Digital Project Budgets & How To Handle Them

Spoken of in whispers or in notes passed under the table, stuck in envelopes or secreted away in emails, in many industries “money” is still a dirty  word and the web industry is no exception. This is where the issue of budgets can be really tough to tackle, with most clients clamming up when asked how much they’re willing to shell out on their project. Misinformation or complete lack of direction regarding budgets doesn’t just cause frustration and delays but can become quite costly for all the parties involved and, in breaking down trust, can impede communication and lead to the total failure of the project. Without trying to stereotype anyone, the following analysis tries to identify types of situations and traits that can generate problems in communicating and estimating budgets, and suggest potential solutions for each one.


 

Lack of Direction

Often people tend to think about digital services like items in an a-la-cart menu – It doesn’t matter how much money I can spend, I first have to know how much it costs. This type of client shops for web services much like you’d shop for socks, first scouting the market and then trying to score the best deal available. This doesn’t mean they’re cheap nor that they’re belittling a designer or developer’s professional skills. They are, however, very misguided and don’t really understand the way the industry works.

Most things in today’s world have a set value range and whether we’ve bought said product in the past or not, we do have an idea about how much most items could cost. For instance, you might never have thought about buying a truck, but you do have a clue about how much a car costs and can even ballpark an estimate for a used and a luxury car. The same doesn’t apply if you’ve never had someone design or develop a website for you.

In the land of digital products, something can cost a little as a penny or as much as a house, with seemingly no rules behind pricing. The cost of an eCommerce website is justified by the complexity of the features in it, the number of hours put in, custom development and many other factors. A simple Magento installation with a very basic theme and a modicum of tweaking can be as cheap as a few hundred to thousand dollars. But, and I really do have to stress the but, unlike other deals and discounts, when it comes to websites, the cheaper they are, the worse it’ll work and look, almost guaranteeing that instead of scoring awesome deal, you’ve done nothing more than flush your money down the crapper. The same applies for online advertising, where people seem to think the first and most important thing is being everywhere and will go with the service provider who is willing to do it for the least amount of money.

If your client has never worked on an online project or has no clue about how services in your market segment are priced, he’ll more than likely ask for an offer rather than tell you exactly how much money he’s willing to spend. Simply pressing for an answer will only serve to irritate your client and may even lead them to think you’re trying to take them for all they’ve got. Instead, explain how you price your projects and what extra costs it might involve down the line. As a client, be honest about how much you’re willing to invest, tell the agency representative exactly what you need and ask them to estimate how much of your requirements fall within said budget.

Bargain Hunting

Similar to the previously-mentioned situation, in that both refer to people trying to get the most bank for their buck, bargain hunting tends to be more money-oriented, often making undue compromises on quality for the sake of a smaller price. These are arguably the toughest clients to work with not only because they will try to negotiate everything but because they actively conceal how much they’re actually willing to invest.

Most digital service providers have gone through the frustrating process of being told that budgets are not a problem as long as they can achieve an (insert random percentage) ROI, being advised of a budget times higher than the actual sum available or any variation of these. The issue isn’t the extra work but its futile nature. Anyone who’s ever been to a designer dress store or has watched one of the dozens of reality shows about wedding dress shopping has probably noticed one of the first things shop attendants ask for is how much the client is willing to spend. It’s not about being nosy, it’s about being practical, because once she knows how much money she has to work with, the dresses brought in for the fitting follow the client’s requirements and, more importantly, are within budget. Trying on 20 dresses you can’t afford wastes the client’s and shop assistant’s time, not to mention the frustration that comes with finding something you enjoy very much but not being able to actually buy it.

Digital products in the first development stages are a promise. It sounds cheesy but they really are just a promise made by a service provider that a certain thing will look and function a certain way. They are very flexible in terms of concept, architecture, functionality and can be molded in an almost infinite number of variations, variations that are only constrained by the limitations of a certain technology, user behavior and adaptability, skill and, of course, budgets. In this industry, you can’t try on a website you can’t afford. Because if you don’t have the money to invest in its development, unlike finding a very similar dress with fake diamonds or made by a no-name designer, the final product will be fundamentally different, to the point that it has completely different design, architecture and functionality.

Make sure your project and sales managers are very clear about how important accurately budgeting a project is, detailing development stages and their costs, and, making sure you address any unrealistic expectations your prospects might have. Invest in a customer retention strategy that involves 3 to 5 demos that emphasize the impact a smaller or bigger budget can have, you might even convince them to spend more. Be careful though, as clients will more than likely ask how much this feature costs versus the other, negotiating which ones to work into the project’s architecture and which to leave out. At this point, the client will pretty much have taken over the development process, making decisions they’re simply not qualified to make so be sure to clarify that any features you are exemplifying are just that, examples.

Fibbing

Another taboo surrounds a habit that, at least in business, is about as common as breathing – lying. Service providers lie about time-frames and clients lie about budgets. In both of these cases, it’s often about exaggerating their capabilities, in terms of delivery for the former and resources for the latter. Unlike service providers who tend to adopt a “yes, sir” mentality and somehow feel pressured to constantly awe clients by presenting impossibly fast turn-overs, clients are trying to see the best version of their project money can buy so they can either negotiate a lower fee or start picking at features to make it more affordable.

Let me take you car shopping for a hot minute. When you’re in the market for a new car, you always have a top amount of money to spend you simply can’t afford to go over, because you can’t buy things through the power of wishful thinking. With that budget in mind, you’ll research online, visit car dealers, weigh in the option of buying a used or new car, with x amount of options and other nifty features. Would you be willing to travel 100 km to visit a Tesla Motors dealership, test drive the car, talk to the dealer, try to work out what options you want on said awesome car, go home and try to figure out how you’d pay for it when, in reality, your budget covers only 40% the price of a Tesla roadster?! Nobody in their right minds would put in this much time and effort to end up with a big pile of nothing.

I don’t care how convincing you are, you won’t be able to get the dealer to drop the price to fit your budget. Not to mention that you can’t exactly tell them to start taking out parts of the car, right? Yet this is how some people understand project quotes – a means of analyzing a project’s full potential only to start hacking at design and functionality to get the price down. This is precisely why it’s essential that your prospect understands the project as a complete unit. Be thorough and explain what a project architecture is, development stages, etc and how all of these are highly dependent on their budget. This entire process isn’t about justifying your work and skill, it’s about introducing your prospect to an industry, pricing model and work environment that is completely new to them. Of course, you’ll run into unreasonable people, who are just rude and insulting. My absolute favorite negotiation technique is I can get that for cheaper if I hire a student. Let them! I mean it. This is the type of client you avoid like he were a leper.

There’s of course a completely different category of people who always know best who are an absolute nightmare to work with. I decided to only mention them in passing because I wanted to be more situation-focused rather than work on client vs service provider typologies. The bottom line is almost any situation and mindset can be changed to allow for a mutually-beneficial partnership, it’s all about how open you are with your prospects and how skillful you are at explaining the staging of a project and its dependencies.


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