Most clients we speak to have a budget in mind for each of their digital projects and will happily tell us what it is. Every company will know how much it can afford to pay for advertising and marketing their business and work within this amount. After an understanding of the scope of the project, knowing the budget the client has in mind for it is the most important piece of information we require. Why?
Firstly, we need to be sure that the client has a realistic budget to complete their project, to the required scope and quality. The budget required for a small brochure site, to promote a local business, without any complicated functionality or branding work, will be very different from a fully-functional ecommerce website for a new brand, with thousands of products and multiple delivery and payment options. If there is a significant disconnect between the project scope and the budget then we need to address that as soon as possible. There would be no point in us wasting hours of time preparing a proposal and fully clarifying technical and design specifications if the client does not have a suitable budget for the project.
Secondly, we need to fully understand the expectations of the client. For example, the amount of branding, design and user experience work required to create the mercedes.com website is considerable. They will have allocated a budget to create the website that was in the tens of thousands of pounds/dollars. A project of that scope, complexity and design quality could not be done for less.
We base all our quotes on the number of design/development/UX/project management hours required to complete projects to the agreed scope and quality required by the client. The budget must be in line with this or we need to reduce the project scope. The image to the right shows this classic time-cost-scope triangle. We do not compromise on quality, so if the budget is not sufficient to pay for the required hours to complete the project, the scope will have to be reduced.
Where possible we work using an agile project process. For us, this means we will break down the project into stages and allocate an estimated time in hours/days for each stage, based on our experience of delivering similar projects, and the price we quote the client will be hourly rate x total time for the project. This is not a fixed price, if we complete the project in less hours than estimated we will bill for less than the original quote, but if we take longer, for example if technical issues are encountered or the client requests new functionality or design work (the project scope increases) the total cost will be higher than the original quoted amount. We like to advise clients to budget 20% more than our estimated cost, to cover these eventualities.
Fixed price quotes
We all like to have fixed price quotes. For example, when I take my car to the garage they will tell me how long the repairs will take and what their hourly rate is. Add on parts and that is the cost. So why can we not do the same for our clients? Well, changing the brake discs has very little in the way of variables. It is a simple process, with little risk that it will take longer than the quoted timescales. Creating design work for clients and coding functionality has a lot of variables. Design is very subjective, the amount of research and the fine-tuning of concepts required to satisfy the client and achieve the business goals is impossible to predict with 100% accuracy. Similarly, creating and modifying software has a number of variables and parameters. The amount of client interaction and therefore client/project management can also vary significantly for each project.
That said, we have and do give fixed price quotes, for small projects, generally changes to existing websites/applications, where we can accurately predict the scope and therefore time required and also specific pieces of design and small website builds, where the project is well specified and the the bespoke functionality required is very limited. We rarely give fixed price quotes for large web applications and ecommerce builds, for obvious reasons, the required effort cannot be accurately estimated. The larger and more complex the project, the larger the uncertainty in time estimates.
Clients feel they have security in a fixed price quote, but there are downsides. Most importantly, it removes flexibility in the project. The project has to be specified very closely and any changes will have to be agreed and costed. This can lead to an increased timescale for the whole project to be completed and also misunderstandings. Relationship and understanding is paramount in any successful project. Fixed price projects increase the risk of a breakdown in the client-supplier relationship, possibly affecting communication, quality and project timescales.
Working with an agile process allows complete flexibility and transparency. The client will get weekly highlight reports detailing the progress on the project and the effort used. Clients can add in extra requirements as needed and change part of the project scope mid-project. The client will get exactly what they need/require and the supplier knows they will get paid for all their project effort. Risk is reduced for both client and supplier. Above all it works. We and the client feel less stress during the project and the end result is exactly what the client and their business needs.