At the beginning of my self-employment, I often made the mistake of misjudging the costs of customer projects. As a result, in some cases, twice as many hours were suddenly required for projects than were calculated. This is doubly painful, of course, because it halves the hourly rate.
In the advertising industry, an order usually works in such a way that the agency makes an offer to a customer for a specific project. The offer is based on a briefing that defines the key points of a project. Finally, the agency prepares a cost estimate for these services and makes a binding offer.
After my first years of self-employment, I finally learned from my mistakes and responded to the challenge by taking countermeasures. In most cases, the calculated hours now largely match the hours worked.
The following methods have helped me to minimise the discrepancy between the calculated and the actually incurred effort.
Especially at the beginning of self-employment, it is difficult to estimate the costs of projects correctly. In order to get a feeling of how much time is needed, accurate time recording is essential. Time recording tools such as Toggl have helped me a lot here. This tool makes it very easy to measure the time spent on a project.
A buffer always belongs in the calculation of a project. My experience shows that this should normally be around 20%. In most cases this covers all eventualities. With new customers or completely new project types I generally include a higher buffer, as the risk of being off-target is much higher.
Break down the range of services in detail
In some cases, it can happen that the effort is out of control because the range of services offered was not clearly defined in an offer. A well broken down, transparent offer can therefore help to minimise the risks.
Inform customers about the current status of the hours
Customers often have difficulties in correctly estimating the costs of external service providers. A “small” change can therefore quickly cost an hour or more in effort. Here too, I have found it useful to talk to the customer about the current status of the hours and to explain the work involved in more detail. It is of course important to break down the number of hours in an offer right from the start.
Handle critical projects on an hourly basis
From time to time there are projects where it is very difficult to estimate the costs. In such cases I personally work on an hourly basis only and no longer offer flat rates for services. This ensures fairness for me as an agency as well as for the client – after all, the client doesn’t pay extra if my hourly estimate was excessive.
Standardise recurring processes
In many projects there are recurring tasks that always follow the same pattern. Nevertheless, mistakes are made in these recurring tasks that you think you have mastered. In the end, this also leads to the fact that you misjudge the time and effort required and that it takes more hours than necessary. In this case checklists offer a good solution. They provide security for complex but recurring tasks, help to avoid mistakes and contribute to keeping the calculated hours.
In every project there are things to learn from for the future. That’s why I have made it a habit of reviewing the project after each project has been completed. Here I ask myself the question: What did I learn from this project and how can I use what I have learned for the future? In the end, this evaluation also helps me to better and better estimate the project’s costs.
These are the methods that have helped me as an agency to get my project expenses under control. But many of these methods are certainly also applicable to other self-employment activities.