NFIB

Pricing One-of-a-Kind Projects
10/ 01/ 2002

by Jeffrey Moses

Most small businesses perform routine services day after day. These services are easy to bid for new customers because all parameters of operations--planning, purchasing, personnel, time allotments--are well established. Completely new types of projects, however, are often difficult to bid accurately because any number of variables can come up during the course of the work.

Here are some guidelines to help you estimate your time and costs as accurately as possible:

1. Perform a portion of the work before billing.

This can help you understand the variables of the job and can serve as the basis for cost estimates or an actual quote.

Shred First (www.shredfirst.net), headquartered in Spartanburg, S.C., specializes in shredding confidential documents and destroying products such as CDs, electronic equipment, televisions and many other types of goods that could be a liability if stolen and re-sold. Most of the products that Shred First routinely destroys offer few bidding problems, but occasionally it encounters highly unusual, one-of-a-kind items that are difficult to price. Unusual projects have ranged from high-end athletic shoes with manufacturing defects to out-of-date pharmaceutical products. The company always asks for samples of unusual products so it can destroy a limited number of items to determine exactly what the destruction process will entail.

2. Inform the customer that one-of-a-kind projects cost more because they demand more.

If possible, charge by the unit (may not apply to service providers). This protects against customers who don't expect to pay extra but add additional work after a quote has been made and accepted.

Other types of work for which you should charge extra include projects with strict deadlines, especially high quality standards, night or weekend work and hazardous assignments. Discounts can be given to customers who provide steady work, but custom jobs usually should not be heavily discounted because of the set-up time involved.

3. Before bidding, ask other companies about their experiences on similar projects.

You'll want to remain confidential about your client, of course, but describing details of the project will help you learn about unexpected difficulties you may encounter.

4. Try to find ways to make additional money from the job.

In Shred First's case, they try to arrange recycling of destroyed products.

If a client needs a custom job that is difficult to bid (and thereby has the potential to make you lose money), ask if there are other projects that you can "bundle" into the estimate. These other projects may be more straightforward and easier to bid--and can provide a financial cushion for the uncertain custom project.

5. Try to give a range of price in your estimate, rather than a fixed price.

This will help guard against unanticipated twists and turns in the work.

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