CozyOS

Since most firms establish their hourly rates based upon reverse competition – that is, what your competitors charge – the cost component is completely arbitrary. I have yet to encounter more than a handful of firms that actually tie out their cost per hour to the general ledger.

Firms that value price do not ask, “What prices do we need to cover our costs and earn a profit?” Rather, they ask, “What costs can we afford to incur on this project, given the price obtainable from the client, and still earn an adequate profit?”

technical project go awry, stop estimating and start budgeting.

our budget is $500k, then we do have enough information. The answer is no, we can’t afford it. If our budget is $5M, then we do have enough information. The answer is yes, we can afford it. If our budget is $2.5M, then we do not have enough information.