Kristen from Kristen Leigh is discussing one of her favorite topics, web design pricing. In this post you’ll learn why you shouldn’t charge by the hour as a Web Designer and instead should focus on creating enticing web design package prices.
Web design pricing is one of my favorite things to talk about! Why you shouldn’t charge by the hour as a web designer is not my first time talking about pricing. In fact, before I dive into this post, here’s a quick list of all the blog posts I’ve written to-date about pricing:
- How Much You Should Charge to Build a Website
- How to Make More Money Without Taking on More Web Design Clients
- How You Can Raise Your Prices by Designing Websites Using Consumer Psychology
- Why You Need to Stop Underpricing Your Services
- What You Need to Know About Charging $5000 for a Web Design Package
- Why You Need to Stop Leading with Discounts as a Web Designer
- A Peek at How Much Money You Can Actually Make as a Web Designer
That makes this post my 8th blog post about pricing! There’s a reason for all these posts.
When I first started my business as a virtual assistant I charged my first web design client about $200. Never before in my life had I built a website (“what’s hosting” literally went through my mind multiple times) and because of this, I assumed I had to charge super low prices in order to land a client.
Then I raised my prices to $550, then $670, and then BOOM! I raised my prices to $3,597 just 4 websites into my web design journey. While that’s amazing and I’m blown away by my progress just looking at that sentence I just wrote… My first website should have been priced at $670 (what I charged for my third website).
Let me explain why.
Billable and non-billable hours
Maybe you’ve heard these two terms before and maybe you haven’t. If you haven’t, no worries. I hadn’t either before I started my business. The important thing is that you learn about them now so you can avoid undercharging for your first few websites when you’re most vulnerable as a web designer to do so.
Billable hours are the time you spend working on projects that can be attributed to a client. Most tasks that fall under billable hours are obvious and others aren’t. Billable hours include the time you spend:
- onboarding your client
- collecting content and reviewing the content
- designing website mockups
- making edits
- building the website
- launching the website
- offboarding the client,
- performing website maintenance
- emailing your client or responding to client messages (yes! Even if it only takes 30 seconds to respond, this should be tracked)
- calls (phone or video) with your client
All of these things should be tracked and your client needs to be charged for them. (Tools like toggl help make tracking your time super easy!)
Non-billable hours are time you spend working on your business that cannot be attributed to a specific client. This includes things like:
- setting up your freelancer profile
- writing and scheduling blog posts
- scheduling social media posts
- relationship building via Facebook groups
- sales calls
- creating proposals
Although you can’t assign these non-billable hour tasks to a specific client, you can and should be covering these costs in your web design prices.
Which leads me to… why you shouldn’t charge by the hour as a web designer!
Use package prices
There’s one major reason why you should always be charging your web design clients using package prices (even if you’re brand spankin’ new).
The reason: To cover the costs associated with your non-billable hours.
Even though your marketing efforts, setting up your freelancer profile, writing and scheduling blog posts, sales calls and all that other stuff aren’t directly related to your client projects, those things are indirectly related to landing those clients. Without the time and effort you’re spending on building your business on the back-end, you wouldn’t be able to land clients and therefore you wouldn’t have any billable hours.
Let’s talk about overhead overhead
Think about it for a minute… a company like Anthropologie doesn’t just price their clothing at the amount it costs them to purchase the fabric that makes up the clothing. No, instead their prices take into consideration the fabric costs, labor costs, rent, electricity and water costs for their factories and home office, rent for their physical locations, marketing material costs, and obviously the costs associated with paying a ton of people to work for them.
All companies increase their prices for either their physical products or billable hours (if service based) in order to cover their overhead costs or non-billable hours (if service based). You are no different. You should be increasing your prices in order to pay for your overhead costs and your non-billable hours. The prices you set need to not only take into consideration the hours you’re spending working on a client’s website but also the tools you had to purchase to run your business and the time you spend marketing, managing, and maintaining your business.
Increasing hourly rate isn’t cut and dry
“Cool, can’t I still charge by the hour and just jack up my hourly rate?”
Most web design clients prefer to work with a web designer that has a set package price. This is for a valid reason, too. As a business owner you always want to be able to predict the expenses associated with running and maintaining your business. When a business owner works with someone who charges hourly, they typically ask, “what’s your hourly rate and how long do you expect the project to take?”
Well, when it comes to web design it’s hard to estimate the amount of time it will take you to complete a project. Every project is different, every client is different, and sometimes things you can’t predict end up happening and cause you to spend way more time on the project than you anticipated. You may tell a client that it will take you 40 hours to design and build their website only to find out the client wants way more edits than you thought they would which causes you to work an additional 10 hours.
Now you’re telling the client it will take between 40 hours and 50 hours to build a website. With an hourly rate of $15 per hour that may be fine because it’s just a $150 difference in price. But you shouldn’t be charging $15 per hour… I charge on average $60 an hour when I break down my package price into an hourly rate.
$60 x 40 hours = $2,400
$60 x 50 hours = $3,000
That’s a $600 difference in price! That’s a big deal for the type of client I work with.
Not to mention… when you tell someone you charge $60 an hour, unless they really understand web design and the value of a website, they may just laugh in your face at how ridiculous it sounds to be charging such a high rate.
By using package pricing, you’re able to hide (for lack of better word) your true hourly rate and cover the costs associated with your non-billable hours.
So who’s with me and ready to trade in hourly rates for even higher priced packages?!