Posts Tagged ‘Pricing’

Expectations 2

February 9, 2008

There are two ways to get a job priced:  flat rate, and time & materials.

I am working on pricing now for a customer that wants a flat rate so that they can “control their costs.”  We don’t bill extra, and any pricing we give them based on flat rate will be based off of our hourly rates x how long we think it will take, + a “fudge factor” that ensures that we don’t lose money.  If the job goes well, we keep the fudge factor as extra profit (is it peanut butter fudge?).  That’s money the customer could have saved.  If the job goes badly, then we’re still covered, so we don’t lose either way.  Who does?  The customer. 

The only reason I see that a customer would want pricing like this is if they don’t want the hassle of paperwork, and if they care more about ease of use (1 number that won’t change) rather than saving money.  It’s a large company, so I can see this being the case… but it still offends my sense of good business practice, as it’s likely to be more expensive for them than an hour or two of some accounting clerk’s time spent processing more paperwork.