One of the most curious challenges in setting up a web-service company is determining your selling prices. It’s not uncommon in Montreal to find a freelancer charging 15-30$ an hour, another freelancer with similar experience charging 70-80$. As an alternative, should you settle on agencies instead, you may find one charging 40-60$ next-door to another firm operating upwards of 150$. What’s going on here?
I don’t want to go down the route of “Montreal is saturated with waves of new, inexperienced web designers who create unrealistically low quotes and create misrepresentation of the web development community as a whole”. The problem may be real, but not the topic of this post. Let’s talk about how you determine a price for your services.
1. Work backwards from your expenses
Take a look at your bank statements last year. How much expense did you incur between groceries, car payments, rent, mortgage, medical visits, birthday presents and dog treats? You should be developing a business model that allows you to live comfortably within these means. Enough so that 1-2 months of hard weather for your business is not completely and utterly devastating. That’s not to say frugality is absolutely required, but if you’re fresh out of school and you find this rate to be upwards of 100$, you may want to rethink your lifestyle.
2. Invest in a business plan software
Doing the above gets complicated when you have extra expenses to consider, such as employees, consultations, software licenses, and the like. The best, most sobering way of calculating the above is to use a business plan software. I recommend using this for any small-medium sized startups. As a company, we use PaloAlto Software The first time I plugged in our own numbers, I realized that we were grossly undervaluing WebCakes and the mission we want to bring to our clients. I stress the importance of being fair with your margins, to your clients and yourself.
3. Use your hourly rate for everything
Don’t get confused by the above – I don’t mean to always charge by hourly rate. There are many situations where that is not feasible to either party. What I’m getting at is pricing your service plans and packages according to your hourly rate. If you offer web services based off features or packages (Something like a Bronze/Silver/Gold/Platinum model), then make sure the prices reflect your hourly rate by approximate development & implementation timeframe. It doesn’t have to be a direct multiplication of these two variables; so long as there’s some referencing your hourly rate within your calculation, anything goes. This practice is useful for determining the efficiency of a given feature in relation to the rest, and can help you decide on what services to market and optimize for the future.
4. Your price is justified to your branding
It starts getting a little more subjective here, but nonetheless the success on communicating your price is determined by your branding. If your marketing slogan looks a little something like “Quick, affordable web solutions”, then don’t be surprised when you find it hard to sell them on a higher bracket. If you’re a freelancer or start up company, and you have some solid work under your belt, brand yourself as an agency, not as a small company. You don’t have to be a 20+ employee firm to provide high-quality work, and your branding should reflect that if you want to aim higher.
5. What’s your worth?
Let’s end on this note: Take a look at your past projects, and give those clients a call to ask how their business is doing. How many sales or leads do they think they’ve gotten from your web strategy? Did you or your company give more than the expected value they paid for? As an example, after James worked on the Habitat for Humanity website, their operational scope increased from just Montreal to the entire province of Quebec. Similar to when I created the first version of the iLOC Technologies website years back – they grew from 3 employees to over 15 employees. If you are bringing more value to the table than what is expected of you, if you’re confident that your skills are benefitting the company in an extraordinary way, by all means quote a little higher. It’s more than justified.