What's in a rate?
There is a lot of literature criticizing the Time and Materials (T&M) approach to pricing, where service providers are paid by the hour. The main argument against this kind of pricing structure is that it forces your clients to pay for all of your inefficiencies. A lot of resources suggest going with value-based pricing instead, where a client only pays you for the value you're providing to their company.
However, value-based pricing is not really feasible for us, since all our contracts are long-term, retainer-based projects, rather than only encompassing a single initiative/feature. Furthermore, we are constantly working to make Nebulab more and more efficient, so we believe T&M to be a good option in our case.
With that said, we also want to be fully transparent with our clients about how their money is being spent and give them an idea of how our rates are calculated, which is why we have decided to publish our cost structure for everyone to see and inspect.
How we calculate our rates
We are not fully ready to share our final rates yet, but the cost structure below should give you an idea of what goes into them.
|Item||Percentage of rate|
By adding up these costs, we calculate our break-even rate, which is what we need in order to keep the company alive. Obviously, breaking even is not enough, so we charge a margin on top of the break-even rate. This margin allows us to have a healthy cash flow, make new investments and have a safety net in case of unforeseen events.
The margin we charge clients differs depending on the size of the team they hire:
The reason we charge smaller clients more is that maintaining a small team costs us more than maintaining a larger team. It also makes it easier for clients to scale up their team as needed.