How much to charge?

[Oli Norwell]

Hi,

I need some help with pricing a product that I have written for a company. It consists of two parts, a PC program written in VC++6 and MFC plus a PalmOS program I have created. The two programs communicate through a serial link.

Basically it's a transport monitoring system. They download a blank database to the Palm handheld and then go out and about in the city monitoring public transport, at the end of the day they return to the PC and it downloads their data into a central database. The PC program can also produce reports based on several different criteria.

A friend said I should charge them £2000 (~$4000) but I think it may be worth quite a bit more?. I have spent 4 months of the project, 2 of those full time. In hours it probably works out at about 350-600. What sort of price should I charge them?.

I don't want to look greedy but also can't afford to price it too low. They are a multinational company that will pay whatever it's worth.

One other thing is they want to use the system at 120 sites throughout the UK. They have asked for an open licence, which I think means they are after creating their own CD's when they need them.

The problem is I got the contract because I know a collegue of the person I am dealing with, hence the reason why I don't want it to look like I'm milking the opportunity. We didn't decide on a price at the start of the project because I told them I would need to research the size/costs involved.

Any ideas?

Thanks,

Oli Norwell

[Xeon]

Well there, interesting, Oli! I don't really know 100% what the program does, though I've a vague idea it's a city monitoring public transport program related to probably, say, road statistics etc.

However, here's some guidelines for you to consider, though.

Price is never really an attractive aspect in selling software. It's benefits and features that matters most to the customer. Also, it's not a good idea to charge a software based on the amount of time you've work on it, pal.

Basically, you should research on similar products or products that are somewhat related to yours, and use their prices as guidelines.

If you've spend lots of $$$ from your own pocket in this project, then you should take into account the costs too, but don't add these costs to the final price of your software, cos' it'll make it far too expensive.

But then, since this is something like a B2B transaction, u can set a reasonably higher price(but not 1 million or any daylight robbery figures like that) and wait for their response.
If they say it's too high, u can reduce lowerthe price. Also, bear in mind that business customers are much more willing to pay for stuff than normal consumers.(B2C etc.)

Thus, good luck, and see you. :-)

[b]I'm a honest guy and if my post made you gain at least 0.000001% of knowledge, please rate me. I'll be grateful, cos' u helped me and played a part in boosting my desparatly hungry ego.

Together, hand in hand, we can help to boost each other's ego and pride to the very extreme, beyond the estimation of this universe. Cute li'l girls need not apply, though.(but are welcome greatly)
[b]

[Oli Norwell]

It's interesting because you say that I shouldn't base it on the number of hours it has taken and yet other people have said this is the number one thing to look at first.

I think I will go for a price somewhere between £5,000 - £15,000. This will reflect the potential earnings lost whilst doing the project and also is the minumum amount they could have got a similar system for.

If anyone else has priced a similar sort of project then I really would like to hear from them.

[Xeon]

Heh heh Oli! I said that cos' of what I read in a software selling book. :-)
It's not just or fair to base the price on the hours/work taken to create the software, though.
Another good thing is that u can take into consideration how badly they need the software and price it from there.

In any case, these are just guidelines and good day, and good luck! :-D

[b]I'm a honest guy and if my post made you gain at least 0.000001% of knowledge, please rate me. I'll be grateful, cos' u helped me and played a part in boosting my desparatly hungry ego.

Together, hand in hand, we can help to boost each other's ego and pride to the very extreme, beyond the estimation of this universe. Cute li'l girls need not apply, though.(but are welcome greatly)
[b]

[Joe Keller]

There is a difference between software that is custom designed for a single client and software that is marketed to a wide range of consumers.

In the instance that you are designing software for a single company as a custom package to be used solely by them, then hours are the most important component to your costing structure. You should have some idea upfront what your hourly rate is going to be and be able to pass this on to your customer. It is never a good idea to begin a project with both parties in the dark as far as cost is conscerned.

However, if you plan on marketing the software and selling it to other people and companies, then no, you can not charge every one of your customers for all the hours you spent developing the software.

The thing to consider is that when marketing a product for commercial sales you can only charge your customer for the value of the end product, although the time and effort that you may have put into developing the software will supercede its value, however you make this up by your quantity of sales. Its like a movie, it may cost the producer millions of dollars to create the movie, but can only charge the customer the value of watching the movie, which is usually 5-10 dollars.

However, if creating it FOR SOMEONE directly.. then you charge them for your involved development.

One other thing to consider, if they get the complete rights to the software, then they may also be able to market and sell it, greatly reducing the amount of ongoing profit you could recieve, you may want to think about offering some sort of royalty system, if they plan on doing so.

Good Luck