[codva]

It starts way before you are running over budget. Your entire sales and contracting process needs to reinforce the idea that there are no fixed cost estimates prior to the completion of the discovery process and sign off by the client on the wireframes and/or software specification document.

Granted, 90% of clients don't really work that way. In which case you need to gauge your comfort level with getting them to buy in, or in some cases, you simply have to walk away from the client that has a one page overview of a complex web site and wants a fixed cost, binding bid.

[adamors]

> needs to reinforce the idea that there are no fixed cost estimates prior to the completion of the discovery process and sign off by the client on the wireframes and/or software specification document

I've also found that this is the best way to approach estimation. Granted, I'm not a freelancer, but at my current job we were quite dreadful at estimating so we had to figure out a solution.

Basically one of our developers sits down with either a client or QA/BA type person and for 1-2 weeks constructs a lengthy document (that can be later turned into user stories etc.). Based on these, developers can make estimates etc.

Then and only then we present the client with a timeframe. It worked out well for us so far, especially since it also acts as a filter and keeps clients who only have vague ideas out.