[consulting] Gouging Stupid Clients

Thu Feb 23 18:05:04 UTC 2012

I used to do something similar to the below...
I would charge X dollars to create a specification document, really 
working through the problem, and getting the document to the point that 
a company could bid against it.
Then I would bid against it, along with anyone else they wanted to shop 
it to.  I got the bid most often, but I was paid for the needed 
analysis, and the client had a MUCH better idea of what they wanted, 
needed and were likely to get when I was through with the first 
phase/specification.
Yes, I know this "goes against" agile, but you could do something 
similar for agile development, a scoping document, say.  The process 
itself is very similar to agile in that you are getting the client very 
involved in the descriptive work.  If the interaction with the client 
stopped at that point, it would move to straight waterfall, but that's 
not how I work anyway.
"Be careful what you pretend to be because you are what you pretend to 
be." - Kurt Vonnegut
Doug Johnson
Solution Visionary

On 2/23/2012 5:59 PM, Alex Pavlovic wrote:
> Hi Jamie,
>
> Even with all the possible planning, discussions and so on a complex project could still result in a cost that's higher for either a 1.) client or 2.) you. The
> other thing you need to consider is people involved with the project and whether they can perform and deliver what you are asking of them within your budget.
> You need to have full insight into everyone's skills and abilities as it relates to your project. Also as I pointed earlier, requirements change and this change
> is what can push you to revisit your fixed price, every time that there is such a change.
>
> While we conduct planning, we do so in a 2 phase fashion. Planning, architecting and project discovery are done normally in a separate legally binding phase
> between us and the client. After that a ballpark figure is given based on estimate provided from the first phase and client is actively aware that for the
> development we may either be 1.) below the budget, 2.) above the budget or 3.) meet the budget. All of our development is from that point on billed hourly.
>
> In a second mode ( when client wants this approach instead ), we can work with a client without introducing the cost for the estimate. We take a look at the
> project and run development process on an hourly billed basis.
>
> Both modes are actively tracked and all hours/work is being recorded, along with code commits, comments and so on, so client has full insight into the
> development process during this phase. Client can set budget, modify it, pause the development process or stop it completely. We found this to work extremely
> well for majority of our clients.
>
>
> Thanks.
>
> On Thursday 23 February 2012 09:33:30 Jamie Holly wrote:
>> When I started there were times that I ended up not quoting high enough.
>> I just ate the loss. Now I can get pretty close to everything. The whole
>> key is planning. Make sure you discuss and know exactly what it is they
>> want. As the service provider it's your job to communicate all the
>> requirements and expectations and get them laid out clearly in the
>> contract.
>>
>> There are still times where I do go over on what I would like per hour,
>> but that is my own fault. Usually it comes down to me writing something
>> then getting hit with that "ah-ha" moment where I realize it can be done
>> much better and rewriting. I honestly don't think this should be on the
>> client's end to pay for since it was my own fault for not thinking it
>> through clearly. Of course I feel better in the end knowing I delivered
>> a much more stable product instead of just worrying about getting it
>> done and getting the money.
>>
>> As far as changes, yes that does happen. In all my contracts there's a
>> section that addresses changes ordered by the client and that these
>> changes will affect the price. Anything over X amount will also require
>> a down payment and 50% completion payment.
>>
>> Actually I feel this works out better. For example, say you are working
>> on a 6 month project. Initially they wanted a certain custom feature
>> built in that took you 20 hours. After 2 months you are chugging alone
>> and already got that feature coded. Along comes the client and decides
>> they don't want that feature after all. By all rights you should be paid
>> for it because you already wrote it, but the client didn't know that's
>> one of the first things you were going to do. In the client's mind they
>> are thinking "now why should I pay for something that will never be
>> used". Having a renegotiation clause for changes in your contract is the
>> key to preventing this.
>>
>> Jamie Holly
>> http://www.intoxination.net
>> http://www.hollyit.net
>>
>> On 2/23/2012 12:21 PM, Alex Pavlovic wrote:
>>> Hi Jamie,
>>>
>>> You must be very good with estimating large and complex projects if you
>>> can give fixed quotes like that. What if the project goes over your
>>> estimated budget? Do you re-negotiate it or simply do the work for free?
>>> We found that for large projects it is normally best to work with client
>>> on an hourly basis, so it's fair to both parties and ensures precise
>>> billing is done. There is lot of unknowns when dealing with large and
>>> complex projects. Requirements may also change during the development
>>> phase which furthmore complicates the fixed price approach. However a
>>> rough quote or price estimate can be given to the client so they
>>> understand what the ballpark figure may look like before you start the
>>> work.
>>>
>>>
>>> Thanks.
>>>
>>> On Thursday 23 February 2012 09:00:07 Jamie Holly wrote:
>>>>   I actually try not to discuss hourly rate with clients with the
>>>>   exception of consultation. Instead I bid on a "per job" basis. This is
>>>>   actually they way the field seems to be moving. I've actually been
>>>>   doing this for close to 10 years now and clients seem to love it. My
>>>>   decision to go this route was based upon the flat rate style billing
>>>>   we did in the appliance repair industry when I owned a business
>>>>   there. If clients ask about it I just explain that my bid was based
>>>>   off a number of factors. You aren't just paying for what I do, but
>>>>   also my knowledge and experience. Also what if I'm out for a drive or
>>>>   in the shower and a project is in my mind and I'm laying out the
>>>>   foundation or solving a problem in my head. Should I start billing
>>>>   for that time, even though I'm not technically at my desk pumping out
>>>>   code?
>>>>
>>>>   What I also do is if a project turns out a lot easier than I initially
>>>>   thought I don't have any problems knocking some off the final bill.
>>>>   Clients LOVE this. Actually I've had quiet a few that took the savings
>>>>   and wanted me to do something else that cost more than the savings, so
>>>>   I ended up making more money in the long run.
>>>>
>>>>   Now mind you that is all on big projects. For small things, like "hey
>>>>   can you fix this problem we have in our code", then I do bill at a
>>>>   straight hourly rate. They are billed a minimum of one hour and then
>>>>   each additional time is billed in 30 minute increments.
>>>>
>>>>   The key to success is building a good and trusting relationship with
>>>>   your clients. At the same time you don't need to disclose everything
>>>>   to them. When you go to the grocery store, they don't put an itemized
>>>>   list of all costs associated with getting that gallon of milk onto
>>>>   the grocer's shelves; they just charge you the final price. Our
>>>>   business should be the same way.
>>>>
>>>>
>>>>   Jamie Holly
>>>>   http://www.intoxination.net
>>>>   http://www.hollyit.net
>>>>
>>>>   On 2/23/2012 11:26 AM, Fred Jones wrote:
>>>>   >   OK the subject is exaggerated--that was just to get your attention.
>>>>   >   :)
>>>>   >
>>>>   >   I recently spoke with a client who told me his woes about how he
>>>>   >   had to wrestle a site away from unscrupulous site builders who
>>>>   >   built and hosted it and charged exorbitant fees for any change to
>>>>   >   their (hard-coded HTML) site. He was looking for assistance with
>>>>   >   his new rebuild in Drupal. According to what he claims, I think
>>>>   >   his organization was gouged previously.
>>>>   >
>>>>   >   Now I have a client myself who has no understanding whatsoever
>>>>   >   about what I do. When they ask for a change (and I even ran a
>>>>   >   training session with them (twice) to tell them how to do little
>>>>   >   things themselves, but anyway they like to ask me) they ask how
>>>>   >   much time it will take and what's the price. Usually I say it
>>>>   >   looks like a half hour job and so I will charge you for a half
>>>>   >   hour. I don't want to discuss rates here, but let's just say my
>>>>   >   rate is 100 Yen per hour. So I charge them 50 Yen.
>>>>   >
>>>>   >   But I realize now that if I would say two or even four hours, I am
>>>>   >   fairly certain they wouldn't flinch, and even if they did, I could
>>>>   >   whip out a few big words and explain why it's complicated and they
>>>>   >   would accept that. They would then pay me four hours for a half
>>>>   >   hour of work. So what I could do, to be honest, is to say, "This
>>>>   >   will cost 400 Yen" and not mention that it's a half hour job. They
>>>>   >   don't really care about the time--just the price.
>>>>   >
>>>>   >   I'm sure others have such clients.
>>>>   >
>>>>   >   I'm wondering what others think about this. On the one hand, it may
>>>>   >   be unscrupulous, because no one (not even Lullabot) takes 800 Yen
>>>>   >   per hour. On the other hand, however, they are willing to pay 400
>>>>   >   Yen for this job and the business majors would say "don't leave
>>>>   >   money on the table." Wouldn't' they?
>>>>   >
>>>>   >   Fred
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