Topic: Running debate with a partner...

This is something we talked about. Hasn't happened yet, but we are just getting started.

Scenario:

-Estimate price of a website on hourly basis (padded)

-Customer accepts

-Design site

-Site only took 60% of the time we estimated to complete

Question: Charge the original amount of the accepted and signed estimate or cut the price down after the fact?

I think we should stick with the estimated amount, but then I also think time-off pay is nice. Partner says this is "unethical" and that he would be uncomfortable with it. Pros, what is your take?

I've run into this situation before, and faced this same ethical dilemma. By standard business practices, if you quoted this job as a "flat rate" *based* on your hourly estimate then that's it, you're done and they should pay the full amount. (Another way to look at this is this: would they have had to pay more if it had taken longer? If no, then the above logic applies.)

If this was truly an hourly job with no fixed cost, then I'd spend a few more hours *really* looking at the details, do an even better job than you've done. Then you can bill them for the actual work done, more than you've done so far, less than you estimated, but exactly the amount of work you did.

So! Everything hinges on this one point, would they have had to pay extra if it had taken longer? Answer this and your ethical choice is simple.

Your pal, -doc-

Well it's nice to see SOMEONE is replying in Outpatient Counseling! Thanks Doc, that is a good point about charging if things exceed estimated hours. I myself feel that charging more for this is definately appropriate. I do not want to get whacked by customers with over-active ideas that come about during development. I'll do the work, but not for free! Also, the point of using those hours not used to focus on making the site better is a good one. I guess that would be a justifiable trade-off. I do not want to rip customers off, but my school of thought is based on what the customer has ALREADY ACCEPTED. We are doing things based on hourly rates, however our estimate is just an implication. We are telling this to customers before they even fill out the estimate form..."estimated price cannot be guaranteed, but is an indication of what can be expected". I have heard much from others on this forum in support of hourly measuring and not flat fees. It is more than understandable. The estimate is just something that a customer can see and extract an idea of their budget from. The bidding process is all really frustrating to me though. I just wanna do what I love doing for some loot y'know?!

Yah, hourly pay is definitely the way to go, but sometimes you have to bid a flat rate (even though you'll usually have some kind of "excessive change" cost in place.) If this is the case, and I must bid a fixed rate, the usual practice has been to add 10% to 25% to the estimated cost, and *that's* the fixed fee. Even so, it's still always based on hourly rates, otherwise you're not really doing this as a business but as a hobby. (Not a bad thing, but you gotta know which one you are!)

FWIW, I seem to bill most of my jobs as one of these "hourly, yet with a very firm estimate on the hours" kinda jobs, especially lately, when business is tight. (Although, with any luck I'll sign a 6 month deal next week, 40-60 hours/week at $90/per, working from home, drool drool. :-)

Your pal, -doc-

Thumper: If you quote a flat rate and it doesn't come to that and you own up your bill comes in lower than that then you could impress your customer and you could pick up a lot more business by word of mouth ('I like your new website' - 'Yes its great and the guys are all above board and honest' - you can't pay for that kind of thing). Then again they may think you've bodged the job and there is something wrong. I think the latter possibility is less likely - possibly assess the client - if they were a pain to work with the extra cash might be factored into the bill!!

Its your call but honesty could just pay off.

Emps

Well Emps, after further discussion we actually agreed on a concept much like that. We figured we'd not shave EVERYTHING off the bill but maybe a hair of it to develop that sort of repoir and get referrals rolling. I put myself in the customer's shoes for a second..."why would they give us a discount? Wow that's really friggin' cool!" is what I came up with. I'm sure sacrificing that cash would pay itself off and then some! Thanks.

Good choice, Thumper. Happy customers are your best possible advertising. Might even ask if they would mind being put on the reference list. Let your potential clients talk to them...

Never underestimate the Power of the Dark Side.

I pretty much always charge a flat rate on a project, and here's why: especially on web stuff, why i should be charging less because i'm faster than the other guy?

chris


KAIROSinteractive

I tell this story periodically. When I was first starting doing freelance work, I was doing pen & ink sketches, colored with watercolor or pastels for Interior Design firms in NYC. You know the kind of stuff, they show it still in magazines, ie: "here's what your flat *could* look like!" I was very good at this kind of stuff, I used to do it a lot back when I was designing furniture back in the 80's, and people wanted and needed my kind of work in order to sell their designs.

So! I started doing this work on the side, freelance. It would take me about 20 hours to do a good rendering, something maybe 16x20", worthy of framing sometimes. For this work, I wanted $20/hour. Funny thing, while people who had worked for me in the past loved it, finding new clients was hard, nobody wanted to hire me! So I had this brainstorm and started charging $60/hour and telling people it only took me 10 hours (even though it still took 20!) Business began to roll in, go figure. I was charging more money than before, doing the same work, and people were happier to hire me! Was this logical? No, not really, but people are funny sometimes.

The moral? There could be several I guess - people might be idiots I suppose. I figured that people valued things that seemed expensive more than things that seemed cheap. For my part, I always charge the proper amount, the rest is just presentation. Get the job! Then do the right thing. That's "life as a freelancer" in my opinion.

Your pal, -doc-

Ya know doc, I've got a friend now doing visual effects work who tells a similar story of upping his rates. weird...

chris


KAIROSinteractive

Heh! Doc, I know EXACTLY what you are talking about! I think that the mass brainwashing in this society has given human beings the inherent perception that quality is directly proportional to cost. The more expensive, the better. I guess that's why Nike can design a shoe that looks like shit, charge an arm, and top their competitor's sales and then some. I believe it is along the same lines as the "Dr. Fox Hypothesis". Damn funny! I sometimes catch myself doing it though. I really think it is conditioned during early childhood where the pressures to be popular are at its highest. I heard a song one time had the words "...that the world is full of stupid people..." I guess if they set themselves up for it, take advantage! That's a good idea though!!

Dr. Fox Hypothesis?


Harmonizing new illusions...
ICQ: 67751342

Dr. Fox was an actor who looked distinguished and sounded authoritative. He was provided with a fictitious but impressive biography and was sent to lecture about a subject on which he knew nothing. The talk, "Mathematical Game Theory as Applied to Physician Education," was delivered on three occasions to a total of 55 people. One hour was allowed for the talk and 30 minutes for discussion. The audiences consisted of highly educated social workers, psychologists, psychiatrists, educators, and administrators. The lecture was comprised of double
talk, meaningless words, false logic, contradictory statements, irrelevant humor, and meaningless references to unrelated topics. Judging from a questionnaire administered after the talk, the audience found Dr. Fox's lecture to be clear and stimulating. None of the subjects realized that the lecture was pure nonsense [Naftulin et al., 1973].
If an unintelligible communication is received from a legitimate source and if this communication claims to be in the recipient's area of expertise, recipients might assume that they are wasting their time because they receive no useful knowledge. In terms of knowledge, they would be wasting their time. But their involvement in this activity may lead them to try to justify the time spent. Furthermore, the greater the unintelligibility, the greater the need to rationalize
about the time spent (e.g., if you cannot understand a paper, it must be a high level paper). This might be called the Dr. Fox hypothesis: An unintelligible communication from a legitimate source in the recipient's area of expertise will increase the recipient's rating of the author's competence.