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I am a firm believer that web work is usually a very over inflated product. This leaves many small businessess and individuals resorting to one of three options:
In the design and development business, the consumer is in control and has the ability to discover exactly how much a project costs. Honesty and transparency must be at the heart of pricing a project.
Regardless of how clients document their needs, they often only know the rough strokes of how to reach their goal, not the specific nitty-gritty details (which often involve the majority of costs). But why should they? Helping them find what they want, and (more importantly) what their users want is why they hire People Like Me!
One thing I firmly believe in is pricing a project for what it costs. I have seen situations where someone comes up with a number, then doubles or even triples it randomly to pad the rate for unforeseen circumstances. Addressing uncertainty about the project by haphazardly increasing the price is a strict no-no for me, and is not something I would suggest anyone do.
When I price out a project I not only price out what I know about the project, but also detail what I don't know. I come up with worst-case scenarios, address risks, and point out all the things I think could impact meeting the goals of the project.
To come up with a number, I using the following formula:
task x time(complexity x effort) x rate = price
To break this down, use the example of creating a mockup at say, $100/hr (I'll use simple numbers, because I was never good at algebra): task is the quantity of the work (e.g., three mockups). Time is the value of complexity multiplied by effort, or hours to perform. This is the trickiest part of the equation as these variables are unique to every person or agency. For complexity, start by using a three point scale, 1 being easy or ideal circumstances that take the normal amount of time, 3 being fairly complex and taking 3x the normal amount of time. For effort, enter the ideal amount of time it would take you to complete the task, let's say 10 hours to produce one mock-up.
So for our example, the formula would look like this:
1 mockup x time(1x10 hours) x $100 = $1,000
Three mockups would look like this:
3 mockups x time(1x10 hours) x $100 = $3,000
A slightly more complex mockup might look like this:
3 mockup x time(1.5x10 hours) x $100 = $4,500
And a complex or challenging mockup might look like this:
3 mockups x time(2x10 hours) x $100 = $6,000
Figuring out an hourly is very simple (sorry, more algebra coming):
(expenses + salary) divided by hrs worked per yr. + margin = hourly rate
This one takes a little more explanation. For expenses estimate overhead, rent, utilities, insurance, benefits, supplies, and any cost of doing business per person (which can often be as much as 30-50% of your gross revenue per person). and a reasonable annual salary. Referred to the AIGA/Aquent Design Salaries site.
Divide that sum by the hours worked per year, meaning of the 2,000 hours typically worked per year (40 hours a week for 50 weeks). How much of that will be billable time? The other way to look at this problem is to figure how many billable hours worked per week and multiply by the weeks per year you plan to work (typically 1,500-1,700 hours per year). Then add in a reasonable margin, usually between 10-15%.
The formula for a low-level web designer would look like this:
($20k expenses + $60k salary) divided by 1,500 hrs + 10% margin = $58.66/hr
There are typically four methods of billing for projects: Per Project, Hourly, Per Diem, and Retainer. The first two being the most common.
Most projects are charged on a Per Project rate. The idea here is that the vendor can accurately guess the scope and attach a fixed price at the beginning of the project. This in invariably never the case though, so scope and price is often padded and margin added to protect the vendor from additional scope creep.
The theory of Per Project rates are very karmic. The vendor underbids for some projects and makes less, and others they are able to make huge profits from. The problem is that one way or another somebody loses. Either the client pays more than the project is worth (more than its market value) or the vendor eats into their profit.
Hourly billing is often associated more with your plumber than with a web project and has a pretty bad reputation. The fear with clients is what I call the "Stray Consultant," where the vendor is simply billing for time and not producing any work of significant value. You tend to see the Stray Consultant in very large organizations that have many middle layers of management.
Regardless of billing per project or per hour, I believe that any project is a partnership between client and vendor. That in order to mutually achieve a goal we must work together every step of the way. Communicating expectations of scope and cost is always crucial.
Remember, honest and transparency should always be at the heart of all projects.
Since the average web site project including graphics design and the rest of it comes out to around $1,000.00 - $5,000.00 and seeings how I am pretty darn good at this and since this isn't my only source of income - I generally as a rule charge $100.00 for ever standard $1,000.00 - meaning if I design you a site that would usually cost around $2,000.00 I charge $200.00 - bit of a mark down now isn't it. - If you need hosting and a domain (www.yoursite.com) as well, then i'm sorry your going to end up with a yearly bill. This is how I work it - if you shopped around and got a good deal by going to a great server with all the bells and whistles, your looking at $200.00 a year. - Well since I have access to dedicated servers I also have the ability to cut this annual cost down to $60.00 - Let's do the math shall we? - A standard website anywhere else = $2,000.00 + $200.00 = $2,200.00 bill - a standard website done by me = $200.00 + $60.00 = $260.00 .. Want to save $2,340.00 ? give me a call.