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Andy Rutledge

Project Pricing With Respect to Value

by Andy Rutledge on Jul 30, 2012

How can you price projects so that value is accounted for and so that you are able to realize the most profit possible? The answer lies in your understanding of cost, the relevant applicable values, and your place in the market. By Andy Rutledge

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Ryan Downie

Ryan Downie | Jul 31, 2012 | 11:23pm

Hello Andy,

Thanks for this post; it really has some fantastic approaches to pricing.

We kind of take the same approach when deciding the cost factor, but I also go a slightly different way. There are a lot of variables at play for this and how I tend to do this is have a straight up chat with the client. I tell them my process outright and as they have already seen my work (to get to this stage in the conversation), I already know they are interested. I ask do they have a budget set aside (so I know if we can talk any further) and then go of to research.

I usually set up by working days, and estimating how many days this project would take. This process works best for me as I have the experience to judge near enough how many days it should take to complete the project, and then add in the factors such as delays etc.

When researching the client before taking on a project I always look where in the market they are in, who are the direct competitors, how and where I can help them and add value, and then this is brought up in the meeting. The biggest mistake when I started out was just agreeing a price before doing any research.

I then factor in everything that I have learnt (estimation of days, clients needs, the full project, and the budget) and come up with an itemized estimate for the client.

Jamon Holmgren

Jamon Holmgren | Aug 3, 2012 | 1:06am

I attempted to come up with a formula today based on this article and failed miserably. The problem seems to be in nailing down what the client considers to be the value of the product. I understand that this needs to be a process that involves direct conversations with the client and actually asking them what the value is, but some of my clients don't really seem to know. So then it becomes a guessing game, and that's not really much better than my previous method.

I did learn that I need to consider all of the factors in isolation first, and that does help. But coming up with a formula is really hard to do.

Andy Rutledge

Andy Rutledge | Aug 6, 2012 | 2:11pm

Thanks Ryan. I hope it gives you some further options to consider in your project pricing.

Jamon: Yes, this stuff is not easy. Especially when you're first considering it. As for your clients, one of the fundamental indications of what they believe the value to be is their budget. It may not be the best or final indicator, but it surely helps you to have some grasp of their thoughts on the value of the product. Hope you keep working and develop your own viable formula for price calculation.

Jamon Holmgren

Jamon Holmgren | Aug 8, 2012 | 6:58pm

Great point -- their budget is definitely a good starting point! I think if I work off of that and add in my own factors I can get a better indicator.

Jason VanLue

Jason VanLue | Aug 7, 2012 | 8:01pm

Curious for the group's thoughts primarily on charging for 'discovery'. Obviously certain bridges need to be made — namely, you should certainly do some discovery upfront on your own, not all projects require this (particularly smaller ones), you need to be clear and upfront with your clients, and you need to know how you define 'discovery'.

I tend to work on larger web app or brand development projects, and recently have made it a practice to charge for the discovery time. Many times this is simply an all-day or multi-day meeting with the client, other times it requires more time.

Bottom line, in order to fully understand the scope of the project, what technologies need to be utilized, target markets, business goals, etc etc, it requires enough of my time that it seems reasonable to be compensated even if the client chooses not to use me.

Anyone else do this? Thoughts?

Andy Rutledge

Andy Rutledge | Aug 7, 2012 | 11:12pm

Jason, I've never not charged for discovery. It is, in my own and in my studio's projects, a compulsory part of the billed-for process. As you observed, it might be a couple hours' discussion or it might be a multi-day process. All of this is with the client. Additionally, it is then necessary to use the information gathered in that process for one's own further (now-informed) discovery and research. That, too, should be accounted for in the charges, so far as I believe.

I can't imagine an instance where any sort or part of discovery would not be part of the billed-for items. I'd be curious to hear of examples or reasoning for not billing for discovery.

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