Estimating versus Biding Projects

Here is our take on estimating, making quotes, and how to do it accurately. Andrew and Cris discuss the potential pitfalls of estimating too low as well as why each serves different needs for our customers.

Full Transcript Below:

Andrew:

Underestimating or under-scoping the work involved, the temptation is to give the lowest number possible, to get the sale.

Cris:

It’s says, “Oh, yeah. That’s probably going to be $10,000 to do,” and then they come back and quote, “Actually, it’s half a million dollars.”

Andrew:

Estimates are super helpful because you, as the client, spending your money, you want to have some idea what you’re getting into here.

Cris:

What are some mistakes that we try to avoid and our customers should avoid when they’re having quotes built out?

Cris:

Today, Andrew, we get to talk about estimates versus quotes, which is something that’s really important and is shifted over the history of Bixly. And I think this is something that is commonly misconstrued in the development space, people may ask for an estimate when what they really want is a quote or vice versa. So, let’s talk about the differences. What is an estimate, what is a quote, and how are these different?

Andrew:

That’s a great question. So, estimates and quotes are very different. An estimate is really a best approximation of what something’s going to take, what the work involved is going to be, the time, the cost, based off of typically a pretty limited amount of information. Whereas a quote is a firm fixed price that goes into the contract, but it’s based off of a large amount of time spent really digging into something. So, both our time, and the client’s time.

Cris:

I liken it to, you take your car into the mechanic, you walk in, you say, “Hey, listen, it’s making this weird sound.” They say, “Oh, that sounds like it could be the this, it generally costs this much money.”, “I’m going to estimate it.”, “Leave the car with me though, I’ll call you back in a day or two and tell you what it is.”, “It’s this, it costs this much. It’s going to be this much time to deliver it.” Quote.

Andrew:

Right.

Cris:

And that’s something that I don’t think is always processed through on the development side. So it’s useful information.

Cris:

When we’re building out these estimates and providing quotes ultimately, or people that are going to get this from a different development shop, what are some mistakes that we try to avoid and that our customers should avoid when they’re having quotes built out?

Andrew:

I mean, probably the biggest one is to avoid underestimating or under-scoping the work involved. The temptation is to give the lowest number possible to get the sale. And there’s certainly unscrupulous firms that will do that sort of thing to get in the door and then say, “Oh, by the way, it’s this and this and the other.” So we really try to be diligent to make sure we’re giving accurate quotes, and really accurate estimates and accurate quotes, and spending the time to understand the work involved in order to give a ballpark.

Andrew:

And estimates are super helpful because you as the client, spending your money, you want to have some idea what you’re getting into. Are we talking days, weeks, months, years? What’s the general ballpark of this investment that you’re about to make? And an estimate is a good way to spend a reasonable amount of time with both parties and get an idea of what game we’re playing, what ballpark we’re in, before you really jump in with both feet.

Cris:

So in essence, your estimates should be in the ballpark of your ending quote. And if you’re talking with a firm, for instance, that says, “oh yeah, that’s probably going to be like $10,000 to do.”, and then they come back and quote, “actually it’s half a million dollars.”, they either don’t know how to quote or don’t know how to estimate or what’s the situation there?

Andrew:

So, I mean really the quote- that’s a good question. The quote should be ideally be within the ballpark of the estimate. Now it’s possible that as you do further discovery into the project, that the client will want additional things, and then that quote will move outside of the scope of the original estimate. But what we really try to do in very early phases with the client, like initial calls is establish what kind of timeframe are you working with? Do you need this in three months? Do you need it in six? Is it just as soon as possible? And what sort of budget are you working with? Are we talking a hundred thousand dollars, or, a quarter million dollars plus sort of thing, because we’re going to build something around that budget, right? We’re not going to try to build you a Ferrari if you want a Honda kind of thing.

Andrew:

And so by establishing those parameters, that allows us to build an estimate around what they can afford, the functionality they can afford. And then eventually the quote should ultimately be in line with that so that when they see the quote, it’s not like, “wow, I never expected this,”.

Andrew:

It should be pretty consistent with what they saw. Also, just another part about making estimates accurate is breaking things up into small chunks. So the client will say, “we want this sort of functionality”, oftentimes in very macro big chunks. And then we’ll take those things, ask questions and try to fragment them down into smaller pieces of work that are a week or less, and those things are much easier to estimate accurately than these real big chunks where lots of little pieces of work can hide underneath the surface. And so breaking things down into smaller pieces is super useful.

Andrew:

And also just asking a lot of questions, we really try to understand, what is the success criteria for this? What is the client trying to get out of this? It’s possible that they have an objective that they haven’t really articulated to us yet. And when we really start asking questions, we bring those things to the surface, so that as we go through the whole estimation process we have a very clear target to shoot at.

Cris:

Gotcha. So as a customer, if you’re looking to have something estimated looking to have something quoted, what are some useful questions to bring to the table, to your development team or ultimately bring to the table for us? And then I think as a follow-up on that, what are some good questions that we can ask the customer?

Andrew:

Yeah. I mean, it depends on the application. If it’s something that already exists, it’s a matter of what’s going on that you like, what don’t you like about what you currently have? What are you trying to change? What could be improved, what should be gotten rid of? Really understanding your clients and your customers motivations for wanting to use your services, understanding what success looks like and being able to quantify them, to be able to say “this thing is worth this ROI, if I achieve these things”, because those are the kind of the big scorecard that you’re going to use at the end to say “was this a good use of my money or not?”. I forgot what your original question was.

Cris:

No, it’s good.

Andrew:

I was just going-

Cris:

I think with Bixly as we’re working through these quotes and we’re working through these estimates with our customers, yeah, the question was what are some useful questions that we like to ask the customers, and what’s useful information they can bring to the table to help us deliver the best estimate or best quote for them?

Andrew:

So some really useful questions we can ask them are how are users going to interact with the application that we’re building for them? How are you currently filling that need? Is it a manual pot process? Is it paper and pen? You’re doing an inspection on a clipboard and you’re writing these things down, then emailing it to someone, what is the user experience? How is this used and how should it be used? So just really understanding how the data’s going to move and what the workflow’s going to look like allows us to really just break down these things into very actionable chunks, which we can then estimate.

Cris:

What are some of the dangers with going with the company that bids it lower? Should you always just go with the best price tag?

Andrew:

Well you get what you pay for, but I think it’s important to compare what you’re going to get, not just the outcome of the software product, but really what is the whole experience going to look like? How much time are they going to spend really understanding what it is you want and how confident are you that you’re ultimately going to get what you want when you’re done with that?

Cris:

So how much time was put into actually getting to that number?

Andrew:

How confident are you that they understand what it is you want? That’s a big deal, right? Cause if I spend very little time, I can give you an estimate very quickly. It will probably not be accurate or it will be extremely broad. Right? Two months to two years is probably a safe bet, but really, really taking the time to understand clients is something that we do because we want clients to really be happy and felt like they were understood, and that they have something built for them that isn’t just custom, it’s perfect fit custom for what they needed.

Cris:

And I would say in closing, that estimates and quotes both have their place because there are opportunities where you need to scale quickly on something, and you need that broad range of an estimate to know if I have minimum this and roughly maximum of this, I’m probably going to fall within the realm of what I want to build, and there are opportunities where you can have a little bit more time. You maybe might be a little more budget conscious and you need to know exactly how to build out your milestones and cost phases. And so I would say both of them have their place and Bixly has the opportunity to both estimate and quote very accurately.

Andrew:

Absolutely. I think they both have their place and quotes are great when you know exactly what you want, right? It’s very easy to quote a car, right? Like “I want that one”. Okay. This is the price. Software becomes trickier because it’s custom. And if you can point to, let’s say a competitor product and say “I want that, plus these three things”, that’s one thing. If it’s something that you’re bringing to the market that’s new or really innovative, and you’re going to be getting a lot of client feedback and requirements will constantly be shifting, a quote can be counterproductive because you’re just constantly doing change orders.

Andrew:

Really at the end, you just ended up with a bunch of estimates. You didn’t end up with a quote because it’s shifted all over the place. So for clients that used to be more flexible and have lots of feedback incorporated to be very agile, going more of just the estimate and a very iterative approach can be beneficial when it’s clients that really can nail down. “This is exactly what I want to build here. It looks like this”. A good one for that is if a client already has like a version one or a version two, they know the product super well. And they’re like, “this is what we have, these are the things we want to change, here’s the code, and here’s the original developer that wrote it, that you can ask questions to”. That’s a lot of uncertainty that you’ve taken off the table.

Cris:

Got it.

Cris:

Very cool. Well, I’m hoping from this and the conversations we’ve had, people are going to have a better understanding of what the benefits of a quote and an estimate are, how they can utilize those and ultimately get the best bang for their buck out of their custom software.

Alexandra:

I hope you enjoyed that episode of Bixly Tech Tuesday, hearing Cris and Andrew talk about how to make accurate estimates and bids and what the differences between those two are. If you have any questions at all, go ahead and leave them in the comment section down below. And don’t forget to check out the description box down below. We have a couple of really helpful links down there for you guys, including a link to our free custom software guide that will give you a lot of tips and tricks about how to plan out your own app or website idea. And you can also check us out at bixly.com. And right at the top of the website is a big button that says “get started on my roadmap”. And that will actually get you a free 60 minute conversation with Cris about your app idea. And he’ll give you his advice, his feedback, and his expertise in that time. So we hope you’ll check that out. And until next time, this has been an episode of Bixly Tech Tuesday.