There has been a lot of creativity lately with how web design consultants charge for their work. Let's look at the top five different pricing strategies that are popular right now and get some clarity on the pros and cons of each so you can figure out what works best for you. Stay to the end though because there's a fundamental mindset component that a lot of people are not tapping into which makes all the difference - especially if you're charging high-ticket ($ 5,000 - $ 15,000 +) prices.
The most popular pricing strategy is the 50/50 split where you collect 50% upfront as a deposit to get started. Then you build everything out. Just before you launch you collect the final 50%. Depending on the size of the project (and the responsiveness of the client) development usually takes between one and three months.
This is a super simple pricing structure that everybody understands. Clients sort of intuitively expect this type of pricing structure. It makes sense to give you some money (but not all) to start. Then, pay the final bill when they take ownership of the work.
Clients also seem to (at least subconsciously) appreciate this pricing structure because they feel like they understand what the full cost is and they can compare your rates to other alternatives. Everything seems pretty much apples-to-apples.
Clients feel like there's a big upfront cost to getting a website. Clients get scared and do not say yes - at least not until they "think about it." So, you'll have to deal with objections like:
These tend to just be one-and-done projects with no recurring revenue. Any sort of recurring revenue for hosting, security or marketing is an upsell which most clients tend to reject. It's a hard upsell because clients are not really looking for these services, they feel expensive, and often times they already have some other plan (other than working with you) in mind for their marketing.
You're competing with the whole world. It's not at all uncommon for clients to thank you for your time, take your proposal, and say they need to think about it, talk to their business partner, win a new project first, etc. Then they take the proposal you poured yourself into and shop it around to see if they can get "the same thing for less." In other words, they think of you as a commodity that they can replace. If you're charging high-ticket rates, they'll probably find someone else who they think can offer the same stuff you are offering and they'll save 50% or more on the project - even if they have to give up a little convenience by working with someone who is not local.
The down-side of this pricing model is pretty steep and the upside is not all that great. So why do people do it? Because it's pretty much the mainstream approach. It's what people know and what clients have come to expect. But, when you lay it all out in the sunlight you can see it's not a winning strategy - especially if you're prices tend to be higher than everyone else's prices.
Another common approach is just trying to estimate hours, publish an hourly rate, and tell the client you just charge for time and materials. Sometimes this takes the form of you pre-selling your time in monthly chunks for discounted rates. Sometimes you just track your time, work until you're finished, then invoice the client.
You get paid for all your time and virtually eliminate the risk associated with a fixed price estimate. If scope creep enters into the project it does not matter because you get paid for your time no matter what.
The client gets the lowest possible price because with a fixed price project you have to pad the price to account for unexpected issues that always arise even with small projects. Most people pad the price anywhere between 10% and 100%. For example, if you think through the project and feel like if everything goes exactly according to plan you can knock everything out in about 40 hours. You want to make at least $ 85 per hour. So, you do the math (40 hours x $ 85) and come up with $ 3,400. But nothing ever goes exactly according to plan so you add another 50% to account for scope creep and other unexpected issues. The final price becomes $ 5,100. Then, maybe you round down to $ 4,900 just so the price feels a little better, right?
But what if everything goes a little better than you expect and you do not need the extra 50% of "unexpected" time? Well, with hourly billing, you do not pad your time and the client only gets billed for your actual time. So, they get a $ 5,000 project for $ 3,400.
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