How do we make fixed price estimates? Part 1 – Rough estimate

Let’s talk about fixed price estimates in mobile app development. Making a fixed price estimate is a massive gamble for the developer, especially when we’re asked to estimate a very big project in very little time. Even if we’ve built a similar project before, there’s always a significant element of risk on account of the project’s details. If we get the number wrong, we can end up effectively working for nothing. That’s why a lot of companies nowadays are switching to more and more time and material based contracts rather than fixed price work.

We actually do a large portion of our projects on a fixed price basis. It’s an industry standard way of operating after all, largely because it offers a lot of certainty to the client, despite the inherent risk to the developer. Over the last 6 years we’ve estimated hundreds if not thousands of projects. As a result, we’ve got a pretty good handle on how to tackle estimates as accurately as possible, thus reducing the risk to our company, as well as to the client.

In what follows I’ll talk about how we do fixed price estimates. Other companies may have their own standards and processes, but we’ve found what works for us and have been successfully applying these principles for several years now to great success.

Fixed price estimates – rough quotes

To reach a detailed fixed price quote, we go through 2 or 3 stages. The rough quote, the detailed rough quote (sometimes) and then the detailed fixed price quote itself. First up, the rough quote. I’ll discuss the other two stages in my next article.

Almost every project that comes our way begins with a rough quote (or rough estimate, for the purposes of this article the two terms are interchangeable). Yes, each project is unique, but as you don’t need all the project’s details to provide a rough quote, it doesn’t require a lot of time to produce.

What is a rough quote?

The role of the rough quote is to give the client a feel for the scale of their project. They want to quickly run their brief or idea by you and understand whether we’re talking about hundreds or thousands of hours of work. They understand that the number will be vague and imprecise and that it’s not something you can be held to.

How do we make a rough quote?

Once we’ve got a brief or project overview to work with, we run it by several developers. Based on a brief overview of the project and on their personal experience they give a ballpark number of hours they think the project will take to complete. This process is typically quick, taking roughly from half an hour to an hour or so.

What does a rough quote look like?

The rough quote comes in the form of a range and usually quite a wide range at that. For example the quote might be for 350 to 600 hours. As you can see, the upper limit is almost double the lower. This is the nature of the rough quote though. With this estimate the client would then be clear that we’re not talking about a 200-350 hour or 800-1200 hour project. This helps them understand their own budgetary requirements and roughly how our prices compare to those of other agencies they’ve asked for a quote from.

It’s possible of course that when the specifics of a project are revealed and the detailed scope is provided, or wireframes created, this number can still change. It should stay within the range given, but there’s a slight possibility that it will go higher if the actual details of the project are more complex than explained in the brief.

While discussing the rough quote, the project manager will have discussed the project with the developers and therefore understand which parts of the project are most time consuming. Armed with that info. they can potentially then advise the client how to revise their brief to make it simpler and thus require less hours.

Validation

As the starting point for any estimate, we do a lot of rough quotes. It’s often a validation phase, when a client is looking for a developer who can provide a solution based on their budget. They get rough time quotes from several different companies, and along with the hourly rate of those companies, they get a number which helps them decide which company they feel most comfortable to proceed with. Of course there are plenty of other factors which affect which company wins the contract, but price is the most important in our experience.

If the client is happy with the basic numbers, the next step is to get a more detailed quote.

Rough quote example

By way of example, here’s a short project brief along with the sort of response it might expect:

“Brief – I’m looking to build an Uber-like transportation app, but slightly simpler and targeted at school buses.”

At this point our PM would schedule a call to ask a few more specific questions about the brief. Then they’d talk with our developers and come back to the potential client with a response: “We’ve actually built a similar mobile app solution before (for taxis in Nigeria). Based on our experience, we think that the project’s back end will take us 500-900 hours and the native app will take 800-1200 hours.”

Both the numbers and the request itself here are made up. I just wanted to give you an idea of what the process looks like.

To learn about our approach to detailed rough quotes and detailed fixed price quotes, check out the second part of this article, coming soon.