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Many clients want to build 1-million app for 1 thousand. So at some stage in the process you have to ask him about the budget he had in mind (if he does not mention it immediately).

Now, how soon do you ask this?

As of recently, I started ask for the budget pretty soon. Many times in my first email to a client. In that email I ask him questions about project features, ask for wireframes and documents, but I also let him know that my previous similar project cost XY dollars and does he have the budget which can cover such costs. I also let him know that costs may be lower, but also higher after we review all the specs.

Do you think this is a good approach? For me it's good since if he does not reply back, I know that he is the client from my first sentence. In any case, working this way I do not waist my time on bad or irrational clients.

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    We certainly do believe you are using the correct approach! Spending countless hours communicating with a potential client and preparing his/her proposal can be a waste of your (valuable) time if you were not aware of the budget up front. – Sutton Creative Studios Oct 21 '13 at 6:50
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For the budget conscience scope creeper type client, it's always important to ensure you clear up what they want and what is the minimum viable product that they seek.

Always set expectations up front

You approach is valid and IMHO the best approach. Set expectations in email or written communication and document the exchange if all possible: email responses, written Statement of Work, proposals, etc. This work can be time consuming but it'll allow you to manage scope and documentation for you to review later to better assess their needs.

Identify Risk

From your short explanation of your context, it sounds like you've identified potential areas of risk where costs are higher now. No one likes hidden costs, so it's better to provide them with realistic expectations that X feature will cost more because it's a rather unknown where as Y feature is a basic feature and will require Z amount of hours if this and that are true.

Every client is important but...

as you said they may not be a good fit for you. So don't sell yourself short. If the client trusts you and you demonstrate enough value to them they will find ways to work with you.

This will provide you and your clients a win-win situation.

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