Charge By The Hour, Charge By The Day: Tips for Scoping and Pricing Your Proposal

Ariele Sieling posted this on proposals

dog meme on computerYou get an email. An old client is looking for someone to start working on a new project. It looks like a perfect fit for you. What's next? Scoping and pricing your proposal.

Scoping is the first step. By understanding exactly what you are willing and able to deliver to your client, you help the client understand what you're offering, you can ensure that the project is one you want, and you can more easily price it. So how to scope effectively?

  1. Start by understanding the client's vision. If it's not clear in their RFP, then call them. What don't you know? What don't you understand? Find out exactly what the client is looking for, and build your scope around that.
  2. Outline the problem that your client is trying to solve. Then, provide a solution. Maybe your client is looking for a website redesign--is it just that they think their current site is ugly or old-fashioned? Or are they trying to generate more leads or sales. Lay out the problem, and then carefully lay out the things that you can do to solve that problem.
  3. Clearly state the tasks. What exactly will you be doing? Include even the smallest detail (buying a domain name, setting up Google Analytics), so that both you and the client know exactly what they're paying for.

Once you've scoped out the project, you will need to figure out how much to charge. The key is finding a sweet spot: not too high and not to low. Don't undercut your skills and services by charging too low, just to get the contract. You need to be able to pay for your expenses and make the project worth the time and the effort. On the other hand, don't charge too much for the project. The goal is not to wring as much money out of your client as possible, but to get compensated fairly for the work you are doing.

It's an important balancing act. If you charge too little, your client may perceive your work as being lower quality, and then not hire you again. If you charge too much, you run the risk of not winning the contract, and if you do win it, the client may decide that your services are too expensive for future projects.

So how do you figure out the best price? There are a few different options.

  1. Charge by the day. If your services include being on call, then charging by the day might be the best option. It may also be good to charge per day if the work you are doing goes on at all hours or requires hopping around from one task to another--for example, doing online paid advertising for a client might be a good reason to charge per day. If you need flexibility during the day, then charge by the day.
  2. Charge by the hour. This is a pretty standard option that many people are comfortable with with. If you don't know exactly how long the project will take, if you need to be available specific hours (for example, on site), or if the client prefers the project be broken down into hours, then this is a good option. It does require a lot of tracking, however, and that in itself takes time. And, if you work quickly, you run the risk of letting your expertise decrease your paycheck.
  3. Charge by the project. This is frequently the best case scenario for both the contractor and the client. You will figure out the per project price based on hours, materials, and any other expenses that you have, and pitch that price to the client. If the project ends up being less expensive or taking less time than anticipated, then you get a little extra money. If the project ends up taking longer or being more expensive, you take the hit, but the client doesn't have to pay more for additional services, and then you keep them happy. As a copywriter, I prefer this method in general. I charge per word in most cases, and in this case the client doesn't have to worry about whether I write slowly or quickly--they just pay one flat cost for the project. I build in additional expenses to that per word cost, which is based on how much I want to get paid per hour, how much my competitors are charging, and how quickly or slowly I work.

Once you've decided how to charge, remember to add any additional expenses, and tack on a little for your expertise. Don't sell yourself short, and don't work for cheap just to win a project.

Scoping and pricing can be stressful, but they are necessary to gaining additional projects. Need more tips on pricing? Check out Brennan Dunn's Definitive Guide to Project Billing. It's worth a read.

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