How to Estimate a Project for your Clients
February 4, 2019
As a freelancer, each of your clients and projects may be quite different‚ which means there are a variety of ways to price your services. But, at some point, a client may ask you for an estimate to develop a particular project for them. Determining how to estimate a project can be tough, but if you break it down and gather the right information, you can arrive at the right price for that specific scenario.
Read on to learn more about how to determine a pricing model that’s just right for both you and your client.
What Is an Estimate?
An estimate is a quote on a project that you present to a client before rendering the services they’ve requested. When developing an estimate, you need to make an educated guess about how much time it will take to complete a particular project ‚based on the various tasks involved. Going through this process is also a great way to do some of your own math to determine if the profit makes the project worth doing.
Estimates are a big deal for freelancers, because they’re typically used when bidding on an assignment or trying to secure more work. But building an estimate can be risky: If your price is too low, you may not earn enough to cover your own costs. But if it’s too high, you may get overlooked in favor of another freelancer who offered a more affordable price point.
When done right, an estimate will help you realistically outline what you can do and how much it will cost. On top of that, it will help the client understand the scope of work and whether or not your pricing fits their budget.
How to Estimate a Project
If a client has asked you for an estimate and you’re eager to quickly turn something in and get the job, slow down. An estimate isn’t something you should whip together and submit. It should be created with care, so you can make sure you’re getting just as much value out of the project as the client. Here’s how to estimate a project in seven steps.
Step 1: Gather the Details
First, touch base with the client and get all the details of the project. Ask them specific questions that will help you determine which services to offer, and how big of a project it will be:
- What exactly are they looking for?
- What are the various components of the project?
- How will your finished product be used?
- What is the desired timeline?
For example, if you’re a designer, you’ll need some specifics about what the client wants in terms of assets. They may ask you to help create marketing materials including a newsletter, brochures and even business cards. In this case, these materials would be used externally to attract more customers and boost brand awareness.
Using all of the data at your disposal, you’ll need to create an estimate that fleshes out each of these parts with projected timelines and pricing.
Step 2: List the Tasks
Once you’ve gathered all the details, list out each and every task that must be completed for the project.
This may include time for research, design and creation, administrative tasks, revisions and more. Include everything that must be done to complete the job, as well as the behind-the-scenes tasks you’ll need to perform. Each of these tasks can take up a lot of time ‚and if you don’t include them in your estimate, you could get burned later.
Listing out the tasks and projecting your hourly rate for each can give you a realistic idea of the project’s scope, which can help guide your estimate. For example:
- Research = $25 per hour
- Design and creation = $75 per hour
- Administration = $20 per hour
Consider what your time and expertise are worth, and make sure your estimate reflects your value and a reasonable time frame.
Step 3: Map Out the Time Frame
Now that you have all of your tasks listed out, do your best to judge the amount of time it will take you to complete each. Give yourself a buffer, and remember that many things can take longer than you think.
If you’re having a hard time estimating, look back on similar projects you’ve completed. What were your billable hours? If it was a project fee, think back on roughly how long it took. You may want to start timing your tasks so you have a general idea of how long things take for future estimates.
Overall, a time frame estimate could look something like this:
As you can see, having this all mapped can set expectations with a client, while helping you accurately calculate the time and costs involved in the project.
Now that you have all the tasks listed out alongside the projected hours, it’s time to consider your hourly rate, as well as the additional costs that will go into the project. Ultimately, you need to understand the costs of the project compared to your hourly rate to make sure you can earn a profit.
Step 4: Consider the Costs
First and foremost, consider the labor involved. What is your typical rate for something like this? Next, determine if you need to outsource any of your work to other contractors. If you know you need to pay a contractor $25 per hour for assistance, and your minimum rate is $50 per hour, you might estimate‚ after tax and services‚ a rate of $100 per hour to cover those costs. It’s crucial to consider the cost of any travel, equipment and supplies that will go into the project, too. Let’s say these auxiliary costs add up to $1,000. You could factor that into your hourly rate, or you could present it as a stand-alone cost for which your client must reimburse you.
Now that you’ve set your hourly rate, contractor fees and auxiliary costs, you can weigh your income against your expenses to discover the total profit you’d earn from this project:
Now, to find your real hourly rate, divide your profit by the number of hours the project will take you. In this scenario, this comes out to about $61 per hour‚ which is above your minimum rate of $50 per hour, making this a project worth pursuing. It’s important to make this distinction before accepting an assignment.
Step 5: Create an Estimate
When you have the tasks, timeline and pricing mapped out, it’s time to create an actual estimate. There are free estimate templates available online, and your accounting software may even have estimate features that will make it easier to invoice later on. Decide which format works best for you.
The key to a successful estimate is knowing your worth, the costs of the project and the potential profit. But you also want to make sure your client feels like they’re getting the best value possible.
I suggest offering varying price points and options with what you can deliver. As an event planner, I’ve sent an estimate to a client with three different price points and work options. That way, they can see what the value of each item is, and have the option to choose their price point. Aim a little higher with your pricing and have room to negotiate down, but always know where your minimum lies.
Step 6: Present Your Estimate to the Client
After carefully reviewing your estimate and making sure you’ve captured all tasks and costs involved, it’s time to submit it to your client. Consider adding the following phrasing when you send it over:
Thank you for considering working with me on [Project]. Attached is an estimate of the project. If approved, I ask for a 50 percent deposit up front, and the remainder within 30 days of the project’s completion. I’d be happy to adjust any part of this estimate and talk further about the scope of work.
Thanks for your time.
In your communications with the client, always be clear about the terms and conditions, as well as any expectations regarding your estimate.
Step 7: React to the Client’s Response
If a client approves your estimate, it’s time to get started on the project at hand. But if they request a few changes or reject your fee, you’ll need to take some additional steps.
You can go about this in a number of ways. First, you can ask the client to point out their concerns in the pricing. Use this opportunity to explain why something is priced the way it is (and the value your work will provide them). If they have a better understanding of the reasoning behind the pricing, they may be more willing to accept.
You can also ask your client what their ideal budget is, which can help you trim some unnecessary items, or remove some of the service offerings to align your estimate closer with their number. Just be wary of discounting your fees. After all, you shouldn’t compromise on your value.
Once you’ve made your changes, submit a revised estimate outlining what each party wants. Hopefully, that will push your client closer to an approval.
As a freelancer, you should never sell yourself short. The goal of an estimate is to ensure that each party is happy with the scope of work, value provided and cost.
If your estimate isn’t approved, don’t get down about it. Creating an estimate is good practice, and it will become second nature over time. This process will also help you discover which clients are worth working with, and which might not be a good fit.
Mastering the art of creating an estimate can go a long way in your freelance business. And when done right, building estimates can help you book more work and set clear expectations with your clients from the start.
Melanie Lockert is the founder of the blog and author of the book, Dear Debt. Through her blog, she chronicled her journey out of $81,000 in student loan debt. She is also the co-founder of the Lola Retreat, which helps bold women face their fears, own their dreams and figure out a plan to be in control of their finances. She is passionate about empowering women, helping others get out of debt, and focuses on the intersection of debt and mental health.
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