How Much Should I Charge?

Contractor's vs. Employees

Employee: Buying someone's time.

Contractor: Paying for an hour of contracted labor.

"I don't care when you work, as long as an hour's worth of work is an hour's worth of work."

Definitions

Scope: What do you do?

Time: How much time does it take?

Resources: Flex and Air costs more than HTML.

Budget: How much have you got? I can see how we can put that to what you want.

Pool of hours: This timeframe, this amount of money; the variable is scope.

Redmine: an open-source project management tool. Good for managing budget, especially if you have Shane and Peter's budgeting plugin.

When to us hourly charge:

When the scope is undefined or unclear, this is a good thing to do.

When the world is changing fast (i.e. Facebook's platform for applications).

When clients change their mind... a lot.

When to use retainer:

When the client will need you on a semi-regular basis.

When to use fixed-rate:

When the scope is clearly defined.

Trouble is, people do want to change things. It can be trouble for client relations.

Using fixed-rate...

Shane and Peter use "deliverables," which are items one can check off the list. A "Chinese Menu", if you will, including options, like "You can have this, and it'll cost $x, but you don't have to have that item, in which case it'll cost $y."

Charging hourly...

Figure out what you need, and what tasks make you money, and which make next to nothing. Drop those which or unprofitable. How much business can you drive at a given rate? If you can't drive enough business at $100/hr., then you're charging too much. Clock every single hour that you spend on business stuff; you'll see that it is more than you bill (Read: 6-hour billed day is actually about a 10-hour day). Time that you are spent sitting somewhere is time that can be billed (if an understanding has been reached); for example, tech-support work can be billed both on effective time and sitting time. You can also charge different rates for different "types" of time (meetings, effective, waiting for calls).

Freelanceswitch has a calculator.

In the budget:

Billable

Overhead

Material Cost

% Profit

Make sure you know exactly what the client truly wants. What they say they expect and what they actually expect rarely are the same.

Don't say yes to something that seems low unless business is slow. Remember you could be a "bargaining chip", meaning they are trying to talk someone else down by getting you to take a low price.

Closing Notes:

E-commerce: Charge on commission? Could go either way...

Negotiation is okay.

Don't forget overhead (which may change on a client-by-client basis).

You're charging on value to you, but remember, the client is charging on value to *them*.