I've been interviewing dev shops to develop the second version of my platform. I told them my max budget and that I'd be interviewing multiple firms. Nearly all of the firms have estimated that the cost will be exactly what my budget is. What are the odds I'm being overcharged? If I am, what can I do to prevent this for the next firms I speak with?
I think the odds are greater that the project will overrun your budget regardless of who you choose. As developers we try our best to estimate costs but there are always many unknowns. Hence the let's quote it at your max budget. If you're able to get a fixed price contract that puts you in the drivers seat. I would recommend having as much detail as you can about what you are trying to accomplish. Requirements and tech spec are paramount. This should be all you provide to the firms. If they refuse to respond based on the absence of budget in your RFP then they probably won't be a good match.
Don't give them a budget - provide exact specifications and they will should tell you their costs (with a reasonable profit margin included of course).
Drop me a message and we can have a consult (there's no need to tell us your budget - we'll simply tell you what is costs!)
If you ask to several companies without giving a budget, this way you will see what each ask you. In any case, they should justify the cost, by telling you how much time they need for each part of the development of your project.
Take into consideration time and cost (the cheapest company may not be the right solution for you).
IE: A freelancer will maybe need more time than a big company but you now who is working on your project...
Its quite possible that you are also undercharged, and then have to spend 2-3 times more to complete.
Do you have any idea what tech stack you want your platform to be developed with? If you are not a bit of involved in the process then there is a high chance of getting fooled. I suggest to learn what kind of new technologies can be used for your product. These days AWS like platforms offer such technologies which can be used by fraction of cost and can be developed much faster compared to traditional stuff. So first learn how it should be developed. Either learn online or consult somebody with experience. Then talk to people to develop the exact blueprint you have in your hand. So you can compare apples with apples.
Never blindly trust a development firm period. Find a CTO with startup experience and deep product chops. 5-20% of your budget should be allocated to consultants that act as a check and balance to your software developers. Learn more at tipsfortechteams.com
If they are a serious company, they probably told you the problem with estimating in software development is that there are many things you cannot anticipate. Estimations are only that, estimations. So, unless they are offering you a fixed price, neither you nor them can be sure of what the app will cost exactly.
At the software development company I co-founded we don't work with fixed prices, for this exact reason: we don't know how much it will actually cost us to develop your app. But we do want to take care of our client's budgets, so we make it our purpose to provide as exact an estimation as possible, and we offer them the chance of deciding up to how much they want to invest by giving them the chance to work with hourly caps - we charge them per hour, but they decide how many hours they want us to work on every month, sprint, or what you may. And we use that budget to create something they can use.
So you might want to think about approaching your next option this way: Give them specific requirements, walk them through your ideas, your business model, your goals and expectations, talk about features, technologies, methodologies, roles, and so on. Ask them to provide an estimation. Be aware of the fact that estimations are only that: estimations. And discuss the possibility of working with caps. It's a good way of staying on top of your investment and making sure you are not investing more than you expect to.
Here's the take of a guy who's job is to provide estimates at MVP Factory…
Announcing your budget upfront is NOT necessarily a bad thing. You will have to change your expectations though:
I had a few RFQs (requests for quote) in the past that provided budget information. In most cases, it was a heads-up from the potential customer that the budget is not that big, and that we should account for fewer or simpler features. Which we did and it worked out.
Good luck with your project!
Frankly, no you can't trust estimates, but mostly it's your fault. Let me explain: Most people have no idea how to effectively gather and translate requirements to developers. I get all kinds of crazy requirements from supposed 'techies' that don't understand the technology. The unfortunate side-effect of this is that dev firms have learned to over-estimate their time to err on the side of caution. Also, by giving these guys a budget they are going to do their best to justify using it. (all of it) Most definitely your requirements will change and these firms we charge you to change the solution. Your budget is already blown and now you don't have a solution. This is why startups need a technical co-founder and not outsource at this critical stage.
First of it is not a good idea to share the budget with a provider. In your case you have already shared your budget then there is one workaround and select appropriate provider.
1. Prepare a list of functional points based on your requirement.
2. Send it across to providers and ask them to provide estimates/budget for each functional point.
This will give you in-depth visibility of how everyone has estimated your requirement and reach to final quote. On top of that, you will get detail visibility of your system and can gain more confidence. Definitely, you will have some variation in estimates for each functional point from different providers but at the end, you can judge approximate estimates for each functional point. Finally, you list down estimates for each functional point (based on provided estimates) and ask provider how they are not in line to it. This entier exercise will cut down a number of providers and only serious providers will stay with you until the end of the journey and you can select any of them.