The project business model

The project business model is where you do a piece of work, and then charge for that piece of work for a set fee.

Andre who comes round to service my boiler uses the project business model. He charges me a set fee, £75. It’s the same fee, whether he just has to have a quick look at it and check that it’s safe, or spend a couple of hours easing valves and regulating the flow (or whatever he does).

Another example of the project based business model is often used by web developers. The developer and the client agree the work beforehand and set a fee. The developer does the work, and the client pays the project fee.

Pros and cons of the project business model

The project business model has its pros and cons.

The big prize is that it’s really simple for everybody.

Say I want a lego model of hobbits made for me – well, I might! Or, perhaps more likely, when I want a logo designed or a cash flow plan written up, the project business model is easy for me to understand as a client. I get a quote, agree the quote, then the work happens, and I pay.

Happy client.

And it’s easy for the lego builder/logo designer/cash flow planner as well. They know how much they’re going to charge, what stages they’re going to get paid at, and what they have to do.

This is the model that I use when I’m writing business plans for people. I work out roughly how long it’s going to take to do all the lovely numbers, and then give them a fixed fee.

If it takes longer, that’s my problem. If it takes less time, I’m ahead of the game.

Estimating the amount of time

The project business model relies on you being able to accurately predict how much time and other resources it will take. That’s why people often shy away from the project business model. They don’t know what will be involved in a particular project.

This model can bite you in the bum if something comes up and it does take longer to do the work or the materials that you’re going to use cost more than you thought.

Advantages over the prostitute/billable hours model

However, it has a lot of advantages over the billable hours or prostitute model.

Firstly, you don’t have to tell your client what your hourly rate is. And because they don’t know how many hours it will take, they’ve got nothing to compare it to. So they’re less likely to think that you’re too expensive because they’re thinking about the outcomes for them.

You don’t have to tell them how many hours you’ll be working on their project – believe me, they don’t care. They just want their thing done.

And you don’t have all the faff of doing timesheets, remembering to switch Toggl off when you check your email or do your screen break yoga exercises.

The project business model is much more transparent and easy for everyone to know where they stand.

You have to be good at estimating

I have no idea how long it would take to make this Lego ostrich. Do you?

Or how many Lego bricks it would take, or how much these would cost?

But if you’re in the business of selling lego ostriches (!) you need to have an accurate idea of how long it’s going to take and how many Lego block you’re going to have to buy. If you underestimate the amount of time or bricks, you end up doing tons of work and not getting much money for it. And if you overestimate, you might not get to sell so many of your Lego models in the future.

Don’t overservice with the project business model

On this fixed fee or project business model, it’s too easy to cut into your profits by overservicing your clients. This is especially dangerous if you’re doing creative work that you love, or where you’re learning new stuff. It’s just so much fun to go that little bit further and make it the best lego ostrich the world has ever seen.

The other time that we can fall into the trap of overservicing clients is when we don’t have a lot of other work on. Instead of putting our efforts into doing some more marketing to get more clients in, we spend a lot more time working on that one project that we do have. And then we wonder how we’re going to pay the bills next month.

Here are some tips on how to fit your marketing into your regular schedule, by the way.

The big downfall of the project business model

These projects are usually one-offs.

And I don’t like one-off pieces of work for my clients because that means they have to do extra work to go and find another customer. It can lead to the feast or famine phenomenon. Where one minute you’re working like crazy and the next minute you’ve got nothing on, and you’re worried about where your next invoice is coming from.

In my mind, that’s the big downfall of the project business model – you do the work, you send the invoice, and then it’s all over. And then because you’re onto the next customer’s project, you forget to keep in touch with the first customer and do their next project. You risk losing out on a lot of extra money that could come your way.

Next time I’ll have a look at some of the recurring income models, both on their own, and ones that can be combined with the project-based model.

Photo credits – Eden, Janine and Jim for the lego Bag End and Hobbits, Jared Ebeerhardt for the lego drips, and Henry Burrows for the ostrich.