New to billing and estimation of medium to large sized projects for NPO

Question

I'm a 15 year veteran of web design and front end development, with a couple years of Rails experience under my belt.

Currently I am focusing on forming my own development company, and have landed quite a few clients of small to small-medium size.

Recently I was invited to consult with a local NPO on a project to replace an aging 10 year old software application for order and client management. To date, it will be the single largest project (if I win the bid) that I'll have won, so it's incredibly new territory for me, and a little daunting.

My questions are:

1. How does NPO pricing typically work? I understand most NPO's receive a discount on services, which is then tax deductible (I'm in Canada). Without knowing more about the full scope of the project, what is the general market rate for such a project with an estimated lifespan of 10 or so years (it sounds like they make major investments and then stick with it for as long as they can).
2. I've been told that they would also want maintenance and ongoing support of the application tied into the contract, what value is fair to place on that?
3. Given past experience, my assumption is as follows: There will be a data migration from whatever database/datasource the existing application makes use of, which might include a complete overhaul of the data model.
4. There would also be back end engineering and front end UI/UX work as well as graphic design elements, and documentation would also need to be drafted (system documentation and user guide documentation) as well as training on how to use the new system.

I have my meeting with them this coming Saturday, so I want to be as prepared as possible should they have any questions or want to begin negotiations immediately (it sounds like there is significant urgency to needing this new solution).

Thanks in advance,

Gabrial

Answer 1

You MUST price as if it was a commercial organization, in full detail as above answer. To a self employed person 'every client' is a commercial organization. Discounts to NPOs are only given as a reduction in full fees where an organization has spare capacity to live outside these margins. They like any customer ask for a discount but you are 'selling yourself to a customer' your rates must be real.

I advise as a former treasurer of a NPO, while I might push a big utility (say electric company) to try to get a discount, we never did so to small traders. A workman should be paid his living wage. You need to argue that with the customer. Be wary of NPO internal politics, (especially charge with time) sometime committees like to push their own known folk, rather than the 'best ' who should be hired.

Answer 2

I would not make difference if the project is for Non Profit Organization or not, even if they have discounts on services or taxes, I don't think that you will have too, so you can go with a normal project pricing.

I would make (for my own better understanding) a very detailed estimations for all the costs of the project development including work hours, support, training, monthly maintenance, etc, and then you can make a price for each "item" of your list, and each item specify if is a "one time" task, monthly, yearly, etc.

You can prepare a long term contract (lets say 5 years renewable) and span the whole price along these years in this way, considering the first year with all the migration, development setup and put the whole thing working correctly, and the rest with annual fee for maintenance, etc.

It will be like the first year you will work a lot and have a proper income, then as the more time pass your commitment will be less and you will get the annual fees, probably you will work very little on the project once it will be stable and going.