

Ask HN: How much should we charge for a bespoke version of our site? - sw007

Hi,<p>I have created an alias account due to the confidentiality of the request. We previously launched to HN and got great feedback from the community.<p>We run a site and have been approached by an organisation that employs around 30,000 people. They want their own, branded, bespoke version of our site and want us to do it for them.<p>We are one coder and one designer.<p>It will take us 14 days (full time) to satisfy the request - how much is a fair sum to charge for a one off fee?<p>Should we be offering to support it going forward (we have full time jobs) and if so how much should we charge for this?<p>Should we be charging them a monthly fee for using our technology as well as a one off fee?<p>If they ask us to host it I presume we should be asking for a hosting fee as well?<p>Any advice you can give us would be much appreciated. We can't tell you the business involved I am afraid due to confidentiality reasons.<p>Thanks again
======
rubyrescue
Just two general thoughts...

First, don't underestimate the distraction of hosting and maintaining a
separate code base. Now every time you start on a new feature you have to
think about two deployments, two separate user bases, perhaps two UIs.

Second, you almost never make money on your first "hosted" deal like this -
there are too many one-off things you have to do to get started that don't
directly benefit the client so you can't easily charge for them. different
deployment systems, hosting, monitoring. support, documentation, perhaps a UI
refresh on your ugly admin tool because only you two used it, etc.

Bonus third thought - either charge all operations and support as passthrough,
then track and bill hours, or setup a big monthly recurring hosting fee that
is enough to make you glad you are getting distracted.

Extra bonus Fourth thought- don't promise feature upgrades. Sell only version
1. Tell them that version 2 is not included and then you can sell them version
2 next year when you have time. It's easy to accidentally promise infinite
upgrades or let them assume that any upgrade on your main site they should get
free.

~~~
sw007
The last point you make especially is a great one. I had not really considered
that but you're right we need to set put exactly what they are getting and any
changes late in the day should be made with an additional fee.

------
jasonkester
The key is to remember what it is that you're selling.

You're not just selling 2 weeks of your time at your best consulting rate.
You're selling all the time and effort it took to get the codebase into the
polished shape it's in today.

The best way to approach something like this is to figure out how much it
would cost your suitor to hire a team and build your existing site from
scratch. You should be able to figure out the actual level of effort to do so,
since you've actually done it yourself. Figure out a number, and that's your
price.

It may sound extravagantly expensive, but really it's a great deal for him.
The customer gets his website for the same as it would have cost him to build
it himself, but with a working reference version he's guaranteed that it will
work at least as well as the existing site, and he gets the benefit of
delivery a full 6 months to a year ahead of what he would otherwise have.

So there you are. $100,000 for the source license, plus 2 weeks of your time
at the highest hourly rate that you can say with a straight face, plus a
monthly maintenance retainer, plus several hundred per month for hosting.

Good luck!

------
ErrantX
You are selling enterprise. Repeat this to yourself a few times, it changes
all the rules (luckily somewhat to your favour).

Tips:

1\. Charge high, particularly as they have come to you, and definitely if you
are the only one in your space. A 30,000 person company does not often balk at
spending $10,000's on software, particularly if it is for the entire employee
base

2\. Make sure whoever has contacted you is authorised to accept a figure.
Often managers will get a sub-ordinate to co-ordinate with you to get a quote
and details - at which point it flakes around the management level for a
couple of weeks (while you are distracted from other important work trying to
chase it). Cut through the red tape before you quote a price and make that to
someone who can immediately say "yep, here's a signature".

3\. Write a contract, make it very clear. Make sure you are not tied into
upgrades or maintenance without a fee. Make sure your liability is covered in
that contract.

4\. Sell them hosting (if they want it) _completely separately_ ; separate
price, separate contract. Don't tie the two service provisions together.

5\. If you sell them support make it VERY clear how much support they get and
at what cost. Make hourly limits per month, for example, and charge
extortionately for extra hours. (this is important; we had a client once that
we had a vague contract with and I ended up losing money for weeks trying to
sort out an issue for them when I had other work to do).

In terms of cost... given your prediction for the work required I would quote
somewhere in the region of $40,000. Possibly a little less if they will agree
to tie into a hosting & support contract. Consider charging and extra flat fee
for the code itself.

~~~
sw007
I should probably add at this point that it is a university. Reason I didn't
make that clear was I didn't know whether I should but have since checked and
think I am fine to mention that. It's a university with 30-40 thousand
students who they hope will use the service.

Thanks for all the comments - really appreciate it.

~~~
jayzee
This changes everything.

I have been trying to sell enterprise to universities. They are slow,
bureaucratic, cash strapped, risk averse, willing to take time with making a
decision since they do not face competitive marketplace pressures (at least
when it comes to software) etc.

------
mbesto
I have some experience with this. My old company did a bespoke type project
for a 40,000 person company with a small footprint of developers.

\- 30,000 people means they have deep pockets.

\- 14 days is how many man hours? You can do one of two things: 1. Charge by
fixed pricing (which may put you in the hole if it goes past 14 days...humans
are terrible at planning things so this is not always the right choice) 2.
Charge by hour with the assumption of "Time and Materials" basis. [1] Remember
- companies like this WILL come back to you when something doesn't look right.

\- If you want to charge support you could consider this possibility: Hire up
a junior guy who's only job is to support the system. Spend time ramping him
up while you are actually supporting the customer. Charge the customer what
the cost of that junior person requires (and maybe a very small margin). This
is a great starting point for then being able to build out a future practice.
Some may argue to make a larger profit margin here, but you could get push-
back on price from the customer.

\- Think about bundling hosting and support as a whole entity. Nota bene - For
a 30,000 person type company you will face major IT challenges. Many large
companies require strict security regulations. In many cases they will require
to go through loads and loads of lawyers and IT people. Big client customers
will always require crazy security things like this:
<http://mediatemple.net/company/technology.php>

Feel free to ping me on email (in my profile) if you want more info.

[1] - [http://b.lesseverything.com/2009/5/7/be-wary-of-time-and-
mat...](http://b.lesseverything.com/2009/5/7/be-wary-of-time-and-materials)

~~~
sw007
This is great thanks! We may well take you up on this. Once we have done our
reading and taken on board all your comments we will go back to them with our
proposal. Fingers crossed!

~~~
mbesto
good luck!

------
dagw
Is there a reasonable chance that you could sell bespoke versions of your site
to more companies and is that a business you'd want to be in? If so it might
worth taking this as an opportunity to sink a few extra hours to rewrite your
site in such a way that future re-brandings become much easier. If you really
don't want to be in that business ask yourself if perhaps it's best to walk
away from this offer, as it could lead to you ending up somewhere you don't
want to be.

As for a fee, a simple man-hours * $150-200 * 15% seems reasonable, plus
monthly maintainance fee, plus hosting fee. And don't feel bad charging a
couple hundred a month for hosting even if you're hosting on $15 vps.

The important thing to remember through is that once you start to take their
money, you are committed. You have to willing to deal with all the support
issues and updates that they will be asking for. If you think that after 14
days money will change hands and you'll never hear from them again then you're
probably in for a rude surprise. That being said, bespoke software for large
companies can be a lucrative niche to be in.

------
bhousel
Without details it's impossible for us to tell you how to price any of this
stuff.

But I will say if your goal is to make money off selling your services, then
yes obviously you should include a bunch of line items in your proposal for
hosting, support, etc.

When you offer them a proposal, try to establish a few tiers ranging from "way
more than they'll probably pay" down to "what you think they will pay". Don't
ever say "we could go lower" unless it's coupled with "but only if we remove
these features".

A 30,000 person company is likely trying to buy enterprise software from you,
so read up on how enterprise software is priced and sold. Don't sell
yourselves short.

~~~
sw007
Thanks for this. I appreciate it is difficult to give proper advice when you
don't know exact details.

Like you say we don't want to sell ourselves short but without having
experience with this kind of thing before we also do not want to kill the
golden goose.

Research is key, like you say, so we will get reading!

thanks again

------
duopixel
I'd just multiply my usual consulting rate by the hours it's going to take me.
If you don't have a consulting rate, ask around you area, because it depend of
your country/city.

> It will take us 14 days (full time) to satisfy the request

An organization that employs 30,000 people has probably a lot stakeholders.
Unless there's a hard deadline, you will be looking into a huge amount of
"release fallout". Expect stupid requests such as "change the font —why?
—Because the boss says he doesn't like it". I'd estimate 20 hours of petty
changes spread over three weeks.

> Should we be offering to support it going forward (we have full time jobs)
> and if so how much should we charge for this?

If you have full time jobs, avoid it like the plague. Recommend someone you
trust.

> Should we be charging them a monthly fee for using our technology as well as
> a one off fee?

Is your technology infrastructure? Is it open source software? Proprietary
software? You're potentially looking into a handsome amount of money here,
depending on the nature of what it is, and if it can be easily replaced by
something else.

> If they ask us to host it I presume we should be asking for a hosting fee as
> well?

Yes, they will expect you change a monthly amount for this. Usually it's
billed under "support & hosting" for a fixed monthly fee, which can be
substantial (say, 500 USD/mo). But again, avoid it if you value your free
time.

~~~
jarin
> I'd just multiply my usual consulting rate by the hours it's going to take
> me.

I strongly disagree with that approach. For things like this, don't charge
what you think _you're_ worth. Charge based on what your product is worth to
them.

------
petervandijck
Charge 2 people * 8 hours * 14 ddays * 200$ = 50,000$, plus an obligatory
6-month retainer of 10 hours a month = 2000$/month for 6 months. Total = about
65,000$.

That would be reasonable. If they negotiate it down to 50,000, you're still ok
with that, I'd imagine.

If they ask you to host it, charge plenty for that as well.

(The rather high hourly rate takes into account that you're selling them
something you already built before.)

~~~
arethuza
I'd round that up to at least $100,000 up front with a 20% annual support fee
and maybe another 10% or so for hosting.

Bill any additional work over the first 14 or so at $1000 a day or quote fixed
price to add specific features.

For an organization with 30K employees, $100K is a rounding error.

~~~
dagw
_For an organization with 30K employees, $100K is a rounding error._

To be honest that depends very much on how the organization is structured and
who the actual client is. Many 30K companies are essentially three hundred 100
person companies that each have their own, very limited, budget. If you're
dealing with the CEO who wants to roll this out to the entire company, then
$100K is doable. If, on the other hand, you're dealing with the manager of a
12 person groups within a department of a division of that company then $100K
is probably his annual budget.

------
skilesare
$5/client license a month with a minimum of $50k per month. If a 30,000 person
company wants your stuff, you've made it. Charge accordingly so you can ramp
up and do it over and over.

The people who are telling 60k all in have never done anything in a corporate
world.

~~~
webjunkie
Yes, charge per user... just look at what Google Apps does.

------
jayzee
Are you going to let them resell your stuff? They may _bespoke the bespoken_.
You have to be careful in your contract with that stuff as well. And if thats
ok with you then you should charge for that.

------
profitbaron
As they have 30k users, they are obviously prepared to spend a decent amount
of money on using your product therefore, I highly recommend that you follow
the route of Google Apps, Yammer, Salesforce's Chatter (Chatter Plus) etc and
charge on a per user basis as well as, charging an inital setup fee.

