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In the nine years or so that I have been freelancing
as a self employed web developer, one thing has remained constant
in my business. The way I charge. I have a set process and
standard that I follow, and I find it works extremely well.
I’ve heard so many varying opinions about how best
to charge for development work its become quite tiresome.
Whether it be hourly, per page, fixed rates, or per project.
This debate is always ongoing amongst freelancers and it seems
that none of them can come to an agreement.
Having a background in IT and working for both state and
local government, one area of expertise I was confident in
was how to properly charge for my work. This is probably due
to the constant formalities and nature of the work I was involved
in. Especially within government.
Regardless of that, the bottom line is this.
The correct way to charge for development work
depends entirely on what work is involved.
Here is the pricing structure that I have adopted in my business.
Be mindful that I never enter into any projects without the
client agreeing to my terms and conditions setout in my web
development contract.
Fixed Pricing
For new projects. The requested work involves starting
from scratch, the development of an entirely new website
including all of the usual features and options.
Hourly Rates
For corrective work or maintenance type work. Meaning,
if a client already has an existing functional website and
they have requested changes, then charge hourly for your
services.
Lets look at these two methods a little closer.
Fixed Pricing and When to Apply It
When putting a proposal together for a new client, I always
try to calculate as best I can, the amount of time involved
to complete the project. This then allows me to quote my time
based on weeks, not hours. Remember this is for the development
of a new website only.
An example of this would be:
Company XYZ has requested the development of a new website.
I meet with the client and discuss their requirements. Once
I have this information I then return to the office, where
I begin itemizing the work involved and compiling an estimate
of how long I believe the project will take.
I know ahead of doing this that my time is worth $x per week.
For this example, lets say my time is worth $900 per week.
Im not concerned about hourly rates at all. I then calculate
the amount of time involved which may be for examples sake,
6 weeks.
I then know that 6 weeks work, at $900 per week equates to
$5,400. Which is what I put forward in my proposal to the
client.
I do however, also note within my contract that the client
signs ahead of time, that any changes during the project lifecycle
may directly impact the overall quote. This means that if
the client were to make any change requests, that potentially
cause delays, then my pricing would be adjusted accordingly.
What Are the Benefits of Fixed Pricing?
The biggest advantage or benefit of fixed pricing is that
the client can see a definitive cost, outlined within my proposal.
I never charge an hourly rate for newly created sites, because
timeframes always fluctuate. This can be due to numerous reasons,
such as technical issues, personal problems, or even miscommunication.
Whatever the reasons are, it usually always happens.
Its also an advantage for me, because I can see ahead of
time exactly what I will be paid for the job. I can then try
to work quicker and reduce that estimate of 6 weeks back to
4, thus increasing my overall pay rate.
Most often, I will give myself a margin or buffer, in terms
of timeframe. I typically always give myself an extra week
or two, to prevent having to meet stressful deadlines. If
I complete the work ahead of time, then I make better money
and the client is very happy.
Charging a fixed price works much better than hourly for
new projects where the project requirements are clearly defined.
Here are some other reasons why fixed pricing is better suited
to new projects.
- Client knows the costs are up-front
- Less stress over tracking time or overages
- Deposits are easy to figure (half upfront, or a percentage,
nonrefundable, half upon completion worked well)
- Scope creep is easier to manage with clear deliverables
attached to a specific price–additions to agreed-upon
functionality meant negotiating additional fees
- Maintenance contracts for site updates allow clients
an average, predetermined block of time each month and allow
me an ongoing, dependable source of income.
When to Apply Hourly Rates
Hourly pricing can work very effectively for general work
orders or maintenance type work. I never apply hourly charging
to new project requests. Mainly because timeframes usually
fluctuate and pricing can inflate as a result.
Hourly charging is more suited to smaller tasks, such as
adding new pages or changing navigational layouts. Anything
that can be addressed as a basic change request to an existing
site.
For established sites this method works extremely well and
can be simply documented against a work order that I provide
to the client, outlining exactly what work needs to be completed.
Within the work order I also note my hourly rate.
An example of when to apply hourly charging would be:
Company ABC has requested a number of changes on their existing
website. I meet with the client and discuss their requirements.
Once I have this information I then return to the office,
where I begin itemizing the work involved and putting together
a work order which is then sent to the client detailing their
request.
Once the work order has been agreed upon I commence work,
complete the given tasks and invoice accordingly at my set
hourly rate.
Typically smaller tasks such as corrective work or change
requests only take a few hours, and therefore are less complicated.
This is why I feel hourly charging is more appropriate.
The most important part of charging hourly is clarity. There
must be a clear understanding between both yourself and the
client of what work is to be completed. This is why it is
absolutely vital that the work order itemize in detail, everything
that must be done. It should also itemize exclusions, meaning,
what work isn’t to be done.
Failing to do so, always results in miscommunication, delays,
frustrations and often having to deduct hourly rates due to
wasted time. Be sure to clarify everything ahead of starting
any work. You cant charge a client 15 hours when you spent
the first 10 hours working on something that wasn’t
part of the project specifications.
What Are the Benefits of Charging Hourly Rates?
The biggest advantage of charging an hourly rate is the flexibility
it provides and potential earning power. However it is important
that you abide by the honesty system when implementing any
hourly charges. Especially if your clients are on a tight
budget or time frame.
I'm certainly not a believer in charging a client for 8 hours
work, when I spent 3 of those browsing youtube. It isn't ethical
in business at all and its definitely not something I condone.
What I do find most appealing about hourly rates is that
you get paid for what you’re actually doing in terms
of time spent on a specific project. This kind of charging
surely is in favor of you, the freelancer, since you also
get paid for those extra hours you put in.
Lastly, it is always advisable when charging hourly rates
to your clients that you track everything involved with the
work being done and be sure to submit it within your invoicing.
This covers, an itemized listing of the work performed, along
with the hours taken to complete it, and lastly your overall
costing.
Here are some other reasons when hourly rates are better
suited.
- Giving ranged estimate at the outset to help clients anticipate
costs
- Higher hourly rate for as-needed work other than “contract”
(i.e. flat fee projects or ongoing maintenance contracts)
- Works well for small tasks
Best of luck to you.
John
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