Monday, 22 February 2010

Fixed Price, Variable Scope....

We recently missed out on a project because our price wasn't fixed. The potential client said "Due to the other quote I received giving a fixed and set price, I've chosen that company as yours being open ended with hourly rates, I was worried this could severely mount up and way exceed budget."

On the face of it you might think, fair enough, people need a fixed price. Well, you'd be wrong and here's why.

To give a fixed price you need, and I mean NEED, a fixed scope of work. If you don't get a fixed scope but give a fixed price you are on a road to nowhere. Businesses giving fixed prices against variable scopes go bust very quickly. You need to know exactly what's needed and exactly what you are going to deliver. Where websites are concerned this is often just not possible as clients rarely know exactly what they want, things change as the project progresses and people start to 'get it'.

Fixed prices on variable scope projects result in the agency rates being degraded to the point where they are no longer making a profit. You start out at £50 an hour, for example, for 10 hours = £500. The scope creeps, the fee doesn't and suddenly you've done 20 hours of work for £500 = £25/hr. With a break even to run your business profitably of £40/hr you are now losing money and tensions start to run high, both you an the client start to get tetchy and things spiral out of control.

That's not to say some parts of a project can't be fixed price whilst other parts are left variable. For example, if a client doesn't know exactly how many pages a website is going to have it's impossible to give a fixed scope of work. In this case the design and build would be fixed but the content work would be variable. It's just common sense.

The only way to give a fixed price against a variable scope is to price the project way over the top to cover the worst case scenario, this doesn't give clients good value for money in my opinion.

This problem gets even more acute where SEO is concerned. Here's another quote from a client, a different client. "How much to get our site onto page 1?". Well, how do you answer that. You start by saying you can't guarantee to get a site onto page 1, then continue with an outline of the work required to make a site the best it can be. SEO never stops because making a site the best it can be and better than its competitors is a never ending task. The best approach is to adopt the tack taken by PR companies and charge a set monthly rate in return for time spent improving the site.

The alternative is to do the work yourself, it's that simple. The work needs doing and someone is going to have to do it.

TTFN

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More in this category: General Chat, General SEO