I am sure you have been in this situation before. A client calls you about a job and asks for a quote. You want to give this client a good service and also nail that job. You know that the provider who gives the first quote has the highest chances to be hired and you quickly calculate in your head, the scale of the job and the hours it will take you to finish it. You multiply with your hourly rate and give this client your quote. The client seems happy enough with it and you are hired on the spot.
You are jumping for joy, and you start working on the project. When you are finished with the job, you get paid and the deal is done.
At the end of the month when you go over your cash-flow you realize that you spent so much time on this project, in fact, a lot more hours that you had initially thought it would take, and that’s not even including the endless telephone calls, the adjustments you had to do, and all the add-ons the client requested you to put. To your horror, you come to the understanding, that you actually ended up losing money and have not earned a thing this month.
This happens more often than you think, and this especially happens to freelancers or small businesses which are constantly hungry to get more work.
Let’s look at the obvious mistakes in the situation ahead.
First, when a client calls about a job and gives you a brief general description, the best quote you can give at this point is a general estimate only. This is the case, until you get the detailed specification of the job from the client in writing.
Once you get the detailed specification document, you can actually sit down and calculate calmly the amount of time it will take to deliver this job, multiplied by your hourly rate. The best way to do this is to go through the specifications and break down each task to mini-tasks, then write down the amount of hours it will take to execute each one of them. At this point most freelancers that have gone through this process stop, and hand over their quote to the client.
What most people neglect to add to the quote, may actually sum up to a substantial number. The cost of meetings hours, support time, testing hours, adjustments to the project, add- ons the client requested, research time, traveling cost. Even things like shipping and handling or storing when you are dealing with physical goods, often get left out.
In addition, always charge a markup percentage to cover the operating costs of running your business. Things such as administrative costs, materials, phone calls, and other overhead expenses. These should all be proportionally factored in the price you give to the client.
The worst thing to do to a client and to the reliability of your business, is to keep changing the quote and ask the client to pay extra to accommodate these extra costs.
It is also important to research the market standard for a similar job proposal. This way you will never be way off the mark. In case you have done all the above, and you came up with a price that is significantly lower or higher than your competitors, you need to thoroughly check your costs as they may be too high which in this case you will need to find ways to be more cost effective and competitive. Or worse, your costs may be undervalued or missed entirely.
It’s always better to turn down a job or to be turned down for a job, than spend your time losing money and damaging your cash-flow. In our experience, clients who have been around for some time, will not naturally turn to the cheapest provider, but to the more professional and reliable one. They will prefer the one who gives them realistic quotation for the work and stand by his or her word. Most have already done their due diligence and know what to expect.
As a business owner, you know best which costs you need to add to the quote. Hours worked multiplied by hourly rate is only the basis of the quote on which you need to build up the other costs, in order to get a final and accurate quote for the job, that will not dwindle your cash flow, and will enable your business to remain profitable and viable.
Another advantage you get by giving proper quotes time after time, is that you are building an honest reputation for your business. Clients will perceive you as a hassle-free and professional business and will keep coming back to you.
We, at iQdesk will soon be launching a new version of our free iQDesk Business Management Software for small businesses with a new detailed Quote Tool module, which any business owner will be able to use. The tool is designed to help the user to calculate the best quote for a job and will also generate the expected profit for the project, so you will always know where you stand financially.
Try to avoid “ off the top of your head” quotes, take your time to do it right and don’t undersell. If you treat your business with respect, others will do the same.
Added by iQDesk Ltd.