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New Business Dealing With Clients On Cost Issue

Joined: 11/28/2008

Hello all,

Quick background info: I started my web design business about 5 months ago. I have been in the field for about 12 years and after getting laid off again, got down on my knees and started the business.

Question:

I have a potential client that I gave a proposal to recently who wants a brand new site with a complete CMS solution built into it. I am subbing out most of the work, managing the project and am curious how you would reply to their thoughts on the price. Basically they told me that the price was almost double what they expected to pay.

I am paying $X to the developer for the work, I added some money for my project management time and a little bit more money for profit into the proposal. The dollar amount they told me they expected to spend wouldn't even cover the cost of the developer let alone my time or any profit.

Would you walk away from the client? Would you stick to your original numbers? Would you try to meet in the middle to at least get some money for your time and for profit?

How would you handle this?

Thanks in advance.

Eric

Joined: 11/28/2008
Would you walk away
QUOTE
Would you walk away from the client? Would you stick to your original numbers? Would you try to meet in the middle to at least get some money for your time and for profit?

I'd walk away.

Politely leave the proposal figures with them, and tell them that you'd love to work with them, but that your price is reasonable and can't be reduced.

One of the first things we do on a proposal is scope the clients budget; we don't quote for a five page website then deliver a CMS-based solution, and vice versa. That sounds like the only mistake you made - not knowing the budget early enough - but if you drop your price by 50%, the client is going to think that everything you do is overpriced by that amount.

All is not lost. You've learnt about the clients business area, so start approaching his rivals with a proposal for a website. All the work has already been done...

HTH,

Pete.

Peter Connolly
Technical Director
KP Direction LLC
http://www.kpdirection.com
http://www.kids-faith.com

Joined: 11/28/2008
Peter,I was thinking the same

Peter,

I was thinking the same thing.

In regards to your comment about finding out their budget, how do you approach this? Do you come right out and ask them if there is a specific dollar amount they are looking to spend?

I'm not sure if this was my mistake during my discussions with them or if they just didn't have a realistic idea of what a full CMS solution would cost. I say this because they repeatedly said they want to be able to update the site themselves without having to call me or email me. Maybe I made a poor assumption but I just assumed that meant CMS.

Thanks

Eric

Joined: 11/28/2008
QUOTE(encsteph @ Jul 15 2008, 06:12 PM)
Do you come right out and ask them if there is a specific dollar amount they are looking to spend?

Yep; if you're shy about asking how much they have to spend, you'll never find out. If they don't want to tell you, they're probably a tire-kicker. No-one calls in a web development company without some initial idea of how much they want to spend.

We hit them with our ballpark costs very early on. Never over the phone, but if we're in a meeting, we start feeling them out. "OK, so it looks like you need X,Y and Z. We offer a five-page X for $n,nnn, whilst some recent sites we did with Y in them cost $n,nnn. To add in Z, you're looking at a CMS, and our typical clients of your size who edit their own content are usually more committed to their website and generally want to spend about $n,nnn. Now, lets talk in more detail about timescales and break the project down into needs, wants and nice-to-haves..."

That sort of approach works on several levels; firstly, they know how much they'll need to spend for the magical website that they want. Secondly, they know that we have clients of their size, and how much *they* paid for their website, and thirdly we've engendered a 'need' in them to be at least as good as these other companies.... so they'll go for the high-priced jobbie.

Note that this is for a simple 'How much will you charge' conversation, and there is a limit on the size of client you'll ever get with that approach. If you come to the client more as a business consultant, you can sell the website more as a route to market rather than as an electronic brochure. If you can put numbers on the site - x site visitors => y new customers => z increased sales = bigger profit, then you'll make more and bigger sales. If I come to you and sell you a $2,000 website, you have a $2,000 website. If I sell you the principle that the website will bring in 20 new customers a month, each making a $1,000 purchase, then that website is worth $240,000 a year to them - so I certainly wouldn't be selling it for $2,000.

Peter Connolly
Technical Director
KP Direction LLC
http://www.kpdirection.com
http://www.kids-faith.com

skenow
skenow's picture
I recommend listening to the

I recommend listening to the Web Site Preproduction podcast episode at Geeks & God (look under Past Episodes) - they cover the project management aspect quite well, and touch on budget (but no specific $ amounts).

Have the client prioritize: Cost, Scope, Time and Quality. Initially, the client will come to you (at least, they should) with a list of features they want, the budget they have and the time frame to complete - or this should be part of your discovery process as you define the project. From this, you develop your proposal and decide whether, or not, you will, or can, accept the work. Once you have an agreement of what their priorities are - budget, time frame, scope of quality (pick 1), start brainstorming with them to determine the details of the project. You may find something will change - the budget, the scope, the quality or the time frame will change, and any changes will affect the others.

Stick with your price, based on scope, quality and time frame. You can counter with a new proposal that will be within their budget - not the same scope or time frame as the original, but one that meets your needs, too.

Joined: 11/28/2008
You might be able to reach a

You might be able to reach a compromise if you can show them why it is worth what you said and not what they thought. They might just be trying to bargain you down a little.

~Andrew~

Joined: 11/28/2008
My brother and I have started

My brother and I have started a local design firm here in Dallas. What I've found is that if you deal locally you can charge a lot more.

My parents had an old friend from collage that happens to work here in Dallas in the sales management department for a company that does web work. I was absolutely shocked to find how much they charge (and that it's, like, standard). To give you a rough idea here is part of their template contract they use:

a. Basic HTML editing, content changes $90 /hr
b. Creative Design (Layout Design, Flash Design) $125 /hr
c. Basic Programming (JavaScript, Flash or ASP) $155 /hr
d. Advanced Programming (ASP, ActionScript, .NET, XML, etc.) $175 /hr
e. Server Administration $155 /hr
f. Database Creation and Administration $175 /hr
g. Site Testing and Review/Approval Process Tasks $45 /hr
h. Project management and client communication $90 /hr
i. Basic Graphics (Image manipulation) $90 /hr

We didn't charge near that for our first gig that we got last week. Simply because our portfolio isn't very big (but we still charged a nicely sized amount). But we do plan on raising prices slowly for our work over time.

I was starting to think the web design biz was saturated and low pay... turns out, here at least, that there is a huge demand for local developers (specifically local).

My blog about web development.
And my site about game development.

>>> math.sqrt(-1) == joey101
True

Joined: 11/28/2008
encsteph @ Jul 15 2008,
QUOTE(encsteph @ Jul 15 2008, 06:12 PM)
I'm not sure if this was my mistake during my discussions with them or if they just didn't have a realistic idea of what a full CMS solution would cost. I say this because they repeatedly said they want to be able to update the site themselves without having to call me or email me. Maybe I made a poor assumption but I just assumed that meant CMS.

While its a good thing to look back at the communications that brought you to a point of disagreement, it isn't worth worrying too much about. Time spent finding good clients is better than time spent trying to do what can't be done for a reasonable price. Some clients you just don't want and can't afford.