The formula
quote = hours × (1 + contingency) × rate + expenses − discount
Where it comes from
An hourly quote always breaks in the same place: the estimate is too low. Contingency is not a trick to charge more, it is the part of the price that covers what cannot be foreseen, and whoever leaves it out ends up working the last few weeks for nothing.
How to work it out by hand
- Estimate the hours of work in the project
- Add the contingency on top of those hours
- Multiply by your rate and add the direct expenses
- Apply the discount, if there is one, to the total
What is worth knowing
The most useful output is not the total but the real rate if the project overruns: what you end up earning per hour if you burn the whole contingency. That is where a discount shows its teeth. A 20 % discount on a rate of 45 leaves it at 36, and if the estimate was short as well, the effective rate falls further still. A 20 % contingency is normal on familiar work; for anything new, or with a lot of client dependencies, it is not enough.