In recent episodes of this “Can We Talk” video series, we’ve been talking about all of the standard processes and plans that your WordPress agency or you as an individual provider need to have in place to have a rock solid project management approach for your WordPress projects. We’ve talked about acceptance. We’ve talked about issues and risk management and we’ve talked about client management. And we’ve talked about change management.
The “Value-Based Pricing” Trend
In this episode we’re covering your estimating process and why you need that. First of all there’s this new trend about not using hourly rates to do estimates or not charging by the hour. I don’t necessarily disagree with that concept but it doesn’t preclude your need to understand your cost which is often determined via hourly rates (yours and outsourced third parties)
The value-based method goes something like this: You base a product or service’s price on how much your target consumer believes it is worth. The biggest problem with this method is that the perceived value is somewhat dependent on your experience and ability to “protect” the client (mostly from themselves). That can be a hard-sell in and of itself.
I follow Mike Killen, author of From Single to Scale (and a friend) who has a much better method for pricing ANYTHING. Mike sells high-ticket marketing funnels and teaches others to sell them too. You have 3 options to learn Mike’s “profit-driven” method for pricing your product or service.
But, regardless of whether you use value-based pricing, cost-based pricing, or Mike’s profit-driven model, you still need to know your cost. You need to know what your hourly rate is AND how much time you’re spending on each activity or task, and how that figure is used in your estimate. I’m not saying that you should necessarily share any of that with the client or that you charge them on an hourly basis.
Use a Work Breakdown Structure
Now the first part of a good estimating process is that it uses your work breakdown structure or your project plan and you estimate down to the task level. A lot of people don’t do this. They’ll just look at the activity, like defining the plugins, and then take a wild guess at how long it’s going to take them to pull all that together for a particular site.
If, on the other hand, you break that down into each task and then start estimating each task that has to be completed, you’ll most likely be surprised at how much you’re doing that you’re not charging the client for. So I always start with a work breakdown structure with the phases, the activities, and the tasks that I’m going to carry out and then I do an hourly based estimate for each task and then total that all up. That’s not necessarily something I share with the client. That’s what I use as my basis and then I make adjustments to that based on the details of the client. Sometimes they’re a lot easier to work with or maybe they’ve already got half the content pulled together. So I’d take that estimate and then adjust both the time estimate and the cost estimate based on that.
Use a Mathematical Formula
A good estimating process MUST use a mathematical formula.
The reason that’s so important is because the only way to get better at estimating is to keep doing it. And if you don’t keep doing it the exact same way every time, you can’t get better at it.
So you need to use some form of a mathematical formula to figure out what your estimates are. Basically, that rule would be to stop guessing. Stop trying to use the crystal ball approach to estimating.
Make Your WordPress Website Estimate Defendable
And then the next part of a good estimating process is that it’s defendable. Now most clients are never going to ask you this question but just in case they do you need to be able to answer the question how do you come up with your estimates. And if your truthful answer is, “Well we just sort of guessed based on the last time we did it,” that might be a little embarrassing.
Never Pad the Estimate
In the last two episodes I talked about the change control procedure how important it is to have a good one and how to use the change budget. So I’m not going to go over that again. Here are links to those episodes.
Now if you want to learn even more about project management, you can sign up to get informed about the new free membership that I’m going to be launching in a few weeks called the WP Project Manager’s Academy. When launched, it’s going to give you lots and lots of free content on how to start getting your projects more consistently completed on time and within budget.
In the next episode we’re going to talk about the importance of having a standard communication plan and how to set expectations about that with the client. So until then, Stay Productive, and Stay Strong!