As I am able to read the thoughts of design professionals, I can provide a transcript for what goes through each and every one of your minds while you're estimating a design project:
"Hmm... I think this project is only going to take me 20 hours. Last time, it took me about three days, and we only billed them for 15, so if I make it 20 then it should be approximately what it took me to design it last time."
Time passes. Your boss and/or the account manager review the estimate and think that it isn't cost-competitive. They want you to find places to cut your hours.
"Hmm... maybe I can do the concepts in 16 hours. That seems like one of the few places we might be able to cut back. Besides, I've designed a ton of web pages, so this one should be a little easier than the last time."
Sorry to break it to you, but you're going to spend at least 24 hours working on that project you just squeezed into 16. You're also going to lose money on that project, unless if you bill an astronomical hourly rate.
Why does this happen over and over again? Because of these very common estimating issues.
1. When you cut corners, they always grow back.
If a client, project/account manager, or pretty much anyone on the street asks you to revise an estimate to lower your overall project cost and you don't cut your deliverables, you will still end up working the amount of time originally estimated. That's just the way it is. Perhaps it's subconscious in the designer's mind as they're fulfilling the project, or maybe it's the truism that you can't rush great work. Either way, this is the primary reason that designers blow budgets.
2. Estimating processes don't force breathing room.
On any estimate, you should be adding a creative pad of at least 20%. Some designers, when self-estimating, can be off by as much as 50% to 100% on a new task. With the pace that technology moves, and your client's ever-evolving business needs, you can never assume that everything will go your way on every single project that you fulfill. I see it as a point of maturity when a designer—no matter how optimistic that they are—is entirely pragmatic when constructing and delivering an estimate.
3. The client's budget wasn't gauged until you were too far into the estimating process.
Does the client have $5 or $1,000,000 to spend? The client must answer this basic question before you even begin estimating, or you're never going to be able to accurately understand both the amount of "play" you've got from a time perspective. This is a time-equals-money business, so if you say that logo's going to take 200 hours, you'd better know the budget is going to support that level of exploration, as well as schedule. Unless you have 100 designers working 2 hours each, which is its own sort of existential (and probably unprofessional) problem.
4. You didn't add a project markup on top of the entire estimate.
Your clients don't need to know about how you added breathing room. But they need to know, as part of how you scoped your project, that you've added as a line expense before the total cost of your work a 10% to 20% markup. This markup covers possible increases in scope, shifts in schedule (any delay costs you money!), and negotiations over price to secure a contract without cutting into your project margin. This markup is included not as something that you will definitely bill 100% in full—as it can sometimes push your estimate above fair market value—but as an area that can cover variance over the life of the project.
5. Actuals from previous projects were never referenced in your new estimate.
If you don't use your historical numbers, project over project, you will make estimating mistakes. You'll also never learn from previous estimating mistakes.
6. Vendors weren't marked up properly.
If you're billing to a client any service or tangible product from a third party, you must mark it up. Otherwise, you're just being a bank without earning any interest on the credit you're extending. However...
7. You marked up freelancers so much that your estimate is lopsided.
If you're a single person agency, it's hard to pad an outsourced position's rate, as it can inflate your estimate beyond its market value. Large agencies get away with this by billing hundreds an hour, then hiring freelancers at $65 to $80 an hour and marking them up two to three times. This doesn't work so well when you're a solo-flight designer.
8. You didn't factor in time for managing third parties.
If clients want to use their own vendors, or they aren't willing to pay for markup on vendors that you're suggesting, you must bill the time necessary for management of their output. Otherwise, you're just giving your time away, which equals even more money. You can't expect that money can be recouped by cutting corners in other areas. (Remember Pitfall #1?)
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One parting thought: There is nothing wrong with "revisiting" an estimate if a client asks for you to see if you can deliver less for less. However, the rule of thumb is to do it only once. Constant re-estimating is a sure sign of a client that will apply the same focused attention and behavior to the creative work through the life of your project.
When cut corners grow back, It hurts. I've often found that if you're passionate about what you do, this won't be a problem. It's when you're in this industry for money only do you start to try to find the easy way out.
That's how you ruin the web!
Posted by: Scott Corgan | May 24, 2010 at 02:04 PM
Great post ... I wrote about this same topic a short while ago, there are many variables at play when it comes to accurately estimating time-to-completion, and even the most accurate estimate can be prone to unexpected delays.
Posted by: Anne | May 24, 2010 at 02:08 PM