What is the cost of misquoting?

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What is the cost of misquoting?

During all these years working in technology companies I have seen how costly it really is to misquote a project. Why we do it?  Well, a lot of different reasons, but mainly because we don’t have a clear idea of how quoting accurately works.

Quoting is a process that has little value inside technology companies and the lack of priority causes big losses. For example, many times companies focus on the opportunity of the sale, and not the actual quote. If an interesting client asks for a quote, and we think that “this” project is going to ramp up our reputation, then we are ready to lower the price so much that it ends up hurting the project.  This all happens just because we want that client it in our nice, creative portfolio. The problem is the approach of the decision, which is very emotional and it lacks a rational process. Don’t get me wrong, I am not suggesting you shouldn’t be taking work to improve your brand, but you should implement a way to measure the investment in monetary terms. Usually the process goes like this:

  1. A partner in the company finds an important client.
  2. It’s a big project that will help boost reputation
  3. Because it’s an important client we lower the price based on how much we charged in a recent similar project
  4. Send the proposal

The problem starts on step three where the price is lowered emotionally and not technically. A decision like that can cost the company thousands of dollars because the resources used to finish the project can exceed the actual price of the quote. Moreover, if we have additional costs like a software license or a font fee, it adds to the total cost of the quote. We could end up with a big, expensive loss that we originally thought as a low-profitable “interesting” project.

Therefore, knowing your real costs, such as the salaries of your employees, cost of your most commonly used vendors and any additional cost you use determine the real cost of a project is crucial. Once costs are clear, it is important to determine the type of deliverables and tasks that a project is going to have. When you determine the tasks and hours of each task, you can assign the person that is actually going to work on a determined task and then you have your cost for that task. Add up all your tasks, and there you go, you have the cost of the project.

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