Why That Super Cheap Proposal Will Cost You Double

I see it so often, I could write a book about it. But I’ll keep it brief because you’ve got better things to do than read my rants (even though this one’s important).

Most founders expect a quote for everything they’re building after a simple 10-minute conversation. Let me ask you a question: How can I understand the breadth of your business that you’ve been working on and researching for months (sometimes years) in a short conversation?

Answer - I can’t.

And anyone who says they can is lying to YOU.

The $35,000 Story I Keep Seeing

Time and time again, I have founders ask me to review their development proposals. Some think they’re being protective by not telling me the number. Usually it’s an Indian offshore firm... when I finally say, “Yeah, I’m going to guess they quoted you $35,000.” The founder’s eyes get big and they ask, “How did you know?”

Because I’ve seen it more times than you have, and although I keep telling them it’s a bad idea, they keep doing it anyway. And they come back and ask me to clean it up later.

If you’re not in tech, that number sounds expensive. It’s not. It’s cheap... And I promise your multi-tenant, B2B SaaS, mobile, AI application or whatever is going to cost many, many, many times more than that.

But those firms know you don’t KNOW that, so they do what they can to get the deal. Then every invoice following is just playing into the sunk cost fallacy.

Real Stories, Real Consequences

Let me tell you about a startup I worked with. They wanted an MVP and hired a team out of Eastern Europe who claimed they could build their product for $60k using Bubble after a couple of one-hour conversations.

Six months later, the startup was working on their first major partnership - a deal that would bring in six figures of revenue annually. Nearing rollout, the startup began to walk through the product and realized most of what they discussed with the engineering team had not been implemented. Features that were needed for the upcoming partnership? Missing.

Ultimately, they discovered that the Bubble platform wouldn’t be suitable for those features and that they would need to rebuild the existing product from scratch and add the extra partnership features to get to the point where they could generate revenue.

Consequence: $60k was blown on a product that the startup couldn’t even use.

Or how about another company? They employed an experienced engineer to build out their product. After a few conversations about the MVP, the engineer gave them a quote of $100k to build it out. After he got started, he realized that there were quite a few complications in the details of how the startup wanted the product to work. The complexity of the project meant he wasn’t going to be able to do it himself, and he backed out of the project - leaving the startup with nothing.

Consequence: The startup had unrealistic engineering spend expectations and wasted two years with someone unable to deliver.

The Red Flags You Need to Watch For

Listen, you have to get your requirements together. Written down. Period. Check out our requirements guide here.

Once you have that document, here’s what to look for:

Red Flag #1: Look at the SOW - who is included?

Is it just developers? That’s a problem. You need Product Owners, Project Managers, and QA too. Engineers without support staff are like a Formula 1 car without a pit crew - they might be fast, but they won’t finish the race.

Red Flag #2: Who is managing the team?

Is that you? That’s another problem. You’re already running a business. You don’t have time to manage a development team AND figure out what they should be building. That’s why Project Managers exist.

Red Flag #3: Have they asked you any follow-up questions before giving you a proposal?

No? Houston, we have a problem. A good development partner should be asking you tons of questions. They should be challenging your assumptions. They should be helping you think through edge cases you haven’t considered. If they’re not doing that, they haven’t done the research to understand what you’re building.

Red Flag #4: They’re bragging about how many engineers they have.

Stop asking this question - it means nothing. The number of engineers they have does not equal a good job done. What matters is having the RIGHT team with the RIGHT support staff (remember those Product Owners, Project Managers, and QA folks?). Five engineers without proper support will give you worse results than two engineers with a full team backing them up.

Red Flag #5: They don’t have the personnel to write requirements.

Some engineering firms don’t have the people to help you write requirements. If that’s the case - red flag. If they can’t help you with that, then they’ll never be able to work with you in defining pivots and future growth. You need a partner who can think strategically with you, not just code what you tell them.

How to Protect Yourself

The antidote is simple (but not easy):

Get detailed requirements written down. After you download the guide above and get started, spend $6,000-$7,000 on building out the rest. Believe me, this will have already saved you thousands, and it will pale in comparison to the money you will spend on a bad build.

Give everyone the same documentation. When you’re comparing proposals, make sure all the firms have the exact same information. Otherwise, you’re comparing apples to oranges.

Ask them how they derived their estimates. A good firm will walk you through their thinking. A bad firm will get defensive or give you vague answers.

Check if they’re employing the support staff. If the proposal doesn’t include Product Owners, Project Managers, and QA, run away. Fast.

The Bottom Line

If it sounds too good to be true, it is.

Really cheap proposals often mean that they haven’t done the research to understand what you’re building or de-risk the implementation process. And once that first investment is made, it’s hard to say no to more money. You’re stuck in the sunk cost fallacy, throwing good money after bad.

I’ve seen this movie too many times. Don’t let it happen to you.

Want to learn more about building your product the right way? Check out our favorite tools for first-time tech founders or dive into our complete guide to tech terms.

Coming Next Week: The True Cost of No-Code Solutions - When they make sense and when they limit your growth.