No matter what service you’re selling, you need to know your pricing. But how do you even begin to figure that out?
Pricing is an integral part of what’s called your “marketing mix.” (Hello, business school term!) The other aspects of your marketing mix are products, place, and promotion strategy. In other words, you need to know what you’re selling, where and how you’re selling it, and what you’ll charge for it.
For a creative service like web design, there are a few different approaches you can take to setting your prices. We’ll get into those in a moment, but first, you need to understand that the way you price your web design services matters.
It’s not the be-all-end-all of your business. It won’t kill your business if you get it wrong. For that matter, there’s not even necessarily a “wrong” pricing strategy in the first place…but it definitely matters. And here’s why:
The way you set your prices communicates something about you as a professional. It conveys to your client the way you’ll conduct yourself. It sets expectations with your clients and prospects about the service(s) you offer.
If you charge premium prices, they’ll expect a premium experience. If you charge by the hour, they’ll expect to buy as much time of yours as they want (and they’ll come to the table with their own ideas about how much you can do in these hours they’re buying). You get the idea.
Let’s clarify something, first
I keep using the term “pricing strategy.” What I mean by that is the way you approach and structure your rates. “Pricing strategy is less about what to charge and more about how to charge it. ” Are you with me? Ok, good. Let’s continue.
Here’s the thing about pricing: It’s directly related to money, and money makes people crazy. Couple that with the inherent insecurities so many of us feel and the identity attachment we have to our work, and you’ve got a recipe for crazyment. Overthinking, agonizing, sitting-on-it, asking people, Googling, debating, all of that. Not just about what to charge, but how to charge it.
I highly recommend that you not be that person.
Your pricing strategy is never set in stone. You can take one approach today and a completely new approach tomorrow. You may be bound by contractual obligations with current clients, but any new client coming in the door (or any standing deal that’s being reworked) is fair game for a new pricing strategy.
If you’re onboarding clients well, setting good expectations, and working with a decent sense of your own capabilities, there’s no wrong strategy. The only wrong strategy is putting off money-making endeavors because you still haven’t “figured out whether to charge per hour or per project.”
Thinking about making a switch? There’s no reason not to try it out. Nothing’s stopping you except yourself. Stop agonizing over how to price your services and go with something.
Ready to deep-dive into pricing strategies for web designers like you? Sweet, let’s go.
So how do you set your pricing?
There are a few things you need to consider when you’re mulling a pricing strategy:
- Your target market. Keep in mind their expectations about what and how to pay, their ability to pay, and their willingness to pay. In other words, how hungry are they for someone like you? Does your target market have the cash on hand to put 100% down on a major project fee? Do you cater best to one-off projects that aren’t conducive to a retainer model? Know what your people want and can do, so you don’t go into prospecting set up to get a lot of no-thank-yous
- Your costs. From internet service to Adobe subscriptions to replacing hardware, how much does it cost for you to stay in business? Keep in mind that some of these expenses are weekly or monthly, some are annual, and some are spread out over multiple years (like a new computer or some major software purchases). You need to know your costs so you can keep your prices above them. (Which should be obvious.)
- Your competitors’ rates. You don’t necessarily want to charge what your direct competitors charge, but you should probably be in the same ballpark as designers with similar skills and/or experience. If you’re way cheaper, you might not be attracting the right clients, and if you’re way more expensive, you may be out-pricing yourself.
- Your business objectives. If you’re a freelancer, your business objectives are probably closely related to your costs. For example, one of your objectives might be to net a specific amount of money this calendar year, or to increase your year-over-year profits by a healthy percentage. Another might be to break into a higher-paying market.
Once you have a good feel for the lay of the land – your own, your market’s, and your competitors’ – you can work out a pricing strategy that supports your business.
Types of pricing strategies for web designers
Now it’s time to get into the meat of pricing strategies. The good news is, if you’ve been in business for any length of time, you’re probably familiar with the main pricing strategies: by the hour, by the project, and monthly retainers.
There’s also a lot of discussion about value pricing, but value pricing is deeply nuanced and goes beyond the purpose of this piece. To learn more about value pricing and value-anchored pricing, I’d highly recommend Brennan Dunn’s blog, Double Your Freelancing.
Ultimately, most if not all of these strategies need to take into account your base hourly rate — the bare minimum hourly rate you need to make (or are willing to make). While your pricing shouldn’t reflect your minimum hourly rate (unless you’re ok with just scraping by), it needs to take it into account. No one but you needs to know your hourly minimum, but it’s an easy way to pinpoint specific pricing, especially when you’re considering a project you haven’t priced before.
For all of these examples, we’re going to work with a hypothetical design situation. You’ve got a client who wants to hire you for a new site. Your hourly rate is $100, and you think it will take you 30 hours to do the project.
If you’re pricing by the hour, you’ll need to track the time spent on your project and you bill the client for those hours at the agreed-upon hourly rate. There’s some nuance about what counts as working time and when (if ever) it’s appropriate to round up to the nearest hour/half hour/quarter hour. That’s an individual decision and one that would benefit from a quick survey of your peers.
Clients like hourly pricing because they can “see” where their money is going. They know you’re doing actual work and they get some confidence from that. There’s no invisible wall between your work and their wallets. It’s also nice to know that you’re going to be paid for the work you’re doing, and you won’t be giving your time away.
Clients don’t like hourly pricing because it means there could be a nasty surprise. If you think it’ll take you 30 hours but it ends up taking you 85, that’s tough to swallow. (And in that situation, you ideally would notify the client the minute you realize it’s going to take you a lot longer than you originally thought, and then renegotiate from there.)
In this example, a 30-hour project billed at $100/hr comes to $3000.
Project pricing does away with hourly pricing and instead pegs one set price onto a given project. Clients like it because they know exactly how much they’ll be paying and there aren’t any surprises. Designers like it because it’s logistically easier than tracking hours, and it doesn’t have a built-in penalty for working efficiently.
Clients sometimes don’t like project pricing because they’re used to paying hourly, and they might worry that they’re overpaying because they’re stuck in the hourly rate mindset. The potential downside for you with a project rate is that if you underestimate how long it will take to complete, you’re eating into your profits with no recourse.
In this example, let’s say you did a similar project not long ago and can get the project done in 25 hours. A project fee of $3000 means you still pocket those $500 extra dollars you wouldn’t have made if you’d charged by the hour, and the client is still happy with the outcome.
Conversely, if it ended up taking you 35 hours to complete but you charged a project fee of $3000, you’ve missed out on the $500 you would have received from the client if you’d charged by the hour. (You may have also avoided an uncomfortable conversation with the client if the extra $500 was a surprise, though!)
Moving into a retainer model usually happens after you’ve done a big project for a client. It’s valuable for the client to keep you in their pocket in case something comes up, so working on a retainer can be really attractive. You charge clients a monthly fee in exchange for a guaranteed number of hours you’re setting aside for them. It’s not uncommon to offer these hours at a discount, so for this example, you may offer your client a retainer of $800/month for 10 hours.
Clients like this because they don’t risk losing you, the expert. They also appreciate the discounted rate and the guaranteed availability.
For more on maximizing your retainer model, I can’t recommend this post from Brennan Dunn highly enough.
Final thoughts on pricing
Pricing is a topic that can be as simple or as complex as you want it to be. That said, there are a few other things you need to consider when you’re evaluating your pricing strategy:
- Will you incur expenses as a result of the project, like buying stock images? Those need to be worked into your pricing.
- Are you swamped with work? Congrats! It’s time to increase your rates, effective immediately. Give yourself a raise. Keep upping your rates until you get to a comfortable workload.
- Should you post your rates? That’s an ongoing debate with no “right” answer.
- How do you bill for support after the project is handed over? That’s up to you, but it might be a good opportunity to discuss that retainer model with the client. It’s a good idea to offer some support free of charge for a limited time, but be sure to work this out at the beginning of the project (and get it in your contract) so that expectations are set from the beginning.
Ultimately, your pricing strategy needs to be one that gives you the ability to make money. Within that context, there’s no right or wrong answer. If you’re curious, experiment with your pricing strategy and see what ends up working best for you.