View Full Version : Billing for proposals.
06-10-2004, 12:48 PM
Related to dealing with difficult clients. I started implementing a strategy, whereby, in meeting with a prospective client, I provide one-hour free consultation. I then explain that in developing a proposal for the project, it is billable at my hourly rate, unless I am hired for the job.
Has anyone used this strategy? What's been its outcome?
06-10-2004, 01:12 PM
I haven't really thought it through, but my first reaction was that this might turn off prospective clients.
They might think that you are so hard up for money that you have to resort to non-standard business practices.
If they are investigating several vendors at the same time, your assertion that they will have to pay for a proposal may push them away.
Again, this is just first reaction. I'll post again if after thinking about it, my opinion changes.
06-21-2004, 11:15 AM
I tried to do that for a bit, thinking it might help with problem-clients too. Thing is, it's true that having to pay for a proposal will turn off a lot of potential clients, especially in today's relentlessly competitive market. After several situations where I didn't even get to the proposal stage ("I have to pay you...?") and even some where they went ahead and agreed to it, chose another vendor, and then refused to pay (legal battle for a few hundred bucks? Not likely), I abandoned the practice.
These days I do two proposals: one's a pretty straightforward 'form' style proposal with some tweaks and a rough price. Very few details (avoiding them running off to another firm with my proposal and saying "I want *this* done") but a statement within that states that another, more detailed document will be generated after signing a contract. These are cheap to make, so minimal loss.
The second proposal is more detailed and outlines the goals and critical paths, along with soft timelines. Think of it as a 'business plan' for the project. Strap the cost of the document into "Project Administration" (or whatever item you strap in the cost of meetings and whatnot) and voila! The client is paying for your valuable time.
This really doesn't address the problem-client, but it minimizes the amount of spec-work done. If you know somebody's going to become a problem-client, then my usual M.O. is to simply not take the case. They'll end up costing you money, so why bother even trying to get into a project that isn't equitable?
Anyway, using this method seems to work for me, I'm sure there's a hundred ways to skin the cat and wear his bleeding pelt on your head and run around screaming about the aliens reading your mind.
Hope it helps...
06-21-2004, 11:38 AM
Thank you for your response to my query. So far I am batting 50-50. The client that accepted my terms, gave me a smaller web development job to test my services, with the larger job that I created the proposal for, waiting in the wings while I prove my services.
The other prospect has not responded to my initative, but the difference was that she had been trying to do the work on her own through a template that wasn't working out. So in short, one had the money, the other didn't.
I will continue to experiment to discern if it helps in separating the wheat from the chafe.
06-21-2004, 12:52 PM
It's a common practice, especially if you get to meet with clients often. It is also not a bad idea to charge a set fee when a clients requests a written proposal. However, make sure that the client is informed of such policies beforehand. Most of the time it is quite alright with the clients if the fees become a part of the total costs of the project if it is awarded to you. It is also expected that if they pay for proposal you get them a detailed one and not just a teaser.
06-21-2004, 01:00 PM
Charging a fee for the proposal really depends on how detailed the proposal is and how much information is revealed, such as what needs to be done to a website for SEO purposes.
ReviewGolf has a great suggestion--making the fee part of the overall project costs seems very reasonable.
06-21-2004, 03:15 PM
For a large project I do a preliminary outline for free (takes me usually from one to three hours) and a detailed proposal with some sample pages and time estimate breakdown, etc. I bill for.
I get a verbal agreement and sometimes a short contract based upon the first outline, then we sign the 'real contract' upon completion of the detail analysis. But when we proceed past the preliminary outline, it is understood that I will be doing the project.
I would question a prospect who wanted a detailed analysis from me before committing to having me do the project. And I would be darn sure he understood that I would be paid for the analysis.
Doing a project analysis is part of the development process. If you're going to do that part without payment, why not layout the database and navigation structure for free? While you're at it, how about the design and images?
I spend from one to three hours on 'speculation', depending upon the size of the project and my expectations of winning the bid. That's it. If I want to gamble more than that, there are horse races, poker and Vegas.
06-21-2004, 03:33 PM
I don't think this a good approach at all. I know it's tempting, and I'm sure many consultants wish it worked this way, but clients won't pay unless there is an exchange of value. A proposal does not offer value. One thing you CAN do (this has worked incredibly well for me in the past) is offer the client a needs analaysis report that will outline strategic requirments, site plan, recomendations, etc. and then charge them for that. This documents will acheive a few things:
1. it will let them better understand what they need in advance
2. it will give them a specifications document that the client can use to issue a request for proposal if they are going to send the contract out for bidding (don't worry, you helped create the specs so chances are you will win the bid)
3. It helps you understand the requirments so you can create an accurate quote
4. It makes you some money
5. Becuase you helped them create their "site plan" you are in a great position to get the rest of the contract.
I've been doing this for 9 years. I have clients such as Nortel, Fuji Film, MyFax.com, and I have closed hundreds of contracts using this "solution sales' approach.
BUT, most importantly, learn to qualify clients. My proposal/closing ratio is almost 9:10 becuase I've leanred to sniff out qualified, serious clients over those that are looking to waste my time.
I always look at a proposal as being a $1000.00 investment of my time, so I interview the client to make sure they are qualified:
-Do they have the budget and how much do they have to spend?
-Do they have the authority to approve the budget
-What are they looking for in a vendor?
-Is there a mutual fit between them and you?
If you can't get straight answers to most of the above questions, feel free to move on. After all you've probbaly just saved yourself countnless hours of frustration.
06-21-2004, 03:46 PM
I never bill for the proposal itself. However, for advanced projects I quote a fixed design fee, and an estimated range for implementation of the project.
The design phase has tangible deliverables, like mockups and requirements lists, and includes a fixed quote for the rest of the project.
I typically get about half of the design fee up front, then the rest of the design fee plus a portion of implementation fee at the conclusion of the design. At worst I'll eat half of the design fee if the client walks after the design.
06-21-2004, 05:17 PM
it's been my experience that a problem client is a problem client - implementing a fee to create a proposal won't necessarily screen out the problem clients - they often have no problem paying you in order to acquire another person to boss around... heh
06-21-2004, 05:46 PM
I agree that it is common practice to charge a fee for a proposal depending on how big the job is. However, only when the proposal is more than just a proposal.
By that I mean that if it's just a proposal for a medium to small project, like a mostly static web site, my company would not charge. We do, however, charge for SRS/PRS (Software Requirements Specification or Project Requirements Specification) More Info (http://www.google.com/search?hl=en&lr=&ie=UTF-8&q=project%2Fsoftware+requirements+specification). Most SRS's are written for large coding projects but we have adapted them to suite web design work as well.
Sometimes a detailed outline of what you are going to do can save you lots of time and money at the end of the job when most clients start to want more features for free. With a clear definition of what the job entails you can charge more for extra work not included in your original proposal.
Half down is also definitely the way to go IMHO.
06-21-2004, 07:50 PM
For me it depends on the size of the job. A basic quote I provide free, if the customer wants more or if the job is large enough to require more then its time to charge....
I posted this recently and only got one reply but it seems relevant...
I just received a customer request to provide a proposal for a new web-site design. This request has gone to other web designers and the customer will make a decision on price and design.
They wanted a fixed price quotation and a template design with WOW factor!
From the specification they provided, I estimated that the template design would form at least 25 to 30% of the total site price.
My response was to advise that I would provide a price quotation free but would charge for constructing a template design. I provided a price for this template design and advised that if my company was successful that this would form part of the total price, otherwise there would not be any refund.
I also stated that if my company was unsuccessful, then this template, or part their of, could in no way ever be used for this site or any subsequent site.
How much are you expected to do for nothing to win a job? Am I being paranoid? What do you think?
The customer has just got back to me and said that they could not get any template designs from any website designers so not to worry about it!
How bout that...