Part V: How to Determine a Fair Bid Price the Buyer can pay

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This is the fifth post in a 6-part series on How to Write Winning Bids and Proposals. While I will be giving specific examples of bid writing techniques from Elance, the information in these posts is relevant and applicable to all freelance proposals in any online medium. I hope you’ll be able to use this information to bid smarter and significantly reduce your proposal writing time in the long term as well as attain a higher award ratio.

elance bid priceSo you’ve decided what your hourly rate or fixed fee for this project ought to be and are all ready to place your bid. But wait a sec, did you know that on Elance a very high percentage of bids gets rejected because they fall out of the buyer’s budget? So how then are you going to ensure that (a) your bid price is competitive and (b) that you only bid on projects with a high chance of the buyer being able to pay your stated fee?

Even if you’ve followed the steps of bid writing to a tee, your bid can still go awry at the pricing stage. Therefore it’s extremely essential to not just determine what a fair price for the project would be, but to also have some level of confidence that a buyer will be able to pay your asking rate.

There can be huge disparities in pricing expectations. For example: a buyer posts up a project expecting to pay $.01 per word for 20, 250-word blog posts (ridiculous I know but bear with me for illustration purposes). Hence he prices the job as falling below $500, expecting to pay $50 for the entire project. You rate is $0.1 per word; hence you’d make the bid for (250 x0.1×20), i.e. $500 (not counting Elance fees and any other expenses). You can clearly see the disparity now, eh?

There’s no way you’d be able to convince somebody to shell out $500 when they’ve determined that $50 is the fair price offer. So ideally you want to skip projects like this because you’d just be wasting your time writing a bid for it since the project won’t come to you unless you drastically slash your rates.

There’s at least 4 ways (maybe more) to weed out the buyers who aren’t willing to pay your asking price:

1. Match the buyer’s stated budget with the buyer’s tone to gauge seriousness
2. Find out how much the buyer typically pays or has paid in the past for similar work
3. Gauge the buyer’s reputation for paying on time, paying bonuses, etc both on Elance and on the Net in general
4. Consider whether the buyer has larger sponsors backing him

Budget + Tone = Willingness to Pay

Conventional wisdom would state that you place bids within the stated budget range and while that’s probably the best technique 99% of the time, there are instances when you should bid higher or lower. These instances are when:

* The project’s scope (in your opinion) seems to be greater or lesser than stated in the description
* The value addition and effort on your part justifies the rate

For example, I placed a $1440 bid for a project whose stated budget was less than $500 and got the job – why? And more importantly, why didn’t the buyer just say their budget could go higher so they’d attract quality bids? Here’s what I think happened: I bid that price because the project entailed creative writing in another person’s voice and “tone” and required research of places I’d not personally visited. As to why the buyer started with a low budget, one theory is that often on Elance and other freelance job boards buyers are unsure of the budget themselves (they may not be the expert, you are!) and they may be wondering if there are any quality providers on these sites.

So I bid. But how did I know the buyer would be willing to pay my bid price? After all, it seems like such a gamble, right? I looked at the buyer’s tone. She used phrases like “show me what you’ve got” and “name your price”, indicating she was a serious buyer and not just a “proposal scout”. I went with my hunch and it worked, again proving how crucial researching the buyer is.
History of Payments

This is so easy and do-able; everyone should do it for every project before bidding. Go through a buyer’s feedback history watching for what they’ve paid in the past, both for similar work and for other work. Their willingness to get the best quality will shine through in each and every project they’ve commissioned.


Buyer’s Repute

Gauge the buyer’s performance in doling out bonuses and paying on time. Do more than 90% of providers recommend them for paying on time? Recently I worked with a buyer who promised a bonus for the addition of images. I added non-copyright images and provided them in the file format he’d asked only to never hear from him again – my fault since this milestone hadn’t been added nor escrow funded for it. Lesson learned. If a buyer promises bonuses, add it in as a milestone and have them fund escrow on completion of the bonus task. See how they’ve treated other providers on this issue and you’re less likely to get burned.
Who’s Pocket is the Money coming from?

Some buyers are actually scouting for providers to outsource jobs to from their current clients. Some are the end clients. Determine which is which because in the former case your buyer will be taking a commission cut and will want you to reduce your prices as much as possible. I prefer working with clients who are the end client since they’re much more likely to pay asking fees and want quality work.

So, in a nutshell…

You’ve determined your price. Now determine if the buyer will pay that price to the best of your ability and resources. If you don’t you’re just wasting time on making bids that won’t be accepted and then complaining about how your bids constantly get rejected. And then whose fault will it be?

Let me know in the comments section if you intend to use any of these approaches to determining whether a buyer is likely to pay your price. I look forward to hearing your thoughts!