Isn’t that a million dollar question? Many employers on geniebazaar.com ask me how much they should pay for a project or how much would it cost them to get the project done? Let’s try to answer that, today.
Just like there are many methods for estimating stock prices, there are many methods for pricing a project. Let’s have a look at them one by one.
1 – Find the cost of comparable project (Similar to P/E multiples for stocks):
Many projects have been posted and completed on geniebazaar.com. You can browse through project descriptions of these projects and compare the price that was paid for those projects with the price you are planning on paying. This may give you approximate results, however, you will still notice a huge disconnect between prices paid for similar projects. Ironically, the reason behind this disparity is purchasing power parity (also known as PPP). Project completed in India will probably cost less than the project executed in USA because of the difference in hourly wages. Prices can also differ due to contractor’s experience, customer service, community reputation, backlog of projects, and knowledge. In summary, your project should cost as much as another similar project, if it will be executed within the same country and by similar contractors.
2. Estimate the effort (Much like Discounted Cash Flow Analysis for Stocks):
Find out what is the typical hourly salary in a country by visiting various profiles on GenieBazar.com. Most of the freelancers and contractors display the hourly rate they are willing to accept. You will notice that average hourly rate can be very different depending upon the country. In Bangladesh, website developers charge an average of $9/hour, while UK web developers charge close to $24/hour. You must then add a discount or premium to this rate to account for contractor’s experience and other unique attributes.
Now, try to estimate the number of hours your contractor will need for developing this project. This can be tricky for people with less or no knowledge about what’s involved in completing the project, however, you can get some ideas from friends or neighbors working in the same field. You can also search on Google or Bing for finding out various steps involved in completing your project. Leverage forums and chat rooms related to your project for getting more ideas on latest technologies and trends.
If you end up estimating the project by yourself, then try to break the project down in modules. Estimating the number of hours required for developing each module will likely bring you closer to required “project-hours” or “people-hours”.
Once you have people hours or project hours, you just need to multiply it with the hourly wages you had calculated.
Genie Bazaar Team
Talk Freelance, Talk Genie