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Quotes or hourly rates? Your pricing, how do you value your time?

Thread title: Quotes or hourly rates? Your pricing, how do you value your time?
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03-24-2006, 07:32 AM
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Julian is offline Julian
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  Old  Quotes or hourly rates? Your pricing, how do you value your time?

In response to a topic I recently replied to, I thought it would be good to explain my costings on projects.

I always quote clients unless they want to pay me by my hourly rate. My reason for quoting is that sometimes I can complete a project very quickly and offer the client a discount, which looks really good to a client If I go over time in the project I have to carry the costs, which reduces my profit.

Over the period of a year I always make a good profit. Bigger clients always want quotes, then they want the quotes broken down to hourly costings. This is easy to do after a couple of years of project work, but can take time at the beginning. So if you are just starting I suggest you begin with charging by hourly rates.

Now onto pricing and working out your hourly rates.

I charge out at $100/hour which is fairly standard in my country ($65 US/hr). A 5 page site may take me 3-4 weeks or longer to complete, depending on a lot of factors. Therefore 3-4 weeks at 40 hours/week x $100 = $12000-$16000. I tend to adjust my pricing per client too, if it is pure business client they pay full price, if it is a school/personal site then they get reduced pricing. I may look expensive to some, but I value my time properly.

My hourly rate is broken into numerous factors i.e:

Actual time value (I value my skills and creativity highly): $50/hour
Equipment/software (computers, printers, Photoshop etc): $10/hour
Office space (home office, rented or owned): $10/hour
Overheads such as electricity, printing, phone calls, internet costs, communication, stationary etc...: $10/hour
Profit: $20/hour

My prices also take into account days where I may be sick and cannot work, or holidays I wish to take and won't be paid for etc, or just downturns in business.

I can afford to hire a couple of freelancers, if need be, on bigger projects, and still get $20/hour of profit. If I do the entire job myself I get $70 hour for myself

Now you may be able to eliminate a lot of these costs such as overheads, office space, software etc, it's up to you. But everything you have purchased for this business is a cost. If you don't consider these costs then you are paying for them out of your own pocket. No business pays for these sorts of costs from their own pocket. The business pays for them!

Here is a scenario:

If you are selling a template for $25 and it took you 6 hours to make it then your time is worth $4.16/hour. Broken down that equates to:

$2.08/hour - your hourly rate
$0.42/hour - equipment software costs
$0.42/hour - office space
$0.42/hour - overheads
$0.84/hour - profit

If you are a youngster it is all profit, because you don't pay for equipment, software, office space or overheads. But your hourly rate is still only $4.16/hour.

If you sell your template for even less, you are lowering the industry value even more.

I know that pricing is relative to age but please consider your futures. If you continue with the trends you will lower the whole industries value. It will in turn mean that you will devalue your future income by what you are doing today. I know some of you just want to make a quick buck to buy a new PSP game, or an iPod etc, but please think of the consequences.

If you are a late teen then you should be considering charging near full prices, something in the $50-$75+ bracket, commensurate with experience etc.

Now if you have managed to sell the template for $250 then everything looks slightly better:

$20.80/hour - your hourly rate
$4.20/hour - equipment software costs
$4.20/hour - office space
$4.20/hour - overheads
$8.40/hour - profit

It is still a ridiculously cheap project but is getting closer to where you should be.

For a 6 hour project I would charge $600, broken into:

$50/hour - your hourly rate
$10/hour - equipment software costs
$10/hour - office space
$10/hour - overheads
$20/hour - profit

If I do the job entirely by myself I can consider dropping the profit margin to $5/hour. I can also consider dropping overheads costs such as phone calls and printing if I don't use them...maybe $2/hour. If my equipment is new and modern and software up to date I could reduce or drop this cost to $2/hour or so. Maybe reducing the whole job to $69-$70/hour or less in some cases. So a 6 hour project could be charged at $390 or so, instead of $600.

In all be flexible, don't price yourself so low you will lower the whole industry, and remember you are charging for more than just your time.

Comments?

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03-24-2006, 12:12 PM
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seen.to is offline seen.to
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  Old

Originally Posted by julian
A 5 page site may take me 3-4 weeks or longer to complete, depending on a lot of factors. Therefore 3-4 weeks at 40 hours/week x $100 = $12000-$16000.
If you can get someone to pay you that much for a 5 pager then maybe you should go into sales

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03-24-2006, 03:35 PM
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Andrew R is offline Andrew R
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  Old

Wow, this was very helpful. I will take into consideration the pricing next time I try to sell one of my templates.

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03-24-2006, 04:12 PM
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Sam Granger is offline Sam Granger
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  Old

Interesting! I currently undercharge people say - eg. I code a full vbulletin skin for a fixed quote of usually $80 (takes me a long time to code! example of my coding is hellogreen).

Thinking about hourly rates.

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03-24-2006, 04:23 PM
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  Old

Good post. Accurate and good thoughts, As much as I hate to say it as well, a 5 page site for $14-$16k does seem rather high though? depending of course on what is part of those 5 pages?

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03-24-2006, 04:38 PM
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derek lapp is offline derek lapp
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  Old

Originally Posted by Sam Granger
Interesting! I currently undercharge people say - eg. I code a full vbulletin skin for a fixed quote of usually $80 (takes me a long time to code! example of my coding is hellogreen).

Thinking about hourly rates.
then you are.

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03-24-2006, 10:16 PM
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Julian is offline Julian
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  Old

Originally Posted by seen.to
If you can get someone to pay you that much for a 5 pager then maybe you should go into sales
It all depends on the client Marc, if it was a local car dealer or a personal site I would lower my rates and cut back on my costs for the project. If it was for a national car dealer or celebrity personal site I would charge full price.

Now, I have worked on 3 projects of this size and bigger in the last 2 years, they don't come along every day. The pricing is all based upon adding value to your sale.

Salesmanship does come into the equation, as well as having very strong business skills. It is the whole intangible package that I sell to my clients, not just simply a website

I also work very closely with a graphic designer, she does all my clients printing stationary business and packaging.

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03-24-2006, 10:22 PM
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Julian is offline Julian
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Oh, I also have the luxury of this being my hobby, I do this for enjoyment, not employment. Therefore I can wait for the bigger projects, and maybe take on smaller projects if I feel in the mood
Originally Posted by Julian
In all be flexible, don't price yourself so low you will lower the whole industry, and remember you are charging for more than just your time.
I should also add to this, that you shouldn't price yourself so high you're priced out of every single project.

An amazing thing happens when you quote high, businesses start thinking "wow, they must produce absolute top quality work, we want the best, so let's get them!". Quoting low generally means what it means, cheap and nasty. Even if I don't produce the absolute best sites, I definately give the best service

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03-24-2006, 10:41 PM
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  Old

This was a very good read Julian, a great post. I must say it looks somewhat that undercharge, doing templates (1 page .PSD) for 55$.
But when i look at it: $13.75-$22.00/hour - hourly rate.
I'm really not underselling if i have such a short turn around (2.5-4hr average). Then again, i'm a youngster doing this as a hobby in the room down the hall from my parent's bedroom, so really this is just mad money i can spend on frivolous things or save for more serious expenditures.

And on top of it all, i'm really not doing templates and such for businesses that "hardcore" freelancers would be doing work for, i'm doing templates for those people starting up some random sites to make a bit of money off adsense, hosting or just a personal site for their blog or gaming clan.

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03-24-2006, 11:05 PM
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Andy is offline Andy
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  Old

I can't say that people "underprice" when they make a template and then try to sell it for $200, it's rarely going to happen. If no-one buys then you have "wasted" time, it's much better for you (money wise and portfolio wise) to sell work, even if it is underprice.

Making something completely custom and involving the client allows you to charge higher, for the support during and after, I pay low fees for designs as I just get sent a file and that's it.

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