Charging Per Hour vs. Per Project
If you’re a corporate designer, you don’t have to worry about things like how to bill your clients, as you’re likely either on salary or have a predetermined hourly rate and regular work schedule.
But for freelancers, figuring out how best to charge clients for work completed can be a nightmare. After all, you want to charge clients a fair price, make a decent living, and get enough work so that you’re not struggling to find the next project.
In the world of web design, there are two basic ways most designers charge: per hour or per project. There are advantages and disadvantages to each method, and there are situations where one method works better than the other.
In this article, we’ve presented an overview of what’s involved in each method of charging, as well as what you need to consider when choosing a method.
Charging by the Hour
Charging an hourly rate is incredibly common in the world of freelancers, both for designers and other professionals.
It’s a pretty straight-forward way of charging. I just tell you I charge $X per hour and you either think that’s reasonable and agree to pay it or you don’t and you find someone who charges less.
Advantages to Charging by the Hour
As mentioned, hourly charges are very straight-forward. Some designers have a flat hourly rate regardless of the type of work they do. Others have different hourly rates for different functions (designing, coding, testing, etc.).
It’s easy to lay out for your clients exactly what you charge, and they often feel like it’s a more transparent way of doing business. It’s also a method clients are used to dealing with, as that’s likely how their lawyer, accountant, and other professionals also charge.
Drawbacks to Charging by the Hour
There are a few different drawbacks to charging an hourly rate. First of all, if you’re preparing estimates for your clients, they might be upset if the project ends up taking longer and therefore costing more than the original quote. It’s important to make it very clear to your clients that your proposals are estimates, and that if additional work and time is required, you’ll charge them more.
Another drawback is that a lot of clients don’t understand why designers charge as much as they do. There are tons of low-cost (and generally low-quality) “design firms” out there that charge next to nothing and put out inferior work. Clients will often sign on with these designers thinking they’ll save money, until that $20/hour web designer takes five times longer to do everything than the designer charging $60/hour. Unfortunately, there are clients out there who don’t realize that updating a few photos on a website shouldn’t take eight hours!
Clients may look at your hourly rate and the hourly rate of another firm and go with the one who’s rate is lower, even though the overall project price might end up the same. They often don’t take into account the added value one designer offers over another. And in cases where designers put their rates up publicly on their website, some potential clients may walk away without ever contacting you because they think your hourly rate is out of their budget.
If you’re not incredibly organized, charging by the hour can also be a logistical nightmare. If you charge an hourly rate, you need to keep track of how many hours you work on each project. And if you charge different rates for different kinds of work, you have to break down not just by project, but by task.
This can work fine if you’re one of those people who focuses in on a single project for an extended period of time. But if you’re the type of person who likes to work on multiple projects at once, billing by the hour can be almost impossible. Of course, some designers just estimate how much they’ve worked on a project, but it’s often easy to under-charge doing that, unless you’re taking time to estimate work spent on a daily basis.
Two Common Methods for Charging Per Project
When designers charge for the overall project, rather than just an hourly rate, they generally base that pricing on one of two things: either they base it on the amount of time the project will take (in effect, an hourly rate) or on what the market will bear.
There are pros and cons to both methods, though a lot of it depends on how the designer works and what suits their clientele.
There is a third, though not often used, method for charging per project. This would be charging “per page”. If your design clients primarily want brochure-style websites with only a handful of pages, this style of pricing can work very well.
It’s most commonly seen with rural web design firms who mostly deal with local clients who are only interested in simple websites. This type of pricing only really works for basic HTML pages, though, and can quickly become more hassle than it’s worth for sites that incorporate Ajax or are built on CMSs.
Project Price Based on Time
A lot of designers who quote on a per-project basis come up with their quotes based on the number of hours they expect a project to take them. They just don’t include that hourly rate on the proposal itself.
Pros of Charging Based on Time
As was already covered under the section above about charging by the hour, hourly rates are a relatively easy way to figure out how much to charge for a project.
If you’ve been designing for any length of time, you probably have a good idea of how long most aspects of a project will take you. If you know coding a new WordPress theme will take you two hours (once the design is done), then you just multiply that by your hourly rate and there you have a quote.
Drawbacks to Charging Based on Time
Of course, there are drawbacks to charging on this basis. With a straight hourly rate, you can adjust the number of hours charged based on the actual number of hours worked. If you’re figuring a project based on an estimated amount of time, it’s much more difficult to change that quoted price after the client has agreed to it.
Another drawback to charging based on time spent is that many newer designers won’t really have a good idea of how much time they’ll likely spend on a project. Sure, they might know how long it takes them to code a design, but they might not have any clue how much time they’ll spend going back and forth with a client on the design itself.
Even established designers can’t always be sure about things like that, as every client is different.
Project Price Based on Market Forces
Pricing a project based on what the market will bear often seems, on the surface, as something dishonest (to those who see the market as willing to pay way more than what a site is worth) or potentially damaging (to those who see the market as undervaluing creative work).
In truth, though, it can be the fairest way to price something, for both client and designer.
Advantages to Charging Based on the Market
When a client wants a website designed, they sometimes have a good idea of what it’s worth to them. After all, if they only want a simple brochure website, they’re unlikely to think that’s worth $10,000. They might only think it’s worth $300. Alternatively, if they want a full-featured ecommerce site, they might feel that is worth $10,000 or more. It’s all based on their perception of the benefits they’ll receive from having the site.
The majority of people are happy to pay what they feel something is worth. If they think a site is worth $10,000, who cares if the designer thinks they’ve only put $5,000 worth of work into it? If the client thinks it’s worth more than that, then why shouldn’t the designer be rewarded for the extra value?
Designers who charge less than what a client thinks a project is worth often lose out anyway, as the client will view their work as deficient in some way and choose a higher-priced company (going by the old adage, “you get what you pay for”).
The same thing goes for designers who charge more than what the market will reasonably bear. It doesn’t matter if a simple brochure site design will take 10 hours for a designer to create and they charge $100/hour. If there are twenty other designers out there who will do it for $500 or less, why would the client pay twice that? Sure, the designer who charges more might have a much higher skill level than the lower-priced designers, but how much of those extra skills will actually be used in the site design? If the client doesn’t see the extra value, then why would they pay for it?
If you charge based on what the market will bear, then you’re going to have happier clients. If people feel they got a good value, then they’ll be happy with your work. They don’t care that it only took you a week’s worth of work and you got paid $10,000, as long as they get their $10,000 of value out of it.
Problems with Charging Based on the Market
The biggest disadvantages to charging based on the market come into play when you’re working with simple websites and difficult clients. Let’s say you quote a client $400 on a simple brochure website, because that’s what you’ve found people in your area are willing to pay.
The client happily accepts that quote, finding it in line with what they thought they should pay. Everything goes fine until they start requesting change after change to the design you send them.
Pretty soon you’ve sunk fifteen hours into the design, and they still haven’t approved the design. What should have been a simple five or six hour project is taking way longer than anticipated and your hourly income is dropping dangerously close to minimum wage.
There are a couple of ways to deal with situations like this. First of all, be very careful of who you work with. If a client shows any indication that they’re going to be difficult before they actually sign a contract, politely decline the project. Alternatively, charge an hourly rate or make your contract much more specific on what’s included and what’s not (including how many rounds of revisions you’ll do before additional charges are incurred) for this particular project.
If you fall into the camp of designers that feels like charging what the market will bear is dishonest if the work itself isn’t that difficult of time consuming, you’ll have a different set of issues to deal with.
Here’s the thing to remember, though: people put a lot of stock into their perceptions of value. If they think something should cost a certain amount, and you come in significantly lower than that amount, they’ll start looking at why. It doesn’t matter that the reason might just be that you keep your overhead low and you’re very efficient and good at what you do. They’ll think that there’s something wrong with your work and will place more value on the firm that comes in with a bid closer to what they expected, regardless of whether that firm is actually better.
It’s to your own benefit to charge more if that’s what the client expects. Make up for it by exceeding your client’s expectations. Provide them with a flawless site, phenomenal customer service, and a great overall experience. If you’re still feeling guilty about it, offer them a discount on the final invoice, or on their next project with you. It’s better to have a client who’s happy and feels like they got what they paid for than a client who thinks you have some ulterior motive for charging so little.
Finding out exactly what the market will bear can be the tricky part in this kind of pricing scheme. One way to figure it out is to make sure you ask clients what their budget is. Or better yet, ask them what they expect a site like what they’re looking for would cost. Other ways include looking at what other designers in your area or industry are charging (you can find some of this information on sites like Elance.com by looking at what designers are quoting for different projects).
So How Should You Charge?
Deciding how to charge is going to be largely dependent on how you work. For some designers, charging hourly works well, because of the nature of their work. This type of billing works well for ongoing contracts, or for clients who have a tendency to make changes to scope midway through a project (no need to re-quote, just remind them that changes mean extra time).
Charging per project can work really well for designers who already have a good idea of what kind of time different projects require and how much value clients place on different kinds of work.
For new designers, though, it can be too difficult to quote a price that realistically covers the time a designer has spent.
Written exclusively for WDD by Cameron Chapman.
Can you think of other reasons why one method of charging for projects works better than another? Or do you have any other ways of charging for your own work? Share in the comments!