee isn't an estimate, it's a quote." If things are easier than you thought? Your margins win! If they take longer? You learned a lesson and the customer is still thrilled.

I mean really--what's easier to get approved? "I will build your website that does FOO for $25K" or "I charge $175 an hour for WordPress development; this should take 120 hours-ish?"

Absolutely. The prerequisites are "the ability to solve a problem that people are willing to pay to make go away."

Fixed fee house painting, lawn mowing, and home organizing all have potential.

https://twitter.com/ElephantTopKnot/status/1366881642518777856?s=20

Fixed fee for a duration; I like "monthly retainers." In other words, 'you pay some amount of money that has a comma in it in return for unlimited access to me within some defined scope.'

If you don't use me at all that month? More money for me.

https://twitter.com/ianagne/status/1366921312313171968?s=20

And remember the other thread--you are The Expert in this space. Your retainer fee should be significant, because at this point there's a terrific chance that you should only be giving out advice--not doing implementation.

But that's tomorrow's thread if the schedule holds.

This is why car analogies break down like my car in this hypothetical. "Getting your car fixed" is well and truly commoditized. You want to solve an expensive problem! The equivalent would be "you restore very rare Corvettes from years X to Y."

https://twitter.com/deepakdhingra24/status/1366979158694240256?s=20

It should be borderline impossible to do a true apples-to-apples comparison of what YOU do vs. what someone ELSE does.

That's not wishful thinking; it's very possible.

Thread continues:

https://twitter.com/quinnypig/status/1367283321152049155