[thelist] New to quoting for work

martin.p.burns at uk.pwcglobal.com martin.p.burns at uk.pwcglobal.com
Tue Feb 26 04:19:01 CST 2002


Memo from Martin P Burns of PricewaterhouseCoopers

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Hi Rachel

Here's another way to look at it (which works for most circumstances,
and tends to be how most freelance jobs are priced).

<tip type="general theorum for pricing freelance work" author
="martin at members.evolt.org">

Nearly all jobs are priced (internally if not visibly to the client) in
time
and materials. Materials are obvious - eg licensing software or
photography specific to the job - but time is a bit funky.

You need to work out an hourly or daily rate. This needs to cover:
a) Paying you for the time you spend actually doing the work
b) Paying *all* your overheads (its easy to skip these - don't),
    including depreciation on your kit so you can replace it when
    you need to.
c) Paying you for the time you spend *getting* the work
d) Paying you for the time you spend doing other productive stuff
    which isn't of direct benefit to the client but you need to do to let
    you do the work (eg filing, doing tax returns, chasing clients who
    haven't paid etc)
e) Paying you for all the other time you spend not working on client
    work (sick time, holidays, days when you don't have any chargeable
   work, training, reading thelist - I'm sure there are lots of other
things).

Worked out on a monthly or annual basis, divide it down to get how
much it costs each hour to keep you profitably in business.
Now add a percentage for contribution to profit. This is your base
hourly rate. Work out how long it will take you to *realistically* do the
work you've scoped (it is very, very easy to under-estimate it -
*do not* do this as it will make the difference between making money
and losing it). Multiply the two together for your time cost, and add
the materials estimate from above. Call this total A.

Now work out how much value your work will bring to the client - how
much more money will they have as a result of your work (either in
incremental revenue or money saved) compared to a baseline of
what's likely to happen without your work. Call this figure B

For you to profitably take the job, B needs to be higher than A. If it's
not, the *only* reasons you should take the job are:
1) There's nothing else available (most of your costs are fixed costs,
    so $100 contribution towards those is better than $0).
2) There's a strategic reason for doing so (eg market development,
     (eg breaking into a potentially lucrative client) or product
development
    (doing something new for you) or locking out a competitor).
    Make sure that the discount you offer is accounted for as a promotional
cost,
    not just as a non-profitable job.
In each case, you make very clear to the client that this is a special deal
for them, and not your normal rate. Reason being that otherwise you get a
reputation for working at a non-profitable rate and it's then very hard to
get out of it.

Assuming B is higher than A, you can charge anywhere in that band. But
there's another choice to make: how do you charge it to the client - as
time and materials or a fixed cost? Time and materials fees are usually the
better for you as they more closely mirror your internal costing. Clients
love fixed cost jobs because it's easier for their budgeting.

It's really a matter of which you think the client will go for, but if you
*are* going fixed cost, make very sure that the scope is 100% nailed down,
and changes go through a change control process which includes you
revisiting your estimate. You'd also tend to price fixed-cost jobs a bit
higher to give yourself some headroom for over-runs.

</tip>

Hope this helps

Cheers
Martin


To:    thelist at lists.evolt.org
Subject:    [thelist] New to quoting for work

I'm new to the 'being paid for web work' (I have done a lot of volunteer
work) and I realise that there are major currency differences since I work
in New Zealand, but I would be interested to know what one would roughly
quote for the following site brief (perhaps hours, or money) - please reply
to me off list if this is a sensitive request.  Or is there a site which is
a good reference for this sort of thing?

(1) Design a public access site templates:
* Home / About Us / FAQ / Contact Us / View damaged vehicles / View used
vehicles (on these last two pages, click on a vehicle to bring up further
info, pictures etc)

(2) Sales team area:
* Login/out, change your personal details, add a car sale by entering in
vehicle's code numbers and the date etc

(3) Admin area:
* Login/out
* View, Add, Change, Delete vehicles/sales people/repairers/suppliers
* View reports for sales for sales people/repairers/vehicles/suppliers x
within a certain time period
* View financial summaries within a certain time period (profit, loss, tax
etc)
* View vehicles that match certain criteria etc

- using PHP/MYSQL.


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