How can I say that I agree, but I disagree...Hmmm...

This is an area where I can speak comfortably, since I can honestly say the
majority of my work and income come from consulting on the business side of
things, moreso than the technical. I'll preface my statements by saying that
you may agree or disagree with me, but I will offer one opinion that I
learned during my first business economics class in the mid '70's. It is
still taught the same way today, just with some updated terminology. So, if
you disagree with me on this, you are disagreeing with the educated world of
technical marketers and the entire educational system behind them - because
I didn't write the book on this, I just what successful experts wrote &
taught.

The first rule of successful business is NEVER give it away. Always sell at
full price and discount from there if necessary. Your reasons for
discounting may vary from time to time. These may include "soft market";
"selling a new product or service"; doing the work with new, unproven
tools"; "excessive competition"; etc... etc...

One instructor put it this way: "You can always adjust the price downward.
Just try to increase it upward.."

Applying this to technical consulting or design services, I can offer
examples from several leading international suppliers in the field of
digital imaging equipment that I deal with. The largest has a $125/hr.
published rate. The only one who pays $125/hr is someone who calls out of
the blue explains that he is not a regular customer and doesn't  intend to
become one. he just wants one job done one time. This equals the full rate.

Selling services to a reseller should generally be done with a considerable
discount structure. If I want to re-sell the same company's field
engineering hours, they will charge me about 1/2 of the full rate. I get
this rate because I give them a discounted rate also, and because we have
developed a relationship from day 1 that allows both of us to be profitable.

Size doesn't matter. The company I mention is huge, in fact the world leader
in their field. They could wallpaper all their offices around the world with
$100 bills and they wouldn't flinch at the expense. Yet, my full rate is a
full $25/hr higher than theirs. This is only because of two things: I offer
a specialty service that they can't just shop anywhere for, and my team will
be more thorough in researching the project options than their own engineers
ever could be.

The bottom line is that if you have professional skills to sell, sell them
professionally. You know you will never skimp on a customer's design, you
will overturn every stone to find the best way to do each part of it. You
will think and plan when others are sleeping, and they will love and
appreciate the results you will give them.
That shouldn't come cheap. Selling yourself (because that's really what
you're doing) cheaply degrades your value, and takes a long time to
overcome.

Selling low also hurts the economy. It affects others in similar businesses
negatively.
Selling low attracts the kind of less-than-professional customer that you
don't really want.
Selling low can deteriorate your own motivation to do a super-professional
job.
Selling low gets frustrating the first time something goes wrong or has to
be re-done. What does one do in this situation, ask for more money to
correct the unanticipated fault, or work for free to correct it?
Selling low makes prospective customers think everyone else should work so
cheaply also.
Selling low does not contribute to lasting business relationships.
Selling low implies that YOU THINK your work is less deserving than that of
others.
Selling low never seems to include after-sale expenses in the pricing.
Selling low is like serving McDonald's burgers vs. Ruth's Chris, or Byrne's
Steak House.Your customer knows he will get what he pays for.

When people say that they also started selling their work cheaply, and now
they "worked their way up"... or some such thing, what they really mean is
that now that they have more experience and would never sell themselves so
cheaply. "Working their way up..." means it took a long time to grow past
the image of someone who would work for peanuts.

Hey, it's business. If you want to be liked by someone in a business
relationship, do an outstanding job that will make them money. Then they'll
feel good about you for a long time and call you "friend".

Lastly: Perspective. In two areas:
1. Put together a quote that's 1/2 the going rate for a particulat type of
project. Next, think about how profitable your customer will be when you do
a great job and give them the best possible result. Now, do you think he
would really care if you charged him double the amount, as long as the job
went smoothly and he made a small fortune from your work?
If you are confident that it will go that way, go at it hard for full-rate.
If you are not sure how well you will do or how happy he will be in the end,
don't do it at all. Go find the next opportunity, or learn how to get that
kind of confidence from the start and try again.

2. You are a super Engineer, but you are not using Protel in 3D. You only
have $600 in Eagle tools. You may be using a PCB proto house that you have
limited experience with. You may wind up soldering boards in your
toaster-oven. So what. Your customer probably doesn't care. Explaining all
the details of how and with what tools will probably only bore him and be a
waste of his time. All he will want to see is that the end result works
well, lasts long, and makes him money. That's his perspective. He really
doesn't care about how you see things. If he's straight-forward he doesn't
want to become an expert in what you know how to do. He wants to hire a
competent expert instead.If you are ac onfident expert, he will be also. If
he's a real business person, he'll be glad to pay well to get that.

If he starts to nickle & dime you, RUN, or explain that you are too
professional to compromise the quality of your work and that working cheaply
will cause just that. If you really think he NEEDS a lower price in order to
be profitable, ask him to show you the numbers so you can consider his
offer.
And, yes, faster work means more $$. Not full rate, but a premium on top of
that. Neglecting to do so opens more opportunities for you to be taken
advantage of- but I've written too much already - just try to think about
what the customer is really thinking about. This means putting away all the
fear of losing the job or the customer. 99.9% of the time, jobs and
customers lost for these reasons are best lost.

Engineers should be able to do the math.
10 jobs from cheap customers at $1,000 each in a year = $10,000.
1 job with a good customer @ $10,000 per year still = $10,000 and much less
time.

There's a reason that the pro consultants out there get from $75 to $175
per. In time, they don't get to charge higher and higher rates - they get
more & more work at high rates.

I thought Olin would have commented on this by now. I'm sure he would never
work for $25 hours.....Am I right?

Chris


>He would get "preferential
> pricing".  I'm
> not sure how many I could sell elsewhere a year, 200 @ $100 markup ?
>
> A rough guess (detailed guess TBD very soon) is 3 weeks for the
> electronics design / pcb layout work to get to finished
> prototype, then
> whatever additional time for things like coming up with an enclosure,
> FCC issues, manual, etc.
>
> I will need to buy a schematic capture & pcb layout program.  Using
> xcircuit and pcb on linux will be too laborious.  It will probably be
> the $200 version of Eagle, so $400 total.  There will be
> chips and other
> parts to order, 2-layer pcb prototyping run, some SMD parts
> to solder, etc.
>
> I guess I'm looking for some rules of thumb for all this.  I think
> $20-$25 an hour is a good figure, I'd like to get more but this is the
> first "real" freelance project and I need to build a client base that
> can give solid recommendations.  However things are not so
> straightforward since I will be making money for each unit he sells
> (maybe $50-$75) you could look at it like he shouldn't have to pay me
> much at all, because over time I'll be making decent money
> (hopefully if
> his per-year estimates are reasonable - they seem fine to me).  On the
> other hand, he doesn't have to nor want to deal with
> manufacturing them
> 100 at a time.  That's my job.  And who knows, maybe this kit
> will be a
> flop and he only sells 50 a year.
>
> My current thought is budget $500 for prototype devel costs,
> absorb the
> cost for Eagle, have him agree to cover whatever FCC
> certification costs
> there are TBD, and another $3000 for my 6 weeks of time (i.e.
> about $12
> an hour).  Am I being too cheap?  My rent alone (we are both
> in the new
> york city area) is $1300/mo...
>
> I have a problem where I want everyone to like me and so I'm
> hesitant to
> put in a higher bid that might cause some disgruntlement
> towards me.  I
> suppose I have to get over this, since its business.  How
> much room for
> negotiation is customary?  (the aforementioned prices leave almost no
> room for me to go lower).  Is it acceptable to bid one price but agree
> to a counteroffer from the client?  Does this look bad / sleazy?  The
> "digital analogy" of submitting a bid, take it or leave it,
> if leave it
> there are no hard feelings has a strong appeal, but the world
> is analog
> and everything is negotiable.  What is the typical process for this in
> freelance electronics work?

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