Triplets- Bootstrapping Tactics
During the dawn of ecommerce I started the direct marketing efforts for a major consumer durables company. Getting customers is always the first step in a good bootstrapping scenario so I set out to test some online advertising. Banner advertising was state-of-the-art, so I put together a detailed outline for the creative design of a banner ad that I was sure would capture the hearts and minds of Internet shoppers across the US. The ad featured a variety of animations and catchy phrases. I identified about six different design companies and sent them the spec for a quote.
The prices came back ranging from about $2,500 at the low end to a little over $6,000 at the high end. It all seemed a little much, but what did I know? Before I pulled the trigger, however, I did a little more research and wound up getting the ad designed, exactly the way I wanted for $50. In the end I hired some teenager from New Zealand.
The lesson: keep looking until you find a price that makes sense. When bootstrapping a business you can easily get sucked into spending too much money on things. The activities of an entrepreneur are so diverse that you are bound to run into unknown territory before you know it. I had never paid anyone to design a banner ad so I had virtually no reference for how much it would cost. I did however, have a pretty good feel for what the going rate for a graphic designer was. At the time I thought $50-$100 was reasonable. Given that range the banner ad being proposed would have taken a skilled artist 25 hours at the low end and 120 hours at the high end. 120 hours is three weeks doing nothing but working on a banner ad. Even I, in all my glorious ignorance, thought that sounded excessive.
The problem with buying from a place of ignorance is that it is very difficult to get comfortable with what you have been asked to pay. In some cases a skill is so specialized and unique that it’s worth paying a premium. In other cases it is a simple task, like designing a banner ad, which may not be worth paying a premium.
In order to figure out what something should actually cost you will need a technique for establishing a baseline. Once you establish a baseline you can decide how much more or less you are willing to pay for more or less quality.
The technique I use is quite simple and effective. I always try to find a set of triplets. Triplets are three vendors of similar size and scope that provide project quotes that are also similar. Here is how it works: first, develop a detailed outline of what you want. This could be a requirements document for a Web application or a detailed sketch and description of a new product. Next, research possible vendors and send the outline for a quote to three of them.
If the three quotes are similar you can rest assured that you have found a baseline price and can proceed with the vendor you like the best. If they are not similar send the outline to another vendor. Compare the new vendor to the others. The goal is to find at least three quotes that are similar (triplets). Keep adding vendors until you find three. Quotes well below the three similar quotes may be seriously lacking in quality (but not always). Quotes well above the three similar quotes may have a lot of padding in them.
When people understand your project and provide an honest quote it should look similar to other people who understand your project and provide honest quotes. Discrepancies between quotes can be due to a lot of things such as the experience and talent of the provider or the degree to which they understand your project. A few questions here and there should clear things up but triplets will provide the best proof of what a project should cost.