Determining Project Pricing
Whether you are billing by the hour or attempting to maximize profitability by going with a fixed-fee proposal, time is money. Several factors could affect how long it will take to complete an engagement. These include:
- The availability of key resource people.
- Time spent traveling.
- The number of people on the project. The more people there are the more management and communication required.
- How familiar you are with the client’s problem and the learning curve associated with getting up to speed. If this engagement is very similar to others, your time investment may be much less.
All costs need to eventually be paid by your clients if you hope to stay in business. For this reason, many consulting professionals measure themselves by a recovery rate. They strive to maximize actual billing hours in each day by allocating every possible hour to some current client engagement. To accomplish this, it is necessary to log time carefully and add to the client’s scope of work by charging for such elements as:
- Research and preparation required for the client’s engagement.
- Internal conference calls and meetings with other team members.
- The time required to learn to work with a new tool or technique for the client.
- Travel time to and from the client’s location.
- Administrative time associated with contract work, progress reporting, and firm management.
- Use of research tools such as reading technical manuals.
- Managing defect issues e.g. hardware, code problems.
Several consulting time-cost factors are easily underestimated. When scoping a project, experience and careful estimating are essential to proper pricing. Pay particular attention to:
- Conducting Interviews: Consider preparation, reflection, re-writing notes, and making summaries in addition to the actual face-time with the interviewee.
- Developing Proposals: Interviews, creative problem-solving methods, developing a concept presentation, and revisions.
- Developing Reports and Presentations.
- Managing Meetings: Preparing for team and client meetings are common areas for underestimation. Professional meeting facilitators often allow 4 to 8 hours of presentation time for each hour of client contact.