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December 27 2013

15:48

We could really do with £50k

The following story was written by John Scarrott of the London-based Design Business Association.

50 pound note
Photo by worldoflard

I was chatting to one of our ‘experts’ at the DBA Design Effectiveness Awards when he recounted the following story to me. I’ll tell it from the expert’s perspective.

“One of my clients, a small design agency of five people, was asked to quote on a piece of work. They’d not worked for this client before. They took the time to carefully cost the project, based on their normal charge-out rates, and the time and level of commitment required. The price came to £100k.

“At this point the agency experienced what I would describe as a ‘slight degree of nervousness.’ It seemed like a big number to them; a lot of money. It was. In fact as a project it would be one of the biggest they had undertaken. But, they took a deep breath and sent the proposal off.

“The client came back the next day with the following news: “We’ve only got £50k in the budget.” The agency rang me. Their first reaction was, “There’s £50k we could have.” Mine was a little different — we couldn’t accept a £100k project for £50K. They were initially hesitant to accept my advice to turn away £50k. I reminded them that we had carefully worked out a financial plan for the business based on sound principles and we should stick to it.

“They contacted the client via email, thanked them but said that they couldn’t do the work for the budget, concluding that it would be lovely if they could stay in touch. No counter-offer. The end.

“Actually not, as it turned out. Things did go quiet for a couple of days. But then the client picked up the phone and said they’d found some budget for the project and could pay £95k if that was acceptable to the agency. Which, of course it was.”

Listening to this story, it struck me that that the agency’s relationship with the expert was key, and they’d built a positive and trusted relationship together. So I asked our expert what the key issues and turning points were. What gave the agency the confidence to know what they were doing was right?

1. The size of the number, it felt big!

A perfectly valid thought. But not a fact. The important point was that there were sound business principles behind the calculation of the price. It had been worked out. It was a genuine figure. There was no smoke and mirrors, no figure added on as fat (see 5.). They knew they’d done their numbers properly and this gave them a mindset of certainty and confidence in what they’d suggested.

2. They have a financial plan that underpins the business.

Sitting beneath the studio is a financial plan. This involves delivering income to cover overheads and make a profit. They know they need to bill at £X per hour to be profitable at the end of the year. If they have that plan and someone says “I won’t pay that” and they take what they offer, they’ll never achieve their plan. The more times they do this the further away they get from achieving their plan. They may actually lose money. I’ve heard tales of serial acceptors of these offers, eventually folding as businesses. This happened to one of the best creatives, a household name with books on shelves. No one wants to go the same way.

3. Imagine the atmosphere in the studio if they’d taken this job for £50k!

How are they going to feel? How will the team feel? That they’re working “£100k hard” for a £50k reward. They can’t pull their effort back to £50k because the client’s expecting a £100k job. So they’d be stuck working their backsides off on a job that takes them further away from where they want to be. The effect on team moral is going to be bad, and they want to enjoy what they do, not suffer for it.

4. They’re consistent.

They have a plan and they keep to it. They could add on some fat to the bill to negotiate but they choose not to. This instills a sense of self-worth that is important to them as an agency. It allows them to stay in rapport with their clients by being clear about where they stand.

5. They don’t add margin only to cut it later.

What if they add some money on top, say 20% and then let that slide in the negotiation? How does the client know that they’re supposed to stop there? If they give 20% what’s to stop the client chipping further?

6. They’re confident in their ability.

They know their ability and they stand by it. They know that what the client is paying for is better than they could get elsewhere. They’ve created a niche of expertise for themselves. This is another foundation stone for their confidence.

7. They understood the myth of “We’ll just do this one.”

It’s always a tempting thought. Could £50k now be better than nothing? What about up-selling the client in the future? These things get questioned, but what stops them is the knowledge of what could happen. A better opportunity could come through which they can’t accept because they’re doing the £50k job. They know getting the client to pay more next time will be an uphill battle that in all likelihood they won’t win.

Of course if you try this the next time you’re asked to cut the price you might send the email and never hear from the client again.

It might be the best thing that never happened to you.

John Scarrott is membership director of the Design Business Association. Catch him on Twitter.

July 10 2013

10:36

Picasso and pricing your work

A question I’m often asked is whether to charge clients by the hour or by the project. The following short story is the best answer I can find in favour of charging by the project.

Picasso and Brigitte Bardot
Photo of Picasso and Brigitte Bardot, from Getty Images, via The Telegraph

Legend has it that Pablo Picasso was sketching in the park when a bold woman approached him.

“It’s you — Picasso, the great artist! Oh, you must sketch my portrait! I insist.”

So Picasso agreed to sketch her. After studying her for a moment, he used a single pencil stroke to create her portrait. He handed the women his work of art.

“It’s perfect!” she gushed. “You managed to capture my essence with one stroke, in one moment. Thank you! How much do I owe you?”

“Five thousand dollars,” the artist replied.

“But, what?” the woman sputtered. “How could you want so much money for this picture? It only took you a second to draw it!”

To which Picasso responded, “Madame, it took me my entire life.”

Quoted from How to charge, one of the archived posts on 1099 — “the magazine for independent professionals.” The post was written by Ellen Rohr, author of How Much Should I Charge?

More resources for pricing your skills.

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14:56
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June 19 2013

14:47

Design pricing for non-profits

Kim Hatton asked:

“I’ve read your articles on design pricing but don’t see any reference to non-profits. Do you believe that the same design pricing principles apply?”

Percent symbol on building
Photo of Stuttgart’s Kunstmuseum, by Ralph Unden

There are a few options:

  1. Pro bono design, cutting your full rate by 100% for the public good
  2. Non-profit discount, offering a percentage off your normal rate
  3. Service trade, where you do the design work and your client offers a product or service that’s useful to you or your business (although this is probably better suited to for-profit clients)
  4. Full rate (we might call them non-profits, but they’re still businesses with design budgets, and they need to turn a profit to grow)

Most of my clients are for-profit businesses (I take it as it comes), but when the third sector gets in touch, sometimes I’ll choose one option, sometimes another. It depends on my workload and how strongly I feel about the cause. When a client needs a reduced rate and I can’t deal, I’ll always offer feedback on ideas if it’s wanted.

A quick tip for if you work pro bono or offer a discount: send a full-price invoice as normal, but show the saving, whether it’s 100%, 10%, or whatever. It’s a little reminder about the value of design so clients are less likely to think, “It’s free. It’s not that important.”

Thanks for the question, Kim.

Identity Designed

Brand identity inspiration on Identity Designed.

August 09 2012

10:59

“Nobody bought the cheapest option.”

The following is excerpted from pricing experiments you might not know, but can learn from.

People were offered 2 kinds of beer: premium beer for $2.50 and bargain beer for $1.80. Around 80% chose the more expensive beer.

Now a third beer was introduced, a super bargain beer for $1.60 in addition to the previous two. Now 80% bought the $1.80 beer and the rest $2.50 beer. Nobody bought the cheapest option.

Three beer bottles

Third time around, they removed the $1.60 beer and replaced with a super premium $3.40 beer. Most people chose the $2.50 beer, a small number $1.80 beer and arounf 10% opted for the most expensive $3.40 beer. Some people will always buy the most expensive option, no matter the price.

You can influence people’s choice by offering different options. Old school sales people also say that offering different price point options will make people choose between your plans, instead of choosing whether to buy your product or not.

How to test it: Try offering 3 packages, and if there is something you really want to sell, make it the middle option.

The story is referenced in William Poundstone’s 2011 book Priceless: the myth of fair value (and how to take advantage of it). Via the 11 ways that consumers are hopeless at math, on The Atlantic.

Beer bottle photo by jovike

Identity Designed

Brand identity inspiration on Identity Designed.

Related posts worth a look

March 04 2012

10:00

Things to Consider When Estimating for a Website Development Project

Do you sell website development services? If so, then you are well aware how difficult it is to keep projects in scope during the website development process. Oftentimes website designers price website development jobs according to the specs initially presented by their client. Unfortunately, the client doesn’t always know everything that he needs/wants until after the project has already been scoped. This leads to website development companies either eating costs or having to have very difficult conversations with customers in order to get paid for the additional functionality and features that clients request during the development phase. I like to refer to this as “scope creep”. This article is going to talk about how we can avoid scope creep OR be prepared to deal with it effectively when it inevitably occurs. After you’re finished reading this article my hope is that you will be better prepared to estimate your website development projects.

Website Development is a Tough Business

Building a website takes a lot of time and effort. The client doesn’t always realize just how much work goes into it. If you don’t properly set expectations and price things accordingly up front, inevitably there will be scope creep. The client will keep requesting things that weren’t scoped for during the proposal process. The client will also continue to put in requests long after the website has launched, which again, if not scoped for up front, will lead to some uncomfortable conversations or even worse, you eating costs. We don’t want that. Here are a few reasons why it’s so tough to estimate costs for website development projects:

  • Customers aren’t comfortable with what goes into building a website. This lack of knowledge leads them to think things are easier than they may actually be.
  • Customers can’t visualize a website prior to it being built therefore their needs change throughout the project
  • Oftentimes customers ask for more rounds of revisions than were scoped for because as the process unfolds they are continuing to look at other websites for ideas
  • Customers think that if they see something on another website that it can easily be incorporated into their website
  • Customers don’t realize that they will need additional support after the website launches. They don’t like to pay for that up front, but then they ALWAYS come back with email requests asking for changes once you’ve completed your end of the agreement.

5 Steps for Making Estimating Website Development Projects Easier

website project proposal

Now that we know the reasons why scope creep occurs during website development projects, we can start to focus on how to do everything possible up front to avoid it. Here are 5 steps for making website development estimating easier. Start step 1 after you receive a request to build a website.

  1. Create a standard list of questions that can be semi-customized for each customer. Customize those questions for your current proposal and send them over to your prospect before you even have a phone call with them.
  2. Meet with the customer to review their responses to your questions and to dig deeper into their needs.
  3. Create your initial proposal and submit it to the customer. Schedule a meeting immediately to walk the customer through the proposal.
  4. Set customer expectations based on the initial proposal. Collect changes to the scope of the project based on the initial proposal and your expectations setting conversation.
  5. Finalize the proposal and begin work.

Great, so we have a plan for how we are going to go about estimating for a website development project, but the steps above lack critical details in order for you to actually follow them. So let’s dig into each step in more detail.

Create a Standard List of Website Development Questions

Having a standard list of questions that you can send off to a prospect who’s asking for a website development proposal from you will help you get answers to important elements of building a website. It also forces the person requesting the proposal to think through the project up front. You can always refer back to their answers throughout the process if there is ever a need to do so. This critical first step also allows you to make step 2 much more effective. If you skip step 1 and go right into a meeting with the customer then that conversation is going to take much longer than it needs to. Be prepared for step 2, complete step 1 first!

Some initial questions might include the following:

  • How many web pages do you need for your website?
  • Who is responsible for creating the website design, architecture, and content?
  • How many decision makers will have to approve the website before it launches?
  • What’s your timeline for the project?
  • Who will be hosting the website?
  • Do you have an internal IT person who can update the website after it has launched?

There are a lot of other questions that would probably be valuable to ask up front, but this list will definitely get you started. Once you have these answers you can move on to step 2.

Have a Face-to-Face Meeting with the Customer

Having a face-to-face meeting with the person or people who are going to be decision makers for this website development project is critical to the success of the project. They must get to know you, and you must get to know them. Website development can become contentious at times, when you have a better understanding of the players involved, and have taken the time to build a relationship with them, most of the issues that come up can more easily be resolved.

website estimate

Now, just because you must have a face-to-face conversation with your customer doesn’t mean you have to be there in person. Use tools like Skype, FaceTime, etc. to facilitate these meetings if you’re not in close proximity to your customers. A side benefit is that your use of technology will probably impress them. It may be that you must have more than one meeting. If that’s the case then doing so via Skype will be much easier. Once you’re satisfied that you have as much information as possible about the project it’s time to create your initial proposal.

Create an Initial Website Development Proposal

It’s time to create your initial website development proposal. I say “initial” because proposals for website development almost always change once you’ve had a chance to review them with your customer and set expectations. Basically what you need to do is take all of the information they have given you, match that with your recommendations, create a long list of assumptions, break it down into a few areas of focus, and put pricing behind each area of focus. Areas of focus might include:

  • Design, architecture, and content development
  • Website Build
  • SEO
  • Hosting
  • Post-Launch support

The key here is to give your customer enough information so that they understand just how much work is involved, but not so much that it overwhelms them or provides them with too much to nitpick. I usually like to pad hours for website development projects as customers inevitably ask for a reduction of costs, without cutting down on the tasks. Once you’ve put the proposal together, reviewed it, and are OK with it, go ahead and send it off to your contact. Be sure to request a meeting ASAP. Don’t let too much time go by without walking the customer through it.

Set Customer Expectations

During your proposal review meeting, you absolutely have to start setting customer expectations. You do so by explaining each area of the proposal, explaining what it includes and also what it does not include. You want to make sure that everyone is clear as to what is covered and what is not. I even recommend that in some areas where you did not include something, but you can foresee it becoming an issue future-forward, that you bring it up during the call. Explain to them that although it’s not covered in the proposal, you think they should consider including it OR simply remember that if they request it after you’ve started work, you will have to submit a change order to the project costs.

Another thing to be sure to openly discuss during this meeting is change orders. You can be honest with them. Explain to them that in your experience website builds often have scope creep. Cover the reasons why that is. Let them know that it’s OK to change the scope as long as they are all comfortable with the fact that when the scope changes, they should expect your budget to change as well. If you get your customer comfortable with this process up front, then they will be prepared when you send them an updated budget or change order.

Setting customer expectations is the single biggest step in this entire website development proposal process. Those who do it well will experience much less pain moving through the website development process.

Finalize the Website Development Proposal

Here it is… the final step in winning a new website development job. Finalize your proposal. Take everything that was discussed during your initial proposal review meeting, incorporate it into your proposal and finalize it. Be sure to put in a list of “assumptions” based on what was discussed at the meeting. If your customer said they are providing all of the content, be sure to state that. If they said they do not need post-launch support, include end dates for the work. The biggest thing during this step is to just be smart and think it through before you finalize your bid. If you do that, then you should make things much easier on yourself once you start work.

Website development is a tough business. We all know it far too well. Things can go South quickly and people can lose money even quicker. If you follow the steps we’ve outlined in this article you will be doing everything possible to minimize that risk. Start your website development projects off right, follow the steps above, set customer expectations, keep open lines of communication, and you should be just fine.

What do you think? What’s been your experience when it comes to estimating website development projects? Do you have any other tips that might help all of us when we are scoping work? Please leave your comments below. We can’t wait to hear them.

January 31 2012

16:00

Pricing Strategy for Creatives

Not only does my company work with a great CPA specializing in us design and creative folk, but the head dog @JasonMBlumer also offers some great advice on Pricing Strategy.

September 06 2011

15:21

The Dark Art of Pricing

I tend to talk quite a bit about the art of the business of design and Jessica Hische nails it on her post The Dark Art of Pricing. A worthwhile read.

August 22 2011

14:40

What does a website cost?

Imagine asking a Real Estate company, “How much does a house cost?” Well it depends. First off, what are the essentials you need? Three bedrooms because you have two kids? Central air conditioning because you live down south? Now that we have the essentials, what are some of the less essential, yet nice features? Basement? Extra storage? Large backyard? Three car garage? What if you could have it your way? How about a pool? Sounds nice right?

All these factors go into the price, yet we all have a budget to adhere to. Most of the time it comes down to what we can afford. Many times this means opting out of some of the less essential amenities.  Even if we opt out in the beginning doesn’t mean we can’t potentially add them later. Wanted a pool, but couldn’t afford it upfront? Save up a bit more and you’ll get your pool in a few years. Great things take time.

How does this relate to web design?

I cannot count how many times I receive the “How much does a website cost?” email. Design in any instance doesn’t have a generalized price tag. It’s an investment of experience and time. While the experience factor is tough one to measure and quote, the amount of time, on the other hand, depends on the scale, complexity, features, elements, components, and so on.

Typically, my clients start off by filling out a project worksheet, which helps to gauge the project from the get go appropriately. Questions such as, “Does the redesign need copywriting?”, “Will your site require a CMS?”, “Which ‘social’ feature(s), if any, will be required?”, help to get a general feel for the timing and scale of their specific site.

Check out this site for things to consider when calculating the cost of a website.

January 20 2011

15:29

A useful assessment to pricing, accounting and client selection

Designer and Illustrator Frank Chimero discusses a technique he uses called Whiteboard Accounting: A guide to deciding which jobs to accept or skip.

November 23 2010

16:14

On Self Worth and Perceived Value

“Accepting a valuation that’s less than you’re worth is a quick way to lose others’ respect and diminish your chance of success. By pricing your value at full worth, you give the person an opportunity to have more than they thought they needed. Not everyone will recognize this opportunity, but the right person will. That’s the person you want to work for.”

October 14 2010

17:39

Strategies and tips on budget negotiating

For one, I’m a bit giddy that this article shared my latest post on Project Budget and Secrets – as I have massive amounts of respect for the guys of Happy Cog. Beyond that, the article provides great thoughts and insight on negotiating budgets and talking price points of design work. A must read if you run an small / large design studio or freelance.

September 23 2010

15:11

Project Budgets and Secrets

Let me start off by apologizing on the lack of new articles. This year has been hectic, but great in so many ways. I’m still doing my best to figure out time management and unfortunately that meant less writing in recent months. Nonetheless, the site lives on and with my lack of self-written posts I’ve made it a point to update the Notebook (almost) daily with great resources and articles. Have a peak if you haven’t in awhile.

On budgets and advising

With the year coming to an end in three months, it’s that time when any business should be reflecting on the good, bad and mediocre of past months in effort to change for the good the following year. Lately I’ve been reflecting my pricing methods and communication between myself and clients and clients and myself.

The majority of my clients I’ve never met in person (40% of my conversations never extend beyond email; mostly those of overseas clients), so I make it a point to build as must trust as possible given the circumstances – one is sharing my thoughts and processes on this blog. However the dreaded question of ‘pricing’ always tend to weaken the knees of everyone. Again, in a trust building effort I try to explain, in much detail, on what their project needs to accomplish, how we are going to do it and whats needed to accomplish it – one of which is a typical project”starting” price.

I also break the ice first by asking their budget. Before letting them respond, I quickly explain that sharing their budget allows myself to determine how much time I’m able to invest (since my estimates are based on my hourly rate and a projected amount of time). At the very least, I explain that determining their budget allows advising on how to best use their budget to accomplish their needs and wants (don’t confuse the two). For example, there are many instances when a client has a slightly lower budget than necessary to pave a truly successful outcome, but knocking off a few “wanted” (a.k.a. not necessary for launch but a cool feature) parts of their website to implement at a later time when they have additional investments is more beneficial than simply slapping something together.

Secrets, secrets, are no fun…

The reason I explain the above to all my clients before letting them interject with an actual budget is to help them understand how I work so they understand that I’m just not trying to get the highest price out of them. The more time I can invest the better the outcome. The more time I can research, prepare, try, scrap, try again, etc. Simple and fair, no? Still many conversations about budgets proceed like this:

Client: *pause* “Ummm… *pause* We don’t have a budget.” *awkward silence that awaits my next move*

Me: “Based on my explanation (above) on how I charge and my hourly rate of $XXX.XX, a starting price for a project you outlined will be $X,XXX.XX. Obviously the goals and outline of the project can change throughout the the course of your project so this is only an estimate, but for the most part they are quite accurate. This prevents the project from getting out of hand and beyond the scope of the contract.”

Client: *pause* “Ummm, well… that is substantially higher than we would like to spend.”

Ok, let’s stop there. Does the above situation sound familiar?

Within the first few minutes of contact — in my effort to be as open and detailed on how I work as possible — the client counteracted by lying about not having a budget to clearly having a budget. How does the relationship change? Put yourself in their shoes. Would you want to work for someone that lies and keeps secrets? Setting the tone and the relationship from the get-go is extremely important – not only from a client-designer standpoint but from a project standpoint. Honest work is good work and this goes both ways.

June 02 2010

00:45

Why I dislike “freelance”

Don’t let the title fool you. I certainly love being self-employed, but I cringe when I hear the self-employeed reference themselves as “freelance.” Maybe it’s the way others perceive freelance, but overtime I’ve come to find that people think of freelancing as something “we do on the side after we get home from our real jobs.” While this might be true to some, it most certainly is not for those of us that do it full time. And by full time I mean 7 days a week, 12 hours a day. Anyone that runs their own design business knows that this is a real full time gig. I’ve received short conference calls while out to eat with friends on a Friday night as well as made contacts at grocery stores; it’s non-stop.

Make no mistake about it; running an independent business, no matter what field you are in, is extremely time consuming, exhausting and requires a lot of motivation and dedication. It’s not for everyone. Running your own business means that there are more unpaid and non-billable items that you perform on a daily basis. Emailing, answering phone calls, marketing, networking… these are all, for the most part, non-paid facets of what we do. If you are an in-house designer, responding to emails, answering phone calls, and marketing, among other things, are payable because you are on the clock. You get paid for the time you are under the roof of your office. The self-employeed unfortunately do not. This means that we need to compensate for the time we do not get paid. Freelance means that we do more unpaid “clock” work; not that we do more paid work for less money.

This might sound familiar to some most of you: I received an email from a potential client inquiring a new website. After a few emails back and forth, the talk of money came into the equation, only to have the client question why my rates where so high as “they too were freelancers or small businesses.” They also asked if I’d consider slashing my rate by two-thirds. How about this one: I received emails looking for a $1,000 website because large firms I’ve contacted charge in the six-figures.

There are reasons large companies charge $100,000 for a website and it’s not only based on credibility and size of the website. They have more employees to pay and a much larger overhead to cover. The price for this is taken into consideration. It’s not just design firms that do this. It’s all businesses. How much do you think your local grocery store buys a box of Cheerios for? Having worked for a TGI Friday’s a while back I remember seeing how much they get a rack of ribs for in comparison to how much they sell to the consumer. The margin is so unbelievable that you don’t even want to know. The Apple iPad costs $270 to make. Does this stop you from buying one for $499? Most likely not. Why? Because there is the need factor and there is the trust factor. Need not in the way that if we don’t have one we will die, but need as in we want that one instead of another tablet computer. Why do we want that one? Because we trust it and the company behind it. The same can be said for design services. Sure you can go out and get a $500 website done up, but I guarantee you will eventually come back to getting what you want from someone you trust, and between me and you, if someone is designing and building a website for $500 I’d be extremely vigilant making that decision.

I receive a lot of emails from designers just starting off asking “how do you charge?” This is a tough one and I can tell you with time it only gets better for understanding what you should be charging. Now I’m not saying to go out and rip off your clients, but when you are pricing your services take into account all of these extra “non-billable” things. A good ten hours of my week (at least) is dedicated to answering emails. Do I get paid for this? No. However, I do need to make up for all of these extra hours someway. Either that or I’d find myself spending more than I make per say. Also, consider taxes. Around 40% of my income goes to good ol’ Uncle Sam. A thousand dollar project pretty much goes right down to $600 bucks. Freelance is a business and it should be handled no different than any other. Sure, we can charge less than the large firm because we have lower overhead costs. That’s one benefit of working with an independent designer, but lets not take advantage of the fact that we are working alone. Quality design and development comes with time. Each project requires a unique solution and without taking the time to think, plan, structure, design, develop and so on, will only return bad (or less than par) results.

I understand that it is often difficult to budget a company, especially if its just getting its feet wet, however building a larger budget and coming back to a project later is a much smarter investment than getting something slapped together for the sake of needing it. Investing a few extra hundred or thousand dollars (or whatever the cost difference might be) to have it done to the best of its potential will kick back a greater outcome all together and all sides will be much happier in the end.

January 05 2010

10:23

What’s In A Price: The Guidelines For Pricing Web Designs


By Thursday Bram

Pricing a website design can seem impossible. A good website design can cost anywhere between thousands of dollars and under fifty dollars, depending on the type of site, how you build it and a hundred other numbers. Those numbers can make it difficult to decide where the right price point for your own work is: how do you know what your work is worth when other designers’ prices are all over the place?

All prices are not created equal: while it may seem to the lay person that all websites are similar, differences like the framework the site is built upon and the process the website designer uses can require drastically different prices. A website design that doesn’t require you to do much more than design a new theme for WordPress probably shouldn’t be priced the same way that an e-commerce site that expects to see plenty of traffic should be. It comes down to the question of what’s in your price. In this article, we’ll look at how four web designers set their prices — and how you can learn from their experiences.

Money in Whats In A Price: The Guidelines For Pricing Web Designs

The Basics of Pricing

At the most basic, your prices must cover your expenses with hopefully a little extra left over, unless you have another source of income. The standard advice for determining your prices is to calculate what you need to live for a month — and then break that down to what you need to earn per hour. There are some nuances: it’s rare for a web designer to have 40 hours of paying work every week. It’s not impossible for a freelancer to have only 20 billable hours a week, especially when he’s just starting out. The rest of the week may be spent marketing to new clients, handling paperwork and other necessary tasks.

There’s also the danger of underestimating your expenses when you decide on your rates. It’s easy to miss one or two expenses, like health insurance, and wind up with prices that just won’t work. It’s important to build in a buffer when estimating the money that you need to bring in: your income needs to be able to cover savings, emergencies and even price hikes on your standard expenses. These factors mean that the price range you find by estimating what you need to cover your expenses should actually be the bottom end of where you set your prices. Your own expenses are only a small part of what goes into the price you charge for a website design.

1. Deciding Between Per Project and Per Hour

One of the biggest decisions you have to make as a web designer is whether you’ll charge per hour or per project. Most website designers think in terms of how many hours a project will take them to complete, which translates easily to charging by the hour. There are some other benefits, as well: an hourly rate makes it easy to revise an estimate if a client suddenly changes a project or needs an extra round of revisions.

Should I Charge Per Hour?

Mary-Frances in Whats In A Price: The Guidelines For Pricing Web Designs

Mary-Frances Main is a web designer based in Colorado. She chooses to only work on an hourly basis. As Main says:

“We only quote per hour. Very very occasionally we will get a ballpark complete project cost, but rarely… We find that project bids very rarely end up in our favor. It’s too difficult to adjust for design dilemmas or changes in direction or lack of organization from a client. We make up for not giving whole project bids by only charging updates with a base rate of a quarter of an hour.”

The type of client Main usually works with is a big factor in her decision to work on an hourly basis. She prefers clients that need a web designer for the long haul — they need the web designer to handle updates, maintenance and any adjustments the site needs. Because Main charges an hourly rate, she can comfortably handle those updates, while still making enough money to cover her needs.

Charging per hour makes sense if:

Project requirements may change after you’ve already started working,
It’s hard to tell exactly how long a project will take,
You’re handling lots of small tasks or projects as they come up,
Your client wants something beyond what you ordinarily offer.

Should I Charge Per Project?

Noel in Whats In A Price: The Guidelines For Pricing Web Designs

While charging per hour makes sense for some web designers, it doesn’t always make sense for everyone. There are drawbacks to pricing by the hour, as well. A client who doesn’t really know what to expect in terms of the amount of work it takes to create a website can look at an hourly rate and quickly become concerned. Having a rate of $100 per hour can scare off a client who thinks in terms of people working 40-hour workweeks. If you say that you can have the project done in 3 weeks, you can wind up with a client picturing a bill in the tens of thousands of dollars, no matter how large or small his project actually is. Giving a set rate for a whole project can eliminate that sort of pricing confusion.

Noel Green, a web designer based in New Mexico, takes a per project approach to pricing his work:

“While we have a per hour rate, we prefer to quote per project rather than per hour. After 8 years of doing this, we’re quite good at knowing, approximately, how long a project is going to take us, so giving a client a ‘flat fee’ lets them feel more comfortable with the process.”

Pricing per project has had other benefits for Green, as well. He’s found that clients are less likely to add on to the original project if they know that they’ll have to pay an hourly rate for any changes.

Charging per project makes sense if:

You do this type of project often enough that you know how long it should take,
Your client has a budget that doesn’t allow for an open-ended number of hours,
You want to offer a package deal, such as a website and hosting for a certain price,
The project is relatively short and specific.

Price Per Project And Per Hour

There is one other option, which Dixie Vogel, a web designer with more than 10 years of experience, uses. You can use per hour pricing in some situations and per project in others:

“For larger projects, I price by project (after figuring out a time estimate to multiply against my base rate). I dislike time tracking and the feeling of rushing through work to keep my clients from being overcharged. I’m also frequently interrupted, which made tracking difficult. For small, limited scope projects, I do bill hourly as I tend to underestimate the time on simpler tasks and ended up undercharging. Either way, however, I give my clients a range at the outset and stick very close to that.”

How Low Should I Go?

It can be tempting to price yourself below your competition, especially if you can bring in enough income to cover your expenses even at those lower prices. It seems like a lower price would get you more work and more clients. But it’s a temptation you should avoid: not all clients assume that a low price means that a particular web designer is offering a deal. Instead, many prospective clients will think that there is a reason your prices are below other web designers with similar portfolios and skills. Maybe there’s something wrong with your work or maybe you’re a particularly slow worker — a low price could be more easily explained by a problem than by a web designer trying to set a price lower than his or her competition.

Charging For All The Time You Spend

There’s a more subtle version of this problem that can appear depending on just what you charge for. Many new web designers charge only for the time the spend actually creating and implementing a website. When Main first started designing websites, about nine years ago, she fell into this trap. Now, her prices cover a lot more:
We used to have entire email exchanges and design processes that went uncharged, we now log all of that time and charge for it accordingly.
Beyond the actual time you spend on designing a website, you can and should bill your clients for the following:

Revisions: It’s rare for a client to like a design exactly the way you come up with it, but you can bill them for the time you spend revising your designs.

Education: With some clients, you can spend hours going back and forth, educating them on what a website design actually includes. That is time you’ve spent on your project and it’s time you can bill to your client.

Set up: Some designers take care of setting up hosting, if not providing it entirely. The time it takes to get everything ready on the hosting end of things is an expense your client can cover.

Explaining Your Prices

There may be a client or two who questions your prices. It seems to happen more with clients that aren’t familiar with the work necessary to create a website, but it can happen with a wide variety of client types. As long as you can explain your prices — and you remain firm on them — clients are typically willing to work with you. Green has had clients try bargain and barter with him on his rates:

We didn’t budge, so they chose someone else…the client who left because we wouldn’t go down in price ended up coming back to us after the company they DID go with didn’t deliver what they’d promised.

When a prospective client wants to argue prices with you, it can be hard to stand firm, if only because you want the project even if it means dropping your rates a little. But there are a lot of reasons that a web designer can ask for high prices and get them:

You can complete a project significantly faster than an amateur. It’s cheaper to pay your hourly rate and get a good design quickly than to let a non-designer drag out the process for weeks or even months.

You do more than just design — you manage the project as a whole, from creating a design to coordinating content.

You’re a professional. Your clients wouldn’t ask a vendor to drop their prices.

It can be hard for a new web designer to price a project high enough, simply because of a lack of confidence. As you build your skills and gain confidence, it becomes easier to quote higher prices to clients without worrying that the price is too high. Stephanie Hobbs, a web designer based in South Carolina, has increased her prices along with her confidence:

When I started in 2003, my first paying website was $450 for 5 pages. Once I figured out a reasonable time estimate, I offered a four page site for $600. As my skill level has increased and I’ve raised my hourly rate, that number has gone to $800, $1000, and now $1200. My hourly rate started at $40 (I think, it might have been $50) and is now at $75. But I’ve raised my rates because I was very low to begin with because I didn’t have confidence in myself.

When Should I Increase My Prices?

What you charge today isn’t necessarily what you should be charging for it a year from now. As you add to your skills, as well as your reputation, you’ll not only be more valuable to your clients but you’ll be able to demonstrate your worth with a larger portfolio of completed projects. You’ll be able to increase your prices — and you should.

Vogel started freelancing at $25 per hour. She actually considers clients not complaining about prices a bad sign: “If no potential client complains, you’re not charging enough.”

As she raised her prices, Vogel would start quoting new projects at her higher rates, as well as informing her existing clients.

For any rate increases, I’ve always sent out notices to my clients explaining what I was doing beforehand and giving them all plenty of opportunity to opt out. I’ve never lost a single client raising my rates.

Timing A Price Increase

Timing when you’re going to announce your rate increase can be tricky, especially when you have existing clients or you’ve already offered an estimate for a new project. New clients are much easier to deal with: it’s just a matter of quoting your new rate as you talk about new projects. With existing clients, however, you may find that they’ve gotten used to your old rates and aren’t prepared to budget more for your services. There are a couple of times that it can be easier to announce those new rates:

The New Year: With the end of the year approaching, you can simply send out a notice that your rates will be going up on the first of the year. The same approaches works with the beginning of a new month if you aren’t prepared to wait until the end of the year.

New Projects: If your client brings you a new project, it can be an ideal time to make the switchover. You can explain that for future projects, you’ve increased your rates, which provides you and your client a chance to talk about the matter.

Contracts: If you have a contract with your client to provide certain services, like maintenance, on a continuing basis, that contract should have an ending date. That date gives you an opportunity to renegotiate your rates.

Increasing your prices may not always be just a matter of making more money. If you want to be able to offer a discount on your work, as Hobbs does, having higher rates is necessary:

I do offer a 20% discount for people in my networking group, and a 30% discount to nonprofits (which is part of why I raised my rates from $1000… I’m actually making closer to what I intended to make, since many of my clients are from my networking organization).

Prices in the Wild

All the information on how to set prices may not be enough to help you decide what is a reasonable price for your web design work. Actually seeing what other web designers charge is necessary to decide if your prices are comparable.

Mary-Frances Main charges $60 per hour for most web design work. For programming, her rate is $72 per hour and for Flash, her rate is $65 per hour.

Noel Green charges between $2,500 and $5,000 for a complete website, guaranteeing a 4-week turnaround on projects. Projects at the upper end of that range typically involve more complex features, such as shopping carts.

Dixie Vogel charges between $60 and $80 per hour for most web design work.

Stephanie Hobbs’s rates start at $1,200 for a 4-page website, add to her estimate for larger projects and sites with extra features, like Flash.

These prices differ due to factors like the designer’s location, their experience and even the type of clients they prefer to work with. But, in each case, the web designer in question has thought through not only what he or she needs to earn but how comparable those prices are to other designers and where the prices can be increased.

About the author

Thursday Bram is a full-time freelancer who has been working on her own for more than seven years. She writes about the business side of freelancing and maintains her own website at ThursdayBram.com.

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