I know a lot of web firm owners and something I have found curious is the vastly different ways in which they manage client projects.
I’ve seen a lot, from the creative agency that gives the customer a handshake promise for a great web site, and then nickles and dimes them along the way adding 20 – 50% to the project.
Then there are the companies that excessively scope out projects ahead of time just to avoid scope creep. These companies sell strategy phases and have a personal goal to avoid at all costs any surprises down the road — both to the client, and for themselves.
Then there are companies that choose to charge an hourly rate and enjoy the benefits of not having to write endless proposals… a frustrating process. Their friends tell them they could make more if they gave out fixed bids.
Lastly, there are companies that respond to RFPs and other large contracts, and put in gigantuan proposals (100k +) and eat the endless change requests that the clients have. These kinds of companies only get 5% – 10% of the jobs they pitch, but the number they win continues to grow as they mature.
Most companies blend these approaches, but follow one or two consistently.
Which one are you?
7 responses to “Web Agency Owners”
We’ve moved towards charging hourly more than not. It is true that you can generally make more with a fixed price, but they usually end up being more stressful because so many things have to be put in writing.
Clients generally end up happier with an hourly rate because A) 9 times out of 10 they spend much less and B) they are able to modify things along with the process instead of having to change a contract to implement the new ideas they have.
You’ve explained exactly why we like working hourly.
we charge a fixed price for a fixed time frame, this is different from charging by the hour as we always cost in some ‘just in case’ time. If anything significant changes along the way we stop and either do these changes as a phase 2, or cost them out as additions and amend the times to suit.
we prefer phase 2 type solutions as we get to concentrate on getting phase 1 out and making money.
We’re hourly. The disaster contracts that I’ve worked on have all been fixed-bid. Hourly, everyone ends up happy.
It’s just too hard to get an accurate bid for something as complicated as building most web applications. Too many things can go wrong. You end up having to double your bid by default and then you’ve priced yourself out of the running.
My question is how on earth do you get people to agree to an hourly rate? Don’t your customers then simply insist on knowing how many hours it’s gong to be? How do you get them to sign up for “how long is a piece of string” pricing?
I usually give them a rough estimate with the caveat of “it might cost more it might cost less”. Then they are fully aware that if they want something changed – it’s going to be more hours and more money out of their pocket. It makes everyone think about stuff.
Yikes! We fit into the first and last profiles. Are those the evil ones? 🙂
That said, I never agree just based on a handshake, as a casual promise will always come back to bite the customer, and the agency. Better to have a formal agreement written in common language that both parties sign on, but don’t go hardcore on the scope, which is never accurate in the end anyways.