On Thu, Jul 21, 2011 at 9:33 AM, Bob Meetin <bobm at dottedi.biz> wrote: > I'm still getting a handle on the other thread... The general problem with > fixed cost pricing is, as you say, uncertainty. Most of my clients are very > very small businesses. They are tight and can only deal with a fixed dollar > amount. Sounds to me like you already understand the other thread. What you are saying here is that your costs don't set prices; your customers' willingness to pay a particular price for the work sets prices. The challenge you are describing is just a situation where the difference between what they are willing to pay and what you estimate your costs are, is smaller than is comfortable. So, if your estimate is wrong in the wrong direction, then you will regret taking the project. Everyone always has a magic formula for coming up with a project price. When I worked at one of the big boys, we had a massive spreadsheet where all you'd have to do is enter in some values of how many of this and how many of that, and it would spit out a man-hours estimate by type of resource and then of course give you a dollar total. Do I need to even tell you how well this worked? In fact, I was involved in a committee that was working on new estimation methods, and we were looking at a statistical model that used a person's estimate as input and adjusted based on past actuals-estimates history for that person, within a confidence interval. So if history shows Joe underestimates by 23% with a deviation of +/- 10%, then we would adjust Joe's estimate for that item by that amount. But let me underscore. This is us determining what our floor price would have to be. The price we charge is a very different matter and is based on what the customer is willing to pay and where we think our competitors can come in at relative to their ability to execute. In smaller freelancing/contracting scenarios, you generally are not in as competitive a situation as when 4 firms with known reputations are fighting for the same RFP. -- Matt Warden http://mattwarden.com This email proudly and graciously contributes to entropy.