Need help with pricing for software service (Java development)

[jasnook]

Hi,

I am a Java software developer who has been working in the industry for 5 years. Recently I have started contracting through my own company.

I am interested in growing the business so that instead of just using it for my own contracting work I build up a small team with diverse skills - i.e., requirements analyst, java developer, tester and work out of my own premesis on full projects. We would work in an agile framework taking on work in weekly chunks - at the end of each week, the work would be signed off and the customer would decide whether or not to use us for another week.

If it worked for one team, I am hoping that this would eventually lead to having a number of small teams each working on a customer project.

Our main focus would be on very high quality work using the latest technologies.

The big questions that I am struggling with at the moment are:

1) Does this model sound like it has a reasonable chance of success?
2) How much do you think would be reasonable to charge for this service?

If anyone has experience in this field, or would be interested in our services if the company gets going I would be very interested in your opinion.

 

[garyk]

I think you need a salesman! I've done this in the past and if all you guys are techie you will suffer feast and famine. Get one project in but too busy working on that one to actually go and find another for when that one finishes. You need to get some lead generation in place to ensure a stream of work.

Gary

 

[Justin_B]

You can mitigate the peaks and troughs Gary describes by also marketing your own software application. I worked with a business that did exactly this for the mortgage market a few years ago. They sold large scale project and development services - but also sold a web based software application that allowed mortgage lenders to offer quotes and illustrations via their websites. The revenue ended up being about 50/50 from each stream.

 

[garyk]

Yep agree 100% Justin, you have to productise (is that a word?) your business or a part of it, I do that now but wish I had done it when I started 17 years ago!

 

[jasnook]

Thanks so much for the help!

Looks like I will have to come up with a product. Problem is trying to work out what it should do

 

[garyk]

Thanks so much for the help!

Looks like I will have to come up with a product. Problem is trying to work out what it should do

Well there's the other big issue and something I wish I knew when I started.

Don't start off thinking about what product to do, start off by finding out what the market *needs/wants* and then address that need.

Gary

 

[DanHaynes]

Not knowing anything beyond what you posted (obviously!) I would say that your business model is not one you want to follow unless:

1. You have some people (Java developers) already committed to working for your company.
2. And you have your first project 'in the bag'

Even then I would not want to start employing someone on a permanent basis at that stage (employ them on contract).

You would be looking to pay any decent Java contractor a minimum of £250 per day (give or take), and really you would want to charging your client something like double that to cover those costs (plus adding your own/companies costs).

But the reality is the first bit of work you get is crucial and you may have to do this at a loss.

If you have just started contracting I would focus on finding short term contracts 6 months at a time and do that for a while (and increase your rate!). It's also a very good way to learn about different business and IT practices (the stuff you can't learn about in books). And a great way to get inspiration on good ideas about products or services that might work in the future.

Another route you might want to follow is develop a open source framework of some sort. While this may not provide a direct route for making money for your business it may produce results from spin-off services. However this type of thing is generally a long-term proposition.

There are companies out there (big and small, consultancies/body shops) who do bespoke development in the Java area. There is no real advantage that I can see in setting up a company to compete in this area. Good technical people are very difficult to find and harder to keep (there are just to many opportunities for them).

Probably most requirements analysts or java developers worth their salt have already (or are planning) to set up there own company (to contract through initially) and will have ambitions to do something similar to you. In my view the best way to do something like this is for 2/3/4 like-minded people with these skills to set up a joint company when they have their first real contract (a job paying £10,000+).