What should I charge?
What should I charge?
What should I charge?
What should I charge?
What should I charge?
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What should I charge? What should I charge?
What should I charge?
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Old 03-08-2005, 10:52 AM
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loquinWhat should I charge? loquin is offline
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Note: This post was initially made in response to this one.

You need to look at the sales approach you want to take. Are you pricing the app at "Value Added," or at "Cost Plus"?

In a value added approach, which is what many large commercial vendors try to do, you try to assess the value that your application is providing to the client. In other words, how much time is saved by the client, and at what rate? Material savings or machine efficiencies should also be included, if applicable. Then, you can calculate a Return-On-Investment (ROI) that the client will be able to justify. The challenge with the Value added approach is that you must be able to accurately document the projected time/dollar savings and the Return-On-Investment (ROI) to the client as a part of your sales approach. For example, suppose that your application will save time on the order of 20 minutes a day for one employee at each store. If the average burdened labor rate for this employee is $10/hour, this means that each of 51 stores saves $3.33 per day by using your application, and the entire chain saves approximately $170 per day. If you wish a ROI of 6 months, 6*30*170 equals $30,000. (actually, the ROI on $30K would be a little longer, because you have to include the cost to borrow money over time) Your case would be a bit different, since while there may not be as much time saved locally, you've got an analyst who has to go from store to store. How much expensive time is spent driving around, at $30+ an hour, plus mileage???

In the Cost Plus approach, you determine how much it actually costs you to produce your product, then add a reasonable markup (50-100% for one-of-a-kind type of applications.) If you spent a good deal of time learning how to code during the process of building the software, that portion of your time should be discounted.

You should determine your approach, and stick with it. If you decided to sell at a cost-plus approach, you should also estimate the savings in order to justify your time spent (and therefore the money spent by the client) or, on the flip side, if you decide to sell using the value added approach, (which requires a more rigorous analysis to calculate the ROI) you should also document the time spent on the project.

Typically, the value-added approach is used by companies that will not sell ownership of the software to the client, as they're trying to sell the SW to other clients as well. So, you also need to look at how you're actually licensing the software. If you turn over ownership of the app to the client, you can never sell it again, and you need to recoup all your costs at one time. If you license the use of the software, then, you could sell it to another chain, and therefore spread out the development costs over multiple clients.
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Last edited by loquin; 05-03-2005 at 10:50 AM. Reason: Typo, add link, slight cleanup.
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What should I charge?
What should I charge?
What should I charge? What should I charge?
What should I charge?
What should I charge?
What should I charge? What should I charge? What should I charge? What should I charge? What should I charge? What should I charge? What should I charge?
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What should I charge?
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