Price the promise, including the work around it

A price is a promise expressed in money, but the cost of keeping the promise is often distributed across many small tasks. Preparation, customer questions, checking, revisions and handover can consume as much attention as the visible output. A viable offer must allow for that surrounding work.

The following numbers are fictional planning assumptions for Fieldnote Studio, not recommended market rates. Amounts are in Australian dollars, with GST excluded throughout the simplified example. A real business must include applicable tax payments and receipts in its cash planning and state the tax treatment clearly in customer prices.

Estimate the complete job

Fieldnote considers a A$3,600 package. It estimates 24 hours across input review, drafting, customer discussion, revisions, checking and handover. An internal planning rate of A$85 per hour values that time at A$2,040. The rate is an economic allocation for this example; it is not a statement that every hour creates an immediate cash payment.

Here, planning contribution means the price remaining after these stated job allowances. It is not net profit, a tax calculation or a standard accounting presentation. General overhead, wider sales effort and any costs omitted from the assumptions still need to be covered. Keep the definition beside the number when using it internally.

The uncertainty allowance is also not a measured expense. It acknowledges that the estimate may be incomplete. Replace estimates with actual information as the job proceeds, without treating unused allowance as money that has necessarily arrived in the bank.

Test changes before agreeing to them

At the proposed price, the planning contribution is about 26.7% of revenue: A$960 divided by A$3,600. A A$400 discount reduces revenue to A$3,200. If scope and costs remain unchanged, contribution falls to A$560, or 17.5% of revenue. An 11.1% price reduction has removed about 41.7% of the original contribution.

This does not mean discounts are always wrong. It means the effect belongs in the decision. A smaller scope, lower delivery cost or deliberately funded experiment may justify a different offer. A hope that the customer will be easy to work with is not an equivalent cost reduction.

Now consider five extra hours at the original A$3,600 price. They add A$425 to the planning cost and reduce contribution to A$535. Do not subtract the uncertainty allowance again unless the five hours are a separate addition beyond what that allowance was intended to cover. In this scenario, the extra hours are explicitly additional to every original allowance.

Discuss scope and price together. If the customer needs a lower total, identify which output or service level can change and explain the consequence. Avoid preserving the same promise while silently planning to spend less time on checking.

Treat capacity as a separate constraint

A positive contribution does not establish that the work can fit. Suppose Fieldnote has 80 delivery hours available during the relevant period after existing commitments, administration and planned absence. Four packages at 24 hours each would require 96 hours before any overruns. Accepting all four into that period creates a 16-hour shortfall.

Available capacity should be based on usable time, not the number of people multiplied by every hour in the calendar. Consider specialist bottlenecks too. If only one person can perform the final review, the team’s total hours may conceal a review queue.

Possible responses include a later start, staged delivery, a genuinely smaller scope or qualified additional help whose cost and coordination time are included. Overtime may occasionally be chosen, but it should be an explicit limited decision rather than the hidden assumption supporting every offer. Reserve time when the agreed booking conditions are met, and state how long an unconfirmed slot remains available.

Map cash by date

Cash planning answers a different question: can the business meet payments when they fall due? The Australian Government’s cash flow statement guidance supports recording money coming in and going out over a period. Mark forecasts as estimates and use the expected receipt date, not merely the date an invoice will be issued.

For a simplified pre-delivery period, Fieldnote begins with A$1,800 in cash. The proposed payment schedule is a 40% deposit, A$1,440, followed by A$2,160 later under the agreed terms. Assume the deposit is actually received during this period and total business payments during it are A$2,300.

Closing cash = A$1,800 + A$1,440 − A$2,300 = A$940.

If the deposit arrives after those payments, the same period would instead end at negative A$500. The total fee and estimated contribution have not changed; the timing has. An expected receipt cannot pay a bill before it arrives.

The A$2,300 payment figure is a separate cash-budget assumption covering payments due in that period, including other business commitments. It is not the A$2,640 economic job estimate converted into cash. Some allocated owner time may not be paid then, some project costs may fall later, and overhead payments may relate to several jobs. This distinction prevents an apparently precise but incorrect reconciliation.

Make uncertainty actionable

Use a few plausible scenarios rather than an elaborate forecast built on weak assumptions. Consider a delayed customer input, an additional revision round and a late receipt. For each, identify the effect and the action available before the problem occurs. A later delivery slot might resolve an input delay; it will not solve an unaffordable cash gap by itself.

Keep estimates and actuals together after delivery. If revisions repeatedly exceed the allowance, investigate whether scope is unclear, inputs are incomplete or review is fragmented. Raising every price without understanding the cause may hide a process problem.

Exercise: evaluate one real offer

Write the price, complete task estimate, relevant external costs and uncertainties for one proposed job. Calculate the contribution using an explicit definition. Then separately place the work into a capacity calendar and place expected receipts and payments into dated periods. Record the weakest assumption in each view.

Proceed only when the economic case, capacity and cash timing are acceptable together. The next chapter turns those decisions into an offer the customer can understand and assess.