This document discusses pricing development projects. It covers 3 key components of pricing: cost, value, and price. Cost is the minimum required to complete a project. Value is what the customer receives, which is subjective. Price is the amount exchanged. The best scenario is when cost is lower than price, which is lower than value, creating a win-win. Risk is a major factor in determining value and price, as reducing risk increases both. Pricing structures like hourly, fixed, retainers are discussed along with estimating costs and values.

1. Pricing Development
Projects
Glenn Stovall
!!!!!!!!!

2. 3 Components: Cost,
Value, Price

3. Cost: Minimum you must make on a job.
Cost of time + cost of materials +
customer accquisition cost

4. Value: What the customer receives
—Value is subjective.
—More art than science.

5. Price: The Amount of
Money that Changes
Hands

6. Cost vs. Value vs. Price
—Price < Cost : Developer goes broke. !
—Price = Cost : Developer breaks even. "
—Price = Value: Client Breaks even. "
—Price > Value: Client goes broke. #

7. Best Case Scenario
Cost < Price < Value :
Win-win range !!

8. Making Profit
—Price - Cost = Profit
—By providing more value, you can charge a higher
price.
—Estimate cost, estimate value, set price between
the two.
—Optimize towards profit.

9. Estimating Cost
—Think in ranges.
—Reduce uncertainty.

10. Common Estimation Stumbling Blocks
—Mythical Man Month
—Negative Network Effect (aka I-285 Syndrome)
—Death Marches
—Lack of Margin

11. Items to consider
—Development time
—Meetings
—Communication
—Documentation
—Launching
—Revisions

12. Estimate Value
—Tangible benefits
—Intangible benefits
—Reduction of Risk

13. Examples of Value
—Increased revenue
—Decreased cost
—Reduction in workload
—Increased opportunity
—Competitive advantage
—Emotional Impact
—Risk mitigation

14. Worthless Rigmarole
—Your Idea for the “Next Big Thing.”
—Which programming language you use.
—The number of hours spent on a project.
—The number of features your app has.
—The extendability of your code.(sometimes)
—Using the most 'cutting edge' technology.
—Building a custom solution instead of using
something 'off-the-shelf'.

15. Ways to be Worth More
—Reliability of your code.
—Good communication.
—Speed of delivery.
—Force multipliers.
—Education (Documentation, Training, Consulting)
—Coding isn't the only work that produces value.

16. Risk is the #1 Factor in Value & Pricing You can
control.
The lower the risk of your offer, the higher your
value.

17. Examples of Risk Reduction
—Guaranteed delivery time.
—Guaranteed price.
—Reputation / Pedigree.
—Warranty.
—Money back guarantee.

18. Thought Expieriment
The Business Wizard

19. How much would you pay
a wizard too...
Cast a spell that instantly makes
your business $100,000?

20. How much would you pay
a wizard too...
Cast a spell that makes your
business $100,000 over the next 12
months?

21. How much would you pay
a wizard too...
Cast a spell that has a 10% chance
to make your business $1,000,000?

22. Pricing Structures
Hourly vs. Fixed?

23. Pricing Structures
—Hourly
—Daily / Weekly
—Fixed / Project
—Monthly Retainer
—Productized Consulting

24. Hourly
—Client takes on all risk (lower value).
—Price anchored to cost (lower end).
Fixed
—Developer takes on all risk (higher value).
—Price anchored to value (higher end).
Others:

25. Common Stumbling Blocks
—Spec Work.
—Fixed rates based on cost not value.
—Not talking about money.
—Offering Discounts.

26. Discounts You Shouldn't Give
—Friends and Family Rate.
—Just Getting Started Rate.
—Charity Rate.
—Pay your Dues Rate.

27. Setting Your Price
—Understand cost.
—Understand value.
—Understand constraints.
—Understand risk.