How to Price Your Services (The Question on Everyone’s Mind)

By Andrew Neitlich | July 12, 2004 | Selling Web Design Services

http://www.sitepoint.com/blog-post-view.php?id=177424

In the above blog, a good number of you wondered how to price your services effectively. Many of you seem to be suffering from what one of you call “low pricing self-esteem.”

The following link will take you to a much-requested article about this subject and how to price your services.

http://www.itprosuccess.com/articles_how_to_price_your_services.shtml

Near the end is a link to yet another article on the same subject.

I can’t find the link, but somewhere on Sitepoint is an excellent forum thread that included Brendon Sinclair’s take on pricing; he was responding to someone’s posts and the comments that followed. Check that out too (maybe someone can post the link once they find it).

Written By:

Andrew Neitlich

Andrew's consulting practice focuses on helping professionals and entrepreneurs build successful businesses. He received his MBA from Harvard Business School in 1991. You can get his books, sign up for his free newsletters, and learn more about him at www.fastmarketingresults.com. Andrew also maintains Down to Business: SitePoint's Small Web Business Management blog.

{ 16 comments }

sleep-deprived babe September 23, 2008 at 7:04 pm: Hi,
I’ve been just recently freelancing and web design is not really my forte but a client has been asking me to design the layout for a one- page site because of my visual arts background. No coding needed, that’s some other guy’s job. I came across this thread because I haven’t the slightest clue on what to charge him and I figure perhaps, I should do some research first. Though, it’s not been clearly stated but I think I pretty much have an idea already but if you, guys have some thoughts to share regarding how I should go about it, I’d love to hear it because the posts hear have been really enlightening.
Thanks muchly.
Then, I just realized that this thread is already 4 years old! duh! It doesn’t matter, would love to know what anyone says.
Dorsey July 19, 2004 at 11:16 am: Gordy hits the nail right on the head. I didn’t want to sound pretentious, but, frankly, the expertise brought to the job 20 years ago was far more than is commonly found now. The trend was there, just not fully realized: new technologies and the tools to support them have “dumbed down” the development effort. This is not to disparage developers, just that, as Gordy points out, WYSIWYG editors allow those with little technical or engineering skills and experience to produce nearly anything, and quickly. What’s often missing are the things Gordy identifies, as well as integration with back-office systems, training, documentation, and support.
This leads customers to make penny-wise, pound-foolish selections. How many people do you know who bought websites a few years ago are now having to completely overhaul them, top to bottom? I hear many potential customers complain about getting *****ed because the original developer painted them into a technological corner, and left nothing behind to explain the selections, decisions, or nuts and bolts of how the site functions.
I know what it takes to do a thorough job and why thats necessary, and it’s become my job to educate potential customers so that they understand why I deliver the value I do. It can be a tough sell.
Another big difference between now and 20 years ago is that I was selling my skills to people who had similar skills, or at least understood the value of the experience that I brought to the assignment. In other words, we spoke the same language, and I was often hired because of my broad background, rather than specific skills. Now, I’m selling my skills to people who have zero understanding of technology. All they see is the tip of the iceberg and, often, would rather not know that the rest of the iceberg exists.
Gordy July 15, 2004 at 10:13 pm: I think the reason 80′s contract programmers were paid $45-$65/hour and web developers today are paid $35/hour is due to the fact that back in the 80′s, only someone with true coding skills could produce the product. With the WYSIWYG editors so popular today, any Joe or Janet that knows how to click a mouse can create a web page (albeit one with sloppy HTML code). Since most people only see what they see in their browser, they think developing web pages is easy and it’s not worth the $45-$65/hour. But real web developers know that there is more to creating web pages than just what a person sees in one particular browser. True expertise comes into play when making in look good in all browsers (including those browsers that help the impaired) as well as provide good search engine rankings. I have no qualms about charging high for my services because the HTML that I produce is cross-browser compatible, follows accessibility guidelines, looks good, and provides good search engine rankings. One company hired an SEM firm to produce optimized pages and those pages have consistently ranked lower than the so-called non-optimized pages I created. TO sum up, clients need to be educated that creating quality web pages is more than pointing and clicking.
Paul Minty July 15, 2004 at 8:42 pm: I researched the graphic design industry to help set prices in our web studio; the current wisdom is to charge an hourly rate and simply get better at estimating and selling. The same applies to engineering consultancies. These are mature industries and I reckon it’s good to learn from their experience.
If you are using code snippets etc, then try charging a licence fee to make it up to the overall value of the project.
Function Fox is a timesheeting web app; and the company has some great articles on time billing. Try http://functionfox.com/resources.html. I’ve never used the app, but the resource library is great.
Dorsey July 15, 2004 at 10:42 am: I was a contract programmer for most of the 80′s, when it was routine to *take home* $45-65 per hour (in 80′s dollars) on projects of a year or more. What a surprise it has been to find that $35/hr. (same geographic area) is now the going rate for web developers, and you have to work very hard to find those short-term assignments. Yikes!
I’ve learned that stressing the value of your work in the customer’s terms is the best way to increase your rates. After all, people aren’t paying to simply have you around to dispense cool technology – they’re hiring you to produce something that adds value to their business. It’s a simple equation: the more value you add, the more you can charge.
Therefore, I charge a fixed fee for a well-specified result defined in advance, based on my understanding of the value to the customer. That way, there are no surprises on either side, and my customers can quantify the value they’ve received. This isn’t all that different than lawyers who charge somewhat more for defending against murder than shoplifting – the value received justifies the higher charges, even if the skills involved are the same.
fbdp July 14, 2004 at 4:11 pm: Andrew, is this thread?
http://www.sitepoint.com/forums/showthread.php?t=4238
kcomer July 13, 2004 at 2:39 pm: I also use a floating scale of sorts. If I take on a job that will be drug out over several months because of adding features, doing updates etc… I will charge a completely different rate, because I know the money will be there and that I don’t necessarily have to get the whol project donr within x number of days. Thats when I go with webmonster’s thinking and discuss with the client what the value of the project is and come up with an amount for the entire thing.
brianhoberg July 13, 2004 at 12:22 pm: Hey Webmonster, thanks for giving us a breakdown of your process, it helped to clarify the different ways one can charge and price. I appreciate it.
-brian.
webmonster July 13, 2004 at 9:25 am: Here’s my 2 cents. I have tried pricing jobs 3 different ways now since beginning my web development business about 4 years ago. I first tried charging by the page (example: $50 per page, 10 page site = $500) I thought that was pretty good at the time…NOT! Actually it was a pretty stupid way to charge a job so I moved on to an hourly rate. I learned that is not the greatest either because of what Kyle said. You can scare a client off if you tell them you charge $50/hour. Since they have no idea that a simple website might only involve 10-15 hours and only cost $500-$750 they are thinking you are WAY overpriced at that kind of hourly rate so they walk.
My new way of bidding jobs is more like what Sergeant says which is trying to think about the VALUE of what you are providing to the client as opposed to the amount of time you are going to spend on it. Just because you are a good web developer that can crank out a website in not time at all that does not mean you should only charge the client $500 for it when you know that the value this adds to his business is worth 10 times that amount. Base your estimate on the value you are giving the client and be confident about what you can provide them and be able to answer any questions about why the estimate is what it is.
Also something I like to try to do is provide a range to my estimate. Almost 100% of the time I end up going with the higher end of the range because as most of you know a web project can easily turn into more time than you thought and things get revised and added so your time gets stretched to be more than what you initially planned. That is the purpose of the high end of the estimate range. I explain to the client before hand that if everything goes according to plan (which they have been involved in) then the low end of the estimate is what you can expect to pay. But if things get going in a different direction and the end product turns out to be very different from the initial plan for the site, then the higher end of the estimate is what can be expected. I have never had any problems with providing an estimate range and I have had the most success with this type of pricing. Hope that helps!
Sergeant July 13, 2004 at 4:49 am: You should charge the value you give your client. Not per-hour.
1 website with 3 pages and a form is worth 1500 dollar. Put some extra marketing with that and the value for your client is getting higher, let’s say 3000 dollar.
When your client wants to sell products with that site he will make big money. So 3000 is not that much for what he is earning in the future.
15 p/h will make that about 10 hours… slick 150 dollar?
Kyle Neath July 13, 2004 at 2:18 am: Well, unfortunately there’s no way to tell as it’s completely a person-by-person basis. I can accomplish in 15 minutes what it may take some developers hours to do. So, just judge for yourself really and make an accurate estimate, as that’s all you can really promise.
mutandis July 12, 2004 at 8:13 pm: My concern isn’t how much to charge per-hour. Rather, how do I make an accurate estimate of how long something will take in order to quote a job at all??!? Clients are more concerned with total cost, not necessarily hourly rate – when you’re new, how do you know how long things should take?
Auto Mechanics have books of general time estimates broken down by job. Each car is different, and may take a little more or less time, but at least they have something to base their quotes on. What do beginning web developers have??!?
Kyle Neath July 12, 2004 at 4:02 pm: In response to your comment kcorner, I believe the problem lies within the fact that as web developers, we are paid for our expertise, not our time. Most people do not realize this.
When you’re talking to any company and they hear that you’re some young kid making $85/hr they choke. They immediately multiply it out in the way that they think:
($85/hr)*(40hrs/week)*(52 weeks/yr) = $176,800/yr salary, which does seem rediculous.
They’re not realizing that we spend so much time marketing, getting the deals, and overall just not working “on the clock.” They want to pay a more reasonable amount, say $15/hr.
Another fault young web developers are common to is that loosing out on some deals is worth charging more. Sure, you may not be working for 2 weeks more, but once you get a job at your targeted range, you’ve more than made up the money you would have made working for cheeaper the past two weeks.
annoyer July 12, 2004 at 3:35 pm: Hmm, not bad. Kcorner: You’re gonna love me for this, but, why did that person have a problem with that?!
Matt Mickiewicz July 12, 2004 at 3:07 pm: More pricing articles:
http://www.sitepoint.com/article/web-work-should-charge
http://www.sitepoint.com/article/freelance-pricing-1-set-rate
kcomer July 12, 2004 at 2:23 pm: I often see freelance developers doing work for $10-15/hour. This makes me cringe. Do people really think they are only worth that much? I think people sometimes get caught up in the “I can use this for my resume” idea and then never grow out of it or move on. I did 3 projects for $35/hour and then I moved on and I now charge a flat rate that I feel is middle ground for the industry. I think the major drawback to choosing a developer that has a very low rate is the volume of projects they take on to make up for it. I would much rather take on one or two well paying projects and give them my full attention than have 10 projects that I can barely manage, just to keep myself financially stable. I have had this conversation with employers when they ask why my quote was more than xyz company and so far everyone has fully understood and not had a problem with paying the going rate. (minus one, but don’t ask about that)