Join Kelly Goto for an in-depth discussion in this video The art of estimation, part of Web ReDesign: Strategies for Success.
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This is the age old question, how much is it going to cost? Getting in to the art of estimating means that you have some years of experience in knowing what to expect, how long things take? All that comes into effect but in the end there are couple realities we have to deal with. One reality is we charge what we can. Of course, we want to make money on a project; internally you are going to want to put as many resources as you can into a project. You have to understand that even if you're working internally in a organization, you have to track your hours and be accountable for them.
So the first reality, we charge what we can. It's really based on your experience, what you bring to the table. If you're available, if you're dying for work and you are really needy versus being completely swamped, a lot of the overhead that you have, and outside cost. If you're a single designer working at home or in your basement, your overheads are a lot lower than if you have a beautiful suite in the middle of Manhattan. You have to take a look at some of the other factors that have to do with cost and associate your end-result with that. Documentation is important, but not always necessary.
Some companies charge a lot of money and a lot of documentation is expected in return. Just remember that with documentation comes additional budget. If you have a lot of programming and technological considerations, of course, you are going to need to take that into consideration and as always, timing and expectation. Is it due tomorrow, do we have to pull four all nighters in order to get it done, or do we have the leisure to do it on time and on budget in a way that we do it best? Taking a look at the estimating reality number two is, you really do have to think about hours.
You get to the point where the client asks you, well, how much is it going to cost? And you ask, well how much budget do you have? Of course we want to always start with that but we have to break it down into actual hours that we are accountable for and that means either giving a fixed price based on the hours, taking a look at both high and low range of estimates. If all goes well, and we only have two rounds of design, then we can actually come in at this price. If we have three or four rounds of design and the decision-making process isn't really smooth, we might have to get into the higher range.
Some companies end up charging time and materials which works well if a project is not defined from the beginning. And you have your resources available and you want to just get in there and start the work without doing a lot of upfront prep. So there's many, many methods of estimating either hours, task, or just based on your gut. But you are going to need to base your costs somewhat on hours and make sure that you build a 10-15% cushion in it at all times. Although the art is in the experience, estimating time is not that hard.
We are going to show you some different ways that you can take a project, break it down and estimate it based on task, time or resources. Let's see what we are talking about. Taking a look at a project, you might have a basic eight week project, this lays out pre-project, prep work, the things you need to do before you get started. Now we get into week one through eight while you're defining the project, structuring it, going through the visual design and interface, producing it, and then comes launch. Well, some projects are in a shorter time-frame, 4-6 weeks, other ones maybe 12-14 weeks and beyond.
This is a very good basis to take a look at, spreading your product out into weeks, and looking on the right side of how much project management do you need? For a lot of hand-holding, you are going to want that project manager on almost full time, and you need to allocate the time and resources for that person to do their job. If it's something that's an internal project or if it's a client you have worked with before, you may able to pair that down into 20% or even 30% of that person's time, thus the hours go down. Taking a look further, art direction, design, HTML and production, you can start to see where they fit into the process, and once again glancing at the entire core process and seeing where your resources fit in.
If you're one person wearing multiple hats, you are going to see where your tasks fit in. If you have a team of individuals, you are going to see where they play into the bigger picture. This is the start of figuring out how much time a project is going to take? So just to take a crack at my own theory of breaking down a project by role and then breaking it down by task, I took a sample project, set up some dummy hours, took a team member approach and thought, okay, what do I need in terms of days in order to get this job done? You can see how it multiplies out.
You take into account overhead, and then you get a total. In this scenario, with this small eight week project, I was able to estimate that this project was going to come in slightly under $30,000. Breaking the project down by role means you also need to associate your resources with an hourly cost. If you are hiring someone freelance, they maybe between $50 and $70 per hour. If you're hiring someone with a lot of experience and expertise, they maybe charging a little bit more. But remember, they usually take less time because of the experience involved. So remember when you are figuring out the budget, that you want to pay someone according to the 30-30-30 rule.
The simplest way to understand that is to start off with a billing rate of $150. Take a third of that, and pay that person the contractor, approximately $50 an hour. Make sure that you have saved about $50 an hour, to take care of your overhead cost, and then hopefully another $50 for your profit. Now, the 30-30-30 rule is general and you want to adjust it to meet your individual needs, and remember that service based businesses actually generate between 18% and 25% profit on a regular basis. If you have a product-based firm or some other kind of simple production outsourcing, you can generate a much higher profit margin.
So use the 30-30-30 rule as a starting point, and then adjust it to meet your individual needs. If you have a production resource that's just out of school, you maybe able to get away charging either intern rates $ 15 to $20 an hour or starting up with $20 to $30 to $40 an hour depending on the level of expertise that person has. Whatever the rates, just make sure that you account not only for what you're paying them, but also you just want to remember that rule of thumb. You want to pay someone 30% of the overall budget that you are charging which accounts for 30% for that person's role, 30% for overhead, and hopefully something around 20-30% profit.
Breaking down a project by task. This was also part of my mental exercise to take a fictitious project, eight week cycle, and break it down into the phases using the core process for project definition, site architecture, information design, graphic design, production programming, and even adding a little bit in there for usability testing, competitive analyses, copywriting and QA. So taking that into consideration, estimating the hours involved for each task, and multiplying it out by their hourly rate, I was able to get something that was pretty close to the other estimate.
If you remember, it was just slightly under $30,000 and actually $26,000 in that case, and here it rounds out to about 28,000. If you don't want to be so specific with hours, you can use days, but remember some days are 8 hours and some days are 12. So it depends on how you're paying your staff or the contractors you bring in. Also if your client, hiring an outside team, they maybe charging overtime hours for night, so we can work. So make sure that you take this all into account as budgets are being established. So breaking down by task.
This takes a little bit of experience but a project definition phase usually can be done in less than a week. Site architecture, if we are in a good mood, takes five days. Generally, if it's a larger project, it's going to take at least a couple of weeks worth of time back and forth. Getting into the information design and the visual design, really depends on the complexity of the site, as does the HTML production. So really, although these are just estimates, you may want to take standard projects that you have done before for this type of client or project and take a guess at seeing how many days you feel each task will take.