Early January 2001.
Wise-Women List Archive File
How do you charge, and what to charge for?
Should you charge by the hour, the page, or the project?
Question 1:
It's been quite a while since we discussed the topic of how to charge, and we have quite a
few new members who might be wondering about the benefits and drawbacks of different
choices.
I have charged by the page, by the hour and by the project and found that by
the project works best for me. Why? Because some of what I do is easier
and some is more difficult. If I were to charge one rate for writing
content and another for graphics and yet another for Javascripting, that
would be extremely complicated. One flat project rate covers everything.
Clients expect estimates that are as close as possible to the exact amount
they will be charged. If I give a potential customer a per hour rate, based
on what I *think* it will cost, that estimate could be way off-base.
Sometimes I'm slower than other times. Sometimes the work requires research
I wasn't aware of in the first place.
Then again, in all honesty, I can never determine the right way to price a
project and have not once gotten compensated properly as a free-lancer. And
looking into starting a new venture, as well as having hourly pricing
emphasized and damn near insisted on by my potential business partner's SO,
I'd love to see what others have to say about this.
Question 2
I've been wanting to start doing freelance work for a while. And I think I've got my first one! The client has asked me to have a look at what's been done, and then meet with him this weekend to talk more in depth about a web site for him.
So I'm turning to you all for help!! Although I've worked on web sites (outside of my job) on a voluntary basis, I've never done one all by myself, and/or get paid for it! If I do it well, I think it would bring in more work - but I'm a bit scared!
I'd be so grateful for some suggestions/ideas etc - I'm actually terrified of this, the first step!! I guess I don't have enough/much confidence in my design ability, although I know I can do the "technical" stuff fine.
And some of the answers and discussions:
Regardless of what else you do, get at least an informal written
agreement signed and get 1/3 to 1/2 of your fee in advance. Don't do
anything till you get a check.
For a small web services business, it's often a good idea to offer content creation as well.
Not only do we offer web design as our main service, but we also offer all
the surrounding content creation stuff that we need to get the project going
and even promote it afterwards. Sometimes, a client comes in with the firm
intent to provide his own material and after the file has been opened for 6
months, we get him to finally realize that he can't manage and bring
solutions to him directly. Others know right from the start that they can't
do it and give us "carte blanche" to do as we please.
As is the case with the site we're doing now , I have 7 people working on this. 2 graphic
designers that did the design for the paper documentation, a copy writer to remodel the
texts, a translator (it's a bi-lingual site), me as a Web designer and sales representatives'
trainer and a Web positioning expert to index the site once it's done. All in all, this
project will have generated substantial revenues for the team. I'm the one in the middle
supervising the whole project.
(Editor's Note: other "content" services mentioned in this discussion included taking digital
or other pictures, scanning, and keying in existing copy.)
All the people around me are independent workers and are part of my company's network.
Their services have been tried and used and their quality of work was established. What
the clients like is that I let the sub-contractors meet with the client directly. So if
the client needs a specific service (like translating) in the future, he can go directly to
the sub-contractor without having to go through me.
I know some people want to keep control over everything. But the
sub-contractors I use aren't actually taking any work for me and I believe
that this way of "sharing clients" is the best way to go. I share my clients
and they share theirs. Still, I have to mention that I do not have any other
Web designers than ME in my network (I'm not THAT stupid !) although I might
use the services of outside designers when I'm in a bind.
By doing this kind of networking, one can tackle bigger, better paying
projects. If I had just kept to myself, I wouldn't have grown. There is just
TOO MUCH to learn.
In my own opinion, networking is THE way to go for small businesses... which
is more or less what we already do out here on the WW list.
We charge by the project, but carefully define what we will do within the
scope of the project.
If we've been led to believe that the client wants X pages and he ends up
wanting XX, then we can point to the agreement and say, "our price was based
on X pages. Since you're now asking for XX, we will need to add $Z to our
fee.
If we've told the client that two concepts are included in the project fee
estimate and he asks for more, we up the price.
We would never put ourselves in the position of being forced to do one page.
Instead, we would determine and suggest what we think the client needs. Our
job is to provide the best creative product for the client possible, and we
cannot do that with the client trying to exert too much control over the
project.
I've found that you really have to go into a project with a "take charge" attitude.
Most clients prefer it that way anyway. They want you to make suggestions and be creative
with their web site - take them by the hand and show them what needs to be done.
You can usually tell pretty quickly if a potential client is a control freak and will in
fact want to "exert too much control over the project". I turn and run from such clients
quickly. They're more problem than they're worth. And, as you've said time and again,
have a contract and put explicitly into that
contract exactly what you will do for that client as well as what will be
expected from the client. Otherwise, you will at the very least end up with a
"but can't you just add this, that, and the other?" client and possibly end up
in court and out a lot of money.
Well, we actually have to be somewhat flexible. An example:
[We] did one or two illustrations for the client of a client, and the guy drove
us crazy. So [we] asked the client, to have their other
freelancer work do the artist's next projects. Recently, the pain-in-the-ass client got dumped back on [us]. It's one of those "lose the battle, win the war" scenarios.
Actually, this is a great example of retaining control. You are
agreeing to work with him over a specified period of time, and he
knows what will happen. Presumably he is pricing accordingly
because this is part of the cost of working with this guy.
You are keeping a nice, zen-like distance. This distance is what
will keep us making the best choices, and retaining control. You
are strong. The philosophy lesson is now over.
This discussion is really interesting to me at the moment! What I'd like to know is -
how do you work out how much to charge? Especially if it's just one person doing everything.
What I've thought is - break the site/work down into various elements:
Design/layout:
- entry page
- various level 2 pages
Coding x approx how many pages
"Specials" - e.g. chat-rooms and forms
Prepare templates for client to use in future
Then I guess one has to estimate how long this would take, and guess at a cost!
Does this seem right/sensible? Probably I'm missing things that I haven't thought of ...
Good list of pricing concerns/elements!!!
I am also including such elements as:
- Support
- Writing services
- Graphics
- Maintenance contract
- Hosting
- Administrative (this may include support and hosting, depending on the
size of the account)
- Research
- Costs of any necessary programs
- Overhead (such items as utilities, phone, rent, equipment, etc. -- the
basic cost of doing business)
- Printing
Of course, not every client will require every service so these are on an
"as needed" basis.
I'd love to know how everyone decides on charges. What criteria do you
use to determine how much? Do you have a basic, ground-level web site cost
and add on to that as needed? If hourly, do you charge a minimum? Do you
use the going rate in your area? More? Less? And how do the clients take
it when you give them an estimate -- do they panic... do they politely
decline... do they say they'll call you but never do... or are they
receptive and think the price you quoted is fair and equitable, and give you
the go-ahead?
It's just so hard to know how much to charge. In the past, I've been afraid
to charge too much because the client might balk and turn me down when I
desperately need the work. OTOH, not charging enough left me without money,
feeling used and bitter, and I've been told that it made me look
unprofessional. I want to be fair to my clients but also to myself. Also,
I have been doing graphic design for 11 years and web site design for 5 -- I
AM a professional and damn good at what I do. That comes with a price
tag... but I don't want to gouge anyone.
Geeze, do I sound wishy-washy or what?
So far, I have only charged by the project.
I can use as many minutes/hours as I need or as many pages as the site and
client needs. If I underbid the project, I have no one but myself to blame.
:) The client knows up front how much the site will cost, and how much the
different payments will be and when they are due. I require a down payment
of 50% to start the project, 25% at first review {usually no further away
than two weeks from project begin date since I am working with small biz or
personal sites}, and final 25% at project end.
If I were to set up a maintenance agreement, then I would charge a minimum
of so many hours per maintenance and charge by the hour for anything beyond
that time period.
Project pricing, I also feel it gives me the freedom to throw in any
"extras" that I want to learn or experiment with for the customer's site...I
am not charging them by the hour so do not have to worry about losing a
couple hours work to a Flash navigation experiment. It also gives me the
freedom to create/program and not worry about counting minutes and hours. I
feel like I am getting paid to learn something I want to learn but not
taking advantage of the customer because it is my choice and I do not have
to do anything extra that is not part of the contract if I do not want to do
so. But customers do like to get "extra stuff" beyond what is in the
contract and feel they are getting extra services for "free". I've factored
a little of that higher cost into the project but they do not know or
realize that because my prices are reasonable to them.
Yes I am on the low end of pricing.....next time I will be more mid-ground
but I now have more experience and corporate experience too that I didn't have
before. As I get better at what I do, prices rise but the time frame gets
faster too. :)
Check out this link. It's a good article and very helpful!
Just FYI, everyone is a little hinky about discussing actual prices as
this can be construed as price fixing and get us in trouble :) However,
you asked HOW not HOW MUCH, so here goes:
My prices are a combination of:
- the number of hours I expect to spend
- the value of what I'm doing. Is it a complex database program that
would cost $XX normally but I can do it in less time because I've done it
before - I still charge $XX! By the same token, if I really want to learn
how to do something, I won't charge for my learning time but I can
probably resell that script or use that knowledge later on when I WILL
be paid for it - maybe more than once.
- who I'm dealing with (are they a worthy cause or a high profile
company that I might want to give a break to because it's likely to bring
in better business later or be a community asset?)
- what my subcontractors will charge me - I rarely do my own graphics
now, for instance, so what that person will charge me is of course a
factor.
- the only prices you see on my web site are hourly and a blurb about
"web sites start at...". I put them there only to discourage companies
with really small budgets from contacting me.
I'm not exactly sure where my rates fall in terms of what local web
consultant/developers charge. Locally (I'm in a pretty rural area but
within an hour of a big city), there aren't really any that do exactly what I
do. In that large city nearby there are some but they are generally large
design firms that charge a LOT (they have a lot of overhead too - they
have to. I work out of my home, no employees, so can charge a lot
less than the big guys for similar level stuff).
How do clients react to estimates? Well, I don't know their immediate reaction because I never deliver proposals in person or on the phone - always in writing (mail, fax, email). I don't want to see their initial reaction, frankly. I create the best proposal I can and let it talk for me. I will have already met with the client though, to discuss what should go into the proposal. Even before I deliver the price, I usually nail down exactly what they want to accomplish and how I will address those goals and get them to agree to that.
Lately most of my work is for clients I've worked with before so this is
not much of an issue, but when I do actually write a proposal I'm pretty
sure they'll accept it - and they usually do. I often turn clients away if I
don't think we'll be able to agree on specs and price - you can go broke
writing proposals all day!
I haven't written a proposal for a very small business in a long time
though - it's been my experience that those companies expect a lot of
work and have very small budgets and writing a proposal is a waste of
time because they don't want to pay what I charge. This is not helpful
info for anyone starting out, I realize - my business is fairly mature at 5
years old and things were definitely different the first couple of years.
It's just in the last year, really, that I've felt like I'm at the level I want to be at.
And how do you figure out how long a project will take to complete?
This is just experience. I keep track. I am often asked to create similar
things (search a db on several fields, for instance) so I can pretty
accurately quote my hours now - but I lost money on some projects
early on - live and learn. My quotes are getting more and more accurate
as I go on.
First, it is important not to be too specific in discussing prices on these
lists. There are laws about price fixing and other lists have gotten into
trouble because of these discussions. There are also problems with doing so
because of variations in local rates -- what you can charge in LA is not the
same in Ames, Iowa.
With that said, my bids are based on using different hourly rates for different
services and basing my estimates on what I understand of the job at the outset.
I list very specifically what I think the customer is asking for and how many
hours I think this will take. I demand half up front before work starts. The
next 25% at preview and the balance at launch.
I remember someone else saying that they didn't want to make it this
complicated. My feeling is that this is the only fair way to do it -- one that
acts as a check on both sides. I want clients to know (and include a paragraph
that explains this) that there are many times when I come in under the
estimate. But that it is based on a reasonable amount of tweaking. If,
however, they want major revisions after approving a design element, that would
cost them more.
My experience is that clients will not be as quick to demand silly changes if
they know they are paying for them. Without this approach, you get -- Oh, let's try that in puce, with a different type face. And after you make the change, it's -- Oh, I guess I liked it the way you had it before. But unless they know that you are billing by the hour, they do not understand that this little exercise is going onto their bill.
Are there times when I spend six hours on an element and bill for four? Yes.
When I know that part of what I spent was learning time from which I will
benefit.
Bidding is one part of this business that I dislike. I'm not very good at judging my time - guess that comes with more experience.
I've got another pricing question. How many of you are doing a lot of site
maintenance work? How do you charge for that? I have two clients that I bill
for maintenance monthly. I keep a detailed log of what exactly I do for them
and keep track of all that time in 15 minute increments. My contracts with
them state that I charge $X.xx for up to the first four hours of work. I'm
guaranteed that amount each month (which isn't very much) even if I only do
one hour of work - guess that's kind of a retainer amount. If I go over that
four hours (and they always give me enough work that I always do), I charge
them $X.xx per hour (which is slightly more than the hourly rate for the 1st
four hours) - billed in 15 minute increments.
This method of charging for maintenance has worked well for me, but I find it
very tedious to have to do invoices for this type of billing every month.
Currently I have two clients which I invoice using this method. Even though
I've trained myself to keep track of the work and the hours as I do the work, it still takes more time than I'd like to do the billing each month. I try to mail out my invoices by the 1st of the month, but it seems like any more they're being sent out later and later. Any suggestions?
This is basically what I do, although it sounds like you're including in the
invoice what's in the detailed log (is that why it's tedious?). I do
something like this:
Retainer for January 2001................$xxx
Additional hours for January 2001.....3 at $xx per hour
Total..............................................$xxxx
Net 10 Days ;-)
Thank you for your business.
And I email my invoices.
I haven't had any problems ;-) but I haven't quit my day job, either.
I have found that putting bids in very concrete terms is helpful. People understand when they deviate from the terms that it will cost them more. I also like the fact it addresses the form in which the material will be received -- you would be surprised how many clients do not realize that it will cost them more if the copy needs to be keyed in rather than pasted in. Some letters go six to 10 pages -- usually those open with a summary abstract that lists major section costs and a total.
This is a valid point that can also be handled within a project-based fee.
The key is to be quick and recognize when the client is starting to attempt
to lead you down this path. Then, say something like, "Sure, we could try
that, but our project estimate didn't allow for a lot of experimentation. If
you want me to explore some other options, I'll need to charge extra at $XX
per hour." That will usually end the silliness.
Author/consultant Cameron Foote has excellent pricing strategy info for
freelancers and graphic design firms available at as modestly priced Acrobat
files on the Creative Business site. Dozens of publications are listed, but the one I'm referring to is second from the bottom of the page, listed under "Booklets":
Also, I've started avoiding questions about our hourly rate, even though we
take an hourly rate into consideration when we are coming up with project
price estimates. I've found that people who've never been self-employed tend
to think almost any rate above $20/hr is exorbitant. Such people are
usually incapable of understanding all the issues around hourly rates for
freelance work. They don't realize that $25-35/hr will result in
poverty-level existence, $65/hr will only result in a modest freelance
income, that some designers owning companies in larger markets charge from
$100-150/hr. I even know a designer (whose name many of you would recognize
from mailing lists) who charges $300/hr for some specialized services.
What we seem to be running into is feature creep and a changing scope for the
project (we do a lot of CDs and this is a huge problem with them). How are
you getting your clients to sign-off on the scope of the project when you
put in your bid? And, how do you handle if they want you to add something
that was not in the original description of the project?
The way we handle such problems is to carefully describe the scope of the project in the letter of agreement. Then, if they start in with excessive changes or additions, we tell them that because the changes they are asking for weren't covered in the original estimate, we'll need to charge extra for it.
Barbara Ganim's "Designer's Common sense Business Book" provides examples of
an excellent paperwork system for tracking changes and getting client
sign-offs on estimates and change orders. Though an older, pre-digital
design book aimed at print designers, her system is still very good.
I write a very detailed proposal/contract where everything I can think of beforehand is covered so that I know what the project scope is - I've met with the client once maybe two to three times to get the information BEFORE writing
the proposal/contract. And change orders and scope additions need to be
covered in there too.
I liked the "kill" fee idea....I hadn't thought of that and wish I had with my last customer......I had 3/4 of the money and the project just sat for over a year before being sort of done...to me it is a mockup but to the client it is a finished web site. He never provided new graphics, product descriptions etc, but he paid the rest of the money and considered it done. If he wants me to re-do it in the future....I will....after another contract and fees :)
My best advice is never to let the client know you need the money...gives them an edge you do not want them to have :)
Related articles:
Sign 'Em Up with an MOU by Wendy Peck
Contracts 101 by Attorney Scott Fine
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