1 2 Previous Next 27 Replies Latest reply on Aug 15, 2017 6:23 AM by Mike_Mitchell

    How do I bill?

    max88s

      As a developer, I am brand new to the "art of billing." Frankly, I have no idea how much to bill, when to bill, how to handle a client who has issues that could actually be a programming error on my part, etc. My solution is provided via a server and I have access to all of my clients' solutions.

       

      I currently have three clients. I am not billing any of them now because my product is brand new and I have considered them "beta testers." But the time has come to change this practice.

       

      Is there such a  thing as an industry standard as to the amount I should bill? Is this an hourly thing or more of a maintenance agreement?

       

      I would truly appreciate some guidance here.  Thank you!

        • 1. Re: How do I bill?
          Mike_Mitchell

          There are lots of different billing models, and they all have advantages and disadvantages. Some people bill hourly, regardless of what they're doing. Some people subscribe to the "value" billing strategy, where they take a percentage of the money the client makes or saves by using the solution. And some people simply license the product and have a fixed fee per time period (typically, a year).

           

          I have products that I license, and the rest of my billing I base on an hourly rate. I typically offer a few hours a month to each client as "free" support for emergent issues. I also try not to charge for things that are truly bug fixes - stuff that's clearly my fault. (Although, that really never happens.)   

           

          As for rates, you'll find they vary widely. There are two basic factors in billing: How much the market will bear (what your clients are willing to pay), and what your expenses are. It sounds like you're a freelancer instead of someone who works in a firm, or who owns a firm with multiple developers. The freelancer has some advantages over larger companies, primarily in lower overheads. So you can afford to charge less than a typical shop would and still make margins - and you should, because the customer is taking a larger risk working with a freelancer who may or may not have backup in case of absence or the ever-feared "hit by a bus" contingency.

           

          So the short answer is, "How do I want to bill? What are my costs, and what is my business model?" For a vertical market solution (which is what it sounds like you have), a licensing model is very popular, for good reason. Charge a certain amount per year, maybe with lower fees for renewals. You should determine what that should be based on:

           

          • Your overheads (cost per month)
          • The development time you have in the product vs. the return (ROI)
          • Your actual financial needs (are you full-time, or is this a side gig?)

           

          But there is rarely a "one size fits all" answer for this question. One more caution: Be competitive with your pricing against what others in the area are offering, but don't go cheap. If your price point is too low, you advertise you're not worth much. That will attract the wrong sort of client - the one whose only interest is cost and not value, which is what you want to sell.

           

          HTH

           

          Mike

          4 of 4 people found this helpful
          • 2. Re: How do I bill?
            beverly

            Great reply, Mike!

            I bill "hourly", but first I get an estimate of what I think it will take. There is an agreement. Communication is key as if anything changes, both parties need to be advised. But that is for 'besoke' (custom) development. For "products", if you have tracked your time to create the first one, that helps to estimate the cost, but you also have to weigh the estimate of how many you think you might sell. Will there be upgrades?, etc.

             

            Also, take a look at the Business session of the past DevCon:

            (some have videos!)

            Beverly

            3 of 3 people found this helpful
            • 3. Re: How do I bill?
              taylorsharpe

              I concur with Beverly.  Project work is great if you can clearly get a project defined ahead of time and some big corporate companies can do this.  Most small to intermediate sized companies are not good at defining the scope and keeping within it and you want to avoid doing scope creep for free.  So I do hourly.  However, clients don't want to have an open checkbook and they need things to fit in budgets.  I used to give quotes.  I don't call them quotes anymore.  I call them estimates and I usually review things that can move the estimate up or down such as lots of quick feedback and testing reduces development time, new features and good ideas increase the amount. 

               

              I also find that working with small and medium sized businesses that cash flow is a big deal.  So by billing monthly my hours (Net30), I let them pay as we go.  That way they don't need a large amount up front or at the end, but they basically pay as they go.  And if they get tight one month, we can slow up on development, etc.  The reality is you have to keep your clients finances in mind and work with them.  But also not screw yourself by doing work that was not part of the original plan for free. 

              1 of 1 people found this helpful
              • 4. Re: How do I bill?
                taylorsharpe

                One more thing... some people put clients like this on what is called a maintenance contract which guarantees a certain amount each month, but also limits the time you are committed to them for any given month.  It is a promise to be available for those hours if needed.  I don't do this, I just do hourly as I go.  But this is common in the IT business world. 

                • 5. Re: How do I bill?
                  Mike_Mitchell

                  Wholly concur with Taylor.

                  1 of 1 people found this helpful
                  • 6. Re: How do I bill?
                    philmodjunk

                    For specific projects with clearly defined and agreed upon deliverables, I take my hourly rate, estimate the time needed to do it and quote a flat fee for the work done. The clients like this as it provides a predictable cost to the project. It can cost me $$ if I screw up the estimate and it's not a method to use on open ended projects or those with fuzzy objectives.

                     

                    It's especially useful for first time clients as a way to build trust and handles the issue that consultant A may bill $100/hour and bill for 10 hours work while consultant B might bill $150/hour and bill for 6 hours to do the same work.

                    1 of 1 people found this helpful
                    • 7. Re: How do I bill?
                      dburnham

                      I think the most difficult aspect of FileMaker project billing is the "unknown unknowns" ( thank you, Donald Rumsfeld).   I remember in the 80's giving a software developer something called a Functional Specification List, against which he could estimate his time and thereby give me an idea of what I would be paying.  It's painfully difficult to get a small or medium size business customer, especially entrepreneurs, to comprehend the meaning of it and to adhere to the process of creating it and sticking to it.   And the time it takes to go through the process needs to be quantified too, and included, unless you want to take that on the chin.

                       

                      The commodity we are dealing with is itself partially responsible, for 2 reasons:

                      1. You do the work, it gives the customer a taste of what's possible, and they immediately come back with new ideas and requests for things that are not on the list.  You either have to firmly resist the temptation to say "no problem" and you will begin absorbing the cost of "feature creep" or else you need to strictly enforce whatever disclaimer you put in your proposal or contract that covers this.
                      2. New versions of FileMaker also give rise to feature creep.  While many customers think that "if it ain't broke don't fix it" there are at least as many if not more customers who are willing to re-engage with you, or engage on a continuing basis * as a consultant to keep improving their system.   Script triggers, popovers and the new window options are 3 obvious examples.

                       

                      * If you call yourself a consultant, that's the nature of your career.  No client is ever "done".

                       

                      Let me take this occasion to mention that the newly formed CAPDA professional association -- Custom App Professional Developers Association -- will someday offer its members a template Work for Hire Agreement which will be backed by E&O insurance.   The insurance element, beginning with Business Liability coverage that is now needed by FBA members, is already available, with E&O as an option.    I was not permitted to announce this at Devcon but that's now in the past.

                      CAPDA logo.jpg

                      Check it out:  Custom App Professional Developers Association - Home

                      1 of 1 people found this helpful
                      • 8. Re: How do I bill?
                        bigtom

                        For a vertical product I never want the time for return on the development costs to exceed 3 years in the worst case. For most niche products a worst case being only one customer who wants the product. If you feel you will have a minimum of X customers you can decide from there.

                         

                        inreskev has a good session To review. BUS005 - Succeeding in a FileMaker Vertical Business - Kevin McAllister

                         

                        There are costs for development, support, revision, billing/invoicing, employees you don't have yet, GL insurance, E&O insurance and cyber insurance to pick up anything  or covered by other insurance.

                        1 of 1 people found this helpful
                        • 9. Re: How do I bill?
                          richardsrussell

                          Here's an entirely different perspective that will be worthless as an answer to your original question but which I'm throwing in just in case there are other people out there in the same position as me. I'm retired and have no need to make money off my database work. So I do it for free, as a hobby, for various non-profit organizations and small family-owned businesses in my area.

                           

                          I take pride and pleasure in doing a good job — like, for example, a master cabinet-maker of old. I do stuff "behind the scenes" that the customer will never see and may not need but which adds to the neatness and elegance of the solution. I find that kind of thing satisfying. I'd feel horribly guilty if I were charging by the hour for doing it, tho, and so I'd skip over it if I were in the business, but I'd feel bad about it.

                           

                          What I'm saying, I guess, is that there are certain emotional/psychological costs and rewards that are just about impossible to monetize, and you may want to spend some time thinking how much value you place on those as well.

                          • 10. Re: How do I bill?
                            philmodjunk

                            "Neatness and elegance" can save the client $$ in the long run by reducing the time needed to revise the product in the future.

                            • 11. Re: How do I bill?
                              bigtom

                              Richard S. Russell wrote:

                               

                              I'm retired and have no need to make money off my database work. So I do it for free, as a hobby, for various non-profit organizations and small family-owned businesses in my area.

                               

                              richardsrussell I am not in a real need to make money from my database work, but my wife does not like the idea of me doing things for free and I think most things should have some value attached. I started by helping small NPOs and businesses. However, as the projects grew and the potential for liability increased I had to start adding billing something. If you work on something with any sensitive data, even if it is for free, there is some risk there.

                              1 of 1 people found this helpful
                              • 12. Re: How do I bill?
                                CarlSchwarz

                                I'm with taylorsharpe and Beverly with their billing models.

                                philmodjunk wrote:

                                 

                                It's especially useful for first time clients as a way to build trust and handles the issue that consultant A may bill $100/hour and bill for 10 hours work while consultant B might bill $150/hour and bill for 6 hours to do the same work.

                                I tell my new customers I bill hourly and try avoid mentioning the hourly rate but rather guide them to getting an estimate for the first round of work.  That way the customer gets two things

                                1) An idea of development costs for a tangible deliverable

                                2) A real value that they can take to competitors for comparison, hourly rates are 'flexible' depending on the developers charge-out model so it doesn't really help the client to know that.

                                • 13. Re: How do I bill?
                                  dburnham

                                  The same can be said for appropriate use of color.   Nevertheless, there are people who will never understand this.  Maybe they were denied a box of crayons as children.

                                   

                                  This is a little bit askew from the topic, but it speaks to the difficulty of billing for aesthetics that customers don't appreciate..  Here is an example of a layout made by a person who loves his self-created FileMaker database because everything he needs is on one layout.  Imagine being hired as an employee with this being something you have to use throughout the day.

                                   

                                  When FileMaker Inc. creates presentations and marketing materials that encourage people to do it for themselves, I wonder if they realize that this contributes to a negative reputation for the company and the product.   I know, I know, this is a free country and people are allowed to express themselves creatively as they wish.  But I believe that we, the developers, have a responsibility to set a higher standard.

                                   

                                  Screen Shot.png

                                  • 14. Re: How do I bill?
                                    Mike_Mitchell

                                    Thanks a lot. Now I need two Advil ...    :-)

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