7 or so years ago, I stopped selling time. When I first went out on my own, I though I had to come up with an hourly rate, stick to it and NEVER lower it. I would then estimate projects based on how many hours they would take and then come up with a budget based on that simple, but entirely illogical math:
RATE X HOURS = BUDGET
Translated as:
ARBITRARY AMOUNT OF DOLLARS MULTIPLIED BY ARBITRARY GUESS = ARBITRARY NUMBER.
Meanwhile some of my clients would do what we all do when we get an estimate we aren’t quite sure about:
“Can you send me a breakdown?”
Well, after about 10 of these in a row I decided I would just start with the breakdown. It was better, but led to a few awkward conversations.
“Why are we paying for nightly database backups?”
“Do we really need a wildcard certificate?”
“How come Microsoft charges so much for SQL Server licenses?”
Yes, those are real questions, by the way. I finally realized that I needed to spend time with my clients and potential clients to understand how much value they see in the project. If I walk away from that discussion thinking my app will replace 2 full time salaries a year, it makes the math much easier. If I realize they don’t see much value in the solution, I will actually try and talk them out of doing it altogether. It’s actually an honest art. I’m not trying to sell anyone anything (cue John Cusack in Say Anything). You can get all kinds of bizarre answers if you listen closely enough.
“Arrogance is the camouflage of insecurity”
Tim Fargo
I once had one of the most arrogant people I’ve ever met tell me he had a billion dollar idea. Billion with a B. I immediately told him we could not continue our conversation without a mutual NDA in place. I said I would email him one right away and to call me when he had it signed and returned if he would like to continue the chat. After a week of pointless back-and-forth “with his legal team” he signed it and faxed it over. 30 minutes later he called and said he had his partner with him and they were in my parking lot and can they come up and talk for 30 minutes. Pushy and awkward, but Ok, I guess. I knew almost immediately I wouldn’t be working with these people. The “partner” refused to say anything at all about what the project was. He kept asking me about my hourly rate.
Me:
“I don’t sell hours, sorry”
Him:
“Of course you do. You are in the service business. Let me educate you. If you can’t tell me your hourly rate, how can a client know if you’re good? All the mechanics I hire at my used car dealership have an hourly rate. The expensive ones are better, but usually aren’t worth the money.”
(Cool! I get an education for free!)
Me (about 10 minutes in):
“That’s all very interesting, and I don’t mean to be rude, but…we do have a mutual NDA in place. Can we talk about the project now?”
Him:
“We might get to that, but not until I determine you are worth hiring. If you won’t tell me your hourly rate, we can’t work together.”
Me:
“At your request, I allotted 30 minutes for this discussion on my calendar and we have burned up almost half of that already. I expect a healthy skepticism from potential clients, and in fact, I practically demand it. However, if we can’t discuss your project I will have to say no thank you.”
(already knowing there was literally no chance of me working with this person)
Finally the original guy spoke up and blurted out the concept for the project. Finally. My hero. Mr. Great Deal On A Previously Owned was irritated because he wanted to play poker with me all day. I was irritated at being lectured about service by a used-car salesman so I decided to make it a bit personal, in the most professional way possible.
Me:
“Now that I have a high-level understanding of what your application does, and the fact that you value it at a billion dollars, I can tell you that my price will be 10 million. I’m sure anybody with any business sense would spend 10 million to make a billion dollars. Anybody would kill for a thousand percent return on their investment.”
Him:
“You can’t be serious. Ten million dollars? Who do you think you’re talking to? This is a waste of my time. If you don’t want to build this app you should have said so.”
I politely got up and said
“I agree. Thanks for your coming by. I’m going to have to say no at this time. I don’t want to build your app.”
I opened the door and they angrily got up and left. All because they wanted to somehow equate my value as a professional to an arbitrary number I would charge them for an hour of my time. I was half tempted to send them a bill for the hour of my time they wasted.
But alas, he would then know my hourly rate.