Lump sum or annual fee over x years? How do you price your websites?

[sparkdigital]

I was just wondering if any of you have any experience with charging for your websites over a longer period of time. Personally I have always charged a lump sum straight away to the client that covers my costs and then charge a small hosting fee annually thereafter.

Do any of you charge ONLY an annual fee or a small(ish) fee the first year and a set annual fee thereafter?

Do you find this has any benefits / drawbacks? I'm looking into this as it would generate a steady flow of income over the years to come - if a client stays with you then you could potentially make more money. But I can also see potential dangers of clients backing out / not paying etc.

Something else to keep in mind is that all the websites I build use a CMS so the client is able to do pretty much everything on the site themselves - does this merit a higher annual fee anyway?

What are your experiences?

Thanks,

Konrad

[Dan Schulz]

Hi Konrad,

Please bear in mind that actual price discussions (such as "I charge $X,XXX.xx or $XX,XXX.xx per client site" or "I charge $XX.xx per hour") aren't allowed here, but I'll give you something that should work VERY well for you. (Ok, this is meant for everybody else who reads this thread, but it had to be said anyway. Bear in mind that I'll be giving a hypothetical scenario/example later on using actual monetary values; in most cases these are fine, as long as actual parties are not mentioned/named with regard to actual practices.)

What I normally do is get half of the payment up front as a deposit - and then either the other half when the job is done (if a relatively small site) or set up milestone payments (if it's a larger job). Either way, once the site has been completed, I get my final payment for the work completed, and then the client gets his/her site.

About 3/4 of the way through, you're going to want to pitch to your client a maintenance package. This package will include X amount of hours per month for Y amount of money. If you can get enough clients to sign on to your maintenance plans (and they will be billed each month regardless of whether they use all the hours or not - and extra hours will be billed at your normal rate, of course), you'll be able to earn plenty of residual income this way (for instance, if you have ten clients each paying you $250 a month for maintenance work, that's $2,500 a month in residual income you'll be getting - for what amounts to less than a week's worth of work).

Oh, and even though they're using the CMS, you might want to sell them on having you update the changes yourself "to save them time so they can focus on working on their businesses, rather than in them."

Hope that helps.

[sparkdigital]

Ah, so really you're doing both - asking the full sum for the website AND charging a monthy 'maintenance' fee here.

Anyone here that just works on a monthly or annual basis for the website to be online (no maintenance included)?

[liam_uk7]

Its always good to offer the client a choice in how they pay. It will give them more trust and allow them to pay you around their current financial structure. Some companies work weekly, some monthly and some annually. So if you have 3 options set up to allow this to happen, your client would probably be most pleased.

Although this much depends on you, if you are in need of the money sooner rather than later you could offer discount or incentives for the client to pay the full amount up front.

[Sgt. Baboon]

I have done a couple projects where I spread the cost out over a period of time for the client's convenience. The only problem I have had is that when they don't make a payment, the project is on hold. This can really drag a project out.

[sparkdigital]

Thanks for your input!

I know spreading the cost in different ways could work as an option for the client, but have any of you ever tried to sell a website on a 'subscription besis'? I mean a low(ish) amount per month / year for as long as the website is online?

Could this work in your opinion?

Thanks,

Konrad

[Dan Schulz]

Not the site - once the client gets the work, it's theirs to do with as they please. Instead, selling your services (to maintain the site for them) would be a better idea - not to mention more profitable.

[beley]

The problem with charging over an extended period of time is that you're not being compensated for the labor that went into the development hoping it will pay off in the long term.

Don't gamble like that with your business.

We break out the payments like Dan suggested, sometimes it's 50% deposit and 50% upon completion, and for larger projects we may break it out into 3 or 4 payments, but we always work it so we get our final payment when the site launches.

Maintenance agreements are great, but you need to make sure you are profitable on the project when it actually launches.

[shadowbox]

have any of you ever tried to sell a website on a 'subscription besis'? I mean a low(ish) amount per month / year for as long as the website is online?

There's plenty of companies doing this, mostly ones offering CMS based solutions with ready-made design templates. There's little work required setting up each site, so they can just charge a monthly fee for as long as the client needs the site - in return you provide hosting, licensing and support. Just make sure you charge a set up fee if they require more than your default offering (e.g. bespoke design etc).

The problem is that this is a highly saturated market, and most domain name companies and hosting companies offer some kind of site builder service for a couple of quid a month, so it will be a struggle to make a go of it IMO.

[Ravedesigns]

There's little work required setting up each site, so they can just charge a monthly fee for as long as the client needs the site - in return you provide hosting, licensing and support. Just make sure you charge a set up fee if they require more than your default offering (e.g. bespoke design etc).

I've always charged 1/2 upfront and 1/2 on completion myself, but then once a job was done it was on to the next one.

I have a friend I kinda pushed into doing web design and he's done pretty well with the model Shadow described above. Charging a small setup fee and then a few bucks a month for hosting/maintenance he's at almost a hundred sites now and putting a few grand in the bank each month.

Sure, he's had a few support issues and headaches along the way, but overall this has been a very positive and profitable thing for him.