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The Boss of You

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Reader Q&A: How to estimate pricing when your time investment is unpredictable

May 3rd, 2010 by Lauren · 1 Comment

I posted on our Facebook page to see if Boss of You fans had any business questions for us, and we got a great one right off the bat:

I read your book (awesome, thank you!) and I ran into the first snag when trying to figure budgets. What i want to do would be a new venture into something I’ve never done before, and that each person does in their own way and pace (so asking others already doing it wouldn’t help much), so i have no idea how to figure how much production i can get done in how much time, hence i can’t figure an operating budget or make sales projections.

Any ideas/suggestions? I’m all ears!!

—Carina Feldman

Here are my thoughts: First off, are you able to track your own time for a few clients / projects and then average it out in order to estimate your costs? That would be my suggestion if it’s possible.

I strongly advise using a time tracking system (personally, I’m a fan of Harvest) to record all the time you spend on each project. From there you can generate reports to help you with your pricing.

If the clients and projects really vary, then you’ve got to find a way to predict the variables. For example, check out Ads With Intention’s customer intake form; it asks prospective clients to identify how much preparation they’ve done (photos chosen but not cropped, images already cropped & ready to go, or needing help choosing images & advising on content), which in turn allows the designer to determine how much time she’s likely to have to spend with the customer in order to get the job done.

Other lines of work have time-specific cost structures — for example, massage therapists or music teachers simply charge by the hour — but the rest of us have to estimate our fees based on the time we anticipate spending with each client, and then charge accordingly.

Now, that being said, time is not the only factor in your pricing. Some business experts advocate pricing based on the value of the service you provide, rather than the time it takes you to get the job done, and I think there’s some wisdom in that. But the challenge that a lot of us have when we’re starting out is that we often underestimate how long something is going to take us, and that means we under-charge for our services. The best way to find out whether you’re charging appropriately — at least in order to assess whether you’re making the salary you deserve — is to track your time, set a target wage for yourself, and then check your numbers for each project you have so that you start to learn what types of projects are more or less time-consuming (and therefore more or less costly).

For the sake of your start-up budget, you’ll simply have to enter some round numbers, and then re-assess after a month or two, once you have some firm numbers you can work with.

Tags: Business Advice · The Boss of You: The Book

1 response so far ↓

  • 1 Angela // May 3, 2010 at 8:49 am

    I strongly agree with Lauren on the time tracking. This is especially important on fixed bid projects and with clients who habitually scope creep. We track time to keep track of when projects are going over budget, estimate the variance in work with ongoing higher maintenance clients (usually clients that “churn” over work), and generally so we have *something* to tie pricing to on larger projects.

    I’d like to add that if you’re starting up, one of the best ways to come up with numbers is to break the project down task-by-task and assign a number to each line item. That way you’re not making such wild guesses…. instead you’re saying the the homepage design will take 5 hours, the product page will take 3, coding up the core site assets will take 20, project management will take 8. (Obviously you’ll need a line for each page of the site.) I break out excel for this task.

    Good luck!