Along with technical skills and business savvy, the ability to accurately bid on a project is a cornerstone of any consultant business. Predicting project duration, identifying potential pitfalls, defining the scope, and including provisions to cover yourself if you have erred are make-or-break skills.
But what happens when you make a mistake and your estimate is wrong? What do you do when you have misjudged the time a project will take and the amount of money you should be paid? Check out the five tips below to help you adjust your project bid after the fact.
1. Has the scope changed?
Before you blow the whistle, check your contract for any sign that the client has changed the scope of the project. Such a situation would merit going back to the client to renegotiate and make negotiations easier, said lawyer Holly Parrish.
Parrish, an IT attorney at Weintraub, Genshlea, Chediak and Sproul in Sacramento, CA, said that one of her current cases involves a disagreement between a consultant firm and its client over the scope involved in building applications for the company. The customer believed work could begin at any time, while the consultant firm was waiting for the customer's Web site to go live.
Parrish urges consultants who have signed contracts to approach renegotiating with caution, because an unwillingness to proceed with what has been promised could lead to a charge of breach of contract. She suggests adding clauses to the contract before it’s signed that allow you an "out" if needed.
"You could put some provision in the contract that says there is an estimated 10 hours involved, if it goes beyond that…then the parties are to resume good-faith negotiations,” Parrish said. “Maybe put an hourly fee in at that point."
2. Own up to your mistake quickly
If you do discover the work required will exceed the number of hours and the pay that you bid, alerting the client as soon as possible is imperative, said Deanna Zandt, a Web developer in New York City. Such communication can avoid the implication that you deliberately lowered your estimate to win the job.
Zandt recently underbid a project by accident, and didn’t discover it until the work began. "The day I started working on it, I worked for an hour or two, and I realized, 'What was I thinking?'” recalled Zandt. "I called them that day and said, 'You need to make a decision now.' I'm just very blunt about everything."
Being direct and honest are the two qualities Zandt believes are most appreciated by a client, and they’re better than invoicing the business later for twice the agreed-upon amount. "'No surprises' is a big key."
What clients are less than forgiving about, according to CJ Rhoads, a consultant for ETM Associates in Douglasville, PA, is when consultants make mistakes and don't admit them. Rhoads, who for five years worked at two major financial firms as a vice president and hired consultants and consultant firms on a regular basis, said she has fired consultants and developers more than once over such dishonesty.
"The moment you know, they should know—within hours. They'll forgive you if you do that," said Rhoads. "It's when they find out days later or find out from someone else—that's when you get screwed."
3. Be willing to negotiate
In Zandt's case, honesty about her underbid contract with the client was rewarded when the company cut back on some of its expectations of the Web site. She was also paid a percentage over her original estimate. While neither party got exactly what they had set out for, they did receive what they needed. The company even asked Zandt back for additional work when the site was finished.
As Zandt discovered, more money doesn’t always have to be the goal. The amount of time allotted for the project, the consultant’s duties, or even the payment structure are all up for negotiation.
4. Prepare for a job review
When consultants try to renegotiate the terms of their hiring, the result is usually a performance review by the client, according to Rhoads. Consultants, she warned, can risk losing the engagement.
One company during Rhoads' tenure at one of the financial firms fell prey to such a situation. Rhoads said the consultant firm had come back to ask for more money, beyond the contract, to finish an application they had started. The client had previously been dissatisfied with the consultant firm's performance and saw the renegotiating opportunity as its ticket out.
"When it came down to it, that software could not do what they said it could do, for the price that they said they could do it for," Rhoads said. "When they came to ask for more money—because of their own mistakes in setting up the application—we said, 'No thanks.'"
5. Consider eating your mistake
As unsavory as it might be, deciding not to ask for more money in order to foster good relations with the client is also an option, explained Madeline Brane, a project manager who worked for IBM for 19 years.
One consultant Brane has worked with underbid a project by accident, but instead of asking for more money, he responded by alerting the client to his error and then not charging them for it. Such honesty earned trust from clients and helped build up his business.
"He said, 'You need to stick by what you tell the client, and eat it. It was up to me to estimate it, and I honor my word,'" recalled Brane. "You can't go back and ask for more if it's because of something you didn't understand."
Brane's suggestion, after hiring a number of consultants in her career, is that you show the client the number of hours you spent working, then place them on the invoice, but don’t charge for it.
"If you really messed up, you have to go back and say, 'I really goofed up, but I'm going to eat it because your long-term business is important to me,’" Brane said.
The desire to keep clients and continue a good working relationship also motivated Zandt when she realized halfway through a Web project for a bed-and-breakfast in New York that she had underbid. Instead of asking for more money, she chalked it up to a learning experience and decided she would rather have the future business than create a potential problem.
"I think, in the end, the most important thing is that your client has trust in you. Being direct, open, and honest facilitates that trust," Zandt said. "And that's how you get more work later."