Freelancing quote calculation?

[Ano Ano]

Hello,

 

I got this side project and I need some help calculating the quotation that I should give to the customer as this is the first time I am doing this.

Lets say that the hardware cost is "X" and the time that I spend writing the software is "Y". I charge "Z/hour" and spend "W" on gas, calls etc.

 

Hence the total cost for the client is: X+Y*Z+W ?

 

Or should I add a profit margin on top?

 

Is there anything else that I should consider adding to the quote?

 

Thank you in advance

[hooovahh]

What's your relationship with this customer?  Will they beat you up on price and get you to agree to (X+Y*Z+W)*0.6?  I don't have much experience with quoting freelance stuff.  But in larger competitive bidding generally sales will tack on some percentage for overhead, then another percentage for a buffer expecting the price to be negotiated.  Of course when you tell sales the bottom price will cost $100K, then they tell you the bid was won for $50K, engineers tend to get a little upset.  (I'm not bitter, honestly)

[crossrulz]

Of course when you tell sales the bottom price will cost $100K, then they tell you the bid was won for $50K, engineers tend to get a little upset.  (I'm not bitter, honestly)

There's a reason I always gave management an estimate that was 4x what I thought it would take.  They would always cut an estimate in half trying to win the bidding war and then crap happens which causes things to take twice as long as you initially thought.  Hey, I was right on budget!  How did that happen?

[Ano Ano]

Thank you for the replies.

 

This is the first time that I am doing freelancing job on my own. So there is no company overheads or a manager/salesman to make discounts!

 

So the bottom line is, after adding hardware costs, incurred expences & labor, what is a reasonable & competitive percentage that I should add on top as profit?

[ASTDan]

Err on quoting high.  You can always come down.  Customers don't like it when you go up in price.

 

When I started out I found I was underbidding myself.  I would have an optimistic estimate on the time the project would take.  Among the things to take into account when determining your time is Prototyping the UI, writing requirements,  software testing, debug, and support.

 

I have found I spend 1/3 in requirements, design, prototype, 1/3 programming, and 1/3 testing debug.  Just taking programming time you will off by a factor of 3.

 

Good Luck!

[ShaunR]

Thank you for the replies.

 

This is the first time that I am doing freelancing job on my own. So there is no company overheads or a manager/salesman to make discounts!

 

So the bottom line is, after adding hardware costs, incurred expences & labor, what is a reasonable & competitive percentage that I should add on top as profit?

 

Actually there are company overheads. your mortgage, car payments, medical insurance, food and so on. These are taken into account (I hope) when you decide on your hourly rate.

 

If this is your first foray into contracting, I highly recommend quoting on a time and expenses basis and providing a preliminary project plan with deliverables and milestones for them to sign off. Fixed price quoting is very dangerous for the inexperienced.

 

If you are fixed price quoting then your "profit" is on the hardware and services as a value added supplier (usually 5-10% of cost), and your hourly rate which you make up based on how much you think you need to live your lifestyle and how much the market can bear. There is no overall "project profit percentage". When you negotiate, you negotiate less time and less hardware provisioning until you and the customer agree to the minimum effort and hardware supplies (from you) required to do the task. If that is still not good enough then your extra "margin" is on the hardware so you can go from, say, 10% to 5% If that is still not good enough - walk away because you aren't making any money!

Edited December 10, 2015 by ShaunR

[Jordan Kuehn]

If this is your first foray into contracting, I highly recommend quoting on a time and expenses basis and providing a preliminary project plan with deliverables and milestones for them to sign off. Fixed price quoting is very dangerous for the inexperienced.

 

Definitely pursue a time and materials basis like ShaunR outlined.  Make sure to have clear milestones with time and cost estimates (often our first milestone is purchasing all of the hardware) and then not only get a sign-off, but try to negotiate so that you get paid after each milestone.  This serves two purposes, it helps keep you from fronting too much time or money, and secondly it is a very firm indicator that they agree that you have accomplished that milestone to their satisfaction (deliverable and actual cost).  If you run into trouble down the road (total # hours differs too much from the estimate for example) you can point to that sign-off and payment as proof that you and the customer both agreed to progress on the project after that point.

 

That being said, don't make milestones too small.  Depending on the size and scope of the project you might look at 20-80 hours of work.  You don't want to be spending a ton of time writing invoices and making them cut checks.

[Tim_S]

I've only done quoting for companies I've worked for, so take it for what you will. There should be markup. This covers any overhead you have that you can't bill the customer for. That can include R&D, capital purchase, advertising, licenses, lights, heat, coffee, accountants, lawyers, time between jobs, health care, sick leave... When I worked for a small, private company (<50 people) that was much higher than now working for a large company.

 

Quoted price should also represent risk. A new customer is more risk. Lots of bleeding edge technology is risk. A customer that makes lots of changes in the project is risk. A customer who is going to take everyone's price and tell them they will pay 10% less at NET120 is high risk (strange how many companies sent back no-bid on that one).

[crelf]

Don't mark up NI hardware - NI doesn't like it when you do that. They prefer you to have a relationship with them (partner) where they can give you a discount and you sell the HW to the end-customer at lost outside.

[Tim_S]

Don't mark up NI hardware - NI doesn't like it when you do that. They prefer you to have a relationship with them (partner) where they can give you a discount and you sell the HW to the end-customer at lost outside.

 

Last time I talked with a local sales rep (which has been a couple years now), getting the discount required a certain number of certified programmers and a minimum volume of purchase from NI. Any idea what the current requirements are?

[hooovahh]

I believe you only need to have one CLD, or CLA on staff.  Here is the page that has some very not concrete requirements, but to become the lowest level of alliance member doesn't look too difficult.

http://www.ni.com/alliance/join/