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.
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.
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.
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.
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
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.