If you offer a service or a product(make-to-order), a prospective client asks you for a quote.You quote a price for your product or service based on your estimate. Your client agrees on your quote so the project proceeds. But later on, it turns out that the actual costs or working hours are well over your previous estimate, in this case, how do you remedy it?
Tell me more
×
Answers OnStartups is a question and answer site for
entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
|
|
|
If your quoting flat rates, I think in general you just eat it, and learn to estimate better/and include more buffer room in your estimates for future products. This is of course as long as what your building/producing hasn't changed. If your going to be going overboard due to client changes outside of minor expected ones, than I think that warrants re-negotiation. |
|||
|
|
|
I'd took care of this situation defining a section in contract that would assume and define the terms for additional hours, when and how they could be used and price for these. If you didn't think about this and don't have contract covering this, i suppose you'll have to complete a product within previously agreed price. |
|||
|
|
|
If the quote does not contain any provision for cost overruns, then you are contractually obligated to deliver the project at the price that you quoted. This is both the opportunity and the risk presented by fixed price work. The opportunity is inherent in the client accepting a quoted price that is well above your costs for performing the work, which provides you with a profit margin. The risk is in all of the unknowns of the project that can inflate the effort beyond your quoted price for the work. Next time you need to allow for unknowns. Fixed price estimation is a particularly difficult aspect of running a service business. |
|||
|
|
