Consulting & non-hourly projects: Ask for general budget?

[Smokystache]

I've begun to do some small projects for companies that tie in with my academic expertise. These are one-off projects, fairly involved projects where I have a general guess on how long they will take me to complete the project. For example, let's say a medium sized hospital wanted me to develop a program that would reduce burnout among nurses and would include: 30 page booklet/handout of information, some brief video clips to share internally about reducing stress/burnout, 5 articles of website/blog content, and a 50 minute presentation that I might provide for them several times. I know the topic, and have created similar materials, information for other topics - but never all together as part of one big program for an outside company.

My plan is to estimate the amount of time I expect it to take me and then add 25% more time to deal with unexpected problems, etc. I will also factor in how much I think this program will help the company and may adjust a little upwards from that (I have a tendency to undervalue my time). I plan to provide 2-3 options of various prices (they asked for this). They also mentioned that they had budgeted for this program.

Question: Should I ask them for a general range of how much they've budgeted, under the guise of wanting to create a proposal that has a chance of being accepted? This is not an open-bid situation, I have a specific area of expertise and knowledge about how that applies to a specific business (much more specific than burnout and nurses). I've begun working with this company on other projects and there is the potential for a lot of business with them. I have a very good working relationship with a couple of key contacts at the company.

I guess I'm curious if there are any fields/situations where asking for general sense of their budget would be normal.

[Ocinfo]

I don't have my own company but, as one part of my job, I do estimate costs for engineering and research projects for an 8,000+ person company (I'm an engineer, project/program manager). These are submitted to potential customers for pricing negotiations.

All of our work is outcome focused and done on a firm-fixed price contract. This means that we must accomplish the stated objectives and do it for the stated price (some work is leading edge so a viable outcome might be that xyz isn't possible). It also means a potential customer isn't talking to us unless other cheaper companies can't reliably do the work.

My point is that we basically do what you suggested where we have a pretty good idea of how to do things so we can estimate the number of hours and employee level. We add some risk adjustment factors and also add overhead costs (pays for admins to support work, paper, office, etc.) and other fees. Companies are use to seeing these charges. Just know that you're on the hook to deliver and if it's easier than you expected then make the end product nicer than planned and if it's harder than that's what the extra hours are for. Either way customer gets what they wanted.

Just remember, "pigs get fat, hogs get slaughtered." -some genius



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[CareCPA]

I have trouble with this as well, so I'm interested to hear advice.

In my mind, if you estimate the number of hours it will take you, and your quote is based off of that, you're still just trading time for money. The only difference is the client doesn't see an itemized bill of the number of hours.

I think the hard part is bidding based on your value to the company, not the amount of time. How do you know the value to the company?

[Heroes821]

My current business does consulting and the work I did at my previous company was billed similarly.  While a project might have a Quote of X the Hours still get billed at Y depending on who is doing the work.  A medium level worker might bill the client $250 an hour, but the employee will only get $50 an hour.  So while you feel that your personal work salary or pay should be w/e number make sure to add more to that to account for taxes, healthcare, any other benefits your business might provide you, business insurance if your work would need it.

I would also look into forming an LLC which is free and will allow you some legal protection and legitimacy to your work.

[Smokystache]

Companies are use to seeing these charges. Just know that you're on the hook to deliver and if it's easier than you expected then make the end product nicer than planned and if it's harder than that's what the extra hours are for. Either way customer gets what they wanted.

Just remember, "pigs get fat, hogs get slaughtered." -some genius

Good advice and always a good reminder. I definitely want a long-term relationship with this company - perhaps eventually do something on retainer.

I have trouble with this as well, so I'm interested to hear advice.

In my mind, if you estimate the number of hours it will take you, and your quote is based off of that, you're still just trading time for money. The only difference is the client doesn't see an itemized bill of the number of hours.

I think the hard part is bidding based on your value to the company, not the amount of time. How do you know the value to the company?

Yes, I was wondering if asking for their general budget for the project would be the easiest way to give me information about how much they value this project/program. I know sometimes people say, "It doesn't hurt to ask" - but I know there are some situations where it does hurt to ask .... as in, "if you were really a professional, you wouldn't ask that question."

My current business does consulting and the work I did at my previous company was billed similarly.  While a project might have a Quote of X the Hours still get billed at Y depending on who is doing the work.  A medium level worker might bill the client $250 an hour, but the employee will only get $50 an hour.  So while you feel that your personal work salary or pay should be w/e number make sure to add more to that to account for taxes, healthcare, any other benefits your business might provide you, business insurance if your work would need it.

I would also look into forming an LLC which is free and will allow you some legal protection and legitimacy to your work.

Looking into this. I've got a question up on the Taxes forum about the best legal and tax structure for the side business. I think for various reasons I need to move beyond my current sole proprietor status.

Thanks for the responses thus far.

[Heroes821]

Well, once you form the LLC the options of how you want to file are definitely open to you.  I think the general rule is that the business would need to bring in about $100,000 or more to justify S-election filing. Otherwise a sole prop should be fine.  As a side gig income on top of a normal W2 advice, definitely let the Tax section if you some more clarity.

[Axecleaver]

The way to approach this is to figure out what basket of services they want you to bid, and ask, "What's your budget for all of it? We can do this a variety of different ways, but I need to know your budget to give you good options." If they hedge, throw out a number (scope it at say, 1000 hours/6 months or 168 hours/one month of your time) and see how they react. Go big on the first number.

The reason they asked for choices, may be to dial in different budgets from a menu-based selection of services. $x to develop the content, $y to deliver it, $z for the desktop publishing, and so on.

Be prepared to provide transparency around your cost models. Customers who ask for choices, are sometimes searching for transparency on how you build your bids. As a buyer, I look for this myself. It helps to understand their models so I know how I can cut costs.