Captain’s log, stardate 20160914
Sent by Jonathan Stark on September 14th, 2016
Apperson Labs founder Matt Apperson pinged me on Twitter to express his feelings about value pricing.
We had a polite chat about the subject (by Twitter standards, at least 😉 ) and I’m glad we did.
Here’s our thread:
MA: I agree with all the value based pricing arguments... but the result feels to me like a shake down from a shady used car dealer
JS: Value pricing seems like a shake down to you?
MA: It feels like that shady guy in movies who when asked a question by the cops asks “whats it worth to ya?”
JS: Gotcha. You know what’s worse IMHO? Estimating a job at 100 hours at $X/hr and it really taking 200 hours.
MA: how is that worse then value based and charging for the equivalent of 300h at $X/hr for 200h of work? Just as bad maybe?
JS: The difference is that if you provide a price up front, the client can make a buying decision based on facts.
MA: the only thing about software dev that’s different is that we suck at estimating time
JS: You quickly get better at estimating when you’ve got skin in the game.
MA: that’s just an argument for fixed bid though
JS: Ah ha! I finally think I understand where you’re coming from. Thanks for elaborating.
My mistaken assumption at the beginning of this chat was that Matt felt hourly billing was more fair than value pricing.
After some back and forth, I realized that he was not advocating for hourly billing. He was saying that he objects to basing prices on value, instead of basing prices on cost.
(at least, that’s where I think we landed)
Could you do me a favor?
I am going to devote my next webcast to the subject of fairness in value pricing. Could you do me a huge favor and reply with your feelings - good, bad, or indifferent - on the subject?
Does the idea of value pricing feel like a shake down to you? Or gouging? Have you ever been a buyer of fixed price services (value based or otherwise)? If so, how did it make you feel?
Anything you can share about pricing fairness - from the buyer side or seller side - would be helpful. Thanks!
P.S. Regardless of how you calculate your fixed prices, hourly billing is nuts.
P.P.S. Thanks to Matt A for being a major dude!