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Charging by the hour
Web Site Development.
MWpro

10+ Year Member



 
Msg#: 637 posted 9:41 pm on Jan 9, 2003 (gmt 0)

I usually charge my customers a one time fee and they can purchase an additional management package for website updates, but I am curious as to how you go about charging a customer by the hour for web site creation and management... Like how do you ensure them that you are being honest with the time and make sure that they pay you for all of the hours you spent on it? Any information would be great, thank you.

 

incywincy

10+ Year Member



 
Msg#: 637 posted 10:04 pm on Jan 9, 2003 (gmt 0)

hi mwpro,

clients like fixed price contracts. being in business is about taking risk unlike being an employee where most of the risk is taken by the employer.

couldn't you make an estimate of the number of hours work required and multiply it by your hourly rate? sometimes you'll be under and sometimes over but over time (pun not intended) you'll get pretty adept at forecasting.

oilman

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 637 posted 11:13 pm on Jan 9, 2003 (gmt 0)

>> how do you ensure the client that you are being honest

if they don't want to pay a contract price and just want to pay hourly then you shouldn't have to ensure them anything beyond itemized invoices showing what you did and how long it took you. If they choose to pay hourly then they should shoulder the burden of trust not you.

One thing to watch out for is when they say "I know a guy who could do that in 3 hours instead of the 5 it took you. I'm only paying you for 3" and so on.

MWpro

10+ Year Member



 
Msg#: 637 posted 4:04 am on Jan 10, 2003 (gmt 0)

Year I like fixed prices as well because I know exactly what my profits will be and the client knows exactly what to expect. I have just been reading some of these posts on this forum and some people I know swear by charging by the hour. Just looking for a better way to do business, you know? Maybe I will even offer that in addition to the matainence packages so if they don't want that commit they can still get what they need fixed.

aus_dave

10+ Year Member



 
Msg#: 637 posted 4:17 am on Jan 10, 2003 (gmt 0)

Like incywincy said, use an hourly rate and work out your expected hours (add 25% if you think it might be a more complex job than usual). Then give the client the estimate as a flat fee. He accepts the estimate, everything is ok. If he doesn't you can always come down if you are desperate for the work. If you believe you offer value for money then you should stick to your guns and explain why (hard to do sometimes though).

The hardest part is to estimate the hours - you also need to work in the time spent on briefings, phone calls, concept development etc. If you can charge out half the hours you actually work in a week you are doing well.

What would be a good thread is to compare hourly rates. If it could be run as an anonymous poll it would make good reading ;).

Pacific

10+ Year Member



 
Msg#: 637 posted 6:57 pm on Jan 12, 2003 (gmt 0)

I usually give an estimate to the client, explaining that if they give me information and pictures, they will save money.

In the end, though, I always make it clear that it is only an estimate.
And when I send in the bill, I always add this statement:

We do a lot of work on your website "behind the scenes" that is not easily visible. Our Time Sheets are always open for viewing.

I have never had anyone ever ask for them.

Pacific.

Undead Hunter

10+ Year Member



 
Msg#: 637 posted 1:55 am on Jan 14, 2003 (gmt 0)

We started off charging by the hour, with 1/4 hours billed for the small things... but no monthly minimums. Seemed like a good idea at the time, but psychologically I feel it deterred most clients from doing more every month. Once you start a client that way, its impossible to tell them that "now you have to start spending X amount every single month". Well, its not easy, anyway.

Then we had a really big project with a major corporation. They wanted it split up over several months to make paying for it easier. Here I worried about detailing everything that needed doing - and after a lot of hand-wringing and worrying, and then talking to some older consultants in related fields, we ended up doing this instead:

Feb. project fee = $X,000

No details at all, no breakdown of the hours spent. We *did* have an initial contract about what work was to be done, though. And every month they saw various changes. And lo, it worked just fine for that company. ALTHOUGH we were prepared to list out all the details if they asked - but since they never did, it saved us time and money.

Now we usually do a hybrid - detail alot of the things we do, but we *don't* break it down by charge, and just list the total. That seems to be a better compromise, 'cause people see a long list of things done without thinking about the potential "nickel and diming".

So basically, my experience has been that the less the client sees the hourly or per-hour breakdowns and fees, the better it is. In a way, laying out every single hourly charge is putting *too much* emphasis on the money versus the *value* of the work you're doing.

running scared

10+ Year Member



 
Msg#: 637 posted 7:54 am on Jan 14, 2003 (gmt 0)

you also need to work in the time spent on briefings, phone calls, concept development etc

It goes without saying that you need to have an effecient system for logging all time spent. Sounds easy but easier said than done. Having such a system will also allow you to comapre estimates with actuals.

Pacific

10+ Year Member



 
Msg#: 637 posted 7:58 am on Jan 14, 2003 (gmt 0)

Thanx, Undead_Hunter, it's posts like this that help us all. Webmaster World is the best!

paragon

10+ Year Member



 
Msg#: 637 posted 8:25 am on Jan 14, 2003 (gmt 0)

Hi mwpro,

I just came across the btobonline.com's web price index for 1999-2002 (http://www.btobonline.com/webPriceIndex/index.html). This might shed light on the averages that the participating companies/agencies charge for services like design, programming, etc.

I've recently fine tuned my pricing, also basing it upon the web price index. A client is now given two options.

One is to purchase time blocks of 10, 20 or 30 hours. What inspired this was research on how virtual assistants conduct their fee structures. This is generally how they do it. And when you determine your rates, just multiply them to the number of hours and voila! You get the dollar figures. You could use a project mgmt software to track your tasks for your clients or use the timer function in Outlook.

The other option is a retainer. Either based on scope of work, or by time projections for the task/s. I provide retainers for 3, 6 and 12 months. Of course, the client gets a % discount when they choose the 12 month agreement. (a) Its convenient for my budgeting and revenue projections (b) The client doesn't have to continually pay blocks of time. Their monthly retainer fees cover for a set of tasks.

In addition to the fee structure (which includes fees for web design, site administration, seo, programming, affiliate mktng mgmt, email/newsletter mktng mgmt), I outline the objectives, goals, strategies, scope of work and timelines. Basically the S.M.A.R.T. model (specific, measurable, achievable, realistic, timely).

aus_dave made a great comment about "you also need to work in the time spent on briefings, phone calls, concept development etc." - this helps as my client msn im's me throughout the day, saving the long distance charges. This reminds me to factor this time spent also. Thanks.

chris_f

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 637 posted 9:16 am on Jan 14, 2003 (gmt 0)

With a fixed contract there is one thing you need to hammer down hard. Any price you give is for the spec they gave you at the time. Any additions or changes (no matter how small) should be met with the phrase 'They will cost an extra .....'. If you let them get away once they will expect it again and again.

Chris

markd

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 637 posted 10:47 am on Jan 14, 2003 (gmt 0)

Just for my 2 cents/penny's worth...

I quote establishing a site (or marketing campaign) as a 'project', which usually incorporates a design concept, build/programming and, importantly Project Management time.

Many clients understandably do not appreciate the amount of time you can spend on collating information, liaison with them and possibly external agencies to gather and fit information to style.

I also itemise part of the project costing for testing.

After this, if a client wants 'ad hoc' updates and amends I usually charge this by the hour, with a min charge of one hours time/cost.
I class an 'ad hoc' update as anything which does not affect a change in the sites' navigation or sub-navigation structure and can be made without a drastic re-design of an entire section.

If amends such as these are required, I class this as a 'project' and cost accordingly.

hayluke

10+ Year Member



 
Msg#: 637 posted 11:09 am on Jan 14, 2003 (gmt 0)

I'm working with an agency at the moment who give us a quote based on their hourly rate which they quite often go over or under slightly. To be honest we don't really know how long it should take as a lot of what they are doing is outside my area of expertise.

The relationship we've built with them though means we generally do trust them and they've always delivered work we've been happy with so we're fine with the arrangement. I think if you've proved yourself in the past and have a good relationship with your client(s) then it may be the best way to do things..

D3mon

10+ Year Member



 
Msg#: 637 posted 2:32 pm on Jan 15, 2003 (gmt 0)

(love this site, just registered to post after reading most every day for about a year!)

I'm currently 'wrestling' with the same issue. Having done a number of sites for friends and friends-of-friends etc. on an hourly basis (are we allowed to talk rates?), I'm moving toward fully 'setting up' in web development. While the hourly rates worked fine for those previous clients, I'm not entirely sure it will be suitable as a general policy. I think the estimate, based on an hourly rate multiplied by the expected coding time, is probably the best way to ge for me, but I anticipate some unfortunate (and costly) estimation mistakes within the first few months.

Does anyone have some 'generic' guidelines on building estimates? I've been thinking about an 'hour per page' basis, but this only covers the HTML (no backend work) and has the potential to encourage customers to cram all their info on to one or two pages. Also, links to/or any other sound advice on charging policies would be most appreciated.

:)

paragon

10+ Year Member



 
Msg#: 637 posted 3:45 pm on Jan 15, 2003 (gmt 0)

Hi D3mon,

If you look up my post just a few above yours, you'll see a URL to btobonline's web price index that covers industry hourly rates to both front end and back end work.

I would seperate your services and fees this way. That way you don't get jacked. And that's why one should not charge per page, as a client will suddenly adopt the "more is more" approach.

If you offer a couple of billing options, ie. purchasing time blocks, or retainers based on scope of work, you should be safe.

Happy billing!

Undead Hunter

10+ Year Member



 
Msg#: 637 posted 4:02 pm on Jan 15, 2003 (gmt 0)

There is one resource that really helped me re-think our pricing scheme - [www.brennerbooks.com] - they keep a database of 10,000's of prices for the desktop, web, etc. fields. They have some older sample prices there - but I purchased their Pricing Guide for Web Services, and it soooo helped me re-consider how to run this as an honest-to-god business instead of just a limited single income run from the home. But then hey, I was a bonafide artsy when I started all this. Never studied business at all before getting into this.

The biggest "revelation" for me was how little time I *really* have during the day for actual work. At first you'd think that $40 an hour was great money, until you stop and realize a) how much time you're not working and b)the fact that you can't grow your business into something more because you never have the time or resources to do so.

It was something that was happening all the years I've been in business, without me being aware of it. Now I focus my time much more on generating sales, and let my employee do much more of the work. Next step will be to get a comissioned salesperson...

D3mon

10+ Year Member



 
Msg#: 637 posted 9:30 pm on Jan 15, 2003 (gmt 0)

Paragon,

Am I reading this chart right in that, last year, the average charge for an hours HTML work is $112?!?

Syren_Song

10+ Year Member



 
Msg#: 637 posted 11:09 pm on Jan 15, 2003 (gmt 0)

That's exactly how I read it. Come to think of it, that was my reaction too! ;)

paragon

10+ Year Member



 
Msg#: 637 posted 11:19 pm on Jan 15, 2003 (gmt 0)

you are right! its an average of the firms surveyed.

Are you thinking its too much or too little? Prob the former, huh? :-)

I gained some confidence in knowing that my rates, which is a set discount rate off the index, is not too far fetched. I don't charge the index, but close.

And I give the clients that index, to show them what the industry index is for those services they want.

D3mon

10+ Year Member



 
Msg#: 637 posted 10:46 am on Jan 16, 2003 (gmt 0)

It's like 3 times what I have been charging, and comes as quite a shock.

Does/did anyone else have a nagging voice 'is my work worth that much?' in the back of their mind when discovering this? I've a strong tendency to down-play my own work/abilities which doesn't help matters either.

I use HomeSite to hand-code all my sites (usually to XHTML standard - checked by W3C) and am proficient in using PhotoShop, Style Sheets, ASP and SQL server, although I wouldn't claim to 'know it all'.

How can I realistically gauge whether my work is of an acceptable standard for these rates?

aus_dave

10+ Year Member



 
Msg#: 637 posted 12:07 pm on Jan 16, 2003 (gmt 0)

Not sure if I agree with the way the data is collected (seems a bit imprecise) but the average of $100+ hour sounds about right to me ;). That's chargeable hours though, and on bigger jobs I find you need to give the client a break on the number of hours the job actually takes.

The FAQ page on that site has some excellent points about pricing and how to run a service-based business. I won't quote them all here but knowing what you are worth and sticking to your pricing is a very good tip.

If you do good work and provide excellent customer service then you should be able to price your services at or just below the premium end of your market. It's easier to make ends meet this way than competing with all the operators that do cheap work but provide lousy customer service.

Syren_Song

10+ Year Member



 
Msg#: 637 posted 1:42 pm on Jan 16, 2003 (gmt 0)

I know I'm charging below the numbers given, but I'm also just getting started.

I think the best advice I've ever read for how to price your services was on a thread in this forum. It went something like this - "Start low. If you're getting too much work, raise your prices. If you're not getting enough work, lower your prices."

Makes sense to me (within limits, of course). ;)

Travoli

WebmasterWorld Senior Member 10+ Year Member



 
Msg#: 637 posted 1:45 pm on Jan 16, 2003 (gmt 0)

The more you charge, the more they value your work. Just make sure you can back it up with quality design and lots of traffic :)

Undead Hunter

10+ Year Member



 
Msg#: 637 posted 4:54 pm on Jan 16, 2003 (gmt 0)

$112 is definitely right when you're looking at bigger companies with multiple employees - because they have to charge 3x as much to cover their wages, expenses, and then finally profit. That doesn't mean single-owner design firms can't charge up to or around that price - it's whatever the market, or client will bear. The URL I listed early for Brenner Books puts their rates around the $65 mark, I think. But I think that's including a lot more single-owner firms, etc. That doesn't mean you should lower your rates to that... if anything, I think the vast majority of single-owner firms drastically undercharge - just like *I* was doing when I started.

There's definitely cases where undercharging will actually hurt your creditability. When I was still on my own, I was lucky enough to have a friend in a corporation who wanted us to bid on an upcoming project. We had to come up with a rate, and I was feeling it out, my friend basically told me to double my rate if I wanted to get the bid - which we did!

As I mentioned in another thread, I'm personally getting away from listing hourly rates in the various quotes we give - I think it's ultimately determental. Instead we're looking at establishing the value for the service.

For Example: Would you pay someone $350 for one month just to add two new web pages to a site - or would you rather pay $350 to have a "webmaster on call, saving your company over $3,000 or more in payroll and related expenses"?

Positioning is everything. And again, if your project is, say, automating a process and saving a company $10,000's of thousands over a period of years - why not charge *by value* vs. straight time or billing? The billing time might end up being $15k, but if you can justify saving them $80,000 a year, then you could easily charge double that and they'd still be overjoyed. (Unfortunately its not always that straight-forward - but its something to consider.)

Another problem will hourly billing is the end cap! At best, working on your own, you'll only average 80-90 billable hours out of a possible 160 each month - this is crucial, if you *don't* set your rates based on that, you'll end up working McJob wages, or at least never saving, never growing...

Pacific

10+ Year Member



 
Msg#: 637 posted 5:12 am on Feb 3, 2003 (gmt 0)

Excellent thread, fellows, thanks.

The problem I have is justifiying the linking that a website requires now to get the visitors and SE prominence. It takes sooo long to find the "quality" sites to put on a links page, request a reciprocal, reply to the answers, and check that the reciprocal was actually done.

THIS is the most time-consuming task I do! I have suggested to several clients that they could do this themselves (to save money), but then it doesn't get done!

How to convince the client that "quality" links are well worth the cost of me doing it.

It seems from experience that it will take me about 15 minutes per link - that's 4 an hour, roughly. so the client can get charged 4 hours work for less than 20 links! Am I spending too much time on this?

So far, I have been charging by the hour. Does anyone do a flat fee for reciprocal linking?

Alan

Undead Hunter

10+ Year Member



 
Msg#: 637 posted 11:12 pm on Feb 3, 2003 (gmt 0)

Pacific, don't do a flat fee if means you're losing money you could be making elsewhere! Flat fee would probably be a better sell to the client - If you make $100 an hour, tell them "10 links for $250" rather than "10 links for 2 1/2 hours work x $100 hour = $250".

If they see 10 links for $250 and aren't "aware" of your hourly rate, they don't know that it doesn't take you 20 hours. And they don't need to know how long it takes! All they need is RESULTS.

Anyway - maybe you shouldn't be spending your time on it at all - but train a high school kid to do it for you, and pay him/her minimum wage. It will be good experience for him/her, and will leave you to be making more money with new clients. So charge $250 for 10 links, pay the kid $20, keep $230 and meanwhile make an additional $250 doing other work ... (don't forget out of that "$230" will be your time to manage and overlook the kid's work, too. It's still *your* knowledge and hard work, whether you do it or not. AND it only works well when you *can* find new work, or do spend the time doing so. If you sit and watch them and play Tetris while it happens, you're definitely losing money.)


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