Hourly rates, flat-rate bids, and overtime... ugh! A web designer's time is not free nor is the software, hardware and effort needed to build websites. When starting out, it can be tempting to offer free projects to build up a portfolio, but that's not a sustainable way of working. If you want work full time as a web designer, it's time to start generating some money!
Introduction: The Web Designer's Dilemma
Trying to establish your pricing and rates as a web designer can often feel like opening Pandora's Box. What do you need to consider? Do I charge by the hour, or by the project? Will my client accept my fees? What do I do if he rejects them? Price them too high and you might scare clients off; but price them too low and you might end up unable to pay the bills. Worse yet, by offering special deals to friends or cheap clients, you can find yourself with more work than you can finish (and a contractual obligation to do it anyways which can hinder the final result).
To further complicate things, pricing is a little different for web designers than for any other industry. Unlike a plumber or a painter where the variables for putting together an accurate budget are relatively limited, the amount of time that a web designer can spend on a project can range wildly. How many times have you expected to spend 4 hours on a project and ended up spending 12? We'll cover these questions to, hopefully, bring some clarity to your own approach to pricing.
Navigating Prices: Factors to Consider
If you're just starting out, setting your prices as a web designer can often feel a bit like throwing darts. Plucking a random figure out of the sky can't guarantee that you're pricing is both sustainable and profitable though. Let's go over some of the factors that you'll need to consider when coming up with your own pricing structure.
Identifying your costs is an important step in establishing your pricing model. As anyone with a business degree knows, you need to charge more than your overhead is in order to turn a profit. Therefore, it's time to audit your own costs and expenditures to consider some of the following points:
- Professional Expenditures - These costs include things like your office rent (or your house rent/mortgage), insurance, any subscription services (online, web hosting, internet, phone etc.), your computer's hardware and software plus any other accessories or equipment and any traveling.
- Personal Expenditures - This is the kind of stuff that everyone pays, regardless of occupation (ie, things like rent/mortgage, insurance, tax, utilities and your general spend on essentials like food.
- Rainy Day Fund - I'm not one to advise you on your financial management, but most freelancers class a rainy day fund as a cost, used in case when something goes wrong like a car breakdown or similar.
Your profit is anything above your costs to spend on anything that's non-essential. The amount of profit that you want to factor in should be calculated based on how much you spend on anything outside your costs in a month. You may find it hard to distinguish what is essential, especially if you're a technology lover as many web designers are, so my guidance is to seriously consider the question, "What do I 100% absolutely need to be able to work on this project?" Then add anything else that you think you want here.
By moving that second computer to your profit category, you'll have a little leeway to negotiate with a client over price, leaving out your primary equipment.
Ideally, you should have some idea for the timescale of the project. Obviously, longer projects requiring more effort will most likely lead to greater fees and you should reflect this in your quote if you're trying to calculate a fixed price for a contract. Don't ever sell yourself short by adding extra tasks to a project without raising the budget. Extra feature requests, edits, and anything else that a client can think up take time... and as the cliche goes, time is money.
Beyond the "time is money" cliche, your clients' money should always correspond with some sort of "value". You usually can't get away with billing for time spent "thinking about a project while you sit in traffic"... so you need to separate between billable hours and non-billable hours. The distinction should be pretty simple: Billable hours are hours where you can show actual value to the client for what you've done. Non-billable hours are usually everything else. Some designers draw the line differently though, so figure out how you'll approach this before you move on. Also keep in mind that your billable hours will need to pay for the non-billable ones... so if you only spend 4 "billable" hours a day, your rate may need to reflect this.
If you are working out an hourly rate, time is especially important as you come to calculate money over time. You should identify your workable hours over the same time span that you've worked out your costs out over and then divide the two. Workable hours are simply the number of hours in a day/week/month that you can realistically spend working. For example (and completely hypothetically speaking), if you could realistically work fifty hours a week and needed to earn $1000, your minimum hourly rate would be $20.
Once you've established some basic figures, you can get an even more accurate picture of what your rate should be by re-calculating everything on a yearly time scale. That way you can factor in public holidays, vacation time and other non billable days due to problems like sickness. Keep in mind that even in a productive year, you probably won't be able to spend 10 hours a day 6 days a week working for the entire year. Factor in some reasonable downtime, then set your final hourly rate.
It's not just your literal costs that determine your price. Demand is an important factor that can change on a project-by-project basis. If you have work flowing in with no signs of stopping, you can be safe to add a couple more bucks to your quote. However, if there's very little work you may have to lower your expectations in order to compete with other designers. Think: if I can't secure this project, can I fall back on a similar one?
Lowering your prices isn't always the answer though. If demand is low, pricing higher can secure a bit of a nest egg in case work dries up to a point where you're estimated work days become incorrect. Setting artificially low prices can also undercut your own business - bringing in cheap clients with inflated expectations. The moment you try to raise rates back to normal levels, those kinds of clients will run for the hills, potentially leaving you high and dry.
The surest ways to drive demand for your services high is to:
- Improve the quality of your work.
- Market yourself in the places you want to find clients.
- Set rates that are reasonable, affordable, but don't disrespect your hard work.
Some clients turn into regular business and it might become appropriate to lower some of your fees to encourage further business and say thanks to your clients for returning. However, it's important to not become too friendly with a client who might feel like he can get more and more, taking advantage of his repeat business.
And also don't excessively lower your prices to ensure repeat business. Don't knock $200 of a new quote in the hopes it will secure repeat business because it might not. Treat all first-time clients the same at the start and don't discriminate on potential loyalty.