A fixed price and an hourly estimate

Two suppliers can describe the same job and still offer different certainty about its price. Comparing only the two initial totals leaves out what happens when the billable hours change.

First make the work comparable. Then ask what happens to the amount you pay when the job takes longer or less time than expected.

The same finished job, two price bases

Consider an invented exhibition organizer who needs forty supplied photographs prepared for a digital contact sheet. The agreed work is to crop them to a specified shape, use the supplied titles as file names and produce the numbered sheet in the agreed format. The organizer has checked that both suppliers can perform this work and offer the required completion date.

Supplier A offers to complete that defined job for $480. Supplier B offers the same work for a $60 setup charge plus $70 per billable hour, and estimates five hours. In this example, neither offer has another charge. The five hours are B's estimate, not a limit on its bill or a promise that the work will be finished within that time.

B's initial total is $410: $60 plus five times $70. That is $70 below A's price. The difference is worth considering, but it is not yet a known saving on a completed job.

For home improvements, the FTC recommends written estimates that identify the work, materials, completion date and price. Those fields help establish what is being compared. The organizer's next question concerns the price basis within two otherwise matched offers.

Prices under the supplied fictional terms

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Find where the comparison changes

At six billable hours, B costs the same as A. Below six, it costs less; above six, it costs more. That threshold follows from the supplied rates. It does not tell the organizer how long B will actually need.

The organizer can now ask how B arrived at five hours. Has B examined all forty source images? Which images need more attention, and what could cause the job to take longer?

Perhaps B has inspected the complete set and explains why the work resembles jobs it can normally finish within that time. That would be relevant information to assess. It would not turn the estimate into a fixed price. A few familiar images and several files B has not opened would give the organizer a different basis for relying on the same number.

There is no reason the fixed offer must win. If B completes the work in four hours, the bill is $340 under these terms. The organizer may prefer the hourly route and be prepared for variation. Someone with only $480 available needs to confront what happens if B requires a seventh hour before choosing that route.

A spending stop is not a finished-job price

Suppose B agrees to stop after six billable hours and return whatever has been completed. The bill would be $480. If all forty images and the sheet are ready then, the organizer has the required result. If an hour of work remains, the organizer has reached the spending limit with an unfinished job.

That is different from B agreeing to complete the entire defined job for no more than $480. The organizer can ask for that alternative, and B can accept, decline or offer different terms. A request for a ceiling is not an accepted whole-job offer.

The organizer could also reduce the work before commissioning it, if a smaller contact sheet would meet the actual need. The revised quantity, output and price would need to be clear. Paying less for fewer finished items does not establish that the original forty-item job became cheaper.

Chapter 5 of Infinite Upside: Building Wealth With Room to Live connects an unclear sales promise to the work that returns later as cost or disappointment. The offer needs to be understood before the customer commits. Here, agreeing on the images and completion date is only part of that clarity. The parties also need to know whether the stated amount buys the whole result or a quantity of time.

When comparing offers, keep the required result at the top of the page. Beside each price, record what makes it change and what happens when a limit is reached. The cheaper estimate may be a good choice. It should be chosen as an estimate, with a plan for the work and payment it could still leave open.