Gregg
greggs at msn.com
Mon Apr 25 09:32:13 CDT 2005
Kath,
I tend to convert everything to hours. My estimates are broken down by hours and totaled. Only at the end are they multiplied by an hourly rate. I want the customer to believe (1) this is a service not a commodity, (2) before this project is finished there will many changes and additions requiring additional hours and (3) when we are finished he will think of 10 more things he will like to have. Simply stated, this is going to be a long-term, by-the-hour relationship. I then report every month where those hours are spent.
If I was quoting a $10,000 project at say $50/hr that would be 200 hours. I would quote $1000/month for 10 months with the first payment up front. I would report every month the hours and the balance on that project plus whatever additional services they asked for under that project's name or a Misc category. Obviously, their payments would continue past the 10 months until the balance is paid. Hopefully by this time you have built a positive relationship and identified lots more to do to justify continuing the payments or even some lower payments. The long term goal is to sell the customer that there will always be a need for your services and he might as well budget for it annually.
Obviously whatever arrangements you make are going to have a negative impact on your cash flow. Essentially some of the hours you work today you won't get paid on until 6 months from now. If you don't have money in the bank, you need to be very careful about how far you extend terms on the first project and how often you do it.
Hope this helps.
Gregg
----- Original Message -----
From: Kath Pelletti<mailto:KP at sdsonline.net>
To: Access Developers discussion and problem solving<mailto:accessd at databaseadvisors.com>
Sent: Sunday, April 24, 2005 8:13 PM
Subject: Re: [AccessD] Client Payment Methods
Gregg / Dan - Can you tell me how this works? I also only do fully customised systems - my normal process is to provide a written quote on a job and ask for half as deposit and the other half on completion. Additional work quoted separately.
So if I was to quote a job which worked out to $10,000 - how would I convert that to an ongoing monthly payment? My accountant has also suggested that I get some monthly payments happening - but I have no idea really how to do that....How much should they pay? What do I promise in return? How long does the arrangement run for???
Kath
----- Original Message -----
From: Gregg
To: Access Developers discussion and problem solving
Sent: Sunday, April 24, 2005 2:31 AM
Subject: Re: [AccessD] Client Payment Methods
It's a very good idea. Removes most of the sales objections. Allows the customer to kind of try before they spend a lot. Makes the purchasing decision nearly a no-brainer.
The only downside I can see is if their expectations are far different that what your software delivers, you will either have to make modifications quickly and essentially for free or they will be tempted to shop around for another solution.
I have done something similar. Our software is totally custom for each customer so our end product is almost all programming by the hour. This year I was able to convert 4 long-term customers to a regular monthly billing. We still track hours and make adjustments when necessary but now I can count on a regular monthly check. It's been good.
Also, I have noticed a change in their mindset about asking for additions and enhancements. In the past there were mini approval processes where they would get an estimate of our labor before proceeding. Now, I guess because of the monthly payments, they tend to think of it as a maintenance contract (where requests are seemingly free) even though I have been very clear that it is not. Now, from their perspective its a budgeted, yearly commitment (once-a-year decision) even though they are free to get out at any time.
----- Original Message -----
From: Dan Waters<mailto:dwaters at usinternet.com<mailto:dwaters at usinternet.com>>
To: Database Advisors<mailto:accessd at databaseadvisors.com<mailto:accessd at databaseadvisors.com>>
Sent: Saturday, April 23, 2005 10:18 AM
Subject: [AccessD] Client Payment Methods
To All,
Yesterday I had a business planning meeting with an advisor. He brought up
the idea of asking my clients to pay me on a monthly basis - the concept is
that they would pay me a portion of the ongoing value they get from my
services. (By the way, this is not a maintenance fee.)
This sounds quite attractive. My customers might skip a major budget
discussion (often lasting several months) and quickly get started. They
have a low risk because they could discontinue whenever they want, which is
actually a good business position. On my side I would be a little shocked
if they did discontinue because no one would really want to go back to the
old way of doing business.
I'm thinking that I would ask for a monthly amount of 1/36 of what I would
have asked for to 'sell' a module. The monthly payment would of course
continue after the 3-year period. This gives me a long-term regular income
stream, and allows my customer to make small monthly payments which might be
easier to get into.
Does anyone provide software under similar terms? Or, does anyone use
software under similar terms? What are your thoughts on this payment
method?
Dan Waters
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