Determining Project Estimates and Consulting Rates

I have gotten very good at estimating projects (I mean huge projects from 15k to 2 million with time lines of a few weeks to over 2.5 years). My advise is create a itemized task analysis. List every task you can think of from documentation, deliverables like comps and final designs, feature-based items (news, events, online form submissions), to time for meetings, project planning and management, time for providing support and discussions on the phone, driving to meetings, lunches, everything.

Find everything you can think of that would be involved in your project and then try to determine how many hours you spend on each. Once you have buckets of hours, for individual tasks add 30% to 60% to the estimated hours (this depends on a lot of factors, but generally it can be how familiar you are with the scope, technologies, subject matter, and if the client is "high maintenance"). Over time you will start to get averages for similar tasks and estimating will take less time.

Group your tasks into logical stages I use a 5 stage process which can either be "waterfall" one stage after the other or more "agile" where you cycle through each of the stages multiple times over the course of the project. The difference between the two is money plan and simple; I generally don't do "agile" consulting unless the client has a blank check. Many clients push for "agile" thinking they will get their product faster for less money. That has never been the case, EVER. If someone is trying to sell you that "agile" is cheaper than traditional software development they are selling you snakeoil (that or they have a very robust development process that supports it).

Stages

1. Proposal/Inception
2. Design/Elaboration
3. Development/Construction
4. Testing/Training
5. Delivery/Support

Segment each of your tasks, "Design Comps" for example into discreet sub-tasks:

First there is inception, where you discuss business and creative concepts that will impact your design. At this stage you may write down your understanding of the client's requirements and use this general understanding to base your estimates and contracts on.

Next is Elaboration, where you write down (in detail) the business and creative concepts the client has stated to you, then you write up additional creative treatment concepts and justifications for the ideas that may convey the requirements the client has mentioned. At this time you would have the client sign and agree to the requirements and creative treatments prior to construction.

Next is construction were you work on 3 comps that reinforce the agreed upon business and creative concepts. During that time the client chooses one of the designs that is then used for the look & feel of system features (notice I stated system, not website? CMS systems are business systems not marketing brochure websites and should be stated to a client in that manner. Business systems are complex, robust, things that can be very challenging to tame).

In the testing and training stage you may document identity or design rules that content must follow (if the client is going to create content or a 3rd party is creating the content in the future. Make sure the client pays for this it isn't a freebie on top of the design it should have it's own budget.) to keep the design consistent.

Delivery and support involves delivering the creative assets to the technical team for integration into the business system.

That is just one item, each feature for the site from server setup to CMS setup and configuration should have similar tasks.

Now comes the hard part, which requires some soul searching, budgeting and arithmetic, and a shrewd knowledge of the creative and technical landscape. What rates do you use?

For my consulting company we spent about 3 weeks running numbers, calculating billable hours and non-billable hours, estimating the number of concurrent projects required to stay in business and make a profit, and estimated rates for 3rd party consultants (when needed) to determine our rate structures. We provide two types of rates the first is line item rates where each task or specialty has it's own rate. In a given day I may accomplish 20 different skills for a client each with a different rate and cost. (it pays to have a really, really good accounting package and time tracking software). Or the "blended" rate which is a upper-median rate that everything is charged at. Most clients go for the blended rate which can end up adding additional profit to the bottom line and make invoices easier for the client to review.

So depending on your work history, education, and your proficiency at your given skills your rate could range from $35/hr to $250/hr, this of course assumes you are working directly for clients. I'm sure you won't get rates like that working through agencies, you are lucky to get what? $35-55/hr through an agency or headhunter company? Why is that you may ask?

Well if you are sub-contracting through an agency or consultancy they have overhead. It also depends on what the company is providing to you as a consultant. Do they offer benefits, w-2 (managing your taxes and unemployment) or only 1099 (just give you a check)?

What many consultants don't realize is finding prospective clients, keeping the relationships going, and getting opportunities to bid on projects is time consuming it takes patience, shrewdness, and charm. Then you have to win the bid and fulfill the contract. Larger agencies usually involve a team of employees or consultants which requires coordination and management of both the team and the client's team. Then you have accounting, food services and meetings, electricity, business insurance, business registration and taxes, the list goes on and on.

Your lower rate pays for that, if however you were to go out and get the projects and accomplish all of the business oriented tasks and assumed the risks then you deserve the added rate.

As a sub-contractor you are providing your services to solve a business and or technical need. You are not taking on the risk nor the costs of running the larger business. And although when I consult on my own I can charge my full rate ($100-$250/hr) that is because I am taking on all of the risks and doing all of the work managing the business, sales, and clients.

Honestly working by myself it is harder to win larger projects for enterprise or government agencies; sure I can provide business or technical consulting but for larger, long-term projects I can't do all of the work on my own. Such jobs require development work where usually there are 2-50 person teams with varying levels of education, experience, and training.

Working directly for small, medium, or large businesses is the best route. Finding a way to market and generate clients is a totally different tome to discuss and there are plenty of business groups and business websites like linkedin etc that you could leverage. Usually we only bid on projects that will support time and materials and shy away (mostly) from fixed bid or RFP proposals.

But I'm sure you are asking, "But that rate is really high I can't get projects with that rate." I say wrong, think quality over quantity. Instead of having 30 barely break even high risk projects with low margins you could instead focus on 10 good projects with a high profit margin and lower risk. If a client doesn't accept your rate or estimate, drop them.

My's Rules of Profit.

• Do not negotiate a lower rate (unless you have already artificially inflated your rate).
• Do not drop your estimated hours (unless you have already padded the estimate above 60%).
• Work for profit not for some sense of good will or to benefit someone else
  (Even the noblest cause has people at the top making a profit)
• Believe in your worth
• Believe in your experience
• Believe that you are worth what you are asking and that you deserve it.
• If it were easy they wouldn't be paying you to provide consulting or to accomplish the development.
• And never, ever be afraid to just walk away from the bargaining table.
• If you make an agreement always keep your word and deliver what was agreed upon.
• Only state what you can prove.
• Prove your worth and experience by past work and successes.

** note rules of profit is not to be confused with the rules of acquisition.

Having been unemployed at one point for almost a full year with no work then scoring one big job I can tell you having lots of little jobs during the lean times would not have kept me out of debt nor would it have kept me very sane. Having one client with medium to large pockets who values your experience, work product, and services offered and will pay their invoices is worth 50 clients with little money and lots of demands. As those same clients (with little money) are the ones who will eventually put you in bankruptcy or in the loony-bin.