As private investigators no doubt you regularly have clients telephoning you and asking about your charges. Generally the prospective client wants a simple answer so they can then go from firm to firm comparing costs.
It’s extremely difficult for some businesses to give standard prices for services. This may be because the skills, time and equipment required for each job vary depending on different clients’ needs.
This situation tends to be more common in the Private Investigation and the service industries than other trades and businesses. In the Private Investigation industry, rarely do we carry out exactly the same job twice. When it’s not possible to work from a standard price list, we need to give a quotation or an estimate instead. If you were to simply put forward an hourly rate to a client, this would tell the client nothing about what the final costs of the service would be.
A quotation is a fixed price offer that can’t be changed by the service provider or the customer once accepted by the customer. This holds true even if you end up having to carry out much more work than you expected or anticipated. If you think this is likely to happen, it makes more sense to give the client an estimate. Usually within a quotation you would also specify precisely what it covers, and that any variations outside of the quotation will be subject to additional charges.
An estimate is, in essence, an educated guess at what a service may cost – but it isn’t binding. To take account of possible unforeseen developments, you may provide several estimates based on various circumstances, including the worst-case scenario. This will hopefully prevent clients from being surprised by the costs at the conclusion of the assignment.
To work out a quote or estimate we need to know what our fixed and variable costs will be. These include the cost-per-hour of labour and such things as the cost of travel if appropriate, use of specialist equipment and out of pocket expenses. A quote or estimate is then calculated according to what we think the job will involve.
Where possible provide all your quotes and estimates in writing and include as detailed a breakdown as possible. This will help to avoid any disputes about what work is included in the overall price. It may also be prudent to set an expiry date on the estimate or quote. The quote or estimate may no longer be valid after this time and may have to be re-assessed.
As an alternative to quotes or estimates you could offer clients the option to set a realistic budget of how much they are able to pay, or how much they are prepared to pay for your services. On these occasions you would apply your charges i.e. your fixed and variable costs to the client budget and this would dictate how much time and resources you would apply to the service. Any further work outside the client budget would be subject to an agreed further client budget. Using this method can mean that the client is in greater control of how much they spend, so they are never surprised by any costs.
Above all it is very important that your client understands the difference between a quotation and an estimate. Ironing out this issue can save a huge amount of conflict when it comes time for the client to pay.
- Converting Fixed Costs to Variable Costs (brighthub.com)
- How to Perform a Break-Even Analysis (inc.com)
- How To Identify Good Clients (and Avoid Bad Ones) (smashingmagazine.com)
- Billing hourly: A followup (orestis.gr)
- Startup Makes Customer Service Look Easy (zendesk.com)