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I often receive some potential client who wants me to make his web site. Some of them end up as real clients and give the project. Some others (the most) have no idea about prices and times.

For those, if they are close to me, I can hear what they want, tell them it is going to be about X money and Y time and it can go higher or lower. If they had that idea in mind then I use the time I need to make the right budget.

Now, for the cases that they are not so close to me, I have to lose the time to make the right budget from the beginning. If the budget is accepted I would get paid for that time because I included it, but if it is not accepted, I'd have lost lot of time without being paid.

How can I avoid losing that time?

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5 Answers 5

up vote 11 down vote accepted

You can't. By accepting a potential project, you take a risk to fail to negotiate it. The only way to avoid failed negotiations is to not negotiate at all.

That's also part of your job as a freelancer: you have to deal with the customers who may cancel their project before this project is started, or go to another freelancer who does the work better or at lower cost.

This being said, you can reduce costs spent to evaluate the price of a service.

1. Request the preferred and the maximum cost

One of the ways is to actually ask your customer how much he pay you. It helps a lot in some cases, depending on your customers by eliminating the projects where the customer cannot pay the real price.

For example, working in France, I often see the customers who are willing to pay no more than $500 for a large e-commerce website, and they just can't imagine that they must at least add a zero at the end.

In this case, I don't spend time doing evaluation (which itself can cost up to $200), but kindly explain to this person that their funding is too low, and that they may either want to raise it, or search for alternative solutions like already built solutions.

It also helps in cases where there is a doubt. For example I use it a lot when doing evaluations of cost of a change of an existent project. Sometimes, I can't say precisely if it will cost $100 or $1 000 or whatsoever (imagine a large codebase with legacy code no one can understand, and a bunch of unclear requirements).

If the customer tells from the beginning that he is willing to pay $400 and he can't pay more than $750, I start the evaluation, and stop it as quick as I can determine that the cost will be higher than $750. In fact, the waste of time and resources can be strongly decreased, since you usually get a large min-max range, then make it more and more precise. Taken the previous example, after an hour, I would be able to find that the price will vary from $600 to $1 800. After two hours, I'll find that it's between $800 and $1 300. At this moment, I can stop, since the lowest price is higher than the maximum amount the customer can pay.

2. Give to your customers as much information as you can about the prices

It's easy for us to know that an e-commerce website written from scratch cannot cost $100. But the customers have no idea about the prices most of the time. They don't know what is the amount of work required to do their project. They don't know how much to pay to a developer per day.

By providing precise information about your costs, including the rate per hour, the examples of the previous projects with their price, you will see less requests from people who are willing to spend an extremely low amount of money. If you don't provide any of this information on your website, the only way for them to know the price is to submit you a project and ask for a price.

3. Project triangle: price ↔ speed ↔ quality

To address your comment, consider the last point. Customers are usually interested by two points: how quick the project will be finished and how much it will cost. Strangely, they forget the most important point: the quality.

It forces some developers to lower the cost by lowering the quality. After all, if customer care as much about the cost, why would we bother providing quality?

Instead, you may provide an alternative approach when dealing with your customers. If they request a website which reasonably costs $6 000, and they tell you that they can pay $20 000,

  1. From the beginning, tell them from the beginning that the project will cost much less,
  2. Ask them if they prefer to pay less or to have a project with better quality,
  3. At the end, if you haven't spent a lot of money of your customer, you may suggest new features or improvements.

This doesn't work with every customer. Some just want the work to be done and don't care about quality. Others just want the lowest price. Others are unable to tell how much money do they have. Others want to be sure to pay the minimum. Others are afraid you will spend more than need.

But you don't have to force your customers to give you the two amounts. Make it optional, and use traditional approach with the customers who can't give you the amounts.

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2  
This is a good approach, but I can't imagine any of my clients telling me how much can he pay. It sounds as if I want to charge him the maximum possible, even if the site should be cheaper. –  Diego Aug 3 '11 at 14:22
    
@Diego: I edited my answer accordingly. Also, if you're paid per hour, you can hardly charge more than you should. Also, it's more about the trust: if the customer doesn't trust you, he will always suspect that you're wasting his money in all cases. –  MainMa Aug 3 '11 at 14:42
    
The project triangle typically is cost, time, and scope (or features). Quality is affected by all of these in a different dimension. –  Thomas Owens Aug 3 '11 at 15:38

It's just a cost of doing business. I work for a company and help out with proposals all the time, sometimes we have 5-6 people spending a week writing up proposals and we don't end up with the business.

One way, however, you might be able to mitigate the level of effort associated with deals that were never going to happen is have an initial meeting where they give you a very high level description of what they want and you give them a very broad range just to make sure that you and your prospect have at least the same number of zero's in mind when it comes to the final bid. Then you can get rid of the tire-kickers/lowballers and not waste time on a detailed bid for them.

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If you deal with clients on a one-off basis, you can do little to manage the relationship other than as a short-term proposition.

It may be of benefit to try and arrange as many long-term client relationships as possible. This probably requires some up-front investment on your part, not necessarily in giving away "free" design work to a client, but in doing some client education/management of expectations.

The idea is often presented that project work is bounded by a triangle of constraints: Time, Money, Quality... pick any two!

What I read in your question is the opportunity to tradeoff money budget for time budget. This is a good insight to convey to prospective or existing clients, but it will appear a little less crass/more thoughtful if you include the quality angle as well in your handout or Powerpoint presentation.

Another concept that your question brings to mind is the idea of shared risk. The client needs to invest in the project and make the right stakeholders (requirements, QA, change management) available to you in order to do the project on time and on budget. Convey to them that with a shared risk (investment) in the project it can be completed more cheaply, more quickly, and with a lowered risk of poor quality or outright failure.

Now these are "high concept" approaches, not likely to fit well with one-off clients who think of (say) a website that is bought like a sack of apples (commodity). You would be building your future stock of business (enhancements, new projects) to invest in finding the more "up-scale" customers who appreciate the long-term availability of your talent.

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Call the initial phase where you try to estimate the cost the "project evaluation & budgeting phase" and charge them a standard fee for the preparation of your offer. Tell your potential customers that you will refund that fee in case they will give the project to you, so they won't loose money if they stick with you.

To emphasize that you put some extra effort into this phase that needs to be paid for you can offer some standard rates as an alternative for those people that don't want a detailed plan, but mark those rates with something like "deviations from standards will be charged by hourly rates" or something like that.

I know of some marketing agencies and craftsmen that work this way, because they have to spend some serious time to prepare a good offer.

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A huge downside of this approach is that you will scare potential customers away - they might have bought your services, but their unwillingness to prepare for a cost estimate, something that is generally free in almost all industries, breaks the deal before negotiations have even begun. –  tdammers Aug 3 '11 at 15:34
    
@tdammers: If I understood correctly, the time concern is not about spending one hour doing some basic calculations (which would be difficult to charge for indeed), but about clarifying what the potential client wants in the first place. This goes in the direction of consulting - which is generally NOT free in almost all industries, at least from my experience. Of course, habits may vary depending on country, industry and local competition. If this is about easily calculated standard projects, just go with the 2nd part of my advice (offering standard rates with customization option TBD later). –  Ray Aug 3 '11 at 18:43

You should assume a certain number of hours each week that will consist of doing tasks that you are not directly paid for such as this. This is called indirect work. The projects you win will have to be built so that they include the money for the time spent on projects you don't win. The fee you charge for direct work, should have a multiplier in it to pay for the indirect time. So if you win a contract to do 40 hours of work, the hourly rate you charge should be what you want for the 40 hours of direct time, what you need to pay for 10-20 hours of indirect time, what you need to pay for insurance, hardware, rent, employee benefits etc. So if you want to earn $100 an hour, then you need to charge $150-$300 (depending on your expenses). Typically consultants charge at least 3 times the salary they pay the person doing the work. And an independent contractor, you need to think this way as well.

You also need to be willing to say no and walk away if you think the time to develop a proposal will exceed the money you can make on it. I watched one company I worked for forget this and lose huge amounts of money on a contract they won because they spent more than the projected profit just to win the contract.

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