How do you price your software?

[_tim]

Hi All -

I'm developing a rather complex system for a client and am really struggling with how I should charge for it. So - could you give me some examples of how you determine cost for the products that you develop?

Thanks!

[Narue]

>could you give me some examples of how you
>determine cost for the products that you develop?
For software I develop as a consultant, I typically multiply the estimated hours by my hourly rate ($200USD) for the full price. Half of the price is due on signing of the statement of work, and the rest is due on delivery. The estimated hours is basically how long I think it will take, plus 50% to account for unexpected delays, implementation problems, unexpected redesign, and allowable feature creep.

[_tim]

Thanks Narue - I'm thinking of doing something similar, but I'm concerned that the number I arrive at will scare off my client from future development opportunities - and I know they have a few that they'd like me to do. Is that perhaps an unfounded concern? That's honestly what I'm struggling the most with.

[Narue]

>I'm concerned that the number I arrive at will scare
>off my client from future development opportunities
I worried about that at first, but custom software is expensive, and quality custom software is more expensive still. You need to stick to your guns on the base price[1], or they'll end up taking advantage of you. Here are two reasonable arguments for defending your price that any reasonable client will respect:

Clients should be aware that if they want someone to write an application just for them, according to their specific needs, they're going to pay more than if they bought a "close enough" package at retail prices. This is the balance of value for cost; custom software is vastly more valuable because it does exactly what the client needs.

Another factor is the the number of clients you can reasonably sell this application to. If you can't productize it for some reason, or have no plans to sell the same or a similar solution to other clients, you can't compete with software houses that have hundreds or thousands of buyers. To make a profit, your price goes up if the project is to be worth your time. Clients should be aware of this as well.

If your price is fair, your concerns are unfounded.

[1] For repeat clients with which you have a good relationship, discounts and generous support contracts are an excellent way to keep their business.

[_tim]

Thanks Narue. I very much appreciate your suggestions!