I haven't even read all of the replies . . . but what are you thinking? $500 is too much for a web site? Seriously?
Go pick up a phone book, flip through it, and then call your local ad rep to see what an ad would cost you PER MONTH.
We aren't talking about a $500 haircut, we are talking about a marketing tool that has the potential to generate thousands of dollars of business for your client month after month, year after year.
How much is that worth to them?
Having said that, I think web development now is not so much about the physical tasks, but being able to guide your clients in the right directions and set something up for them that will be successful.
It's not just about slapping pages up on the web. They can go to Weebly and get a free site or GoDaddy or Vistaprint and pay $4 a month.
But are those sites going to get them anywhere. If even one of their competitors has the slightest clue, the answer is NO!
They are not just paying you to put pages up on the web for them, they are paying for your expertise.
As to your original question, I don't do mockups for free. I don't start until we have an agreed upon contract and a detailed spec with a deposit down. The mockups are factored into the cost of a custom web site.