Fixed price quoting. Lets be honest, it's a killer. In fact, its probably one of the 'biggest' issues facing small web design businesses in a highly competitive market. For many small web design businesses it can be a viscous cycle that seems impossible to break out of. You get asked to do a redesign of a website and perhaps some technical development, you ask as many questions as you can in an attempt to get a clear idea of the scope of work required and you politely ask the client if they have a budget in mind for the project and they tell you they have 'no idea how much these things cost' and that they want you to give them your 'best price' for the whole bag. You then you go away and prepare a fixed price quote. What happens next is your new client either loves your quote and signs up and you begin work, or they tell you its too much and want to put the squeeze on.
In my opinion, either way, having provided a fixed price your relationship with your client is already in trouble and your project is destined to fail. Here's why.
You just don't know enough at the outsetEven with the most clearly written brief provided by the customer, it is impossible to know everything you need to know about a web design or development project. So how can you accurately quote on something you don't really understand yet?
Unforeseen things will come up... they always do, its inevitableThings always come up during technical development that need additional thinking. Its natural that as development is going on that both your client and your team are going to be learning a lot about how the new site features and functions should work. Its during development that real opportunities exist to prototype, test and review features and functions with your client and to explore options that could lead to better outcomes. The catch is that working in this way usually requires more time and flexibility. Two things that fixed quotes that have stuffed full of features don't usually have going for them.
With fixed price quoting your locked into trying to deliver an agreed amount of stuff for a fixed amount of money, and if you've allowed yourself to be squeezed on budget there is usually very little room for exploring options and collaborating with your client in this way.
It shouldn't be you versus your client... but it'll end up that wayThere is an expectation by your client that you will deliver the project with all the bells and whistles that you promised in your quote. Lets say your developer discovers that connecting the website to the client's intranet database is going to be a little (or a lot!) harder than first thought, or the client reveals midstream some crucial information concerning how they need that new reporting module to work. Some things might be small and easy to absorb, others may have broader more significant implications for the project.
In the first case, you are going to have to wear it because you probably should have been a bit more thorough when scoping that feature out at the beginning. It's a bummer because it will costs you time and money.
In the second case you might feel that the client needs to fork out additional budget or perhaps drop a low priority feature in order to accommodate the new requirement within the original budget. So you go to the well and negotiate with you client who will understandably be disappointed because they believed you knew what you were doing and now they are going to have to find more cash which they say they don't have. The client will argue they thought something was in the scope, you will argue that it was never mentioned, emails get checked, people get frustrated, the project stalls — just writing about this type of scenarios is stressful.
Now your in a tug of war over money and time and the biggest loser is going to be you, because ultimately it's your businesses reputation for getting things done that is on the line.
Here's the solution...Don't do fixed price quoting on technical projects, or any project if you can avoid it. Instead, try offering a fixed price to run a discovery session with your client to identify, flesh out and prioritise all the features and functions that will be required by the projects users in the first release. Bring your developer along and anyone else from your team who you think will benefit. Pull together a document that communicates all of this in plain jargon free language and provide it to your client for their approval.
Now that you have a detailed understanding of the project scope, you've minimised the risk of unforeseen things emerging midstream and you're in a much better position to provide a more accurate costing. The discovery work you have done will enable you to confidently break your costing down into individual features and functions so your client can see clearly where their budget is going. It helps in budget negotiations if the client can easily see what they can have for a certain dollar value. Having a detailed list of features and functions also means they can easily choose to drop a feature should a new requirement of similar value be identified midstream.
Finally, and most importantly, make it clear that investigating new features and functions midstream takes time and that additional budget to do this has to come from somewhere. If, after talking through the benefits of quoting and working this way, your client still insists on full upfront fixed price quoting - stick to your guns, so no thanks and let it go. There will be other opportunities.
The best thing about saying goodbye to upfront fixed price quoting is knowing that your client relationships will be happier and more enjoyable ones. And happy people make better stuff which is good for business.
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