Date: 01 September 2014
Sean Johnson’s talk at The Business of Web Design 2014 was about the balancing act of finding the right price to charge for a website. He covered everything from working out day rates, whether we should consider an hourly rate at all, and how if you’re not careful you can actually lose out for not attaching the right price to your efficiency.
Plenty of people still work with day rates. Most freelancers I know do, and my personal experience is that one of the first questions a potential client or recruitment agency asks me is “what’s your day rate?”. So how do we work out a suitable day rate for the services we offer when there’s no de facto figure to go with?
Sean tried to work this one out during his talk by breaking his day rate down into three different areas:
That seems like a pretty clean way of working things out, but such is the way of the freelance life that it’s hard (if not impossible sometimes) to predict when the next job will come in. So how do we know that what we charge the next client will cover all of our costs until the next client comes along? Well we build those uncertainties into the day rate, but how do we strike the balance of making sure we’ve got enough to cover those 3 points, but not so much that it scares clients off? Told you it was hard.
There are resources out there for working this kind of stuff out. Cole Henley’s Freelance Rates Calculator is one of them. Each year Cole hosts a form online where freelancers anonymously submit their rates, which all go together to form an average rate, broken down by age, location, area of design, etc. It’s a great starting point for working out your day rate and you can tweak your rate from there.
Part of the problem with using a day rate is knowing that what you’re charging your current client is going to cover your expenditure until your next client comes along. A couple of other issues are:
The answer to these questions, it would seem, is value based pricing. Using value based pricing allows us and clients to focus on the problem rather than what features cost the most and therefore need dropping to save money. Focussing on features doesn’t focus on the problem or the reason why the new site is needed in the first place.
There a essentially 3 factors that go into working out the cost of a project:
We’re fine with points 1 and 2. We can estimate expenses pretty well, and experience should give us a fairly good idea of how long a project will take. Point 3 however is something only the client knows. So how do we get that information from the client in order to give an accurate cost for the project? We need to ask a few discovery questions. The client might not know straight away the exact value that the project will bring to them, so it’s a good opportunity to work it out with them. Ask:
But what if the client doesn’t want to talk about the value of the project? They might feel cagey and protective, which is understandable.
So once we’ve uncovered the value of a project, how do we know how much of that to charge? 20% – 50% is a good range to work with. If the project is low risk go for a low percentage. If it’s high risk go with a high percentage.
On top of the core project, we can offer other items as part of the greater strategy. We can organise pay per click (PPC), email marketing and lots of other things that can all be charged back to the client.
Sean has helpfully put a page together with some links on it for all points raised in his talk. You can find all the links here.