How much should I charge for ecommerce website building?

[keymaster]

Hi,

After many years programming and system design experience, I have decided to try and go out on my own building ecommerce websites for small businesses.

I will generally be developing for LAMP environments, using open source products as much as possible. Most of the work will be integrating, coding glue, with some custom development as required.

Basically, I need some advice from those with more experience than I... (which is most of you)

1. how do you determine the price to charge for a project?

2. Is there a reasonable price range for a basic ecommerce website (CMS, forum, small online store)? What is it .. ballpark?

3. What kinds of upsell or cross sell services can I offer to increase revenues with existing customers?

4. What different levels of support packages are reasonable, and how much should one charge for them?

Thanks.

[jo1ene]

I just sold an os shopping site - no forum, no cms (other than product info), product graphics as is, no text development - for $3,000. And that was a bargain. A lot of companies charge "rent" for stores. I got the job because it was a one-time deal. I came up with the number arbitrarily. I just sat down with the manual and considered how much grief it would cause me compared to a satic site and pulled a number out of the sky. Then I charged them half down. I'll charge them for any additional php programming that I may need to met their expectations. I don't sell support packages. I just charge by the hour as needed. They are planning updgrades of future features so I'll be hearing from them again. Updated functionality and/or security are future selling points.

[keymaster]

Hi Jolene,

Thanks for your reply.

I invite many other replies as well.

It will be nice (hopefully) to get some idea of what going projects are worth in a general sense.

Does anyone have a methodology for preparing/estimating quotes on projects?

Thanks.

[johntabita]

There are different billing methods you can use. Whichever you choose will depending on how you represent yourself. If you represent yourself as a contractor (someone who's paid to perform a task), you'll be paid for the time it takes you. If you represent yourself as a consultant, you'll be paid for the result you produce. The former is time-based billing, and the latter is know as value billing, or value-based pricing.

Time-based billing is much simpler to apply. Once you determine what your hourly rate is, simply charge for your time. You can either charge the client hourly, or estimate the time involved, then charge a flat rate. The downside to time-based billing is that your income will always be limited to how much time you have.

Value-based pricing is where you help the prospect determine the project's value to his business, then charge a portion of that value. The advantage of this method is that it forces you to speak the language that your prospects understand (that is, "results" and "return on their investment," rather than geekspeak, like "PHP" or "ASP" ), so you end up closing more deals. The downside is, since it's more complex, there's a learning curve involved. You really have to change your thinking from that of a developer to that of a businessperson. In other words, you probably won't be able to run out tomorrow and start doing it. I find value pricing more rewarding personally and more equitable to both the client and the developer.

Hope that helps.

[keymaster]

Hi Johntabita,

Thanks for your reply.

Value-based billing sounds good, but I don't understand how in reality it can be carried out.

After all, there are "market" prices for projects of various sizes, and these prices are independant of what this project is worth to the client.

So, if the market price for a project is $3,000, then even if the project is worth $30,000 to the client and you want to take 15% of that as your value-based billing fee, you can't. The most you can take is $3,000, the market price. If you try and take more, the client will go to someone else offering that service for the market price.

I definitely would like to do some kind of contract-based pricing (ie. what you call a consultant), as opposed to per-hour. This way, if I develop a toolbox of reusable infrastructure/utilities over the years, it can let me complete contracts faster, yet I can still charge the same. So there is an financial incentive to becoming more intelligent/efficient.

Thanks for the good comments. Would like to hear from more people, still.

What are the issues in deciding "market price" for a contract? Are there rules of thumb?

If I came to one of you and asked for a basic online store with a content management system and a discussion forum/gallery, would you immediately know how much to charge?

If I asked for streaming video/audio capabilities on top of that, what would you add to the quoted price?

What about if I asked for some custom development for my particular application?

How would you handle these requests?

How do you handle charging for support once the project is developed? Do you have "support packages"? If so, how are they structured?

How important is 24x7 support? What if as one person, just starting out, you can't offer that yet?

[johntabita]

Value-based billing sounds good, but I don't understand how in reality it can be carried out.

After all, there are "market" prices for projects of various sizes, and these prices are independant of what this project is worth to the client.

So, if the market price for a project is $3,000, then even if the project is worth $30,000 to the client and you want to take 15% of that as your value-based billing fee, you can't. The most you can take is $3,000, the market price. If you try and take more, the client will go to someone else offering that service for the market price.

In reality, value-based pricing does work and is used in a variety of industries, including the consulting industry. I first read about it in the book Million Dollar Consulting. Author Alan Weiss earns six figures working out of his home, so I'm pretty comfortable following his advice. As I said, it really does require a complete change in your current thinking.

Perhaps it's different in your area, but I've yet to encounter anyone who's told me my price was higher than "market price." In fact, in the market I sell, there's really no such thing. I'm looking to sell to executive decision-makers who want a financial return on their investment, and they tend to view my services as a solution rather than a project.

Value-pricing isn't for everyone. It requires a pretty steep learning curve (heck, I'm still learning), so do what you're most comfortable with.

[katieray]

I agree to go anywhere you’ll have to learn how to implement the value based pricing into your business plan.

However in the meantime or maybe for this first contract, why don’t you simplify the value based pricing idea with a simple commission on what the store sales? It gives everybody an incentive to make the site work. You might even be able to work out a draw on commission until the site reaches an agreed upon profit. And if you barter for a good enough commission then it might pay off better than you expect.

I would love to learn more about the value based pricing though; can anyone point out some research material?