What to Do When You Underbid on a Project

Being able to guess how much a project will cost is an important skill for a lot of us who work as consultants, writers, contractors, or other project-based entrepreneurs, but it’s not straightforward to learn. Some projects are simple to bid on, like “I’ll write 8 600-word articles for you.” Others are harder, like “We’ll use social media to build an online presence for your brand.” What do you do if you accidentally bid less than what the project will cost you? What to Do When You Underbid on a Project

First, let’s talk about how you might end up in this situation.

Scenario 1: You didn’t really understand the scope of the project.

We all know those clients. They say, “I want more sales,” then give you no clear-cut plan on how to get there. Or they change what they want.

It’s crucial to establish a clear scope with the client at the outset to ensure everyone understands their expectations. The more measurable the scope, the easier it will be for you and your client to assess whether you achieved your goals. Outline what the client expects and how much you will charge for these specific goals.

Scenario 2: Your client keeps piling on the work.

These are the clients I like the least. They say they want one thing, but then they add a little bit more and more until you realise that a project you thought would take you 5 hours actually took 10. Your hourly rate of $100 is now $50.

Be polite but clear: you will only do what is within the scope of the price you bid. Extra work will cost extra, either by the hour or by the extra projects. Your client should understand this. If they don’t, stick to what you agreed on and cease any further work. What to Do When You Underbid on a Project

Scenario 3: You have no prior projects to base your bidding on.

If this is your first project of this kind, you may not know how long it will take.

If you have colleagues in your industry that you feel comfortable asking, get some input from them if they’ve done similar projects. Otherwise, structure your pricing so that you don’t get shorted if the project goes on longer than you anticipated. For example, you could bill hourly, or you could start with a flat rate that includes a set number of hours of work, with any additional time billed per hour. Once this project is complete, you’ll have a better sense for what similar projects should be billed at.

Should you eat the cost or ask for it?

When a Project Goes Over Budget: What to Do When You Underbid on a Project

If a project goes over budget, you typically have two main options: you can either absorb the additional cost yourself or discuss the situation with your client and ask them to cover the extra expenses. Deciding which route to take often depends on several factors related to the project, the working relationship, and the circumstances that caused the budget overrun in the first place. The way you handle this situation can impact both your reputation and your future relationship with the client.

Considering Your Relationship With the Client

One of the most important factors to consider is the strength of your relationship with the client. If you have worked together for a long time and have built a strong level of trust, it may be easier to have an honest conversation about unexpected costs. Clients who value your work and respect your professionalism are often more open to discussing adjustments when a project changes or grows beyond its original plan.

On the other hand, if the relationship is new or still developing, you may need to approach the conversation more carefully, perhaps by providing context for the unexpected costs and emphasising your commitment to delivering quality work. Maintaining professionalism and clear communication is essential so that the client understands the situation without feeling pressured or surprised. What to Do When You Underbid on a Project

Understanding Why the Budget Was Exceeded and What to Do When You Underbid on a Project

Another key consideration is the reason the project exceeded the original budget. If the additional work happened because the client requested new features, revisions, or changes that were not included in the original agreement, it is generally reasonable to ask them to pay for the extra work. In these scenarios, the project has successfully surpassed its initial scope, necessitating an adjustment to the budget.

Keeping clear records of the original scope and documenting any changes during the project can make these discussions much easier. When both you and the client can see exactly what changed, it becomes simpler to explain why additional time and resources were required.

When It May Be Better to Absorb the Cost

There are also situations where covering the extra cost yourself might be the better option. For example, if the project went over budget because you underestimated how long certain tasks would take, taking responsibility for the mistake can demonstrate professionalism and accountability. Accepting the cost in this situation can help maintain trust and show that you stand behind your work.

Additionally, absorbing the cost might make sense if the project is with an important client or someone who may bring you future opportunities. In some cases, a short-term financial loss can be worthwhile if it helps build a long-term partnership.

Considering Future Business Opportunities

Long-term business potential is another factor worth thinking about when deciding how to handle budget overruns. If the client is likely to provide repeat work, referrals, or larger projects in the future, it may be beneficial to prioritise the relationship over the immediate cost. Demonstrating flexibility and understanding can leave a positive impression and encourage the client to continue working with you.

Strong client relationships are often built through moments like these, where communication and professionalism matter more than strict adherence to the original agreement.

Discussing Additional Costs Professionally on What to Do When You Underbid on a Project

If the overages are clearly the result of unclear instructions, frequent last-minute changes, or requests that go beyond the original agreement, it is reasonable to bring up the additional costs with the client. The key is to approach the conversation in a calm and professional manner. What to Do When You Underbid on a Project

Rather than presenting the issue as a complaint, you can explain that the project scope has expanded and outline the extra work that has been required. Providing a clear explanation helps the client understand why the costs have increased and allows both of you to decide how to move forward.

Finding the Right Balance on What to Do When You Underbid on a Project

Ultimately, handling a project that goes over budget requires a balance of good judgement, communication, and professionalism. By carefully evaluating the reason for the overrun, the strength of your relationship with the client, and the possibility of future work, you can choose the option that best supports both your business and your professional reputation. What to Do When You Underbid on a Project