Long before we have a defined scope and a signed contract… someone will ask, “How much will this cost?”
When this happens during the first phone call, my answer is, “$19.95 plus shipping and handling – and shipping is free. It’s usually the handling charge that gets you.”
With the mood a little lighter, I’ll get a “No, seriously.”
Every company, large or small, wants to know how much something will cost before they invest in it. It’s natural. So we start with the “fives.”
“Based on what you’ve told me so far, Jim, I can give you an estimate that will be accurate within one order of magnitude. The good news is that this project will cost less than $500,000. The bad news is that it will cost more than $5,000. That puts us in the $50,000 range plus or minus a large percentage because we don’t have clarity yet.”
You’ll note that this is not very accurate. That’s intentional. The danger in giving Jim anything like real numbers at this point is that people remember them. Once we convey that a price range is “reasonable” – even with caveats – any higher figure becomes unreasonable later in the project… sowing the seeds of discontent.
If I think the project is on the small side (less than ginormous), I might use threes instead of fives. Still, the idea is to paint the outside borders of the budget and create a need in the customer’s mind for a finer degree of accuracy.
“But that doesn’t tell me anything,” Jim responds.
“Actually, it tells you three things, Jim. It tells you that (A) I don’t know what you want yet, (B) the project you’re describing has a wide range of possible prices and (C) you’re talking to a professional who won’t quote a firm price until he knows what you want.”
If the caller is serious, we can then move into a discussion of how to produce a good estimate, which will require discovery activity – the handling charge.