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Comment by magicink81 | Hacker News Reader

Jonathan Stark is a thought leader / coach / writer / blogger etc that has been beating the drum on time-based pricing vs value-based pricing. He helps software engineers and others get off the time-based model and transition to value-based.

Here's his website: https://jonathanstark.com/

Here are some interviews where he covers the topic https://www.youtube.com/watch?v=UT32G9wmONg https://www.youtube.com/watch?v=B1b7QlQILRo

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My side gig is that I have a few clients who pay me $1K a month for 10 hours of retainer. Most months, I barely put in 3 hours. A few, I might work 12 and I don't charge them because everyone's happy. They realize I have a day job and as such, I'm not going to be immediately available unless I can take a lunch break. A win for everyone.

This sounds like a sweet deal. If you don’t mind me asking, what kind of side work do you do that only takes a few hours a week?

Software dev. One client is a former employer, another is a company in an adjacent industry who would have to pay substantially more for the agency who built their sites to look into things for them. The price is not super high, but on average I probably end up making about $350 an hour when it's all said and done because I get paid on retainer and not hourly.

I'm a big fan of Jonathan Stark. As well as value-pricing he has lots of great content on writing proposals, developing productised services, moving to advisory roles etc. He has two podcasts that are worth listening to, The Business of Authority [0] and Ditching Hourly [1]

[0] https://www.thebusinessofauthority.com/ [1] https://podcast.ditchinghourly.com/

Thanks to Jonathan Stark book and podcast I stopped doing billable hours and go with flat fees and flat monthly and my income sky rocketed. I just offer more for my consulting services for a flat fee and customers seems to love it. I always over deliver and was frustrated with crappy time tracking and having to justify it.

This article hits hard in a lot of ways.

Have any of you who work as a freelance programmer managed to get off the hours-based billing treadmill, and onto a value-based system? How do you determine value? When your clients need constant maintenance or small incremental work, do you end up spending a lot of time with estimates?

I'm really struggling with this in my own work.

You shouldn’t realistically expect to charge customers according to value delivered to their company. You’re still selling services on an open market, competing against other contractors and their pricing.

Nobody is really interested in handing a services provider more money than necessary to get the job done at market rates, so even value-based bidding ends up coming back around to market rate pricing.

You can always ask, of course, but at the end of the day any rational company is still going to evaluate your proposal against their other bids from other contractors.

This mirrors my thinking. At the end of the day you have to charge a price reasonable to the customer and sustainable to you for whatever you’re delivering and that’s going to fall somewhere relative to other bids and whatever Google tells them the average hours spent * rate “is”.

For several of my company’s customers they don’t really want to discuss ambiguous ideals of value for cash or negotiate fixed deliverable costs. They ask “so what’s the rate, bottom line?” and we have had a LOT better results estimating and billing hourly than with fixed rate, retainers, and so forth. Not because we are bad at estimating but because there are too many variables on the SMB side that no customer will pay to hash out fully before a project begins, and even if they did, ours tend to value the flexibility provided by hourly billing.

The key to being able to transition to value based pricing is having a differentiated skill set

Fixed bid contracts are riskier than per hour contracts. There is the risk that you underestimate the project and have to work for free. There is also the reward when you overestimate the effort, the client accepts the bid, and then you get paid for doing nothing. The key for being successful with fixed bid contracts is responsible estimation and communicating that to the client.

For maintenance work it's almost always per hour unless you can negotiate a retainer policy. Back when I worked on contracts a not uncommon arrangement was a hybrid approach with the fixed bid deliverable and a pool of maintenance hours on the back end that were essentially options for the client.

Chris Do's work was my introduction to this concept, perhaps you might find it equally helpful.

This is one of his lectures on value based pricing, but he has a number of them that are informative on the concept in different ways: https://www.youtube.com/watch?v=ivKnj9ffcmE

for maintenance or incremental work i'd offer a retainer.

i did that with one client. i started hourly and eventually once we had a good working relationship suggested to switch to a retainer. i actually let the client pick the fee. he picked the same amount that he had paid in hourly rates before. i figured that if there was more work then i'd renegotiate. but what happened was that my work went down, yet the retainer stayed.

that's the big advantage of a retainer. with hourly you get more if you work more and less if the work is reduced.

with a retainer you don't work more than the limit of the retainer allows, but the less you work, the more you make for the time worked.

I strongly disagree.

The dream is that you can deliver a project for 100 hour pricing in 10 hours of work, but usually value based pricing means you'll be spending 200 hours on something that was initially valued at a 100 hour level and there are no one to bill the OT to.

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