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Recently I was contacted by someone interested buying a piece of software that I wrote to automate a process. The 'client' knows little about the program, except what it outputs and how easy it is to use. They are now interested in purchasing it, and I need to give a reasonable price.

I've never done anything like this before, so as you might be able to guess, I do not know where to start with a price. I spent a good 12 hours+ working on the program itself. The client will probably want some changes also.

My question: How can I work out what to charge for a piece of software that I built in my own time?

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Joel Spolsky, founder of Fog Creek software has some insights on this: fogcreek.com/guide Scroll down to Pricing –  K.Steff May 3 '12 at 22:44
    
Thanks for the link, but I didn't find it all that useful for my situation. Bookmarked all the same :) –  Ruirize May 3 '12 at 22:47
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5 Answers 5

up vote 11 down vote accepted

Don't forget you're not just charging for your time, you're charging for what your client will save in time by using your software. If you're trying to figure out what to charge based on how much time you've put into it, you may be heading down the wrong path!

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That's a good point! –  CodeART May 3 '12 at 22:59
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After considering this, I have come to a price. Thanks; Also, thanks to everyone else who helped me out. –  Ruirize May 4 '12 at 15:26
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Since it's a finished product, the 12 hours you spent to create it are irrelevant to the pricing. It's in your interest to keep the client in the dark that it took you a mere 12 hours to make. The only thing that is relevant is how bad the client wants it, and if there are any alternatives they have to get something similar.

Err on the side of pricing high so if they try to negotiate it down, you won't be sold too short. If they go for the high price, then good for you.

If you give specifics of exactly what you made I can give you a guesstimate in US dollars.

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You need to know two things to set a price. a)Cost plus - what it will cost you plus a margin. Note: as you have already written the software, that cost is $0 - you need to look at costs directly associated with the sale.

b) Value Add - what is it worth to the client. How much will he pay for it and be happy with the purchase.

If a) is more than b), don't do business. If a) is less than b) - negotiate.

For your software and situation, I can't help with b), but with a) maybe some insight:

I expect from the post that the software was written by you, for you, for a specific job. If so, the cost to sell it to one person is a *5 - *10 multiplier (A magic number taught to me at the school of life) - if it took 10 hours, it will need another 40 - 100 to make it usable for the customer.

Then there is the cost of sales, post sales and post sales support. You cost of sales is low (he phoned you). Post sales support is not technical support - it's the stuff you to keeping in happy, discussing the next new feature of bug fix etc. It is not the fixing or improving his software. Then there's the cost associated with supporting the software when he wants changes.

All the above need to be worked out before you can set a price.

The other way is to give it to him, you won't make any money, but you won't loose any either.

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My employer pays me X per hour. My employer charges clients at X * 4 per hour.

I charge for my freelance work at (X * 4) * 1.2 where 1.2 represents my free time.

This of course varies with experience, education, reputation and your business relationships.

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I don't understand your formula. Do you mean you charge more than your employer ccharges? –  user2567 May 4 '12 at 6:43
    
Please see an edit. And yes I do. Why should your freelance work cost less if you are good at what you do and you do it in your spair time. –  CodeART May 4 '12 at 6:46
    
I don't say it's wrong, it's because it was pretty uncommon that I asked clarifications ;) Charging 4x your employer's hourly rate is actually a good advice. I assume that the 1.2 is your loss of freetime right? I would increase this a bit because I really think your free time has much more value. –  user2567 May 4 '12 at 6:52
    
Yes, 1.2 is 20% more than they would charge at work. At the same time you don't want to be a lot more expensive than some companies, as people will go to them instead. –  CodeART May 4 '12 at 6:54
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Somewhere between $0 and the most the client will pay. He wants to buy it, why would you need to give him a price? In negotiation, he who speaks first loses.

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