Shanghai, 2nd February 2010
Today is one of those days I have set aside to prepare some fee proposals for which clients have been chasing us. A fee proposal is like having a foot in the door, we have passed the first hurdle of the “selection” process and the client is obviously seriously considering of appointing us. So preparing fee proposals is vital to our business.
When I started as a young entrepreneur I was eager to get my first projects on the board and hence was more focused on getting the job rather than the amount of the fees. As I got more established and more experienced I gradually started to understand the mechanics that make for a good and sound fee proposal. I guess like many I learned by trial and error…
Over the years I have developed a straight forward calculation method for the design fees which is based on the expected time involvement for the various stages and scope of design work required. Time is really our commodity! By attributing a rate to the time we get a rough indication of the fee. While a good indication, this fee then still needs further refinement, because no client is the same! We need to check out the client, his history as a client and paymaster, the level of sophistication and detailing required, etc, etc.
While a fee proposal seems to be made initially to attract a client to appoint you, in reality it is about how to limit your exposure and involvement against maximizing your profit. Specifically containing the potential “variable” costs such as travel, meetings, design variations and additions is key. It sounds harsh but really that is the bottom line. And as long as you keep receiving requests for fee proposals, you know you are still in the business! So…back to my fee proposals! 🙂