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Thread: tips on quoting for projects

  1. #1
    just me duncan drennan's Avatar
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    tips on quoting for projects

    I'd like to know what tips you Forum-ites might have on how to quote for projects - here's my dilemma...

    I'm relatively new to owning/running my own business and am still learning (lots and lots and lots). If you don't know what I do, check out my post in the "Meet & Greet" section, or my website.

    It would seem to me that quoting on a project is an extreme art where you pit your experience and skills against the risk of losing a lot of money (btw I classify profit below a certain level as loosing money).

    There are a lot of issues when trying to quote on a project. Basically we have the know things and a LOT of unknown things. The unknown items decrease with experience, but are still there. So how can one go about quoting and reduce the risk of losing money, but still quote a sellable price.

    For example...

    I need to quote for a project where I have little knowledge and experience of the product. The skills that I have should place me in a good position to do the work, but there are a lot of unknowns such as,

    • What I need to learn (partially known)
    • How long certain things will take (always an unknown, as snags are bound to happen)
    • Cost of hardware (not known until design is done, won't do design until work is secured...grrrr...vicious circle)
    • Cost of tools (difficult to gauge what tools may be required)
    • Implicit value of solution (this has to do with how the client wants to handle IP on completion)


    There are other things, but I think that makes it clear(-ish)? Let me know if I should try to explain better...
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  2. #2
    just me duncan drennan's Avatar
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    Oh sorry, I left something important out - the project type that I am talking about is one that is quoted on deliverables, not an hourly rate.
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    Site Caretaker Dave A's Avatar
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    Welcome to the wonderful world of risk and the pleasures of starting up.

    I'll skip the obvious because I suspect you've already done that (break it down to parts, break it down, break it down..)

    The challenge in costing a fixed price contract, of course, is the unknowns. And they can fluctuate considerably.

    Once a business is rolling, you get an avantage because you've got stats and can apply some sort of average risk adjustment. When you're starting up - you'll have to guestimate those unknowns as closely as possible. In the fumigation game I was told "If you're unsure, whatever you think it might be - double it. And if you're still not sure that will cover it - double it again".

    In many ways it's a mindset struggle with oneself. The temptation to trim margins and increase the chances of getting the contract vs playing safe and risk not getting the contract.

    Of the two scenarios - the first is actually riskier at startup IMHO. You can succesfully deliver and wipe yourself out financially in the process. The less you know, the more you have to factor in for unknown variables. Even if it risks losing the contract. The school fees don't stop when you leave the classroom.

    When I started out, I was pretty averse to asking questions of my client. I thought the best thing was to be a "know-it-all". But here's the funny thing. I've found that asking questions of the client actually demonstrates knowledge!!! At least, if you're asking the right questions. And it builds a relationship that means that they are not just going to be looking at your price.

    People tend to make decisions at an emotional level first and then back it up with logic.

    We're too timid of pushing the client when we start out.

    Push the client with questions, try to build a better understanding of their needs and expectations, and in so doing get a better understanding of the project and the "unknowns".

    You've really got to take the attitude of "If it comes in at my price - it's worth me doing it" - Especially in your line of work.

    Put that price in - look them straight in the eyes and say "This is how much it'll cost" whilst thinking "I'm worth every penny".

    Of course, all that goes out the window in a tender situation where the client is obliged to take the cheapest tender - but then they deserve what they get. I can't recall the last time I took the cheapest option. I always look for the value proposition.
    The trouble with opportunity is it normally comes dressed up as work.

  4. #4
    just me duncan drennan's Avatar
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    One of the things in particular that is bugging me is the hardware costs - can't predict that without design, can't design with a contract

    I was thinking about saying that the physical costs will be passed directly on, or quoted on at a certain point (I'll break the project up into a number of deliveries and payments). What are your thoughts?
    Last edited by duncan drennan; 28-Sep-06 at 10:00 AM.
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    Site Caretaker Dave A's Avatar
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    Damn. Hit the wrong button - I've ended up editing your post Duncan. The problem with getting mod status is that you get an edit button on everyone's post - I had meant to hit quote. ... And there's no undo button once you hit save. I'll have to pay more attention...

    Isolating the direct (and provable) material costs to developing a prototype sounds good. If you don't ask, you won't get. The worst they can do is say no.

    In the bigger scheme of things, you'll probably need to allocate a budget towards the expenses associated with research needed to make bids like these. It seems like it goes with your territory.
    The trouble with opportunity is it normally comes dressed up as work.

  6. #6
    just me duncan drennan's Avatar
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    Quote Originally Posted by Dave A View Post
    Damn. Hit the wrong button - I've ended up editing your post Duncan. The problem with getting mod status is that you get an edit button on everyone's post - I had meant to hit quote. ... And there's no undo button once you hit save. I'll have to pay more attention...
    You know what the worst thing is? I can't remember what I wrote! (other than what is there)

    As far as the expense of quoting it is an issue, but not right now. Obviously if I get the work, the expense (time) of the quote is worked into the project pricing...if I don't get the work, then well I've lost some time (=money), but gained experience. More experience means faster quotes.
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    Site Caretaker Dave A's Avatar
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    Quote Originally Posted by dsd View Post
    As far as the expense of quoting it is an issue, but not right now. Obviously if I get the work, the expense (time) of the quote is worked into the project pricing...if I don't get the work, then well I've lost some time (=money), but gained experience. More experience means faster quotes.
    My point is to some extent you need to work into this budget the cost of estimating for the next project.

    It's about getting ahead of the cash flow monster.
    The trouble with opportunity is it normally comes dressed up as work.

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    just me duncan drennan's Avatar
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    Quote Originally Posted by Dave A View Post
    My point is to some extent you need to work into this budget the cost of estimating for the next project.

    It's about getting ahead of the cash flow monster.
    Agreed - I just didn't express myself very lucidly
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    Site Caretaker Dave A's Avatar
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    I suspected I was just confirming what you already knew. I hope that at least the affirmation helped the confidence to go for decent numbers.
    The trouble with opportunity is it normally comes dressed up as work.

  10. #10
    just me duncan drennan's Avatar
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    Quote Originally Posted by Dave A View Post
    I suspected I was just confirming what you already knew. I hope that at least the affirmation helped the confidence to go for decent numbers.
    Thanks for the encouragement, it definitely does help

    Does anyone else have some thoughts and tips on this?
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