pricing on websites
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And people who quote flat rates rarely stick to them when disaster hits. I've had flat rate construction work done that more than doubled in total cost (because they found huge electrical issues.) Things happen. Flat rates are subject to change should any surprises happen.
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I'll ask some of my clients if they would rather have me quote the job as a flat fee or as an estimate.
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@mike-davis said in pricing on websites:
I'll ask some of my clients if they would rather have me quote the job as a flat fee or as an estimate.
This only works if you honestly treat the estimate as an estimate and don't put in ANY of the quoting costs or the buffer necessary to do a flat fee. Maybe give them both and ask what they want... but you have to honestly not include the quoting time in the estimate price.
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And only works if your customers are financially savvy. You can't just ask SMBs and assume that they know what is best for themselves. The average SMB does exactly the opposite - they will ask sales people for advice and often see predictable pricing as more valuable than low pricing. This is often what makes them SMBs instead of growing to be larger.
If you REALLY have the discussion and show how much more they have to pay for the flat rate, doesn't it sound crazy for them to say that they just want to throw money away?
Only reason I can imagine for them to take the flat rate is that they don't trust you, right?
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The discussion shoudl be something like this....
Hourly: Quick estimate is ~12 hours at X rate.
Flat: We need 2 hours for the estimate, plus 2 hours to cover any mistakes in scoping or unknowns, so the price is 16 hours at X rate.Which do you think that they will take? They'll ask where the extra hours come from. You'll explain that two hours are for the cost of you making the quote. And the other two hours are to buffer against any mistakes on your part or things you could not anticipate.
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@scottalanmiller said in pricing on websites:
The discussion shoudl be something like this....
Hourly: Quick estimate is ~12 hours at X rate.
Flat: We need 2 hours for the estimate, plus 2 hours to cover any mistakes in scoping or unknowns, so the price is 16 hours at X rate.
Which do you think that they will take? They'll ask where the extra hours come from. You'll explain that two hours are for the cost of you making the quote. And the other two hours are to buffer against any mistakes on your part or things you could not anticipate.For the client where they can afford the flat fee, but can't afford the project to cost twice as much, they go with the flat fee.
I do all you can eat MSP pricing. Customers would rather have that than hourly pricing. It's because of predictability. You could also add arguments about the incentives for me to be proactive, but at the end of the day, most of the businesses/agencies I work for have a budget and they can't afford to go over it. With a yearly contract in place they can meet their business goals.
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@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
The discussion shoudl be something like this....
Hourly: Quick estimate is ~12 hours at X rate.
Flat: We need 2 hours for the estimate, plus 2 hours to cover any mistakes in scoping or unknowns, so the price is 16 hours at X rate.
Which do you think that they will take? They'll ask where the extra hours come from. You'll explain that two hours are for the cost of you making the quote. And the other two hours are to buffer against any mistakes on your part or things you could not anticipate.For the client where they can afford the flat fee, but can't afford the project to cost twice as much, they go with the flat fee.
I do all you can eat MSP pricing. Customers would rather have that than hourly pricing. It's because of predictability. You could also add arguments about the incentives for me to be proactive, but at the end of the day, most of the businesses/agencies I work for have a budget and they can't afford to go over it. With a yearly contract in place they can meet their business goals.
So here's an experiment for ya Mike - track hours of your workers, and a normal billing rate for their time. Don't forget to include the amount of time for making these flat rate quotes are part of those projects. Now, when it's all said and done, take the flat rate you quoted, divided by the number of actual spent hours, is it higher or lower than the normal rate asked about above (in my post)?
According to Scott - it will more often than not be higher, but not just higher, significantly higher. This shows that your customers overpaid, and you made money at the expense of your customer. Now - of course, this is good for you, but it's not good for your customer.
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@mike-davis said in pricing on websites:
@scottalanmiller said in pricing on websites:
The discussion shoudl be something like this....
Hourly: Quick estimate is ~12 hours at X rate.
Flat: We need 2 hours for the estimate, plus 2 hours to cover any mistakes in scoping or unknowns, so the price is 16 hours at X rate.
Which do you think that they will take? They'll ask where the extra hours come from. You'll explain that two hours are for the cost of you making the quote. And the other two hours are to buffer against any mistakes on your part or things you could not anticipate.For the client where they can afford the flat fee, but can't afford the project to cost twice as much, they go with the flat fee.
Flat fee is the HIGHER price. That's how it works in the real world. If they can't afford the risk, they can't do it for flat, either. Because things still go wrong.
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@mike-davis said in pricing on websites:
I do all you can eat MSP pricing. Customers would rather have that than hourly pricing. It's because of predictability. You could also add arguments about the incentives for me to be proactive, but at the end of the day, most of the businesses/agencies I work for have a budget and they can't afford to go over it. With a yearly contract in place they can meet their business goals.
As long as their business goals aren't maximizing profits. That's the problem with that approach. You trade profits for predictability. It's the Wall St. syndrome... better to predict well than to actually make money.
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@dashrender said in pricing on websites:
According to Scott - it will more often than not be higher, but not just higher, significantly higher. This shows that your customers overpaid, and you made money at the expense of your customer. Now - of course, this is good for you, but it's not good for your customer.
Unless, of course, their business actually feels that predictable payments actually outweigh profits. I know that that sounds insane, but there are rare cases where a business is not out to make money and its their right to do so.
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@dashrender said in pricing on websites:
According to Scott - it will more often than not be higher, but not just higher, significantly higher.
And if it is not higher, why is he taking on so much risk and lost cost (from the quoting) without benefit?
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@dashrender said in pricing on websites:
So here's an experiment for ya Mike - track hours of your workers, and a normal billing rate for their time. Don't forget to include the amount of time for making these flat rate quotes are part of those projects. Now, when it's all said and done, take the flat rate you quoted, divided by the number of actual spent hours, is it higher or lower than the normal rate asked about above (in my post)?
According to Scott - it will more often than not be higher, but not just higher, significantly higher. This shows that your customers overpaid, and you made money at the expense of your customer. Now - of course, this is good for you, but it's not good for your customer.Did that the other night. It's call staying in business.
Even if I'm making money it doesn't necessarily mean it's bad for my customer. I have one customer where I'm doing the job for slightly more than half of what a competitor quoted them. I would say that's good for my customer. I can do this because of my geographical location and I know their environment really well and scripted a lot of common tasks. I have incentives to be efficient.
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@mike-davis said in pricing on websites:
@dashrender said in pricing on websites:
So here's an experiment for ya Mike - track hours of your workers, and a normal billing rate for their time. Don't forget to include the amount of time for making these flat rate quotes are part of those projects. Now, when it's all said and done, take the flat rate you quoted, divided by the number of actual spent hours, is it higher or lower than the normal rate asked about above (in my post)?
According to Scott - it will more often than not be higher, but not just higher, significantly higher. This shows that your customers overpaid, and you made money at the expense of your customer. Now - of course, this is good for you, but it's not good for your customer.Did that the other night. It's call staying in business.
Even if I'm making money it doesn't necessarily mean it's bad for my customer. I have one customer where I'm doing the job for slightly more than half of what a competitor quoted them. I would say that's good for my customer.
That doesn't tell you that, it only tells you that you are better than someone who would take X advantage of them. It doesn't tell you anything about how good you are for them, only that someone else is worse.
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@scottalanmiller said in pricing on websites:
@dashrender said in pricing on websites:
According to Scott - it will more often than not be higher, but not just higher, significantly higher.
And if it is not higher, why is he taking on so much risk and lost cost (from the quoting) without benefit?
Well, one answer to that could be - experience. History has shown that historically he doesn't have those over runs.. so, to keep customers happy, he assumes the risk himself.
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@dashrender said in pricing on websites:
According to Scott - it will more often than not be higher, but not just higher, significantly higher. This shows that your customers overpaid, and you made money at the expense of your customer. Now - of course, this is good for you, but it's not good for your customer.
I can guarantee that ant flat rate quote I would ever make would be significantly higher than an hourly estimate. Because flat rate is very hard to change later unless you bury the contract in caveats.
It would be so high because I cannot risk losing money due to shit the customer did not tell me. I cannot risk losing money because it took 10 hours to get a god damned intelligent scope of work determined because the client dicked around.
@Mike-Davis you keep trying to say the hourly rate is going to be higher, but shit just does not work that way.
I suspect you are giving away a ton of your time in order to make lower fixed rate deals. If you run the real numbers like we have told you, you will see that you are charging hem more than the hourly rate would cost, or you are giving away your time. One of the two. It is nearly impossible for t to be anything else.
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@dashrender said in pricing on websites:
@scottalanmiller said in pricing on websites:
@dashrender said in pricing on websites:
According to Scott - it will more often than not be higher, but not just higher, significantly higher.
And if it is not higher, why is he taking on so much risk and lost cost (from the quoting) without benefit?
Well, one answer to that could be - experience. History has shown that historically he doesn't have those over runs.. so, to keep customers happy, he assumes the risk himself.
No matter how much risk he assumes himself, in the end the customer must pay for it. That's the law of business. There is only one source of money, the customer. No matter how you slice or dice it, any unnecessary overhead eventually has to come from the customers.
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@mike-davis said in pricing on websites:
@dashrender said in pricing on websites:
So here's an experiment for ya Mike - track hours of your workers, and a normal billing rate for their time. Don't forget to include the amount of time for making these flat rate quotes are part of those projects. Now, when it's all said and done, take the flat rate you quoted, divided by the number of actual spent hours, is it higher or lower than the normal rate asked about above (in my post)?
According to Scott - it will more often than not be higher, but not just higher, significantly higher. This shows that your customers overpaid, and you made money at the expense of your customer. Now - of course, this is good for you, but it's not good for your customer.Did that the other night. It's call staying in business.
Even if I'm making money it doesn't necessarily mean it's bad for my customer. I have one customer where I'm doing the job for slightly more than half of what a competitor quoted them. I would say that's good for my customer. I can do this because of my geographical location and I know their environment really well and scripted a lot of common tasks. I have incentives to be efficient.
No - that means that the other company was screwing them. You instead are doing right by your customer, doing everything to keep costs down.. i.e. real IT.
That said, it's still completely possible that you could run into an issue that takes you 10+ hours to resolve. Assuming you had only 1 hour of sluff time baked in, you (your company) just lost 9 hours of billing. The customer in this case is taking advantage of you.
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@dashrender said in pricing on websites:
@mike-davis said in pricing on websites:
@dashrender said in pricing on websites:
So here's an experiment for ya Mike - track hours of your workers, and a normal billing rate for their time. Don't forget to include the amount of time for making these flat rate quotes are part of those projects. Now, when it's all said and done, take the flat rate you quoted, divided by the number of actual spent hours, is it higher or lower than the normal rate asked about above (in my post)?
According to Scott - it will more often than not be higher, but not just higher, significantly higher. This shows that your customers overpaid, and you made money at the expense of your customer. Now - of course, this is good for you, but it's not good for your customer.Did that the other night. It's call staying in business.
Even if I'm making money it doesn't necessarily mean it's bad for my customer. I have one customer where I'm doing the job for slightly more than half of what a competitor quoted them. I would say that's good for my customer. I can do this because of my geographical location and I know their environment really well and scripted a lot of common tasks. I have incentives to be efficient.
No - that means that the other company was screwing them. You instead are doing right by your customer, doing everything to keep costs down.. i.e. real IT.
There is no way to know that. He's keeping prices lower than a known overcost, but that's all. We don't know if he is low, or just lower.
What if there was another competitor that came into the market. And he cost 50% more than Mike, but still way less than the other guy. He could use the same logic that since he's cheaper than the othe guy, he HAS to be a deal... but that doesn't hold up, because he's So much more than Mike.
See the flaw?
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And what if I randomly quote double that other guy (so 400% of Mike) does that change the other guy from gouging to a proven good deal just because I'm willing to overquote?
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@jaredbusch said in pricing on websites:
I suspect you are giving away a ton of your time in order to make lower fixed rate deals.
I know I did this when I used to do flat rates.. i never included my time of making the quotes.. but assuming I had an employee doing that work, who's paying them? Me - out of my profits? That's crazy talk.. The client is getting free work in this case - and that's just not good for business.
