A key point here is the uncertainty about the price one can expect. Agencies are often found through referrals. And prices are not visible online like with other services. This also makes sense, since each project has different requirements and it is not possible to list the costs without prior agreement. However, once you receive feedback from an agency, you should know whether the listing of services is authoritative and whether you can trust the agency. In this article we will therefore show you what a serious agency offer must contain and how you can distinguish this from a (non-binding) cost estimate (KVA).
Estimate – What will it cost?
Why an estimate?
The good thing about working with agencies: you don’t have to buy a pig in a poke straight away, you can get a cost estimate in advance.
This lists what will be included in the service. This allows you to see if everything will be fulfilled for the project or if you still have additional work to do. And you can see if parts of it are even necessary. In addition, you can ask which costs are how high and generally recognize how agencies set their prices and ultimately earn money as a result.
The cost estimate also gives you the opportunity to reconsider whether you want to carry out the project at all or whether you want to present it to another potential partner.
What must the estimate contain?
The contents of a cost estimate are regulated in US in Section of the US Civil Code. According to the US Civil Code, a KVA must contain the following points:
List of Services
- Specification of the time required for this, including the price
- Additional costs (e.g. material or travel expenses)
- validity of the estimate
- Estimated final price of the service
You must also be able to tell from the estimate whether this is a simple estimate or a guaranteed estimate. So whether the estimate is binding or not. What’s the difference here?
Easy vs. Guaranteed Estimate
The simple KVA is common in many business areas because it has the advantages of a cost estimate over a binding offer. It is non-binding and merely the basis for cooperation. It represents an initial contact in which a service is listed and discussed. The cost estimate does not become part of the contract, which is why an exact offer is required afterwards.
The guaranteed KVA on the opposite side is binding. It represents a guaranteed cost and the agency is bound by the final price. If the costs ultimately exceed the estimate, they must be borne by the contractor, i.e. the agency. Since agency costs often change afterwards, the guaranteed cost estimate is therefore rather unusual in the industry.
Difference to the offer: This includes a serious agency offer
The main difference to the (simple) KVA is: an offer is legally binding and represents the first declaration of intent to create an effective contract. If the offer is accepted within the specified period, a contract is concluded between the client and the contractor.
An offer has some differences compared to the cost proposal. As a rule, no individual services are listed, only the exact amount is given. This makes the cost estimate much more transparent, especially at the beginning of a collaboration.
On the other hand, it is common for the costs to deviate from the quoted price by up to 20%. Of course, this must be communicated openly, but it is fixed in the offer, where the contractor is bound to the price. In addition, a cost estimate can cost something in some cases. This needs to be negotiated but may be common in certain industries. An offer, on the other hand, is always free of charge.
Due to the lack of flexibility, binding offers are rather unusual in the agency industry. Requirements and thus costs can change quickly and additional services often only arise during the collaboration. As a rule, an agency first creates a cost estimate and then, based on this, an offer for the project.
Again in letter
When working with agencies, it is customary and advisable to first have a cost estimate drawn up and then discuss it with the agency. This list helps both you and the agency and speaks for a professional cooperation. In close cooperation with the agency and with good communication, subsequent adjustments are more transparent and can be easily discussed.
If you are still unsure about your budget and the various requirements and therefore do not know which agency is best for you to implement your project, please contact us or create your project on Sort list. We will then find the right agencies for your requirements.
Also Read: All you need to know about Accounting Information
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