Pricing Development Work

By Vince Barnes

"What should I charge for doing web development work?"  I am usually a bit at a loss for the best way to answer a question like that and so will often give an answer something like "everything you can get away with; not a penny less, and, if you're wise, not a penny more." Of course that's not particularly helpful, but then it's difficult to provide a truly useful answer to that question. Here then, I will try to do a little better.

It is still a very tough question, and it's impossible to provide a numerical answer that would have any real meaning in all the parts of the world that are graced by our readership. Instead, I have tried to think up a method for deriving an answer that will hopefully provide some guidance, and enable you to come up with a good number yourself.

There are four elements that go into a price: time, materials, overhead and mark-up. I think it will be easiest to look at each of these in reverse order. Note that these elements are for your own use only; I wouldn't recommend sharing your calculations with your clients!

If you want to include a mark-up, remember these tips: apply a uniform percentage across all the other elements; don't be greedy or you'll lose business; remember that this is a great place for you to give something away in the form of a discount.

Overhead is actually fairly easy to figure out! Take your monthly costs and divide them by your time. That's your overhead! For example, suppose your office space, utilities, phone, internet connection, insurance etc. adds to 2000.00 each month and you work 50 hours a week on your web development. Assuming four weeks to a month, your overhead is 2000/200, or 10 per hour (in whatever currency you are calculating!)  It is, of course, possible to get very sophisticated with overhead calculations, taking into account time required for education, time taken or lost for holidays, vacation and sickness, etc., but these sorts of calculations are usually most applicable within corporations.  An individual can usually adapt themselves to their income patterns or make adjustments as necessary, should web development become their primary income.

Materials are probably non existent unless you choose to use stock photos that include licensing fees, or you wish to consider hosting cost as a "material" cost. Use as close to actual cost as you can, applying your mark-up, if any.  Of course, you could break down the cost of your computer over time, together with its maintenance, and add that here.

Time is what you are selling. Your time is the true value in your website development effort. Consider what is a reasonable amount for your time on an hourly basis. Again, don't be greedy, but rather be as realistic as you can. What could you earn for your work as an employee of a company? As a freelancer, your time would earn a little more than you would be paid as an employee because employers provide other benefits to their employees. When selling your time remember that this fee is all you are going to get for your time, and be fair to yourself as well as to your client.

Let's say that you have arrived at an hourly rate of 15.00, that there are no materials involved, that your overhead came to 10.00 and that your mark-up decision was 10%. 10.00 + 15.00 = 25.00, plus 10% is 27.50. There is your hourly rate. That amount times the number of hours you work (plus the materials -- in this case zero, with mark-up: still zero) is the value of your effort and the amount you should charge.

If your client wants to know ahead of time what the total is going to be, you will have to estimate your time. To do that you will need to have the client give you written, detailed specifications for the site. When you then present your estimate you will have to specify how you will handle changes or variances from the original specifications that occur. The chances of changes coming along are usually very high, and it is not uncommon for the total changes to involve more time than you originally estimated for the entire project. Be certain that you clearly handle this issue with your client in advance of starting work; it has a very large potential area for dissatisfaction in either direction of not handled properly.

Finally. keep an accurate and honest log of your work time. This is how you will get good at estimating your time requirements. It's also how you will justify your charges to your client, if you are billing on a time basis. Not only will your estimating improve as you build experience, so too will your ability to fine tune your rate to the market in which you are selling. Stick to your formula. Don't suddenly start making guesses at the final number. You need to know the elements so that you can adjust them as they change and see the effect on your final number.

Just as your estimating skills improve, so too will your coding skills improve, especially as you continue to use HTML Goodies to pick up new technology skills and advice, and Goodies To Go to keep on top of things! As this happens, your time will become more valuable -- but then, you already know how to adjust for that!!

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