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Contracts/rates
Looking for some basic advice
molecularr




msg:964561
 6:37 am on Nov 28, 2004 (gmt 0)

Hello,

I've been doing the web thing for a while now (mostly pro bono and short-term contract stuff), and I'm finally getting serious enough that I want to have a standard contract and a set of rates to go with more portfolio. Can anyone give me some basic advice on what to include (or not) in the contract? At this point, I'm not dealing with anyone I don't already know, so I don't think I have to be terribly harsh--I just want to cover myself so I don't get stuck with doing any more free work and I don't make people mad.

Also, I'm wondering about rates. I know it's difficult to say what a "fair" rate is (different geographical areas, different skill levels, etc.), but in general, as a free-lancer working solo, should I charge a lump sum for a project or should I specify hourly rates? If I do it hourly, should I charge different prices for different tasks (design/architecture/scripting/maintenance/etc.)?

I know I'm potentially asking a lot of questions here, but I'd really appreciate any suggestions or pointers anyone might have.

Thanks,
M

 

MichaelBluejay




msg:964562
 2:47 am on Nov 29, 2004 (gmt 0)

It depends on the size of the client. My clients are tiny, microbusinesses (usually sole proprietors) with simple needs, so I don't use a "contract" so much as I use a "Terms of Service" Here's most of it:


2. No Spam. In general, you may not add email addresses to any mailing list. There is no such thing as a legitimate "opt-in" mailing list you can buy -- nobody voluntarily signs up for spam.

If we host a mailing list for you, then your customers and visitors must add themselves using the signup box we provide on your website. You may not add addresses to this list directly.
If you manage your own mailing list elsewhere, then the only addresses you may add are from people who have made an inquiry to you or have made a purchase from you. You may not add addresses of people with whom you have no prior business relationship.
Under no circumstances may you send bulk email to people with whom you have no prior business relationship.

3. Liability. We do our best to keep your website functional and accurate, and try to respond as soon as possible whenever you alert us to a problem which could result in a loss of business for you. Serious problems are rare, serious problems that last more than a day after you notify us are almost non-existent. However, we are not financially responsible for any problem which results in a loss of business for you.

4. Popularity and Success. Marketing your site is completely up to you. We will provide at least one link to your site, which will usually get your site in the search engines within three months of the date your site goes up, but we make no guarantees about your search engine rankings, the number of visitors you will receive, or how much sales you will realize. We may offer marketing advice but are under no obligation to do so. Clients may be interested in these tips and books about [link]how to market your website[/link].

When they sign up for my services, the "product" on the order form spells out what I'm offering them, in general, e.g., "Registration, Design, and Hosting for Domain.com".

If they have a lot of particulars about what they want, I would just clarify this via email rather than through a contract. e.g., "Okay, it sounds like what you want is A, B, and C. I can do that for you for $XX. Is that right?"

A contract would protect you if they sued you because you didn't provide, but how likely is that to happen? Would you really go to court rather than refund their money anyway? Weigh the legal benefit you get from a contract with the ease that you and your clients will enjoy without one.

As for rates, your choices are (1) lump sum, (2) hourly, (3) monthly (a flat monthly rate which includes a basket of services).

Lump sum rates are all over the map. Poking around Google I found $50 to $120 a page. I bet the range would widen if I searched some more.

I didn't look at hourly rates but I'm guessing $25 to $60/hr. I wouldn't charge different rates for different kinds of work. Clients like simple (and so will you).

As a lump sum, figure out how long it will take you to do the first page and how long it will take to do additional pages, multiply by your hourly rate, and add 10%. For example, 3 hours for the first page, 1 hour each for four content pages, that's 7 hours, times $40/hr. = $280, add 10% and you have around $300. Of course your mileage may vary.

Whatever you do, try to sell them on a monthly service plan which will include your making any minor modifications they want to their site, technical support, etc. That way you can continue to make some money forever. If you don't do that then your only source of income is new clients, and you have to constantly, constantly, constantly find new clients.

molecularr




msg:964563
 1:53 pm on Nov 30, 2004 (gmt 0)

Thanks for the pointers, Michael. That's good advice about contracts, too. You're right that I wouldn't ever take someone to court, but I do need a way to clarify things up front. Right now I'm stuck in a situation where I was hired to convert an old, crappy site into a functional one. I did the main pages and then got about halfway into some deeper archives before I realized they probably didn't really care to have that older stuff converted. So either I've done more work than I had to or I've got to convince them to let me finish those archives so I can get paid for them. It's all very awkward.

I have a meeting today with a potential client, so here's what I think I'm going to propose. The job is potentially two jobs: an organizations' web page plus the client's personal home page. I'll say I can do both, get some ideas about what they should look like, and make a mock-up of the idea. If the client likes the mock-ups, I'll come back with an order form offering my services as an hourly fee, plus an additional (optional) monthly fee to keep me on the line to do maintenance and so forth.

If I offer my hourly fee in the form of an estimate (like say I estimate it to be 20 hours @ $25/hr = $500), do you think that obligates me to limit it to $500? That seems potentially awkward.

Also, what do I do about taxes? Does this type of income count as self-employment? I hope not. My wife does that and she has to pay a lot more in taxes because she's both an employer and an employee.

Thanks,
M

MichaelBluejay




msg:964564
 11:00 pm on Nov 30, 2004 (gmt 0)

If I offer my hourly fee in the form of an estimate (like say I estimate it to be 20 hours @ $25/hr = $500), do you think that obligates me to limit it to $500? That seems potentially awkward.

Depends on whether you promise that or not. :) What I'd recommend is setting an upper limit -- say 10% to 20% over your estimate, to promise the client it won't go higher than that. You have to have *some* upper limit, to assure the client that this isn't a money pit. Yes, that means there's risk on your part if it takes you a lot longer than you thought. That's part of being in business for yourself. :)

Also, what do I do about taxes? Does this type of income count as self-employment? I hope not. My wife does that and she has to pay a lot more in taxes because she's both an employer and an employee.

Yes, you're running a self-employed business, even if it's not your main source of income. Record your sales and expenses on Schedule C of your income tax return. This is probably the easiest income tax form you'll ever fill out.

Note that if you make more than a certain amount, I forget how much, you also have to make quarterly estimated payments. I think it's 1040-ES.

Yes, when you're self-employed your taxes are higher because you have to pay both he employer and the employee sides of the social security tax. If you're employed you pay 7.65%, if you're self-employed you pay 7.65% + 7.65%. (This is completely separate from your income tax, which is charged at normal rates.) Once you start making enough, perhaps $30k/yr., you might want to incorporate as an S Corporation, take half of your income as wages and pay the double tax on that, and take the other half as corporate dividends which aren't subject to social security tax. This cuts your social security tax in half.

There's a LOT of paperwork involved in forming an S Corporation. I did it earlier this year, but only because I got to the point where it saves me a lot of money. I recommend the book: S Corporations: Small Business Start-up Kit.

voices




msg:964565
 5:56 pm on Dec 3, 2004 (gmt 0)

If you give them a flat price they think they can keep adding on and on and changing this and that. They make it up as they go along. It starts looking good and they want this and that too, all for the original price. Give them a price range or a very detailed site map of exactly what you will do. Then when they add on, you can add on more money.

And 25 an hour won't be much after you pay Uncle Sam.

MichaelBluejay




msg:964566
 9:13 am on Dec 4, 2004 (gmt 0)

I haven't had problems with clients trying to add too much, with one exception. (One client wanted me to build an interactive map of the world to drill down from each continent to each country to each state to each city -- for $75.) I'll change how I deal with clients when I run into problems, but so far informal agreements have worked fine.

$25/hr. might not be how much you want to make long-term but it could be sufficient for starting out. I worked for less than that when I started my business, because I had more time than money, and my strategy was to build a business and then raise my rates as I got busy. It worked.

datadame




msg:964567
 9:55 pm on Dec 6, 2004 (gmt 0)

I've been doing websites on the side for not-for-profits and small businesses for a few years (I do them at work too, but I don't get to decide the terms and conditions there :)). Here's my 2 cents' worth.

Like someone else has posted, I avoid the use of the word "Contract". Mine's called an "Agreement" and each side signs it, but it's understood that it's pretty much a formalization of a handshake. So far, that's served me well.

Built into the Agreement are:
(1) The one-time cost of building and launching the site, an amount that depends on a variety of things - whether they're creating the text and graphics or I am, whether they already have a domain name, whether they already have a host, how many pages they want built to begin with, what's on those pages, etc., etc.

(2) A monthly maintenance fee which includes X number of modifications/edits/additions - for example, one of my clients is a fitness center with a class schedule that changes every month or so. The manager and I figured up how many changes to the schedule they'd be likely to make, added a few for padding, and then the monthly maintenance fee covers that and few more.

(3) Exception to the above: If such an edit is, or is tantamount to, creation of a new page, a one-time build fee applies, and an increase to the monthly maintenance agreement may also apply.

(4) The number of days between any new request and when I agree to have it done, with the stipulation that some requests may require more than those X number of days, in which case I will advise the client ASAP of the reason for, and anticipated length of, the delay.

(5) My agreement to provide them with monthly invoices for their records, with a condition that the invoices are a courtesy. The Agreement establishes the date each monthly payment is due, and stipulates that not receiving an invoice does not relieve them of their obligation to pay on time.

(6) An agreement that the conditions covered are valid for 12 months, after which time either party may initiate discussion of changes. (Note that this does not mean we're married to each other for a year - see #7 below - just means the terms are set for a year as long as we're doing business together - avoids monthly haggling.)

(7) Either party can cancel the agreement by giving the other party notice of the next full calendar month.

There's more to it than that, but the template is at home - those are the things I can think of off-hand. The whole thing is only two pages, though. Granted, a fairly small font, but legible, and only two pages.

I've also recently had to add a comment to my invoices (and will probably add it to the Agreement next time I start a new client) that payments not received by their due date may be subject to a 10% late fee, and that work/support on the site may be suspended until payments are current. (Two clients had gotten waaay too casual about paying on time, one of whom was fairly new and had never really gotten into the groove on paying on time in the first place.)

I charge by the job, not by the hour. I've never charged by the hour and never had anybody ask that I do so.

Molecularr (and anybody else, I suppose!) - If you'd like to see the template I came up with (subject to constant revision as I encounter new situations), post here or email me at the address in my profile. (I'm still pretty new on this board, so if this offer is out of line, someone please tell me, and I'll edit it out of the post.)

mumbledawg




msg:964568
 4:04 am on Dec 10, 2004 (gmt 0)

I charge by the job also, but of course it is based on an hourly rate. I estimate how many hours I think it will take and multiply. How else can you price a job?

The late fee is a great idea! I do updates for $50.00 an hour with a 1 hour min. No monthly maintenance fees. Makes people real nervous at first but they always wind up happy. It makes me happy because they don't send a little change every day. They wait and do it all at once. I often overlook small/quick updates.

I too started out doing sites very cheap, it allowed me to build up my portfolio. Problem was I was stuck with the cheap customers for years.

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