How much to charge for the initial analysis?
I just started my own consulting firm and was talking to a client who has a rather large project. After spending an hour, he then suggests we book another 2.5 hour long call to go through one of the specific functions in a project. Since I work with a developer, he wants us both to join that call.
How do you handle RFPs? Does it make sense to give away 5 man hours at no cost? I mean, who is to say that once that call is done and I prepare the estimate, he'll just take it and run? Should I charge for the initial consultation? And if so, how much?
2 Answers
You really have to consider this work as "cost of sales", as most clients won't pay you for this time, as they are just exploring options at the moment.
Consultancy rates can appear high at first glance, but this is in part due to the time that you have to invest in getting to the billable hours.
For me, I'm happy to invest a few hours talking to people about what they want, as I'd expect to learn something interesting and build a relationship. Sometimes I might spend a week talking to a prospective client, if I think it'll likely lead to months of billable work.
I recommend Charging for analysis when you need to and when it is fair to. If doing the initial analysis for free is killing you you need to charge for it. If it isn't killing you then charge when it is fair to do so. By fair I mean the client has the financial resources to pay for it, you are doing a significant amount of work, and you are delivering value to the client from your analysis such as a recommendation, wireframes, requirements document, etc.
Here is an example when I charged a client for discovery and felt it was fair on a 850 hour project we spent 30 hours onsite meeting with the client to understand what they wanted. Then we spent another 50 hours putting together a 20 page recommendation document for them. We charge them our standard hourly rate for the discovery phase.
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It is true that sometimes a client is willing to pay for "discovery", but I would argue that in most cases you lose more than you gain in doing this. Even in the case you mention, your total time (30+50) is less than 10% of the billable hours, so you may have created a better impression if you had just increased your bill by 10% and offered "free" discovery. Obviously, it depends on the precise circumstances, existing relationships, etc. As always, IMHO, YMMV, etc. – Steve Jones 11 years ago
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It may be 10% for this prospect, but if you have to do this for 10 prospects before you get a billable project then you have to reconsider. – Patrick Moloney 10 years ago
