Jacques Mattheij

Technology, Coding and Business


What price to pick ? This is a tough one, even for seasoned consultants. There is a joke that a price is never right, if something gets bought it was too cheap and if it sits on the shelf it was too expensive.

  • Hourly rates Your price should be a reflectance of your skills level and your reputation. In the beginning of your consultancy career I would suggest to lowball the price, but not too much. If everybody else is charging a hundred local credits, go for between 66 and 80% of that. It will make your offer attractive in spite of your lack of reputation, and it will still be high enough that you are able to make a living. Note: tptacek writes "I disagree with the recommendation of lowballing your prices to start. The cardinal rule of selling things to businesses: they're not spending their own money. Pricing is more about sending signals in corp-corp transactions than it is about utility or pain or emotions. When you come in at 60% of the prevailing rate, you're sending a dubious signal." He's got a good point there, and I'm not sure how to counter it, so I've included it verbatim. Reasonably low pricing will also help you in getting enough deals lined up, especially when you do not yet have an extensive portfolio of companies that you have worked for this is important. It is better to have a filled order book at 60 credits per time-unit than it is to have an empty one at 120. I think the lesson here is to use your pricing as a tool, and to price yourself according to what the market will bear, your reputation, your immediate needs and the status of your order book. Change your price to accommodate changes in situation. If you find your services are in high demand and you could work 80 hour weeks, don't. Work 50 or 60 hour weeks and increase your price. Repeat until you find that people are starting to take others over you. If on the other hand you feel that you have too little work lined up then lower your price! (and make sure your customers know about it, at least the ones that you hope to get work from in the near term). Avoid huge fluctuations here, a 15% increase or decrease already gives you a 30% bandwidth to play with, that should be plenty to cover most situations of glut and scarcity, bigger changes are possible but over a longer period.
  • Fixed price work If you work 'fixed price', so contract jobs then you have to get really good at estimating the work and at knowing your own skills. This is a tricky business and you have to expect to get it wrong every now and then. Key to good estimation is to have a very clear idea of what it is that the customer wants, and then to put this on paper and to get some kind of formal ok from the customer that this is what is required. A good way to invoice such a job is a small part at the beginning, 50% during the runtime of the job and the rest on delivery. See the job estimation and project management sections.