Tim Dietrich is a database consultant, specializing in the FileMaker platform. He is the author of FileMaker Pro 13 Absolute Beginner's Guide and creator of FMEasySync, an open source sync framework for FileMaker.
Wins & Losses in Value Pricing
- What is the most important thing you can share about pricing?
- Describe some of your wins and losses with value pricing.
- Wins – It was easier with a new customer. It was also easier if the customer already had an understanding of the scope/value.
- Losses – They were existing customers. The scope of the project was not well-defined. They had not thought about the value.
- Do you deal with the scope and value of a project regardless of the business model?
- If you do not have a clear idea of scope, the project is going to fall apart.
- Tim and I disagree about the conflict of interest with hourly billing.
- What is an idea worth if it will save the client millions in liability claims?
- Tim thinks there is a difference between the scope of legal services and custom software.
- Tim and I disagree about how hourly billing impacts the management of the scope.
- Tim mentions my interview with Wes McClure on Why Value Is Important in Software Development.
Handling Uncertainty in Software Development
- Tim asks a question: Why do I think there is certainty in a separate discovery phase?
- The failure rates for software development are so high, there must be clear value to do the project.
- Tim and I disagree on who is responsible to determine the value (ROI) for the project.
- Tim asks another question: How do you calculate ROI for an existing system that is mission critical?
- No system is going to last more than 5 years. Continuing the ROI of the original system has value.
- Tim asks a third question: How do you charge for software support with value pricing?
- Have a very specific bug fix period for the initial development phase.
- Use a change bucket to budget money for future support requests.
- Or create a wish list for future customer requests. Then write a change request.
- Or create an access level agreement for future customer requests.
- Tim asks a fourth question: How do you handle emergency support requests?
- Give the customer a price for discovery for the issue and a separate price to fix the issue.
Is Hourly Billing Unethical?
- What are some of the downsides of hourly billing?
- You are being paid less if you learn to work faster.
- You may leave money on the table by not considering value.
- Tim and I disagree about whether hourly billing can be unethical.
- I answer the question: Why is hourly billing unethical for me?
- It creates a conflict of interest between the customer and the professional.
- It is not possible to capture the value of being faster and smarter in an hourly rate.
- I mention my interview with Jon Lax on The History of the Billable Hour.
- What are your thoughts about creating open source projects with proprietary software?
- There is enough work in the FileMaker community to give back and still make money.
- Tim mentions EasySync, his open source project for syncing FileMaker databases.
- It creates opportunity to learn from the feedback of those who are using the technology.
The Impact of Value Pricing
After Tim and I recorded this episode, he published a blog post summarizing his thoughts on our conversation. I think his post is fair, and highlights where he disagrees and why.
Then, after this episode went live, Tim published another blog post describing the impact our conversation had on his business. It is an amazing testimony and demonstrates how these concepts can revolutionize your business. Thank you Tim!