Hi community,
I’ve been running a software development company for about 9 years, and I could really use some advice from anyone else with experience in this industry - either as a buyer or seller.
We help businesses migrate from Excel spreadsheets to web-based applicaitons, and we’ve found a decent client base within the UK. A typical project will take anywhere between 5-25 days of development which translates to a couple of weeks to a few months of project time.
My original business model was to offer fixed price projects, based on an estimate of effort and a daily rate, e.g. 20 days @ £1,200 = £24k project. If I end up going over, I absorb the cost, and if I complete it under then good for me. This has worked very well in terms of making a decent annual income to sustain myself and one other dev - however, I did not have any recurring revenue as I would charge hosting at cost, and offer support for free on a “best efforts” basis.
Typically, our solutions have between 5-50 users as they are internall line-of-business systems
Here’s the bit where everyone laughs at me. Originally, I offered SLAs for support…with the first one at £50 a month. I have since quickly learnt and upped that to anywhere between £300 and £900 per month depending on the SLA, but I never really considered user count as none of our clients have more than 50 users.
Recently I was asked to build a solution that will be used by 2,000 users. Technically, this is not an issue for us, but I was thinking around the monthly price for this. Do I charge on a per-user basis, and if so, what would the expected amount be? (This is not for a helpdesk, that will be handled by my client, but for support/maintenance/hosting of the solution.)
My goal is to up the MRR in order to hire more devs/sales and scale up the business, but there’s very little information out there around what people are willing to pay for bespoke, so any advice would be appreciated!
I’m in the US. No one charges hosting at cost. As a matter of fact, most of these products I suspect they lose money in the initial dev and then make it up with recurring fees.
User count is critical for SLA and anything you do. Adjust that immediately.
2000 users, again, charge less on the dev side and charge more on the hosting SLA side. If you have a good product with little competition you will make more money this way, and this is how all big SW devs function.
Paying for bespoke software is a mixed bag. I have had a lot of terrible experiences with it. Most surrounding, they get you hooked with low upfront cost, you pay per user, second year they bump the price up 5% reasonable. Third year 15%. Fourth year 25%. It gets pretty crazy because you are basically hooked into using the product.
Not a ton of information here, but overall I would continue charging a fixed up front price. Also have a yearly per user support price. Probably have in your original agreement to not increase prices more than 10% per year for 5 years, something like that.
Right now is a good time for pricing adjustments, at least in the US. Inflation is insane. Everyone I hire for this kind of thing are sending like 10 paragraph emails explaining why pricing is going up. I would come up with a pricing model across the board. Email everyone that due to inflation/whatever you are moving to this XYZ pricing scheme that includes hosting and service. Your first 2-3 big clients, call them and say you have a price increase coming for everyone but them, but heads up in the next year you will have to adjust something.