What do you charge for web design? If you’re not sure then you’re not alone.
A lot of web designers and business owners have trouble figuring out what to charge. Whether your a freelance web designer or have a web design business with employees, it’s pretty damn important to get a handle on how to figure out a price for your work.
You typically charge web site design by the project. Clients want to know exactly how much a web site or application will cost them. It’s still important to have an hourly rate that the client is aware of. You use this rate for work that takes place outside of the project requirements.
But there’s more to it than that. The hourly rate is what you’ll use to figure out how much to charge for a project. How so you ask? Well, read on and I’ll show you how.
Your Hourly Rate Must Change
One thing to realize about your hourly rate is that it’s not set in stone. There are many things that can change your hourly rate: increased overhead, inflation, cost of living, employees, etc.
Let’s say you run a web design business out of shared office space in the less than stellar part of town. You have one designer, one programmer and some old PCs. Lately you’ve been experimenting with a hot new marketing campaign and it’s really starting to pay off.
All of a sudden business is good. Too good. You’ve got more projects than you can handle. Time to hire a couple more employees. And moving to a new office space will make meeting with clients easier. Also, while you’re at it, how about some of those shiny new Macs you’ve been hearing so much about?
Well now you have a lot of additional overhead. Sounds like the perfect time to take a look at your hourly rate. Does it mean it’s going to change? Not necessarily, you could crunch the numbers and find out that keeping your hourly rate would net you a nice profit. Or you could find out that you really need an increase or you’ll have trouble meeting payroll in a month. The point is when expenses change take a look at your hourly rate.
Hourly Rate Calculation
First, I’ll start off by saying that the hourly rate you’re trying to figure out is really the minimum rate you need to pay the bills and make some profit. There are lots of articles on calculating a web design hourly rate so I won’t cover that in detail here. Just do a Google search for “calculate web design hourly rate” to find a ton of detailed articles.
Most of them basically say the following:
1. Profit is usually about 15% to 25%.
2. Overhead includes things like equipment, office space, etc.
Yearly Total = (Desired Salary + Overhead) * Profit
Hourly Rate = Yearly Total / Billable Hours
What About Your Competition?
Now that you’ve got your hourly rate figured out you’re done right? Not even close. You’ve got competition to think about. Lots of competition. So much of it in fact that you better have an idea what your competition charges or you’ll be toast.
Not every single web design and development shop out there is a competitor. Not really. Are 2Advanced Studios and AgencyNet Interactive your competitors? Not unless you’re competing for accounts like Ford, ESPN and Bacardi. What’s their hourly rate? It doesn’t matter. They’re not who you need to worry about — at least until you start getting those million dollar accounts.
So you need to find out who your competitors truly are. Who do you lose web design jobs to? Who do you steal jobs away from? Which freelancers or companies deliver similar quality (in your customer’s eyes) web sites or applications? These people are your competition. When a prospect asks you for a web design quote, they’re comparing it against what these companies quoted. Figure out who your competition is, then figure out how much they charge. Spend time doing it, it’s important.
Now that you know what your competition charges, figure out the average and think about whether you want to hit the upper or lower end of that (of course middle is always an option). Remember the previous formula you ran through to figure out what your rate should be? Well, this is where it’ll come in handy. Get as close to that number as you can while staying within the range of what your competition charges.
If you’re new and you’re not sure who your competition is, you better figure it out fast! Locate companies in your space that you feel you can steal a few jobs from. It’s important to be realistic. Find out what they charge and then calculate the average. Because of your lack of experience in the field you’ll probably have to charge a lower hourly rate.
How Much to Charge for a Project
You can see why there’s no formula to figure out your true hourly rate. There are too many variables to take into account. You’ll probably have to change it a few times to find your sweet spot but it’s well worth the investment in time.
Now that you have your hourly rate you’ll need to figure out how many hours a project will take and multiply it by your hourly rate. That’s the price you give a prospect or client. That’s what they want to see, total project cost.
Estimating project time can be tricky as well, my next post will cover what you need to know about project estimation. In the meantime this should be enough to get you started in the right direction.