Day 4: calculating freelance project cost

Estimating project costs is always tricky.

Too low, you obviously missing a lot on the table.

Too high, especially when your clients can’t justify your work, it will derail their trust.

Look, this is what I believe:

As long as you can provide value, there’s no such thing as too expensive.

Remember, there are two important concepts: price and value.

If you pay $100 for something worth $200, it’s a bargain.

But when you pay $40 for something worth $4, it’s a rip-off.

Why the difference? Suddenly $100 feels cheaper than the $40.

It’s because price is what you pay. Value is what you get.

As long as the value ≥ price, you’re good. Otherwise, you will avoid it.

That’s also how your clients perceive your price for embedded projects.

Now, to calculate project cost, I will offer my cost framework for embedded projects. It’s called the Value-Price Matching Framework.

Focus On Your Value First…

Value can be given in many forms:

• Rigid development process following MISRA-C standard
• Detailed documentation down to the API level
• Weekly video updates for the project progress
• Limited support for up to 6 months after deployment
• etc.

Now, the question is: can you actually deliver high-value results with your current skills? Maybe yes, maybe no.

Yes, if you are a seasoned embedded developer who can write a USB driver with your eyes closed.

No, if you have just graduated from university, and don’t even know what TDD means.

That’s why I highly recommend you to gain experience first somewhere else (e.g. from full-time employment) before doing freelancing work. Because you have to give tangible value to your clients. The more experience, the more value, the higher the price you can charge.

That being said, you should adjust your value with your current skill level. Here’s the 4-step way to do it:

Step 1: List all your skills and what you can do

Step 2: List the skills that are highly relevant to your clients

Step 3: Breakdown the project tailored to your specific skills

Step 4: Communicate your value to the clients

The first 3 steps will ensure that your value reflects your skills, so you won’t undervalue and overvalue yourself.

The 4th step will ensure your clients understand what you offer.

The 4-step method above will help you focus on your value.

…And Then Match The Price

Now, because you have a rough idea about your value, you can match the price.

The easiest way to do it is by assigning the number of hours to each task and then multiplying them by your private-hourly-rate (a concept which I covered more in my book Becoming Embedded Freelancer).

For example, you’ve broken down the project scope and you get scope:

• Task A
• Task B
• Task C

Now, you want to estimate how long you need to finish the task. Let’s say:

• Task A: 4 hours
• Task B: 6 hours
• Task C: 1 hour

The total is 11 hours. If your private-hourly-rate is $50, then the project cost would be: 11 x $50 = $550 minimum (the word minimum is important here).

By applying my method above, your price will always tied to the values you provide, and the value you provide is always a reflection of your current skills. That way you shouldn’t undervalue or overvalue yourself.

One More Thing

An important concept about cost is your “private hourly rate”.

To calculate the freelance project cost, essentially you have to:

1. calculate the private hourly rate first
2. then break the project scope as granular as possible
3. estimate each task as accurately as possible (in hours)
4. Multiply the hours with the private hourly rate
5. Get the total development cost

Also have to take into account the pricing mistakes that I made: not charging for documentation, not charging for rush hour, etc.

Well, I don’t want to be salesy but my book Becoming Embedded Freelancer (The Premium variant) covered exactly that.

The premium version also gives you an actual spreadsheet of how I calculate costs.

If you’re interested in my book, you might want to check it out here.

Whenever you're ready, there are 2 ways I can help you:

1. Becoming Embedded Freelancer Book. Learn how to earn more money (even more than your main job) working on freelance projects using a proven path explained from an embedded engineer's point-of-view.

2. Firmware Development Workflow Guide. Upgrade your workflow to achieve efficient development, consistent code quality, robust firmware, and skyrocketed your productivity as an embedded engineer.