Marcus on budgets

A week or so later, the client calls to say that our proposal was probably the best of the lot but, in the end, we lost out on price..

So here’s the situation: I receive an invitation to tender in my inbox from a potentially good client. The brief is well written and, for the most part, the requirements are clear. The first thing I do is check the timescales, second is to see what the budget is.

This is a guess, but I would say that 7 out of 10 ITTs do not include any budgetary guidance. So, I phone up to discuss budget. The private sector is either amused or affronted that I am asking and I am basically told ‘you tell me’. The public sector simply states that it is not allowed to tell me.

I then spend a day or two of my time preparing our proposal. This is often followed by us being shortlisted, so I drag Paul out of deepest Dorset and we both travel to present our pitch. A week or so later, the client calls to say that our proposal was probably the best of the lot but, in the end, we lost out on price.

Anyone who ever got involved in a pitch will now be nodding their heads.

I don’t want to get too cynical here so, I should say that this scenario happens less often these days. This is firstly because I make a positive effort to combat it – that I am going to share with you – and secondly, clients understand the difficulty it can cause so are less likely to keep their budget under wraps.

So why do we need to know

The first reason, and most honest reason, is that we don’t want to do a lot of unpaid pitch work when there is no chance that our price will be accepted. Who would? It’s like having 10k to spend on a car then going and asking to test drive an Aston Martin. You are completely wasting the Aston dealer’s time. (I’m not suggesting a correlation between Aston Martin and Headscape by the way!)…

But this goes both ways – the client’s time is also being wasted. Ok, so it may only be the time to read the proposal and reject it, but what if all the bids are too expensive? Then the client needs to go through the whole process again.

The second reason why we need to know budgets relates to what we would like to include in a proposal over what we need to include.

For example, take usability testing. We always highly recommend that a client pays for at least one round of usability testing because it will definitely improve their new site – no question. But, not doing it doesn’t mean they’ll end up with an unusable turkey. It’s just more likely that any usability issues will crop up after launch.

So, do I include usability testing or not? Another good example of this is additional design concepts. Some clients love the idea of being presented with multiple design concepts, but I am less likely to include them in a proposal where I don’t know the budget.

How to find out

I have found that the best way to discover a budget is to simply provide a ballpark total, usually accompanied by a list of ‘likely tasks for this type of project’, in an initial email or telephone response. This usually gets the discussion going, even with those public sector people who ‘cannot’ discuss it.

Expect a lot of people to dismiss you out of hand. This is good. Don’t be tempted to ‘just go for it’ anyway because you like the client or work is short – you will regret it.

Others will say that the ballpark is ok. This is not as good as getting into a proper discussion about what priorities they might have but it does mean that you are not wasting your time and you do have a chance of winning the work.

The only real risk with this approach is that you misinterpret the requirements and produce an inaccurate ballpark.

Another way

Finally, there is a less confrontational approach that I sometimes use that involves modular pricing. We break down our pricing into quite detailed tasks for all proposals but when I really do not have a clue about a client’s budget, I will often separate pricing into ‘core’ items and ‘optional’ items. This has proved to be a very effective method of presenting price.

I tend to go down this road with prospective clients who have had personal recommendations about Headscape. It is likely that price has already been discussed so the prospect already knows what our rates are.

  • http://www.blueclock.eu BlueClock

    I usually opt for the modular approach as it not only gives the client flexibility to pick and choose what they can afford, it enables them to realise what they are ready to take on in terms of committing human resources. The main advantage that I find is that it also sets out a programme of work for future enhancements to a site.
    The only downside can be the interdepndence between the core and optional aspects of a proposal.

  • http://www.blueclock.eu BlueClock

    PS is this Marcus’s first ever post and if so do I win a prize for being the first person ever to comment to a Marcus post. Worth a try eh.

  • http://www.massmed.org Frank Fortin

    As a client, I always put either a range or a maximum in my requests for proposals.
    That way, the bids I receive are more comparable to each other, and it’s easier to assess the relative strengths of each.

  • http://www.visitthames.co.uk Andy Yeates

    As a client i think it’s fair enough that a design agency asks for a budget figure. I can’t disagree with any of the arguments set out above.
    However, in my experience a client is best building in around a 10% contingency into the budget figure you give to an agency as things will nearly always work out a bit more than you expected. You forget things, extras creep in and sometimes unforeseen things come along.
    I think clients are reluctant to give a figure because 9 times out of 10, when you quote a budget figure, you get a price from an agency that is within 2 %. Funny that :D
    Nonetheless, as long as you ask for a breakdown of costs then you can judge whether the pricing is fair and you don’t waste your time with an agency you can’t afford.

  • http://www.wiltshirefarmfoods.com Matthew Curry

    From experience, I try not to give out what the budget is simply because there isn’t one yet.
    Annual budgets are normally agreed several months in advance of the beginning of the year, and if the website in question is a new project, it won’t have budgetary costs set against it. You can’t always expect to have a figure to work to – nor should you be – you should propose the best solution you think for the problem – if the client grits their teeth when you propose the cost, then you have to argue why it’s the best.
    What I’ve found, is that the CEO or a director or whoever will have a maximum figure that they would be happy to spend, but they don’t diseminate this to the rest of the team. I also agreed with Andy’s view that whenever you say a maximum budget, the agency will always come very close to it – which doesn’t give you any leeway should you want to change the scope slightly.
    But for agencies and freelance designers & developers, you should know where you fit in terms of rates and costs, if you’re more expensive than the norm, then you need admit that in your pitch, and show why your work is of a good enough quality to merit those higher rates.
    A modular approach is always good, that way the client has more of a shopping list they can choose from. Another approach is to go through your portfolio and say how much each site cost – this won’t always be easy of course – where I’ve found Headscape excels is the extensibility of their solutions, and so if I want a change it can be done without affecting the integirty of the site or database structure – this isn’t really something you can show in a pitch, which is where references come in.
    Whatever you do, make sure you DO include a cost – we’ve turned down a lot of agencies on the basis that they simply would not stick a cost again their ideas – in the eyes of a “hungry for blood” CEO – thats a sign of fluffiness that just wont do.

  • eb21

    Marcus, craking post. I’m eBusiness Adviser working for a governmental economic development agency. When going through an ITT I always have the client include an exact project budget or a ceiling budget, stressing that it wastes time not doing it, but it also starts to build the concept of trust between client and developer.
    Developers are “trusted” to respond within the indicated figure. You’d be surprised by how many developers come back outwith the clearly defined and in my expereince, adequate budget. Those responses go staright to the rejection pile.
    Often companies take a modular approach with an indicated ceiling price. Additonal services such as ongoing copyrighting, SEO are included as optional extras, above the original budget. In my experience client often opt for these extras when a project comes in within the agreed timescales and budgets. They “trust” the developer and are more willing to engage them in further work.
    Frank, your comment on making responses comparable is an important one. The ITT’s I help create include a response section that asks respondents to break down the work into induvidual costs per activity. This allows the client to easily compare responses when matching it to the approach contained within the main section of the response.
    Basically, as an eBusiness adviser, i look for responses clearly within the budget and make allowances for those who include additional modules for extra cost above the basic budget.

  • http://circle44.digiknow.com Scott Chapin

    I think your comments on this post and in the podcast are right on. I had just posted about the general topic of RFPs on our company blog a few days before your post.
    The more information we (agencies) can have up front, the better we can match needs and expectation.
    Here’s my post:
    http://digiknow.typepad.com/digiknow_blog_20/2007/10/do-rfps-for-dig.html

  • http://www.castus.co.uk Gary Hides

    None of the special characters are showing. All I’m getting is numbers, instead of Exclamation marks etc.

  • http://akrabat.com Rob…

    Any chance of fixing the apostrophes, etc?
    Regards,
    Rob..

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