Pricing is a bit of a sore point in web design. As Christian Stanley of Crumpled Dog design explains: “Everyone believes they can buy a website for a few hundred quid online. Which they can! But design and bespoke consultancy then goes out the window...” Costing projects can be a nightmare. The infamous ‘scope creep’ is always an issue. “A brief morphs during the production process,” Christian explains. “The market moves fast and the possibilities seem, and indeed are, limitless. Cost control becomes a major factor.” Cost control can be blamed for the demise of many start-ups.
To save your fledgling company from this fate, remember: everything has a value. Ideas are currency and time is money, so the idea is to charge for ideas and time. Some ideas have intrinsic value, some are just part of an hourly rate.
A lot of people don’t know how to price for their work. When you’re starting out, make a point of understanding how web design agencies price their work. “You should research what the average daily rates are, and be firm with how much you charge,” advises Andy Budd of Clearleft. “You have a lot of creativity and you should be charging a decent amount of money for it.” In the web design field, there are a lot of new designers who are charging £500 for a whole website. But if it takes two weeks, and you’re charging £50 a day, that is really not enough to cover your costs, let alone make a profit on skilled labour.
In terms of industry standards, the Design Business Association advises businesses to divide turnover by the number of billable hours (not 7 days a week and not every hour of the day – don’t forget holidays also!) by the number of people. This tells you how much each person is turning over and what percentage of available billable hours are being charged. It will be a lower percentage the less profitable you are.
Be aware that there is no easy money in the web design game. There is a pretty solid glass ceiling. Companies such as Clearleft which create websites for major companies, such as Mozilla, Gumtree and WWF, can charge “tens if not hundreds of thousands”. But new people in the industry are charging very small amounts of money.
“At the lower end of the market, the companies small web agencies deal with only have a small amount to spend,” Andy explains. “And it’s very hard to develop a great website on such a small budget!” Clients do not want to hear this: they want to squeeze the maximum value from their money. And somebody else behind you will always be doing it cheaper. Andy’s advice? “If you’re constantly competing on price in a commodity market, you’re never going to get out of that. So don’t focus on price! To run a web design business, you need to distinguish yourself.”
The quality and service you give your clients will reflect what you charge. As Ross of Rawnet Ltd says, “The price should be based on the value to the customer rather than your cost.” The only thing to do, as you offer a better and better service, is start charging more. And you can only do that if you are constantly pushing and striving to get better clients who are willing to pay more for better services.
If a client is playing hardball, don’t be afraid to push back. “A lot of the time, if you can go back to your client and you explain why your work is worth the money, it will bring more value to your company,” Andy Budd advises. But be warned: a lot of people get fed up. Pricing really is a big issue.