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How to ease the blow on Price quotes
quoting web design
amflores




msg:778992
 10:15 am on Dec 16, 2003 (gmt 0)

I feel so strange quoting my clients sometimes. It just seems like even 1500$ s is way too much for a job. Of course, there's a lot of wok that goes into building a site and no job is considered equal. Why do I feel like I'm asking for too much when I quote a client on a job. How do you guys break down your prices to your clients to make them feel at ease and comfortable with your prices?

 

Fortune Hunter




msg:779052
 8:43 pm on Apr 26, 2004 (gmt 0)

I am relatively new to the web design field so I am probably one of these guys who creates bloated pages and charges too much, but here is my take on the situation.

I may be new to web design, but I have years of experience with marketing and business. I feel my clients need to pay for that expertise.

A web site no matter how slick looking, innovative in design, non-bloated, etc. still needs to accomplish some key objectives depending on the business and the objectives needed...

Generate more sales or leads

Create a strong brand

Lower operating costs

As a result I don't sell "web design services" to my clients. I sell consulting, marketing, and business enhancement services that uses the web as the tool to carry it out.

I offer professional copywriting, marketing, branding, and business experience in creating these sites. As a result I am never interested in competing against some college student who will create a site for $500, why? Because I bring a lot of marketing and business value to all of my projects, not just design skills.

I think that education, experience, etc. is worth a premium. If designers continue to offer a commodity which we will call "web design" they will always get beat up over price, commodities always do.

Economics 101 tells you that a commodity can only be priced as high as other sellers or the market is willing to sell at. If you try to sell for one penny over that price the demand for your commodity falls to zero.

Fortunately web design hasn't become that much of a commodity... yet, but if we keep discounting our talents and services it will.

There is an old joke I saw once where a ship's captain needed work on a boiler. He called a boilermaker who went down into the ship's hold and tapped on the boiler in some different spots with a hammer. He said he was done and presented a bill for $1,000. The captain was upset and demanded an itemized invoice. Here is what he got...

Tapping with hammer: $1.00
Knowing where to tap: $999.00

I think too many of us in this trade are focused on the hammer tapping part (which is the actual coding) and not the part of knowing where to tap (which is the planning, experience, education, etc.)

I believe everyone should offer a niche, mine happens to be business, marketing, and direct response and I use the web to carry it out. I am not a "web designer" I am a consultant. As a consultant I feel I should be paid a non-commodity wage for my services.

As designers we only hurt the industry and ourselves if we value or services so cheaply that a site can be done for $500 or we bill ourselves out at $10-15 per hour.

I personally charge $75 per hour for design work, but I tell the client they are not just getting a "web site" they are getting a business tool that is provided by someone with years of marketing and business experience.

I had a potential client try and pull me into a bidding war for a web site project. I quoted $2,500 for the site that he wanted. He found someone who would do it for $500. When I called to follow up he told me this, then paused waiting for me to match the price. I didn't. I simply said I didn't think he was comparing apples to apples and that he wasn't getting what he thought he was getting or what I was offering for that $500. I told him anyone can create a web site, but someone who can create web site that works is entirely different. I said I wasn't interested in doing the work for that price. I didn't land the client, but I don't care.

Value is very subjective. I felt in this situation my value was worth more then $500. A "web designer" probably felt like this was a fair price, but a consultant didn't.

I know this appears like somatics here, but I believe it is in the approach and the package you present to the potential client.

Just my 2 cents

oilman




msg:779053
 8:59 pm on Apr 26, 2004 (gmt 0)

Thanks to years on this board and the advice of a good friend I know have a new hourly rate and monthly minimum - both of which are higher than I would have ever put them but it's like black magic - I have the luxury of firing clients and turning down new business. These days I send out a boilerplate proposal with a price tag on it - hire me or don't hire me but whatever you do don't call me up and ask for 50% cuz that's all you can afford. I can't afford to give you 50% from a dollars and cents view and from a perceived value view.

It's the black magic of perceived value. There's also tipping point in dollars where clients go from being whiney pitas to hands off trusting businessmen. Find that point in your marketplace and life will be much simpler for you.

Leosghost




msg:779054
 10:27 am on Apr 27, 2004 (gmt 0)

Welcome to WebmasterWorld Fortune Hunter ...a very pertinent 2 cts worth that was .....
I use the same principle for artwork ...my main business ....I'm not paid for marks on paper or 2 kgs of clay ...I'm paid for getting it right first time ...and I refuse to compete with Sunday painters ...Just yesterday I sent a mail to a customer in the states who wanted my work but thought the price too high...they will go to some one who will do it for less but not as well ...and this will bug them each time they look at what they got and what for my price they actually wanted ....

Personally I'd rather wash dishes in a diner and get paid minimum wage than accept to be underpaid for my talent and skills ....

It's how I paid my college degree ....whch for an artist is probably the most useless peice of paper that we ever touch ...'less we want to teach ...

Eric_Jarvis




msg:779055
 1:37 pm on Apr 27, 2004 (gmt 0)

I'm with oilman on this. Set your rates and give good value when you get a client. I used to be willing to mess around negotiating over a day or two, but it simply isn't worth it. The people who want you to work for next to nothing also tend to be the ones who don't pay until you threaten to sue. Best bet is simply leave them to the cowboys.

Fortune Hunter




msg:779056
 4:58 pm on Apr 27, 2004 (gmt 0)

I am with both of you as well about setting a price and sticking to it. Although in practice I have found having total inflexibility in the price to be a problem.

My post above was referring more to having my services discounted at massive rates because someone wasn't comparing apples to apples.

I have been a little flexible in the past. I find people like to think they negotiated a good price for anything they buy. This applies especially to small and medium sized business owners. Most professional sales people will tell you the sale isn't completed at the close. You need to do what is called a "post sell", which is keeping them sold. I found the easiest way to do this is make sure they feel they negotiated and got a good deal.

If you don't post sell all of your accounts you take a chance the client will develop buyer's remorse. I have found in this business that this condition is terrible. If they have buyer's remorse then you have trouble getting content from them, they are slow to respond, slow to pay, etc. They just feel it wasn't a good deal. Help them feel they got a good deal and avoid all this.

To accomplish this I usually add a little "fluff" into the quote to account for the negotiation. If I want no less then $2000 for a site, I will do the initial quote at $2,300 or 2,500 hundred.

This does two things, first if they negoitate with me I can shave off some money on the proposal without giving an actual discount off my bottom line price.

Second, if they review the proposal and they seem to be stalling about making a decision on the project then I know I am in the ballpark on price, scope, timing etc. To "nudge" them into moving I will often say something like... "If you sign the proposal before x date, I will give you a $200 discount". They will sometimes agree on the spot and sometimes they will respond with "Make it $300 and we have a deal", which is fine since I am still above my bottom line price. Sometimes this is just what the prospect needs to agree to the close.

Some people would not like this approach they would call it "game playing" or say it is the game of mark it up so we can mark it down. The fact is almost all retailers do this, especially jewelry retailers. I don't look at it as a game, it is sales plain and simple.

One more thought, how many of you ask for a chunk of the money up front? I personally ask for 30% of the project total upfront. I have been burned in the past by clients who had no financial stake in a project. They didn't respond to requests for content, decisions, etc. In one case the guy said to me, "I just don't have time to do this right now let's forget it" unfortunately I had about 15 hours of work into the project already. I obviously didn't get paid for that time.

In the case above I tried to bill him for the work I had into it, but he never paid. When I confronted him about it he asked "Why would I pay for something that was never done". When I reminded him it wasn't done because of his decision he simply said, "Well I am not going to pay for a project that was never completed".

Now it is a mandatory policy of 30% upfront. If they balk we go back into sales mode. If they outright refuse I walk away because they aren't really serious. If they pay it I start work, when I have worked off the 30% I pre-bill for another 20% and so on. This way I am never out one penny if they stop along the way. Almost all contractors do this. Most contractors won't start a job unless they are paid some percentage up front.

I chose 30% because as someone said earlier in this post the first page is the hardest to do. Developing this first design takes the most work. If you only ask for 5% upfront and they keep delaying you will probably lose money if they pull the project.

Fortune Hunter

iamlost




msg:779057
 11:18 pm on Apr 27, 2004 (gmt 0)

This topic has mutated from how do I justify my prices to a client to how do I justify my prices to myself.

I will address primarily the second (mutated) form in this post, the original is almost unanswerable - how do you justify any price? Or perhaps the mutation is accurate: the only justification is that you, yourself believe that you are worth the price.

If you are a professional (getting paid) website designer treat the entire endeavour as a business - which by definition it is - and not a charity or a hobby.

Add up all your expenses: rent/mortgage, insurance, car, utilities, food, entertainment and seminars, computer/office equipment and supplies, software and books, kids/wife/dog, everything that you pay out for a year. This is not regulation per accountant/government, this is down and dirty real world.

Divide the total by 1920 (12 months * 4 weeks * 40 hours each - leaving you every weekend plus a month holiday (you included vacation cost in your expenses - right?), per year to fritter away on your own sites).

Now you have what I call "wage" or "overhead" money. If this is less than $20.00CAD you need (1) a new life and (2) more computer toys. This is bottom minimum must have eight hours per day five days per week money.

Now add the "professional" or "profit" money which I cost at $30.00/45.00/60.00CAD per hour depending on what the job is (BTW: the top amount is database design, not web design).

No screaming please. Remember the following:

  1. A business pays both itself and it's employees. If you are self-employed you must also pay both yourself and the business not just yourself: a common reason many businesses fail in the first couple of years.
  2. You are unlikely, especially in the beginning, to be able to bill 40 hours every week. If you can only bill 20 hours/week you approximate Ellen's minimum amount which I think is realistic. On the above numbers you must work a minimum of 16 hours per week to meet your "wage" requirements. Doable and reasonable.
  3. You can do "cut-rate" jobs for charities and service groups (drop the "pro" money and still make "wages") without feeling taken.
  4. If you are happy with a wage quit and get a job - what I am talking about is a business/career/joy not a job. As said in previous posts: treat yourself like a professional and others will too.
  5. If all you do is some coding and layout, get a job: my ten year old and his friends can do that. You must:
    • communicate with client to determine wants and needs: now, next year, and five years from now.
    • communicate with client.
    • design in scalability past expectations.
    • communicate with client.
    • design for optimal front and back end performance.
    • communicate with client.
    • design for accessibility, code/regulation compliance, ease of use.
    • communicate with client.
    • design for ease of maintenance.
    • communicate with client.
    • etc. ad nauseum.

  6. And always remember the Retailler's Law:The customer that complains about price will complain about everything else as well.
  7. Over time as you build a reputation (and client list) your time is as full as you want it to be and your charges are accepted because the clients know they are consistent and that you earn them. What becomes questioned is the scope of the project and its value for the money spent which is a much more agreeable topic than your charges.
  8. Finally: It is better to do nothing at all than to do something for nothing.

I have used the previous formula for years and it has served me well. It has provided pension money (do computer-geeks ever retire?) and seed money for my own sites and my ketch and ... well you get the picture I'm sure.

crashomon




msg:779058
 3:06 pm on Apr 28, 2004 (gmt 0)

I had a client balk at paying $500 for a minimal site and I told him upfront, "Don't think of it as money INTO the site, think of it as how much money you want to get OUT OF the site."

Since he stated his 'top price' we stated the exact definitions of how much time we could give him for that price and delivered that and nothing more. He liked it and wanted more added on, which resulted in additional hours being billed.

He wound up paying us almost $2000 for our work and is THRILLED with the results, so don't let the focus be on pricing, focus on value and you'll always come out ahead. (it helps to have a quality product too!)

Good luck,

Patrick Elward
snipped

[edited by: DaveAtIFG at 12:18 am (utc) on April 29, 2004]
[edit reason] TOS 13 [/edit]

lanzaman




msg:779059
 3:27 pm on Apr 28, 2004 (gmt 0)

iamlost is quite right when he says that many businesses fail because they forget to pay the business as well as themselves, this was one of the main reasons that my first business failed and I should have known better having spent 7 years in corporate banking.

If you are dealing with other business people they will understand this. They also will appreciate the fact that you are looking to the future and will therefore be around to help them in years to come not just today. An appreciation of how to do business can be just as attractive to a potential client as knowing how to code.

You have to invest in training, new equipment etc, etc so you must build this into your prices. When you do, you will not find it hard to justify them to anyone, let alone yourself.

jusdrum




msg:779060
 4:10 pm on Apr 28, 2004 (gmt 0)

I tell my complaining clients, "The website is free. I just need you to pay all of my bills so I am in a position to make it for you."

The definition of your worth comes from your awareness of your work's value. Nothing works better for a client that asks, "How come this costs so much." than a comfortably delivered, "Because that's what I charge for it." If they pester you beyond that, then a quick retort of, "It's my cost of doing business and the value of the work." If that doesn't seal the deal, run. Run as fast as you can from clients that complain about prices.

Whatever you do, DO NOT tell your clients what the money goes toward. It's none of their business. By revealing your private information, you open the door to debating your pricing. The only way to win that debate is to continue revealing more and more of your private information, which again is none of their business. I have had to tell clients that I don't discuss the nature of my pricing because they would only need to know the information if they are going to use it against me to debate the price, which is not debateable. That doesn't mean a client couldn't make a counter offer, rather we're not going to debate why I charge what I charge. They always appreciate when you kindly tell them they are asking for information that is inappropriate to ask for. McDonalds will never justify to you why they are charging $1.99 for a soda that costs them $0.11, and you shouldn't justify your pricing either.

I can tell you this. Once you develop a body of work with a proven track record, all of those conversations about "why does X cost so much" tend to go away. It becomes a matter of the work I do is great and if you want it, then pony up the cash. I don't sweat clients that say no (particularly clients stressing over a piddly $2,000) because there are plenty of clients that will say yes. If you have a proven method for converting $1 into $2, clients will beat a path to your door to give you a dollar, no questions asked.

lanzaman




msg:779061
 4:23 pm on Apr 28, 2004 (gmt 0)

I wasn't advocating discussing the innermost workings of your business, finances etc. My point really was that once you have a grasp of the things that you need to cover, such as investment in equipment and the like, then suddenly you don't feel the need to justify your pricing as it all makes sense. If you approach price discussion with confidence then you will have a significant advantage. Real businesses know that you need to cover these things and so expect your pricing to include them. If your price is too low they don't think you are professional as you can't be planning to stay in business.

I do agree that if you gain a reputation for building sites that impact positively on your clients' bottom line then you should never have a problem with pricing and if you do then you really do want to walk away from those potential clients.

jusdrum




msg:779062
 4:30 pm on Apr 28, 2004 (gmt 0)

I wasn't directing my post at you Lan. I think you are doing alright. :-)

photon




msg:779063
 5:20 pm on Apr 28, 2004 (gmt 0)

I tell my complaining clients, "The website is free. I just need you to pay all of my bills so I am in a position to make it for you."

Excellent! Is that copyrighted, because I'd sure like to use that with some clients of mine. :)

jusdrum




msg:779064
 5:29 pm on Apr 28, 2004 (gmt 0)

Thanks Photon, please use the hell out of it.

Fortune Hunter




msg:779065
 8:00 pm on Apr 29, 2004 (gmt 0)

Since this thread has mutated all over the place let me throw another curve in it. How many of you keep track of the time you "sell" the job to the client and end up billing for that time in the project?

I worked for a very large and successful web development company and this was standard practice. They simply billed internal hours in their time tracker towards the selling for the client.

This included time writing proposal, developing presentations, research for the presentations etc. Once those costs were calculated then it was spread out over the cost of the job.

For example, if the job was itemized out then they would just add a little of the cost to each item. They would not include a line item that said "sales costs" or anything like that.

I personally like the idea so I wondered how many had or were using it and if so how successful it was.

Fortune Hunter

lanzaman




msg:779066
 8:38 pm on Apr 29, 2004 (gmt 0)

fortune hunter

I actually do use that system, the difference is that it does go on the breakdown as a seperate item, not as sales costs, but as research and consultancy. I feel justified in calling it this because all aspects of the sale process are research - from identifying the prospect to producing the proposal - all of which help towards the final goal of producing a suitable website for the client.

stuntdubl




msg:779067
 11:57 pm on Apr 29, 2004 (gmt 0)

Tapping with hammer: $1.00
Knowing where to tap: $999.00

I used a similar analogy with a customer once from the Henry Ford idea in this thread (message 10) [webmasterworld.com]

This was after doing a bit of consulting work, and having someone gripe about pricing the entire way. Word to the wise...this is a great thing to say UP FRONT...but not so great after a client has been whining about pricing. I really like the quote of the "Retailer's Law", as it is absolutely true. Unfortunately, I learned the hard way, and lost out on about ten hours of consulting time/ adwords management. I learned a few things fromt he experience: Never do business with someone who GRIPES about bills, and get a percentage retainer.

If you give someone that quote up front, it helps to manage their expectations which is one of the most important elements in the "customer service" of web design/ marketing etc. If you can see that they have unreasonable expectations, you have two options: 1)Explain and Educate or 2) Walk away. If you don't do one of the two, NO ONE will end up satisfied.

delboy1978uk




msg:779068
 5:03 pm on May 4, 2004 (gmt 0)

Quite right
Tell them how much it costs straight away THEN you can get into the working details. It makes asking for the money so much easier :-) After All, a lot of us are really just nice guys who don't really want to charge anything, just live their life doing something they enjoy.....
nice thought but then we have bills to pay too

EileenC




msg:779069
 9:12 pm on May 8, 2004 (gmt 0)

As a content writer and marketing copywriter, I agree with everything you all are saying about end value to the customer. "Knowing where to tap" is exactly right. I often write proposals for people who have never hired a writer before, and have the notion that we're all starving and willing to work for peanuts. They get total sticker shock when they see how much a good quality content or copywriter really costs. It's only when I successfully demonstrate that it's not words on a page that they're getting, but higher business revenues as a result, that I can close a sale with them. I don't work very hard trying to close sales with people who are clearly cheapskates and don't understand the value of superior writing ... they turn out to be terrible clients, and life is too short for that.

[edited by: stuntdubl at 9:39 pm (utc) on May 8, 2004]
[edit reason] Please don't use specifics [/edit]

johntabita




msg:779070
 4:50 pm on May 11, 2004 (gmt 0)

I've been a "fly on the wall" here for a long time, observing the many great threads on this forum, including this one. I'm finally going to join in with my first post.

One problem I had when I first started out was that I judged the idea of a "fair price" based on what I thought was a lot of money. With that mindset, I felt like anything beyond that was going to come as a "blow".

Many here have touched on the concept of value. I'm learning that it's important to discover what your prospect values. Does he value the lowest price? Or does he value having an expert he can trust? Value is always what a person perceives it to be. So if your prospect values the lowest cost, attempting to convince him that he should "value" your expertise may be a waste of time.

I no longer try to ease the blow on pricing, but I've learned the hard way that I must find out what type of prospect I'm dealing with before investing several hours creating a proposal for $5,000 when the prospect had $500 in mind. I've learned that the best way to do this is to actively look for all the reasons why the two of us wouldn't do business together (not just the cost vs. expertise value issue). And I no longer spend hours preparing a proposal unless the prospect has committed to do business with me.

That committment is conditional upon whether or not I can meet his criteria, which I must demonstrate in my proposal. Since part of that criteria will involve price, and since I won't create a propsal with a committment, then I have to discuss all of his criteria beforehand, don't I? So that forces the price issue into the open. So my answer is, if you think of quoting prices as a "blow", then strike the blow as early in the process as possible. If your prospect is still standing, then you've eliminated at least one reason for not doing business together.

stuntdubl




msg:779071
 5:00 pm on May 11, 2004 (gmt 0)

Welcome to WebmasterWorld John;)

Don't be such a stranger...it looks like you have some very good insights.

concept of value.

This definitely sums things up. No matter what you do you must provide value that is above and beyondwhat is expected for your "stock to rise", and for clients to be satisfied and respect you.

The real "blow" comes when the client realizes that they've spent a sum of money on something with no return. I tend to focus on this fact with clients, and let them know that there ARE cheaper options (also insinuating that their are few BETTER ones;).

I really liked the idea of remembering the "MAN" adage when going into/ preparing for a meeting.
A client needs:
Money for the project
Authority to give the go-ahead, and a
Need for the valuable services you provide

Keep these issues in mind, and you will find good qualified leads while keeping "tire-kickers" at bay.

nycweb2222




msg:779072
 8:43 pm on May 11, 2004 (gmt 0)

I completely agree johntabita that the earlier you bring up price the better. I have wasted a lot of time speaking with clients and drafting proposals, when they were expecting a dirt cheap solution.

One problem that I have faced is discussing pricing upfront. One question I wish that more clients started answering is "What is your budget?". Many potential clients get scared of this question and offer the response "make me an offer".

I have never tried to take advantage of someone who has a larger budget then what I charge and I usually try to fit the solution to the clients budget (especially if it involves programming). I obviously won't go below a certain set point, but I can offer more options/features/value for clients with a larger budget, but still manage to offer a great solution to clients with a lower one. The problem is most clients that I have encountered have no idea what there budget is or have unrealistic expectations of the price they should be getting AND won't disclose this idea early on, wasting my time.

Have any of you been able to bring up the clients budget in a way that doesn't scare them?

johntabita




msg:779073
 10:39 pm on May 11, 2004 (gmt 0)

"I really liked the idea of remembering the "MAN" adage when going into/ preparing for a meeting.
A client needs:
Money for the project
Authority to give the go-ahead, and a
Need for the valuable services you provide"

Thanks for the welcome. I'll definitely hang around.

I've heard something similar to what you've said:

A prospect must [1] want, [2] need, and [3] be able to afford your services. The sooner you find if any of these are absent, the better.

"Have any of you been able to bring up the clients budget in a way that doesn't scare them?"

Yes, in fact. Try this:

"The minimum cost for a basic website is $***. Were you prepared to spent that?"

Or, after you've talked to him for a while and have an idea of how involved the project is:

"The cost of the type of site you've described is between $*,*** and $**,***. Were you prepared to spent that?"

If the prospect answers "no," you can follow up with "How much did you expect to spend?"

Also, try turning your comment into something you can use to build trust:

"The reason I need to know this is not so I can charge you as much as possible, but so I can fit the solution to your budget. Obviously, I can offer more options, features and value for clients with a larger budget. But I can still manage to offer a great solution to clients with a lower one."

You're correct about people having either no idea or unrealistic expectations on the cost of a website. We've found that phasing the question in this manner helps eliminates that.

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