I have been asked to subcontract a wireframing project. I do not bill by the hour. What is the best approach to arrive at a fixed fee for the project? Budget is unstated, but the timeframe for delivery is about 3 weeks.
3 Answers
15 years as an independent consultant (IT), and 99% of the time I bill hourly.
I hate to go against your 'no hourly' constraint, but if it's a short wireframe project with no scope but expected duration of 3 weeks, aren't you trying to determine 'how much of my time will it take to complete the wireframe deliverables within the timeline'?
Of course, defining the scope of what the wireframe requirements / end result will be is useful - otherwise you are guessing. You might walk from the deal if you believe it's a 5 week project and they only have 3 weeks to do it.
If you wanted to try 'value pricing' - have your client determine what the value of the wireframe will be. My assumption is they will have no clue, since clients don't tend to think of deliverables in terms of value, but rather cost. My clients (Fortune 50 size) would laugh me out of business if I charged based on value.
Also, don't assume that you are the only resource they are soliciting either. What will your competition charge? What's the going market 'value rate' or 'hourly rate' for similar services?
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I don't sell time units. I am subcontracting, so I don't have access to the end client. I established the desired timeframe ahead of time. I'm not interested in competition. They can go to India if the want they cheapest brain surgeon. Commented Mar 26, 2014 at 18:33
The value of something is inherently determined based on how much someone wants what you offer. Either you offer your time, or you offer a product.
If you offer your time, it's a matter of how in-demand you are, based on how many other projects you have going on at the same time.
If you offer a product, it's a matter of how much someone is willing to pay for the final thing. Then competition comes into play.
Since both of the above you have mentioned you don't consider good enough means of measurement:
I'm not interested in competition. They can go to India if the want they cheapest brain surgeon
I do not bill by the hour.
You need to pick some other means of defining what you offer and how it will be measured. File size? Lines of code? There aren't many other options apart from the two that you have mentioned, which you aren't interested in considering.
I determine price based on hours. I personally would consider how long it would take me, multiply that by my going rate, and bill that. My hourly rate is determined by how many people want my time. Every time someone wants more time from me, my rate goes up a couple of dollars per hour. I don't think I'm being cheated because I solve the problem faster. If I can get it done in so many hours, and my time is considered to be of a certain value, then that is the value of the final product.
People hire me because I solve problems quickly. My rate is higher because I'm fast, so they cancel out. More people hire me, the higher my rate goes. I find this works really well for me, and It's my suggestion to you, because supply and demand determine how much I get paid, and I feel like that's a win-win situation for me and for my client.
Otherwise, why not just thumb suck a number and make an offer? If they say yes, great, of not, negotiate?
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You should read up on the concept of value-based fees. Commented Apr 3, 2014 at 19:52
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Hey Mark, I get the feeling you already have an answer to this question. Just so you know, you're free to self-answer your own question. Just be sure it's an actual answer with content and not just a link to your blog. :)– jmort253Commented Apr 4, 2014 at 0:36
I'd say that depends on the requirements, the time you think it will take you and how much you want or need the project.
There is no objective guideline to come to a price. If all else fails, just decide what amount will make it worth your while.
By the way, a bit off topic: I think you should bill by the hour. Solves all of these questions and in the end it is the fairest agreement for you as well as the client in my opinion.
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Hourly billing is unethical. You, as the consultant, get penalized for solving the problem more quickly. I have no interest in getting into bidding wars either. Commented Mar 20, 2014 at 20:36
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How could that possibly be unethical? You charge what you work. It doesn't get more transparent and ethical than that. And why would an hourly rate = bidding war? Commented Mar 20, 2014 at 20:50
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I've written extensively on the rationale, which I won't post here, but you can read it here: markrichman.com/never-bill-hour-redux Commented Mar 20, 2014 at 20:57
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Extensive indeed. Still don't see how the way you charge determines whether it's unethical though, fixed price gives more opportunity to be unethical if anything, as it's less transparent. The comment section isn't properly suited for this discussion, but I'm tempted to start a question for it. I think it's an important discussion. And hourly billing would still solve your dilemma wouldn't it? Commented Mar 20, 2014 at 21:33
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1Let's see if it becomes an interesting discussion or an [on hold] question :) Commented Mar 20, 2014 at 21:48
xeverymonth to pay bills and make some profit. So chargex / 4 * 3- Simple. But you may work 12 hours a day and finish in 9 days and still charge the same when you present your work after 3 weeks but what if you go over the time? You might start loosing out. So it all boils down to, time is money.