How can I find out if my rates are too low (or too high)?

I’ve just started my freelance career as a web designer/developer. I’m still feeling things out and one area that I feel helpless towards is the matter of my rates and rates of competitors. I’ve recently worked with a couple other web designers who are sub-contracting work to me. I don’t know their rates. I haven’t asked. I suspect they may not reveal that to me. I’m rather confused on how to approach this. I’ve met one “web designer” who isn’t much of a designer and admits to not having any technical ability. I have suspicion she charges as much as I currently do.

Any advice is appreciated.

I’ve met one “web designer” who isn’t much of a designer and admits to not having any technical ability. I have suspicion she charges as much as I currently do.

This is a problem question due to misunderstanding price and value.

Price is what you pay. Value is what you get. Cost is what you really pay on the way to realizing value.

I am hardly (ever) the first one hired. My clients typically blow through three times what I charge on others who don’t produce results. (That’s not skillsets, apps, or deliverable service – results).

I am the last one clients hire.

Newbies think I’m expensive. They are not my customers. My customers have been beaten over the head with the price versus value stick. Then, my prices are downright reasonable.

What you charge is based on what your value proposition allows you to charge. Sales people can get premium prices for pretty little. Geeks unversed in human dynamics have trouble selling intricately coded robust fullblown apps.

It’s not that hard to determine where your rates fall in the range for your skillset, services, and location.

Just look at competitors and get an idea of what [truly] similar vendors are charging. Then look at your business - is your phone ringing off the hook or do you have lots of leftover time? how are your profit margins? are you just squeaking by or are you making plenty of money?

To connect the dots is tough so it’s hard to ever answer if you are ‘too high or too low’ - every business is different. There is marketing to consider, advertising, and nuances of the services between vendors.

But you should be able to identify 5 vendors that you compete with and try to determine what their prices are like and start from there.

My prices are often higher (or much higher) than other bids on the same job. I have experienced (as others have stated) a client that goes through three or four ‘elCheapo’ web developers and ends up coming with me for what they deemed as too expensive on the first round of development. By this time they have often spent double or triple than my original quote for them.

Your goal when bidding a job shouldn’t be to come in as the cheapest. You want to be competitive with your price as to the end product that you deliver.

There is a huge mis-conception by ‘most’ clients, especially those unfamiliar with the web between what they want, and what they need. They say they just need a website… but what is a website? A website could just be a name, photo and phone number and address (business card website) or it could be a huge integrated system with lead management, appointment system, inventory management, customized code/look/feel…etc.

These are both examples of websites… but one may run you $500 and a high schooler might be able to make it, the other may top several hundred thousand $$ and take an entire team of developers to build and manage.

I actually submitted a $20k bid on a previous job… the owner of the company actually came back to me and said that his nephew knew how to build websites and had agreed to do it for $1k. You can only imagine what the end product looked like… It looked (and functioned) just like $1k.

I called the client back a few months after his ‘new’ website had launched just to touch base with him and asked how it was going. He said the website was great, but that it hadn’t produced any leads or sales. (“it was going GREAT”) and that he was VERY glad he didn’t go with a more expensive solution b/c it would have been a waste of money…

So this client is justifying not going with a more expensive solution b/c his $1k solution didn’t produce… 8O How can you argue with that logic?

Man I sure am glad I didn’t get that Ferrari b/c this Pinto really sucks and the Ferrari would have been the same, it would have just cost more!!

I know for a fact that I could have generated this client a great deal of business online. But after this experience do I really want to work with him now? Doubtful.

Well, that’s what I’m trying to figure out – rates of some of my vendors. That’s my question. Should I just have other people call them and pretend to ask for serious quotes?

@DCrux

Yours is the least helpful response I could’ve imagined to my question. No offense.

Honestly, I do not think you should ever base your rates being high / low based on your competition. Prices are going to vary greatly based on skill level, market and what they can offer. You must already have your prices set as it is, so I would take a look at your results in the last 3-6 months. Out of all of the clients you have quoted, how many have you landed, how many have declined due to your rates and do you feel that the rate they were expecting was reasonable?

Your rates may be perfect but unless you have the right client you are looking for, it may be too high / low. I have potential clients that come up to me and scoff that a website could cost over $1,000 at all, but then I have other clients that I just offered a monthly maintenance package starting at $300 per month and they said that was cheaper than they thought it would be. It’s just all in how you sell it to your client and show them the value in what you are offering.

Too low obviously is a little easier to work with since you’re still getting business, but you don’t want to undervalue your services either. As it was already mentioned, if you are too busy with requests and projects, naturally the next step is to raise your rates until you have weeded out the cheap clients. Depending on your business model, most people want to work on fewer but higher quality clients, less work needed for the same money. It’s tough at first to see clients drop off because you raise your rates, but it will even out eventually.

Really the only way to know is seeing your bottom line over time and how it works for you and your business. Someone billing at $25/hr may think their rate is perfect for what they are looking to accomplish but someone with large overhead and higher goals may think $125/hr is more like it.

Just have to find where you are comfortable.

Well, sending in a bogus request for a quote isn’t all that nice but it happens all the time. Ideally you can find customers who worked with your competition and get an idea for their prices that way, but you gotta do what you gotta do.

That’s because you are not looking at the bigger picture.

I am a freelance website “designer”.
I have seen potential clients who use Facebook. It’s free.
That’s one of your competitors. $0.

What do you do now???

That’s the bigger picture? I think it’s fair to assume that the original post is asking how he can learn where his rates fall within the range of competitors who offer similar services in his market.

There are always going to be freebies, nephews, etc. but the real ‘bigger picture’ is that a growing business should learn what their market is and how to access it. If a successful designer is asked to compete against a $0 facebook page, they would simply move on so that isn’t a useful example.

Well, I didn’t clarify. By “competitors”, I was only referring to those who program, design and customize websites. Some clients desire custom websites as opposed to free services that often are very limited in their nature.

This is turning out to be more difficult than i imagined.

Here’s the deal: I know some competitors. I’ve worked or am working with a couple. They need my help as a programmer and designer. So they get clients. I believe they probably charge as much as I do. However I do not believe they offer as much to their customers as I do.

Since I am new to freelancing, I’m wondering if their rates in relationship to their output is a “fair” rate for my area. OR if my rates are possibly just too little for my output. I was once told by a friend/colleague that I should charge much more. However I’m still trying to gauge the market around here and figure it out.

Maybe there is no practical solution. Maybe I’ll need to raise my rates and just see how it goes.

To your mind and the OP’s mind, the competitors are the ones who offer similar services.

Is that the client’s point of view?

That’s all I am saying.

I personally feel that this is a useless exercise. Charge what you want. Then when you are getting too many clients, then you know that you need to raise your rates. :wink:

Are you saying that’s the only way to test out the fidelity of your rates? Just change it and see what happens? I’m not necessarily disagreeing with you but I’m surprised if that’s the only approach. I’m hesitant to just change my rates and just see what happens but… if that’s all I can do I’ll have to think about it.

How To Secretly Find Out What Your Competitors Charge

SitepPoint Article: [URL=“http://articles.sitepoint.com/article/web-work-should-charge”]Pricing Web Work - What Should You Charge?

Took all of thirty seconds. Google is a modern wonder …isn’t it?

That still won’t help you actually get what you charge, but you’ll learn. Pricing and bidding strategy is not inserting a number into a field. There are both people starving and people getting rich charging similar prices; at a variety of price points.

Pricing exactly what the majority of others do puts you into direct head-to-head competition with them. Not strategically viable. And, as many have found, not a viable business model for a starter.

… the owner of the company actually came back to me and said that his nephew knew how to build websites and had agreed to do it for $1k. You can only imagine what the end product looked like… It looked (and functioned) just like $1k.

That owner was lucky. Most don’t get even what little they pay for. I’ve seen $250-$1500 sites (and up) where I felt certain the designer must have paid the client the money as a bribe.

Well ok…he didn’t really answer your question here, but he did tell you a few things most web designers haven’t figured out yet and that could be worth a lot of money to you in the long run, so you might want to file this one for future reference. :smiley:

Whether you’re working with clients directly or doing work as a subcontractor, all things being equal people usually choose the lowest cost option - it’s your job to demonstrate the extra value you bring to the table and give them good reasons to hire you.

Cheers,

Steve

I preach this all the time but here
goes again, look at the total income
potential from a project by factoring
in recurring income AFTER the website
is done. For example, we give 35%
webmaster partners, hosting providers
pay $100 per customer, autoresponders
pay 35%, etc …if you look at the whole
income model, the pricing becomes a lot
easier.

To add to this, freelance switch provide a calculator tool that helps you figure out how much you should charge per hour depending on your living costs / how much you’d like to make: http://freelanceswitch.com/rates/

Plus there is a lot more a web developer can do on Facebook with applications and/or Facebook Connect.

As PauL’ as already stated freelance switch is good. From another web designers blog, I found some other handy tips

http://blog.nerdburn.com/entries/tips-for-freelancers/average-web-designer-incomes-how-to-set-your-freelance-hourly-rate

I agree with Dcrux. You get what you pay for. If the customers opt out to save money for their website design project or even website programming project, the value and quality they get is not so good. In the end, they end up going over their budget because they either have to continue to spend more for the cheap help or end up getting a better freelancer that charges a lot more but they have no choice because they are now in a bind. Then they kick themselves in the butt.

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