|For those of you charging under $57 an hour ...|
...and if you are, are you paying house/retirement/car payments?
I've been having a great chat with a fellow member offline. We decided to post this bit, which comes from Brenner Books, who samples prices and rates from around the country.
I bought their book on this topic, and have recommended it before.
"You may get 100 jobs a month at $40 an hour, and only 50 jobs at $80 an hour, but which strategy returns the most profit?
At $40 an hour and a cost of service at $30, $10 goes towards gross profit.
At $80 and the same $30 an hour cost, $50 goes toward gross profit.
In the first case you get $1,000 gross profit ($10 x 100 jobs).
In the latter you get $2,500 toward gross profit ($50 x 50 jobs). "
Too often, we undervalue ourselves. Now, I don't particularly mind if the rest of you do, because we've picked up 3 contracts from this past summer from one-person shops who were undercharging and have dissappeared completely.
But this same advice goes out to outsourcing firms in India... they're charging dirt-cheap prices compared to here, but do consider whether its dirt cheap for where they're from, too... it could be a warning sign that they won't be around long-term.
BTW, I've been in this for 6 going on 7 years. And I undercharged in my first year. I only got by 'cause my spouse was working full-time. Now there's 2 of us full-time + a team of 8 specialists we ship work out to.
We're interested in what the rest of you do / have experienced.
PS: When you answer this question - answer please answer these, too - are you currently contributing to:
- a retirement fund
- paying medical insurance
- Do you own an house
- a car?
(By yourself - not with a spouse...)
These are fantastic points to bring up. Something a lot of us should think about.
|But this same advice goes out to outsourcing firms in India... they're charging dirt-cheap prices compared to here, but do consider whether its dirt cheap for where they're from, too... it could be a warning sign that they won't be around long-term. |
Cheap is relative. A dollar in the US will hardly buy you a cuppa coffee. In India, a US dollar is about 40 rupees, and 40 rupees can buy quite a bit. What the average American spends on lattes in a week, you could live pretty well on in India.
On the one hand, yes, there's the perceived undercharge. But cost of living is different too.
I agree - I'm sorry I used the word "cheap". What I meant to get across to those from India and those using outsourcing is that both sides need to consider what is a good wage "over there".
I'm just afraid that Indian firms who are new to this will make the same mistake I made at first, and one I see happening in the lower end of this industry, which is that they're not charging enough long-term. So, if they're charging $7 US an hour, maybe they should really be charging $18 or more...
Outsourcing might be a bit different, though. According to the Brenner Book (which I re-read for clarity last night), the average one-person shop has about 30% productivity.
That means 60% of your time is spend looking for work, and 10% on "paperwork", answering email, etc.
So - you need to base your hourly rate on that 30% time, and NOT on 100%. Therefore, if you plan to make $50k, which is around the industry average for webmastering in the corporate world - that's $24 an hour. BUT you'll only be able to work 1/3 of the time...
So you really need to be charging $72 an hour!
That's a VERY simple concept that I think the majority of us don't take into effect.
When you have a partner, things change. Your partner can be as much as 75% effective... they do the work while you do the marketing. That brings the productivity up to 50% from 30%. So you can adjust accordingly...
Of course, the alternative to charging more is that you work 15-16 hour days - spend the daylight hours looking for work, and the night time do the work you get... who wants to work too hard for too little money? How long can you do it before you start to burn out?
No worries, and thanx for expanding your point. You're point - it's the usual "undercharge to break in" mentality. It's always difficult to charge what you're worth, and stick to it.
I wonder how much of the problem entails the leap from being a wage-earner to an independent. Costs are different, and charging for your time, as you've broken it down nicely, entails much, much more than just what you'd normally see in a paycheck. Still, that perceived "jump" can cause stickershock to the one putting on the sticker.
Even harder to realize, is that if you also undercharge to try to gain people on price, that's also where you'll lose 'em. If price is the main consideration, then sooner or later there'll always be someone charging cheaper.
You have to wonder how much quality of service goes into these considerations, or ease of contact and communication, and how much is pure "cut cost, cut cost, cut cost..."
Productivity needs to be mentioned. I'd rather pay $100 per hour for a job done right in an hour than $60 per hour for a job done right in two hours-- or a job done wrong in four. And my clients generally feel the same way.
I've faced sticker shock in this business, too. We've gotten around it by listing what we do, and the price beside it, not putting in the hourly.
There's two other historical problems with hourly that I've mentioned before:
1) The better I am at something, the faster I should be. Therefore, the better I get, the LESS MONEY I make compared to someone less skilled charging the same rate. Wha...?
2) Comparing hourly rates - maybe it takes the guy or gal charging half of what we do per hour takes 2 hours to do the same job, because I know several shortcuts and/or my productivity is greater!
Of course, I've half-joked here before that we can work for $10 an hour, too. But it will take us 10 times as long to do any project. :-)
BTW, "sticker shock" from a client can be a ploy, too, particularly if you "give off any fear" about charging what you're charging. Some people are just sharks that way; they'll feign surprise, or in some cases mild outrage at the price to see if they can get you to lower yours. If its not a ploy, then frankly, they aren't professional, and you owe them nothing. Least of all your continued business.
Had this happen to me. Drove 2 hours to a see a client on a paid referral from a GREAT client of ours. Talked on the phone first, of course, and they were eager to get started.
I got there, and this 60 year old guy made me an "example" for a new, young sales member. First they made me wait almost an hour (I was naive at that point, I'd never wait again...) Then, 10 minutes into it, he tried to get me to lower my price by 1/4. I danced around that, played nice through the rest of the meeting... and left quite angry. The new sales guy was pretty embarassed by the whole deal, you could tell... anyway, naturally I declined working with them. And they *still* don't have a website to this day!
|So you really need to be charging $72 an hour! |
Well good, because that is about what I charge! :) If a potential client balks at the rate, I usually decline the job (unless I am really hurting that particular month). Why? Because the time could be better spent marketing and finding a new client who WILL pay the full rate. In my experience, one great job is better than two so-so jobs at a lower rate.
On top of that, I find that the clients who pay the full rate know what the money is getting them, and their site ends up being a gem that I can be proud to put in my portfolio.
I just skip people that think they need to charge $70 an hour when I can get the same thing for $20 an hour
Too many people seem to equate expensive work as professional work.
|1) The better I am at something, the faster I should be. Therefore, the better I get, the LESS MONEY I make compared to someone less skilled charging the same rate. Wha...? |
This is why I like charging per job. The overall job being preformed is what matters, not how many hours it takes me to do it. When I started out some of these jobs took 6 hours, now it might take me 3-4 but the quality is the same - why should I make less?
|If a potential client balks at the rate, I usually decline the job |
I wish I could give due credit to this quote, but I don't remember which WW member said it. Basically they asked if they wanted a plumber to code their webpages. My plumber charges $125/hour. What is your company worth?
Unless you're getting people from India at that rate, read the thread again.
The point is, you can't stay in business if you're not charging those rates.
If you do get someone that good at $20 an hour, they won't be around forever. I'd like to see *your* idea of what "good" is, though.
But as the other posters said, lotsa luck getting someone truly talented, someone who can make better decisions about the web than you can, if you have that attitude.
Because why hire anyone who ISN'T better than you at what they're doing? Waste of money - do it yourself.
|too much information|
Yea, I love that quote too. I flagged the thread, but I think it's gone now.
I've been the cheap guy in town. I didn't make much money, and the jobs I did get were from clients that wanted WAY more work than I was being paid for.
I now charge what I am worth, I don't bargain... ever. If I ever have someone try to get a deal, I walk. I'd rather have the time off than take money out of my own pocket. Not to mention that I rarely get time off because I get good referals from my clients.
I work with better clients now, I have fun working with them, they value me and my work. I even have parties for my clients now that we have become friends. It's not about being expensive, it's about being honest. Honest with your clients that you can do what you say you can, and honest with yourself that your time and talent are valuable and people WILL pay for them.
eWhisper, I believe you might be referring to a comment I made regarding pricing on another thread. And I was referring to my business of photography, not website development.
Either way, I hope I can offer some advice that cuts across job titles and/or industries and offer what I've learned over more than 25 years in the "creative" business.
What a website designer/developer offers is not something that's quantifiable, no more than what a photographer or illustrator offers. It's subjective, and is driven by what the potential client sees in your work.
If they're calling you, they like what they see. All too often, they call with the promise that the el-cheapo job they have will enhance your portfolio. Well, if they called you because of your portfolio and what they perceived you'd bring to the table, you're already marketable. They're just trying to sucker in some young person and save themselves some $$$$. I've seen many a photographer fall for that line--myself included--and come to later regret the arrangement.
Then there's the "we don't have much money for this project, but I promise we'll pay you full-rate on the next one." How many car dealers would accept the offer to let you buy a new car for half-price with an unwritten promise that you'll come back in three years and pay them full price for another car? A famous photographer once gave his rebuttal to such promises: no, I will do this job at full price. If you come back next time, I'll cut you a deal.
Another scam is the "you said it would cost this much, and now you're saying it's going to be more." Unless you're completely incompetent, you had a very good idea going in as to how many hours the job would entail. The problem is that the client wanted all sorts of extras added--at no additional cost. He/she gets a paycheck every two weeks. In fact, most of the people I've worked with for the past 25 years think that every two weeks the sky opens up and paychecks come tumbling down. For them, yes. For you, no. You only get paid for the time you're actually working. Get everything in writing, and get the client to sign off on any changes that weren't part of the original deal.
"Freebies." These are a real sticking point for me. Art directors./designers/clients will approach you with a project that's guaranteed to win awards. Awards for whom? You? Usually the project entails something that you've already done a million times. The person approaching you with the freebie is looking to build up his/her own portfolio at no expense to himself. What are you getting out of it? If it's the same style of work that you're already showing, you are getting nothing. I've done so many freebies for art directors, helped build their portfolios, and watched them go to the top of the ad agency ladders--and to well over six-figure incomes--that I've lost count. What I can count is the number of times they've come back with some real full-budget jobs as a token of appreciation for my help. That number is zero.
Loyalty. Ten or twelve years ago, loyalty to photographers/illustrators/designers was just a matter of course. There was give-and-take. Sometimes your contact didn't have the full budget, but made it up later on. That just doesn't happen anymore. The lack of loyalty is now a fact of business. Accept it and deal with it.
Threats. Oh, yeah, they happen. I've done a number of projects where everyone up and down the line thought the shots were terrific. Then some egomaniac at the top level decided that one shot could be done a bit differently, and told the art director to relay to me this message: the photographer does this two-day shoot all over again for free, or he never works in this town again. I did the shoot over again, but that was the last time that agency ever sent me work. If there is a God in Heaven, there is justice for people like that.
Low-ballers. You'll never be rid of them, and your only option is to convince your potential client that your work will result in a better quality site that will generate more profits. Unfortunately, too many clients these days look at the lowest bid and don't care about quality or even if the photo/site even works. When it comes down to price alone, walk away or develop bleeding ulcers.
There's far more that I could add to the above, but I hope that those comments will trigger comments from others. There are a lot of people on this forum who are in their twenties or thirties, and who are vulnerable to the kinds of deceptions I described above.
I'm not trying to be completely negative about being in the "creative" business. I'm just trying to alert those just arriving to what they will encounter. I may not know the latest versions of .Net or other languages but, after 25 years in a business very closely related to what the people here are engaged in, I guarantee that human nature doesn't change with advances in technology.
Watch your six.
your words of wisdom are the quality that i look for every day at WebmasterWorld. thank you for your insight, from the bottom of this 20-something's heart!
you're correct, here's the thread for the proper quote:
|I'm just afraid that Indian firms who are new to this will make the same mistake I made at first, and one I see happening in the lower end of this industry, which is that they're not charging enough long-term. So, if they're charging $7 US an hour, maybe they should really be charging $18 or more... |
I'm an Aussie and I charge less than US$57/hour to my long-term US client because it gives me full-time employment without ever having to leave my house to make client presos, pay for city parking etc. But it also leaves me the evenings and weekends to charge for small projects that take me very little time but the client does not know that. I don't bill by the hour, so the client could be paying $200-$500/hour. In Australia, contractors are having to accept as little as US$30/hour to get the job. Before I set up my own shop, recruiters told me to forget it if I asked for more than US$50/hour (marketing sector). They said that some people do get more than that, but they are rare.
I agree about the Indians (generalising, of course). I was born there and I outsource my overflow work to India. I chastise the ones I know well that they are undercharging, but most of them are 20-something and are comfortable to charge low. They live with their parents and don't have a car or mortgage. Some of them subcontract further down the food chain and god knows what the actual worker earns. I expect that they don't want to lose their competitive advantage by raising their fees, as there are other wannabee countries (or smaller Indian towns) where the $ goes even further. Land in Mumbai is among the most expensive (top 10?) in the world.
There is also the perception in the West that Indian contractors are cheap, so customers will not pay them what the work is worth in the US. That is a problem to a certain extent and it is overcome by the larger offshorers by setting up a US office with a small local team. Their model is to charge around 30% below the US going rate, with another 10% up their sleeve if the customer wants to haggle. OTOH, the little companies based only in India charge as low as US$5/hr (email-based customer support in this example).
I have worked with higher quality call centres who charge US$13-14/hour and up, but this includes the provision of the circuit to a US pop. yet, I get US enquiries looking for such a service around US$5/hr. You get what you pay for is still a valid statement in India.
I live in the UK and used to charge £20 an hour. It seemed a fair hourly rate. I have virtually no overheads and £20 x 40 hours in a week (reserving some evenings for bookkeeping etc.) means a salary of £40,000 per year ($75,000). Of course it never works out that way. Not only are you trying to get work but also even if you have got it you are answering emails all day, carrying out research, doing server maintenance.
This may seem a bit mechanical but I downloaded some time and expense software from [magsoftwrx.com...] and now every time I start a client's job I start the timer and every time I have to break off for lunch or to answer a call I stop it. Of course if the call is regarding the job you are doing you can leave it running but usually it is some bloke whose email isn't working!
I think that you would be really surprised both how little solid work you get done in a day and how long each client's job takes. Sometimes I only manage a five-hour day and recently a 10 and 13-hour quote have run to 13 and 17 hours respectively. So in that sense the £35 an hour that I now charge doesn't seem that exorbitant. Just remember that when you work for somebody else not only do they pay you for your holidays but also all that idle time browsing websites and chatting! I reckon that you need to be charging an hourly rate roughly double that which you were previously on in order to make working for yourself pay at least as well.
We are charging less than $57 in hr, but we are in Ukraine :) In US I think take less than $50 per hr is mistake.
Also, IMHO, pricing depends from in what type of deal you involved.
For example our per hr rate to calculate cost of fixed price project or not regular time based works cost 30%-40% more than price of regular month to month staff leasing. Making such deals we have much less risks and non-productive time spending.
A rather wise person I know has told me on more than one occasion that "Computer people don't know how to tell time." I don't think I've ever completed a job in the time I thought it would take. That's why, in addition to including "non-billable" hours, I find I need to pad my estimate before giving it to a client. Even then, I find I under estimate most of the time.
|10 and 13-hour quote have run to 13 and 17 hours |
I think the problem stems from that, while it's easy to how long a job should take, "No plan ever survives contact with the [computer]."
As far as what to charge goes, never break a quote down into a hourly estamate. There are many reasons for this besides what I wrote above. A main one being that not everthing should be billed by the hour. For example, if you plug in an prebuilt application shuch as a CMS, your adding more value than the time it takes to plug it in. Also, most clients have no clue what's a quick and simple task and what's not.
As has been stated before, your rate needs to be adjusted for your cost of living and what your market will bear. One of the advantages of living in an area with a low cost of living is the abbility to under-cut and area with a higher cost and still be doing relativly better. In the end, a dollar is only worth what it will buy: a roof over your head and a loaf of bread for your table. While one shouldn't be greedy, there's nothing wrong with wanting a nice roof and tasty bread.
|Cheap is relative. A dollar in the US will hardly buy ... |