What is the best way to price a project?

Like any good IT company, we are faced with the question of how to fairly price project requests that come to us. We want to provide a good value to the customer, yet be able to pay our employees and keep the business viable. So, how do you price projects that will be of value to the company AND provide value to the client?

To answer that question, one needs to understand the cost of completing a project. Like most manufacturing projects, IT jobs comprise direct cost and overhead costs. In this case, the direct cost is for the developer. Overhead costs include the sales department, project management, any brick-and-mortar costs, etc.

Direct costs are usually determined by the developer. Finding a good developer who works at a competitive rate is a rarity and is something every company is working to find more of. Read Sid’s blog post here for a great strategy on finding reliable and cost-effective talent. If you are able to find a good developer who works at a good rate, then your company can deliver even more value to your clients.

Overhead cost may fluctuate somewhat, but every company needs to understand what their overhead costs are going to be. Once you understand your overhead cost, you need to be able to project what your sales will be. Then, you can split your overhead across all of your sales.

Our deep understanding of these two key elements of project pricing results in proposals that benefit everyone. We work with our developers to come up with an estimate of their direct cost; we apply the overhead cost; the total is what we submit to our client. It’s a recipe for success that Extra Nerds has consistently provided. It results in a satisfied client, a happy developer and a healthy IT firm.

This is the ideal win-win-win.

Posted on January 14, 2015 and filed under Other.