I wanted to take a few moments to share some strategies with you that I have found extremely valuable when approaching the question of whether or not to take on a project. We humans, by nature, are bad estimators. I’ve seen this show up time and time again for projects where I have made time or cost estimates that turned out to be way off and ended up costing me hours upon hours that I had not previously accounted for. However, with the right data, some added structure and some practice we can narrow the gap between speculation and reality and ensure that the projects we take on a truly worth our time.
Understand your base hourly rate
Knowing your base hourly rate is key to being able to determine what you will and wont take on. For example, if you’ve determined that in order to be able to “keep the lights on” you’ve got to average at least $50/hour on a given project, you’re not going to take on a project that pays $250, but will take you 10 hours to complete. How do we determine our base hourly rate? I’ve put together a formula that helps me determine my actual time cost:
Variables:
wbH (weekly billable hours) = (Weekly hours worked) – (non-compensatable hours)
W (weekly budget) = ((Monthly Budget need – external contributions) x 12) / number of weeks per year you intend to work (for me it’s about 46)
The Formula:
W / wbH = your base hourly rate
Example:
$1121.74 per week / 30 hours = $37.39 base hourly rate
*Weekly billable hours should ONLY include hours for which you are directly compensated. This would normally not include other work related activities like handling invoices, preparing quotes, work related recreational time, etc. Unless it’s a line item that your client is paying you for, don’t include it here.
*For the number of weeks you intend to work, it’s very important that you not only account for vacation time, but also account for the possibility of sick days, emergency time off, etc.
*External contributions can be stock returns, a day job, a spouse or partner’s income, or even a monthly check from Gam-gam (Grandma).
*It’s important to note here that if your base hourly rate exceeds what you believe you are worth, start charging that much and see what happens. My good friend, Sean McCabe poses a great question to help you consider doubling your rates: “Will you lose more than 50% of your clients by doubling your rate?” If the answer is no, then go for it! If you do not stand to lose more business than you will gain in monetary return, then upping your rate is a good business decision.
There’s so much more nuance here, but we can talk more about this another time.
Over-estimate the length of each task of the project
It’s not enough just to over-estimate the project itself, though you may find that you give yourself better margin this way, but take some time to get to the details of each task and step involved in completing the project. Over-estimation of each task of the project will result in a more accurate picture of what the project will actually take. Certainly, the more experience you have with a given project type, the more accurately you’ll be able to estimate the length of each task. For this reason, it’s also a great idea to record how much time it actually takes to complete a task versus your original estimation. This will help you to be more accurate in the future.
Know what you will and won’t do for a project
It’s important for us to be diligent about defining the boundaries within our projects. When we were preparing our home for our twin baby boys, we tried to look at things from their perspective and imagine all of the ways they might get into things that could potentially harm them. In the same way, we want to put ourselves in our client’s shoes and imagine all of the ways they might find ways to undermine the success of the project by exploiting a hole in your process. A client doesn’t want to undermine the success of the project, but where we haven’t created clear boundaries, the client, not really knowing any better, will find their way through the holes. Where boundaries are clear and secure, the professional operates with the most creative freedom, the client most respects the professional, and the project get’s the best of what it needs.
Over-communicate expectations with the client
Expectations should not only be written down in your contract, but should be a part of your verbal and email conversations as well. You should take as many opportunities as possible in the beginning to reiterate the expectations and to allow the client to express their understanding and agreement with the expectations. This will be very important as you get to different places in the process, in the case that you need to point back to specific conversations to reinforce expectations. This should always be done in a professional manner and in the spirit of keeping the client’s best interests in tact.
Be prepared to walk away
Hopefully through proper filtering and communication it doesn’t come to this, but from time to time, when expectations and boundaries are not clear enough, we still find ourselves in a compromising situation with our client. We should always take responsibility for a lack of communication on our part, but if that lack of communication could possibly result in working a ridiculous number of hours with a client who doesn’t understand their role in the process, it may be better to give them their money back, walk away from the project and address the places in your process that caused the issue. You have to ask yourself a few questions: Is this project going to be a strong reflection of the value I provide? Does the number of hours I will have to spend to complete this project justify the work I’m missing? Is my time more valuable than what I would stand to lose in giving back the client’s money and moving on to a new project? Again, hopefully this is a rare case, but one I find valuable to prepare myself for mentally. I always want to be free from the scarcity mindset that tells me I can’t walk away from a situation like this, so that I don’t put myself into a compromising situation in the first place.
Don’t take shortcuts
I’m hoping this is also a rare temptation, and that you are already saying to yourself ‘I never take shortcuts.’ I just want to take an opportunity here to reinforce this value and say that shortcuts are NEVER worth it. If you can do something more efficiently while maintaining a high level of quality, that’s great! But taking a shortcut and skimping on the quality of something can have catastrophic results. At worst, the shortcut won’t work and you’ll have to spend even more time correcting the mistake and making it right. At best it works and no one notices, but it eats away at your soul at night. Always, always, always provide the highest level of value you can. If you do, your efforts will be returned to you tenfold!
These strategies are just a few ways we can prevent lost time and money when taking on new projects. Things aren’t always going to go by the book. Most potential clients don’t understand what really goes into our work and, if left to their own devices, will find and exploit the holes in our process. That’s why it’s so important to assert our professionalism and to practice these strategies, so we can protect our time and do what is best for our clients.