To refund or not to refund, that is the question
April 21, 2011 1:32 PM   Subscribe

I just finished up a small project that I way overestimated. I sold the project for a fixed bid, nominally based on the hourly rate I charge for my services. The customer has already paid me - should I offer to refund the difference?

Details:

I honestly overestimated the amount of time this project would take me by about a factor of three.

The total price I quoted for the project is small - under $500, total.

The total price I quoted is about my "get out of bed" price - the absolute minimum price for a project that I'm willing to bid on.

Let's say you estimated and billed a customer 6 hours for a project that only ended up taking 2 hours. Would you refund the difference?
posted by anonymous to Work & Money (27 answers total) 1 user marked this as a favorite
 
I would not refund the difference. If it was a fixed bid and the customer was happy paying the amount they paid, that just makes up for all the hassle-factor annoying as hell annoying jobs you'll be taking where it takes more work and time than you're expecting. If you're feeling gracious or you think it would make a difference, maybe offer them some money off on "fine tuning" or another project or something else. I think people historically underbid on things [or underestimate their own value] and should stand firm on getting paid a decent amount. If it's a small job to begin with, you're looking at a few hundred bucks. Unless you think this is really mission-critical money to your client, I'd keep it.
posted by jessamyn at 1:35 PM on April 21, 2011 [11 favorites]


No. You made a fixed bid, the customer chose it, you delivered the work. Considering that as you say "The total price I quoted is about my "get out of bed" price" I don't think the number of hours it actually took you matters, assuming you delivered quality work.
posted by true at 1:36 PM on April 21, 2011 [2 favorites]


>The total price I quoted is about my "get out of bed" price - the absolute minimum price for a project that I'm willing to bid on.

There's your answer.
posted by cyndigo at 1:36 PM on April 21, 2011 [10 favorites]


No. It was a fixed bid for the work - you didn't bill them for six hours, they payed you an agreed-upon price.

Turn this around - if you estimated that it would take you 6 hours, and they paid you for 6 hours of work, but it actually took you 12 hours, do you think they'd agree to pay you the extra 6 hours? I would be surprised if they did.

One option is to figure out if there's some value-added project that you can do. Can you take it up to a higher level in the remaining 4 hours? This still benefits you because it's a kind of self-promotion (the client says, "Wow, this exceeded our expectations!")
posted by muddgirl at 1:37 PM on April 21, 2011


That's the nature of fixed bid projects. You did good, you got paid. Doubt the client would be offering to pay extra if you went over budget by a factor of three.
posted by tommccabe at 1:37 PM on April 21, 2011 [2 favorites]


The only reason to consider giving a refund is if the client is a non-profit or is otherwise a good cause with very limited resources.
posted by alms at 1:38 PM on April 21, 2011 [3 favorites]


Me? I'd refund it knowing I'd have a client that would think the world of me. You can then move forward charging a comfortable rate with a client that will stay loyal to you. Can you imagine the word of mouth that will spread through their office?
posted by lpsguy at 1:40 PM on April 21, 2011


For a price that low I would not refund it - they could have paid someone twice as slow twice as much to do it. And as a client, I would be happy to pay a bit more for something that was done efficiently and to spec.

But if you're feeling guilty, you could always throw in something extra, like a user guide, better GUI, or something. Or you could just send them some chocolates and an 'it was nice working with you' note.
posted by beyond_pink at 1:45 PM on April 21, 2011 [2 favorites]


I would offer to refund a portion of the money. i do not think it is an ethical or moral issue. You quoted a price in good conscience, it was accepted and paid. A solid agreement. However, as a matter of good business practice and customer relations I would tell the client the job went very smoothly, took less time than you anticipated and would like to refund ???? ( $100-$150). The customer will sense you can be trusted and your long term value ( either directly or by word of mouth ) will be increased. If you do not refund some of the money and the customer should happen to mention you work to someone else it is possible (though not likely) they may say something to the effect that "oh, that job is only worth $200-$300. Try X next time. if you got an estimate for a $900 dental repair and it came in at $600 wouldn't you be pleased.
posted by rmhsinc at 1:45 PM on April 21, 2011


Sometimes projects simply have minimums, and project time gets rounded up all the time. If my plumber only takes 30 minutes to do his work, he's still charging me for the hour.

lpsguy: "Can you imagine the word of mouth that will spread through their office?"

Sure- "Use this guy, you can totally nickel and dime him!"
posted by mkultra at 1:46 PM on April 21, 2011 [9 favorites]


It is not a refund, but a deductive change order, and you never do a deductive change order unless work gets cancelled or a big material cost is cut out (and even then you keep your overhead and profit).
posted by geoff. at 1:50 PM on April 21, 2011 [3 favorites]


I agree with folks who say that the clients wouldn't be nearly so willing to increase the bid price if the project actually took longer. If you want to do something to justify (in your mind) your fee, I'd do it more as as what muddgirl says - offer to take care of a "low-hanging fruit" problem for them that you can easily do in an hour or two.
posted by echolalia67 at 1:53 PM on April 21, 2011


Why refund anything, if this is the minimum you'd charge to "get out of bed"? So it took less time than you thought it would...would you have even taken the job if it took as little time as it did, and you'd estimated it accurately? Sounds like you wouldn't have. If you want to do anything for this customer, if you get any jobs from them in the future maybe give them a small price break. If you go back and give back a portion of the fee, you're showing them they can expect you to do the same in the future. It never pays to work too cheaply or establish a reputation for working too cheaply; it attracts bad customers.
posted by motown missile at 1:56 PM on April 21, 2011 [2 favorites]


Me? I'd refund it knowing I'd have a client that would think the world of me.

"It's nice to be liked, but it's better by far to get paid."

It's not ruthless or ripping off the client; it's being sufficiently confident to set a fair value to your work, and since the client considered it fair, why negotiate yourself down? It's typically hard enough for freelancers to pluck up the courage to quote a price that's actually in the range that the client is expecting.
posted by holgate at 2:13 PM on April 21, 2011 [2 favorites]


If you think that client might have projects in the future, go ahead and offer to refund him at least a part. That will gain you lots of business in the future.
posted by WizKid at 2:24 PM on April 21, 2011


Are you going from getting paid 50/hr to 150 or 20/hr to 60? If you're paying yourself 50/hr, spend some extra time making the project just as perfect as it can be, and offer to do a small free job of some sort, or other bonus. "Here's the widgetizer, Chris. It took less time than I thought, so your next job gets a discount." If you're paying yourself 20/hour, it's not enough, and it's time to raise your rates; no need for any rebate. "Here's the widgetizer, Lee; always a pleasure working for you."

You are running a business, and you plan your time and budget, so giving back money is generally not in the plan. But offering a discount on future work can be.
posted by theora55 at 2:47 PM on April 21, 2011


Nope, do not refund them. They agreed that what you quoted was a fair price for the results you promised, and you're delivering those results at that price.

With a fixed-bid price, the client is guaranteed that the work they requested will have a particular cost, and you take both sides of the risk -- both the risk that it will take you 3 times as long as you quoted, and you have to eat the difference, and the risk/reward that it will take you 1/3 as long as you quoted and you keep the difference. With an hourly rate, the client takes on that same risk on both sides -- if your estimate isn't accurate, they'll have to pay either more or less -- and you get the guarantee that you'll be fairly compensated for all the time you spend on it. In this case, you took on the risk, and it worked out well for you -- enjoy!
posted by anotherthink at 3:33 PM on April 21, 2011 [1 favorite]


How about offering a credit toward the next job? That could work out very well for everyone.
posted by NortonDC at 3:51 PM on April 21, 2011


If you were talking about a 5 or 6 figure deal, things might be different, but for $500? Pffft. As you said, that's your "get out of bed" fee. I think offering them some kind of refund would make you appear ... amature. Like others have said, if you feel guilty, add a bit of polish to the job you've already done, if possible, or do some little odds and ends for them gratis.
posted by Diag at 4:18 PM on April 21, 2011 [1 favorite]


Most of the suggestions are on target - don't refund or tell them it took lesser time than expected. Depending on the client, it may be seen in a negative light - "You did not estimate the job properly". Next time you quote for a project, the inevitable question, even if not asked, would be "Is there some padding in the estimates?"

If your conscience does not allow you, give them an extra, as many have suggested. And tell them depending on the project and the complexity, you may do some extra work because they needed this and this is not always possible.

Expectations, Expectations - they can kill you man.
posted by theobserver at 4:23 PM on April 21, 2011 [3 favorites]


No.

If you're worried they're unsatisfied, first at least find out if that's even the case. Most reasonable people would mostly just be a little annoyed with themselves for not driving a harder bargain, rather than at you (in U.S. culture anyway). But anyway, if they're not satisfied, then try to find ways other than a refund to make them happy first, like spending more time on the project to make it even better, a future discount, or whatever. A refund should be a last resort, or else they might get the idea they can walk all over you, and perhaps others doing work like you too.
posted by gauchodaspampas at 4:59 PM on April 21, 2011


If you are friendly with them you might consider buying them a nice bottle for the Holidays.
posted by okbye at 6:03 PM on April 21, 2011 [1 favorite]


A valued, repeat customer gets small free jobs when I have done a couple good profitable jobs for them. A one-off that came together really fast? I take my SO to dinner and smile.
posted by jet_silver at 6:37 PM on April 21, 2011


What would you do if it would have taken you 3 times as long as you had estimated? Would you ask for more money? If I were your client, I would refuse to pay more... Apply in reverse and you have your answer.
posted by aroberge at 7:33 PM on April 21, 2011


You completed a project on time, within spec, and on budget? Sweet. Remember this well, as it might never happen ever again. Seriously though, just drop them an email letting them know that you are happy that it was a successful collaboration; and then ask for any referrals they might have.
posted by PareidoliaticBoy at 8:39 PM on April 21, 2011 [2 favorites]


Short answer: no, and get yourself a business coach or at least read "The E-Myth" by Michael Gerber ASAP. How much money you make has only a tenuous connection to how hard you work - you just got a very, very good business lesson (good because it made you money, unlike most business lessons).

One of the major routes to success in business is doing things more quickly and easily than the market standard (ie, the competition's average), while being able to charge at the same rate. This is why good systems for managing the work and for enabling staff to do the work efficiently are so important. Think of every job, and all of the jobs you do, in terms of dollars of net profit (not just turnover) per hour, day, week, month, year. Keep track of how long typical jobs take, what they cost in terms of material etc, and accordingly what profit you are making from them. You will probably find that the majority of your profit comes from a few particular types of work; heavily advertise for those, and reward referrals of those. You will discover that some types of work actually cost you money, or make very little profit; reconsider doing these at all. Find someone else to refer or subcontract the work to. If you're expected by customers due to the fact of being in your industry to do those types of work, put the prices up to the point where you make a profit. If the customer accepts your price, great. If they refuse, great. If they kick up a fuss, explain the costings. People that can't follow the logic of you wanting to be paid for work they want you to do, aren't worth working for.

Another major lesson to learn is that most people aren't actually price-shoppers. They don't really care that much about the price, so long as it isn't too excessive; they wanted the thing or service they paid for, more than they wanted the money. This is hard for small business owners to get their heads around, as no more penny-pinching and nickel-and-diming class of human beings exist than small business owners, and everyone tends to assume that other people think like themselves. They really don't. Only about 10% or so of people shop primarily on price. The rest shop on perceived value of the work to them, the urgency of the matter, your reliability on delivery, and whether or not they like you as a person (or as a concept of a person). If your conversion ratio (quotes actually accepted over quotes provided) is over 80%, it's a near-certainty that your price is too low. This also applies to salespeople. As a salesperson, if your conversion rate is 100%, you should not be proud of yourself, you should be ashamed - you're low-balling your jobs, and/or not approaching high enough quality clients. (Corollary: the boss who wants 100% conversion out of sales staff is a damned fool.)
posted by aeschenkarnos at 4:38 AM on April 22, 2011 [7 favorites]


Are you kidding? The number of clients who go out of their way to wring every last cent out of you will go a long way to equalizing that feeling you have.

Continue to offer this client great service. Call them up, follow up, even if the project was a one-off. The kind of client you have there - the paying kind - is the best kind.

Another thing, it could make them feel weird - maybe not uncomfortable, but weird. They start to question things. The next time you give them a bid, they wonder if you are over quoting, will you return the excess? What happens if you need to increase the fee? That'll be awkward. You need to avoid awkwardness.
posted by Xoebe at 12:48 PM on April 22, 2011 [1 favorite]


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