“I have plenty of work coming in,” one of my clients told me, “but I’m not getting paid enough. Every project seems to take longer than I anticipated, and I end up putting in too many unpaid hours. How can I fix this?”
If this problem sounds familiar, there are two likely causes. You may be underestimating the amount of time required to complete a job, or you may not be negotiating adequately with the client at the beginning.
Let’s look at the estimating process first. To make an accurate estimate of the scope of a project, you need to gather a substantial amount of information from the client. What is the exact result they expect to see from your work? By when do they want to have it? Will there be review cycles or checkpoints along the way? How many? Who will be conducting these reviews on the client’s behalf?
What methods are they expecting you to use in doing the required work? Where will the information and materials come from? Will there be limits on your access to the elements you require? How many people will be involved? How and when will you communicate with all of them? Who will decide when the project is complete and whether the result is satisfactory?
When you have the answers to these questions and others specific to your line of work, you can begin estimating the amount of time and materials involved. Your estimate should take into account both actual work time, and the elapsed time required for gathering information, acquiring materials, review cycles, and two-way communication.
To make sure you are including everything in your estimate, plot out a rough schedule for the whole project, and examine each step separately. Only after you have completed a detailed estimate should you quote a price to the client. If you are pressed to give a quote before you have enough information to make it accurate, quote the client a range rather than an exact price, based on what similar projects have cost in the past.
Accurately estimating the time a job will require is a skill you can build as you work. For every project, keep a record of how much actual and elapsed time each phase takes. Eventually, you will assemble a library of past projects you can refer to in order to make better estimates.
Even with a good estimate, you can still get into trouble, since there are unpredictable elements in any project. This is where negotiating comes in. Instead of quoting the client a fixed price, offer them a base price for a certain number of work hours, review cycles, or visits to the client’s site, and ask to be paid an hourly or daily rate for time which exceeds that initial amount.
If they are paying you by the hour to begin with, make it clear that your time estimate is just that — an estimate — and you expect to be paid for the actual hours spent. It’s important to negotiate any additional compensation at the beginning of the project. If you wait until the project is under way to ask for more money, you run the risk of not being compensated for your extra work, as well as antagonizing your client. The client may even threaten not to pay you at all, because you didn’t “deliver what you promised.”
What do you do when you make an accurate estimate, set a fair price, and the client tells you it’s too high? Whether it’s your billing rate they are objecting to, or the time and materials estimate itself, don’t lower either of them! Instead, negotiate the scope of the project. Suggest they save money by doing some of the work themselves, cutting out a nonessential element or process, or choosing cheaper components. It’s usually the total price that interests the client, not where the money goes.
When you are in a competitive situation, think twice before you decide to compete by lowering your price. Try playing up your experience, credentials, references, or the quality of your work instead. If the only way you can get the business is by working for less than your time is worth, maybe this client isn’t really one you want.