Andy Budd writes a piece on doing spec work for clients, and why it’s nearly always a bad idea. He’s right, but the tough part is resisting that (mistaken) feeling that if you don’t give a potential client exactly what they ask for, you’ll lose the work. I’ll bet that getting over that fear would be worth the risk.
However if a client is basing their decision on the spec work you create for them, a pitch ends up turning into a visual design competition. Visual design is so subjective, it’s not usually the best company for the job who wins the pitch, or even the “best” or most appropriate design. It’s the design that most appeals to the key decision makers in the room. Not really a good way to make an important, strategic decision.
If you end up getting the job, the main decision makers will already be wedded to your design concepts (after all that’s why they chose you isn’t it?). You’ll end up being stuck with a design concept that the MD loves, but one that is likely to be inappropriate to the users goals and the business objectives of the site.
Personally I feel that doing work on spec sends the wrong signals about the value you put on your time. It also sends the wrong signals about the value of design as a whole.