February 21st, 2013, 11:44 AM
Coming up with a price point to negotiate
I could potentially find myself working for a client soon and I'm having trouble pricing the site.
We'll be using Drupal and the "main" site itself is fairly straight-forward I think. I'll be doing content rewrites, info arch, and working with modules. My roommate will be doing the theme and modules. But then it gets messier - they want a "facebook style" sort of interactive portion that a third person will be hand-coding from scratch.
A local company wanted near 6 figures to do it and blatantly said it was the interactive part that was going to cost so much. This company is on a budget so that's just not possible, they simply don't have it. We're a bunch of new grads looking to potentially create our own company and we have ties to this company that needs the site done so we're willing to go considerably lower than the other guys. However, we still want to actually walk away with something while being fair. We're not even sure where "fair" would be, ballpark.
I ran some searches but couldn't find any info. I'd rather give them a flat rate and go from there. I'm not even sure what number to begin negotiating at and what point it wouldn't really be worth it anymore. Any input would be appreciated.
February 21st, 2013, 05:41 PM
You have to work out two things:
- How long will the project take to complete?
- How much are we going to change for our time?
When you have that, you'll know what to charge. How much for a per-hour rate is really up to you and what you all feel comfortable with. There's way to many factors that come into it when you're not a "proper" (no offence intended there) company, and you have some existing relationship with the company that your building the system for.
February 22nd, 2013, 12:02 AM
Catacaustic is complete correct there; in the end, everything comes down to time. I recommend using this formula:
(how long do you think it will take) x (your hourly rate) x 2
x2 because in the end, everything always takes longer than you expect with very few exceptions.
[I just saw in your other post that you're not familiar with Drupal. In that case, multiple by x4 because Drupal has a massive learning curve; probably the highest of any PHP framework.]
In the US, rates for contracted professional software development tend to fall between $50 and $200 per hour. If you're not used to billing hourly though, it's probably difficult for you to gauge what your time is worth on an hourly basis - so think about it on a yearly scale instead. A full time worker works approximately 2000 hours in a year. What do you feel is a reasonable yearly salary? If you're just coming out of school, I expect you're thinking somewhere around $50k to $100k. $50k/2000 works out to $25/hr, BUT remember that as a contractor you don't get full time benefits. Those benefits are easily worth another $10k or $20k. So a $50k salary actually works out to closer to $30/hr - $35/hr.
To be honest, it sounds to me like you're about to commit to more than you quite understand. Obviously I have not seen actual specifications for the project, but a 6 figure estimate for a site that like is completely reasonable - because it's going to take a really long time to build. The company was probably estimating 1500 - 2500 hours, which is the same ballpark figure I would give if someone came to me and asked me to build a custom Drupal site plus a site like Facebook.
So first you have to ask yourself, do you actually have that much time to commit to this project.
Then you have to ask yourself, can I actually do that much work in the timeline they want.
And finally, you have to ask yourself, am I willing to do that much work at a hugely discounted rate?
For a 2000 hour / 1 year project, $100k works out to only $50/hr. So how much lower can you really bring that?
If the company doesn't have the money to do the project, then they don't have the money to do it. That is (a) not unusual, and (b) not your problem. The fact that they simply don't have the money doesn't make the project any easier or less time consuming. Tell them to reduce the scope of the work or get a loan.
No, believe me, that will not work out well, it almost never does. You will walk away stressed and overworked in the end because you feel they misrepresented the scope of the work in the beginning (and they probably did, because very few people actually understand the scope of a project like this, particularly non-technical people). Plus, in the end, they will still walk away feeling cheated because in their opinion you never finished the site.
The one wildcard is that possibly the first company that they talked to misunderstood the project specifications and overestimated the project. It does happen, but not very often, and based on what you've said I doubt it happened here. Software companies have an incentive to underestimate work, because then the client is more likely to move forward with it. Any software company that consistently overestimates work is going to have a lot of trouble landing projects.
I don't mean to sound all negative on this, but I don't want to see you end up screwing yourself over on this, and I can totally see it happening. If you move forward with the project, be totally and completely sure that you document EXACTLY what you're going to build for the client and get them to sign off on it; that's the best way to protect yourself.
Comments on this post
February 22nd, 2013, 02:19 AM
Don't forget that whatever rate you charge, the government (certainly in so-called 'western' democracies) will be looking to take 30% to 50% off you by way of various taxes (and fines for getting it wrong).
Assuming you're happy to go ahead on the technical aspect, the next thing your group should do is go see an accountant / company lawyer to see what is the best business structure (say a limited company) which best protects your interests.
Rather than go for the whole A+B+C, which they can't afford, and you're not sure you could do it anyway, why not propose to them that you do A+B to begin with (they can afford it, you can do it), then work on C on an incremental basis.
February 22nd, 2013, 08:16 AM
Thank you everyone for the great input!
I feel certain we can do it. I'm viewing this in two parts - the "normal" site and the interactive portion.
The "normal" site will be split between myself and my roommate. My roommate has already done Drupal in the past, quite a bit larger than this one, and I'm learning for extra support but am mostly looking into mods given all the hunting and studying you seem to need to get even one installed...
The interactive part is all our teammate who said he could have a working prototype before our presentation. He's apparently been working on something like this as it is.
The only issue is how much we should charge and whether it's worth it. I suppose the way we're looking at it is okay so...they don't have the money. It's like squeezing blood from a turnip, it's just not there. We're up against two other "groups" of people - an English grad who seemingly thinks she can do the entire thing alone which is like...just no unless she's skipping the interactive part. The other is a student who feels he can assemble a team to do it in the summer as a "summer project". Mind you, the current tangled up mess they have is in place due to repeated student efforts...what happens to students? They graduate and leave, their schedules change and they quit...not the most stable workers.
I know I have the people to do it and instead of waiting for the summer, we can start now. While we're not trying to undercut this local company (if we start our own, our clientele won't even be the same as we have different target markets already in mind), we see this as a potential way for us to jumpstart our own careers with this portfolio piece under our belts. We're also hoping, given their connections, they could help us with word of mouth. So I suppose, for us, it's okay they can pay X which is Y less than what we should get - but they can bring in Z in other clients that we might not get without them. But maybe I'm totally naive in thinking this, haha.
We definitely didn't think about the ridiculous taxes if we don't go about it correctly. So thank you very much for all of the estimates you guys took the time to post, it's very much appreciated. I'll have to talk to a few people and do some calculating, thank you.