Mar 3rd, 2007
4 Steps To Effective Web Design Pricing
Perhaps one of the hardest skills to learn when freelancing in web design is how to fairly and effectively price your services. A project quote can either sell a client, or turn them away. Here are some guidelines on how to develop a web design pricing guide. A lot of people have different methods for coming up with their prices, but this is just to get you started. This guide only deals with charging per project. There are other ways of charging clients, but per project is the easiest and perhaps the most widespread method of pricing.
1. Determining Your Hourly Wage
This is by far the most important part of developing a pricing guide. You will always start with your hourly wage, so it’s critical to get it right from the start. It’s pretty simple to come up with your hourly wage. The formula looks a little something like this.
(Expenses + Salary) ÷ Hours Worked Per Year = Hourly Wage
Using this formula, if you wanted to make $60,000 a year, and spent $10,000 a year on say, hosting, stock photography / videos, fonts, etc., and you worked a normal 40 hour work week (2,000 hours a year), then your hourly wage would be (10,000 + 60,000) ÷ 2,000 = $35/hr. This is what you’ll be using in our pricing guide to determine how much you’ll charge per project.
2. Develop Base Prices For Different Project Types
Now that you have figured out your hourly wage, it’s time to incorporate that into some pricing. I’d recommend setting base values for all the different types of projects you’ll be dealing with. Say you’re a basic web designer, and you offer both design and coding. You would make a list of all the basic services you offer. Your list might look something like this:
- Logo Design
- Website Design (design only in .psd format)
- Website Design (design + coding into xHTML+CSS, less than 7 pages)
- Forum Skinning (design only in .psd format)
- Blog Design (design + coding into WordPress theme)
You now have your basic services listed, now it’s time to create a base project for each project. We’ll be using another handy dandy formula, this time incorporating your hourly wage, time it will take for you to complete the project, and a complexity variable. This will be used depending on the project type, and how hard or complex it is.
I use complexity levels of 1-5 for my pricing guide, but this is something you’ll have to determine. I really like logo design, and it’s easy for me, so I assign it a 1. Blog design is the hardest for me, so I assign that a 5. The rest fall somewhere in between. You’ll take the complexity level as a decimal + 1. So logo design would be .1 + 1 = 1.1. Here’s the formula:
(Hourly Wage x Estimated Time To Complete) x Complexity Level = Base Price
As an example, we’ll take a website design with coding. I assign web design + coding a complexity of 3. So it adds up to: (35 x 15 hours) x 1.3 = $682.5. This would be an odd number to quote someone, so I would round the base price down to $650, but you can round up as well.
3. Develop Prices For Any Additional Requirements
You know how your base pricing guide down. That will suffice for some (maybe most, depending on your clientèle) of your projects, but you’ll get a lot of clients wanting something special added to their site. This could be everything from a flash presentation on their homepage, to a simple login/user system.
It’s the same process for this step to determine prices for additional elements added to the project. Most additional elements will be code based, that is a script, or a web app. Again, make a list of all the additional elements you can think off, and go through the formula again deciding how much you will charge for them. Things like:
- Online Calendar App
- User login system
- Email contact form
- Flash Presentation
- Shopping Cart
- Additional Pages
For additional requirements I assign them all a complexity level of 3, and plug them into the formula from step 2. For additional pages, I charge a flat $50 fee per page the client wants past 7.
4. Develop Prices For Outsourced Work
In the first three steps, you have developed a pricing guide that will be suitable for most of your work. However there comes a time in every freelancer career when you will have to outsource some work. Maybe the client wants a custom illustration, or a big web application developed. You could try and tackle it if you wanted, but then you run into biting off more than you can chew. Nothing is more embarrassing and detrimental to your designer-client relationships than telling a client you can code “the next big thing” for them, and half way through having to tell them you can’t do it. Know your limits, and charge accordingly. Pricing outsourced work is extremely simple:
(Quote From Contractor x 1.10) = Price
You are simply taking the quote from whoever you are outsourcing the work to, and adding 10% to it.
These steps should give you a great start in developing your own freelance pricing guide. You can change pretty much everything in this to work for your needs. These formulas are very simple, and very flexible. One of the advantages, besides the obvious, of having a pre-determined pricing guide is that you can change it on the fly. Say you’re designing for a non-profit, just take the normal price x .5 to give them a 50% discount. I hope this article helped you if you were having trouble developing a pricing plan, or just had no clue where to begin. To those who already have pricing down, how do you do it? Do you have a set pricing guide, or just come up with a number on the fly for each project? I’m interested in hearing your point of view.
[…] March 4, 2007 at 5:22 am · Filed under Uncategorized 4 Steps To Effective Web Design Pricing Perhaps one of the hardest skills to learn in web design is how to fairly and effectively price your services. A project quote can either sell a client, or turn them away. Here are some guidelines on how to develop a web design pricing guide.[news] [technology] [design] […]
Very informative article. For someone like myself who has solely done contract-based work at a set wage per hour this serves as a great starting point for any future freelance or side projects I might encounter.
Keep up the great articles. Look forward to reading more.
Unfortunately graphic artists are a dime a dozen.
It all comes down to get this job done fast and cheap.
Good basics but too low in my opinion. Especially for sub-contracted work. Sub-contracted work falls into two areas.
1. Work beyond the scope of your abilities - Flash, Advanced PHP or other scripting
and
2. Grunt work - typing scanning and other work outsourced to save you and or the client money.
Both of these situations should be handled in one of two ways depending on the job, the client and the situation.
A. You hire the sub-contractor and pay the sub contractor. In these cases you should always charge Price x 2 x difficulty factor.
(Quote From Contractor x 2 x 1.10) = Price
While this may seem high it is not. If you are taking the risk of sub-contractor not delivering or having to fix their work than you charge at least a 100% markup plus something for your time to account for that possibility. Trust me even with a sub-contractor you will expend time communicating and making sure things get done right. This is time the client does not have to spend, time they can spend running their business. You have every right to charge a fair price for this time and risk.
B. The client deals with a sub-contractor directly - In this case recommend two or three people who can do the work and let the client deal with them and be billed by the sub-contractor directly. In this way if there is a problem they do not expect you to fix it for free. In practice I rarely do this method. Only when it is a client I like with a budget problem and then I explain we can trim the budget if they work with the sub-directly but they are assuming the risk. In my experience this works well only some of the time. More frequently something goes wrong and the client blames you anyway. At least you are not legally on the hook though, which is something.
I can tell you in my 10 years with my own advertising & design firm I have have lost many jobs on initial quote because I do above pricing scheme A. However at least 50% of those clients have come back after being burned by others and gone on to be long term clients. Never cut your price too low to get a job, you will regret it.
Thanks for providing such a useful information.
Can I just ask what you do if you don’t work 40 hours a week?
Shouldn’t you factor in the fact that not all of your hours will be billable, or you may have a period where you don’t have work?
I just started freelancing on web design works, and this article is very useful read. Thank you!
[…] 070304 Elsewhere 04Mar07 4 Steps To Effective Web Design Pricing. So. Useful. […]
Very interesting article. I do flat rate work, but it was really interesting to hear about how people who charge hourly figure out their costings. I used to charge hourly, but I am terrible at coming up with time estimates, so stopped and moved to flat rate.
Hey Josh what about a follow-up article about invoicing and bookkeeping for us unorganized freelance people???
SEC —-
wow thanks for this guide. i usually give pricing responsibility to the middle man, i know its a big mistake thats why i only take projects if i trust the middle man. but then again you can’t trust anybody even your self when it comes to money matters. my base for pricing usually depends how big the company is and how much company image they want to project, how much help i would get with respect to the materials needed. how much time they are willing to wait, and lastly how important this website would be for their company (i know all of this is ridiculous thats why thanks for the guide). Now i wont feel bad charging smaller companies what i really deserve. ^__^
Nice article. The problem I, and probably more people, have is that I don’t constantly work on projects. I sit behind my computer and switch all the time between client work and doing other ‘fun’ stuff. So it’s very hard to come up with a good hourly rate. Simply because I can’t keep track of it.
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re. basic price formula:
(Expenses + Salary) ÷ Hours Worked Per Year = Hourly Wage
if you base your salary on what you’d be paid at a job, then you really want to double the above - to reflect expenses that would otherwise be paid by your employer (office space, utilities, insurance, employer’s portion of social security, and so forth) and to reflect that you’re likely to spend a good percentage of your time on non-billable activities (sales, bookkeeping, etc.)
It turns out that (annual salary)/1000 is a good rule of thumb - (salary/2000 hours) x 2 = salary/1000
@sarah… I think I will do a follow up article on that. Stay tuned!
As a newly started design LLC. I have been stressing over what to charge for web design. This post will get me off on the right foot for sure.
Thanks!
Your Hourly Wage Determination formula is flawed. You should divide all your expenses (including your salary) by the amount of “billable” hours you want to work per year. Of the 40 hours in a week, only about 20 will be spent doing things you actually get paid for (like Web designing). Maybe most Web designers have been using your formula, which can explain why most of them are so cheap.
-Nick
Nice start, but as far as rate goes, I found that when I freelanced for 3 years that I actually need to charge about twice that formula…
(Expenses + 2xSalary) ÷ Hours Worked Per Year = Hourly Wage
This allows for those dead times when you may have a week or so with no work, and the ramp up time it takes to get a new client acclimated with your processes and securing the sale.
Nice…Like you said this is one of the hardest things for me to do.
Thanks
maddDidley - www.maddapps.com
[…] Voici un guide intéressant et assez réaliste indiquant comment les Designer Web débutant devraient élaborer leur liste de prix. La première étape est un peu simpliste puisque selon moi il y a d’autres facteurs qui devraient entrer dans le calcul (par exemple il n’est pas rare de vouloir compter le salaire dans les dépenses et ajouter un profit pour couvrir les périodes mortes). Vous pouvez consulter l’article ici. […]
@ Miles
VERY TRUE. His 35/hour doesn’t cover the fact that you are taxed up the wazoo for freelance work. I think it’s close to 35%. So really its 22.75/hour after taxes. If you consider that you spent a thousands for legal software (you did, right?) freelancing at that rate may be a bad idea. A book by the Graphic Artists Guild, has some other factors that you may want to consider, and contract templates (super important).
Kudos for addressing this important issue… but you’ve got a couple of bits missing in your methodology.
First, if you’re freelance, you’ll rarely be booked full time until you’re established. You can end up starving if you price based on 2,000 billable hours per year. Assume you’ll bill no more than 10 or 20 hours per week to start. That will climb as you gain clients.
Second, you’ve forgotten benefits. If you work for yourself, you’ve gotta pay for your own medical insurance, and you should plan for some sort of retirement savings as well. Employers who are figuring the true cost of an employee “burden” the salary number with from anywhere from 25% to 50% to cover these things plus the cost of his cube or office and IT support.
Third, and most important, you forget the concept of profit. The hourly wage you pay yourself isn’t profit - in theory it’s the salary you could command working for another shop, with minimal risk. But you are in business for yourself and taking risks, so it’s important to factor in a significant profit margin. There is a reason that successful consulting firms charge $100-350/hr while only paying their consultants a small fraction of that.
4 Steps To Effective Web Design Pricing…
Here are some guidelines on how to develop a web design pricing guide. A lot of people have different methods for coming up with their prices, but this is just to get you started. This guide only deals with charging per project. There are other ways of…
I know it’s just a set of examples, but I can’t see how you’d logistically make $60,000 / year while covering your expenses at $650.00 per basic promotional website. You’re looking at 70,000 / 650 = 107 websites. All good and well if you A) Feel like designing & coding 107 websites in a year and B) Are able to snag that much work in a typical year.
Please charge more for your work fellow industry workers, or you just ruin the entire game for everyone.
luogo interessante, soddisfare interessante, buon!
@Chuck: yes, I wasn’t really working it all out, but that would be a lot of work during the year. But like you said, those numbers are only examples.
@Albert: good points, I know when I’m in a heavy freelance period, I can easily have 40 hrs of work a week, so that’s why I chose that. I also didn’t factor in benefits, mainly because I don’t have any right now (in college, still under parents insurance.) That is something I will have to deal with though in the future, thanks for bringing it up.
Thanks for the tips, additions, and input guys, I appreciate it. Keep it coming
SEO is a great way to increase profits, some charge crazy prices for each site they work on!
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http://www.WindowsVistaUserGuide.com
Thanks for the information. I went a head and created a spreadsheet out of what you suggested (using OpenOffice, hooray!) and was very pleased with the results. This is one of the better suggestive pricing guides I have seen on this subject.
I’m glad it helped James
This is probably why web devs don’t make money. One rule of thumb when you do business, the fundamental principal that you learn in a business school is that you DO NOT price your product or service based on cost, as long as you don’t lose money. If selling a forum software installing has a market price of a hundred dollars, but if your hourly rate is $50 and if it takes 30 minutes, you WILL NOT charge $25, you charge a hundred dollars and you say it took 2 hours. This is how things work.
I was wondering if anyone here can tell me if there is a fair way of figuring out the hours needed to build a website? I mean if you take a car to a mechanic they have a big book that tells them the hours that will be needed to fix whatever problem that needs fixing. Now I know that there is probably no-such book for us in web design but I wonder if there is some simple guidelines to figuring the hours for simple website jobs.
Ken Barrette
Hey Josh, for your article on invoicing do you want an invite to our closed beta?
http://www.lessaccounting.com
easy expense tracking (with mileage log)
simple sales lead management
proposal sending and creation
invoicing and payment tracking
basecamp, blinksale, harvest and tickspot integration coming soon
Really Great information.
There is not an easy way to charge for website design serivces, but what you have missed is market. If everyone else is charging 2000 for a site and you are charging 650, you will soon have issues keeping up with demand, depending on your end product of course. No one will want to pay for a site like http://caseyisageek.com when they can get http://eatmorejerky.com for the same price.
I’d agree that developers are charging far too little for their services and expertise. Granted, the quality of work varies in the industry but I think on the whole we need to be more aggressive about demanding more for our skill set.
Consider too that most freelancers are performing front-end and back-end programming, layout design and navigation, and graphic design production to create a sophisticated double-edge sword that draws in customers and keeps them. Also consider the amount of time that needs to be recouped for masting programs like dreamweaver or photoshop or flash…
Developers are continually using both sides of their brains and that ain’t cheap work, friends.
Three cheers for developer appreciation!
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not to bash hard, as he has good intentions, but it’s not exactly the most tested advice coming from a college kid. work a few years in the industry and you’ll find that the post really has zero weight for what to charge.
Thanks for such an informative article!
Your pricing guidelines are excellent and taking into consideration the fact that I always quote a flat rate that turns out to be 5x too low… I’ll definitely be using your formula in the future.
(In response to one of the comments on tracking time spent on projects versus personal time on the computer, check out www.worktime.info — it is one of the best apps I’ve used over the years.)
[…] Of course developing and documenting the goals of a website is the first step, but that’s a discussion for another time. Whether your a designer or a customer seeking web design, here’s a few articles to read before engaging in those discussions: Discussions and resources I suggest you read regarding web design pricing 4 Steps To Effective Web Design Pricing Here’s how one clever web designer priced out his/her worth […]
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Luogo molto buon:) Buona fortuna!
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luogo interessante, soddisfare interessante, buon!
Lo trovo piuttosto impressionante. Lavoro grande fatto..)
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@Lisa Edwardsen & Achtentachtig,
I’ve been using AllNetic to track my time. If I leave my computer for more than a 2 minutes, when I come back it will ask me if I want to record the time I was away or not. Pretty slick. WorkTime looks similar…maybe even better. Thanks Lisa!