So, this morning I was reading an article by Eric Nagel (via Steve Poland) about how to estimate the cost of a consulting gig for a client.  Mr. Nagel recommends figuring out about how much time you think it will take, then doubling it and providing that as a quote.  I used to do that, but fell out of favor of it because I think you’re prone to scare away clients by giving them quotes that, for the most part, are considerably larger than the final bill.

I, instead, use a 3-number quote, where I quote the minimum time it will take (no way I’m getting it done faster than this), the maximum time it will take (no way it will take longer than this, and even if it does, I won’t bill you for more than this), and then the projected time (I usually end up coming in within 10% of this number)

The gap between the minimum, maximum, and projected varies based on what the job is.  For example, for coding a straight HTML page, there aren’t many surprises that are going to come up, so my quote might be:

Minimum: 2 Hours
Maximum: 4 Hours
Projected: 3 Hours

On the other hand, if the job is building a shopping cart and integrating it with a CC processor I haven’t used before, there gets to be a whole lot more that could go wrong.  This quote might end up being:

Minimum: 10 Hours
Maximum: 60 Hours
Projected: 25 Hours

By quoting out projects this way, I find I can get a much more realistic proposal together for a customer, so they can look at it and instead of just seeing “This is going to cost $6,700″ even though the final bill they get actually turns out to be $3,500, they see “This is going to be somewhere between $2,500 and $7,000, but it will probably be in the mid-$3k range.”

I hear time and time again that “Customers are Stupid, don’t give them too much information,” but I just don’t think that’s true.  Customers want you to tell it to them straight.  Customers understand that building a web site isn’t like aligning your tires– it’s impossible for me to tell you exactly what the total cost will be.  If I have to do a set cost, then I, like everyone else, will estimate high rather than low.

I also think that you need to always be proactive about letting customers know where their accounts stand.  If you bill monthly, send a weekly note with the number of hours you’ve billed that week.  The last thing that anyone wants is an angry client who received a bill that was more than they expected.

Lastly, use a contract and be clear on your terms.  Both you and the client need to be on the same page as to when you will bill them, when they need to pay, and the payment methods accepted.  Before I started accepting Credit Card payments, I had a customer on the other side of the country call me the day that payment was due, and say “Alright, I’m calling in to pay off my account, are you ready?”  That was the very day I started accepting credit cards.

It all comes down to communication.  Be clear and honest with your clients as to all of the details, and you’ll have smooth sailing down the road.