In this article I will present you five methods how you can charge your projects as a freelancer or self-employed web designer. Each pricing model has its own advantages and disadvantages, which I will try to explain to you. It is about the hourly rate, the daily rate, a fixed price, a retainer and finally about the supreme discipline Value Based Pricing.
Important: Do not have a standard for different customers
Even if a certain pricing strategy sounds right to you, you should by no means have one standard for all customers. Projects and customers are different and even if you know inside that there is an optimal way for you to agree on a price with your customer, this does not necessarily work for everyone.
Method 1: Work on an hourly rate basis
Working with an hourly rate as a web designer means that you get exactly as much money for your service as you need time to complete it. So just like with permanent employees, you exchange your time for money.
The derivation and application is actually quite simple and especially for the beginning of your self-employment well suited to gather experience.
Many freelancers start with an hourly rate and thus work pretty close to what they also need to live on or what they spend.
- You write down all your monthly expenses and fixed costs in a table.
- You sum up all expenses to one result.
- You divide this result by the working hours you have available.
- Monthly expenses: $2500
- The pure working hours you have available on average per month: 60 (important: do not calculate with 8×5 hours per week, because you will not have work in every hour)
- 2500 / 60 = 41
- Your hourly rate would be: $41
- Plus profit surcharge: 20% = approx. $50
One disadvantage of working on an hourly basis
Chances are high that as a just starting web designer, you can earn far better this way than with the other pricing models I’ll introduce in a moment. However, the hourly rate has a tricky trap that you can fall into very quickly depending on the optimization of your design process.
Imagine your projects are paid with a fixed hourly rate and you have two employees in your team. One with more experience and one with less experience. Both help you with the implementation of websites.
Who do you think you make more money with?
One has optimized his process over several years and can handle projects efficiently and quickly. The other is still rather fresh and is slower and has less experience.
So you would earn more money with the inexperienced web designer than with the experienced one, simply because it takes him longer for tasks.
So an hourly rate prevents you from optimizing your own work process to become better and more efficient on the next project.
So you could say that if you charge by the hour, you can earn the most by working slowly and taking a long time to complete your projects.
This is only one of the points that speak against it and yet there are still thousands of freelancers who work with this method.
I’ve put together a whole separate post for you on why you shouldn’t work with an hourly rate in the future and how it can lead you to sell yourself short:
Time is a limited resource
If you are paid at an hourly rate, then you are selling your time. So it’s possible that someone else is taking your time for money. Think of it the other way around, though. Can your money buy you more of your time? No. No one can. Not even the richest person on earth can buy more hours in a day. Even for him, each day has 24 hours and no more. And that is why your time is something very precious. Therefore, think very carefully about how you want to deal with it.
Method 2: Use a daily rate or a weekly flat rate
Someone who doesn’t want to move away from an hourly rate because of their clients and still asks me for an alternative, I recommend as a next step to first use a daily rate or even better, a weekly flat rate.
Why is a daily rate better than an hourly rate?
If the client pays you for a full day and books you for a full day, so to speak, it’s up to you how fast and how long you need to complete the activity. And that automatically helps you find ways to build your projects smarter to take less than the eight hours of work time to do it.
Even better would be a weekly flat rate, which you can use well on the projects where it is already foreseeable that they will take longer.
A big problem that a daily rate as well as a weekly flat rate or hourly rate have in common is that while you can initially estimate for the client roughly how long you will need for the project, this is an estimate and not a price. A price is fixed. It does not change. But you can’t predict 100% accurately how long it will take you, so you probably say minimum X days.
If you take a look at your last projects, it could well be that this time was never enough for you, because in our industry it’s simply incredibly difficult to predict something like this and every now and then tasks come along.
In this case, the customer has to pay more than he actually planned before the project started. This automatically leads to frustration and in the worst case it also leads to a bitter reverberation for you, as the customer sees you as someone who can’t properly assess their time and tasks. This is the reason why I personally would recommend switching to the next pricing model as soon as possible.
Method 3: Use a fixed price
With a fixed price, the customer knows in advance exactly what the project will cost him in the end, and he also pays no more and no less.
When a client asks me why I don’t work with an hourly rate but with a fixed price, the argument is usually plausible. An hourly rate is only an estimate, so you will most likely incur more costs. But I would like to give you a price that you can count on in advance and that you can plan as an investment in your business calculations.
If you’re working as a freelancer for an agency, this might be unusual (you can work well with a daily rate there). But if you’re working directly with your own client, they’ll most likely love to know a fixed price upfront.
However, you may already see a danger coming here.
What if a fixed price takes you longer than you originally planned?
Then the problem is not with your customer but with you. Either you still have difficulties to estimate your working time for certain tasks correctly or you have not defined the goals and the result clearly enough in advance.
The fact that you can’t properly estimate the duration and time for performing a task is probably because you simply haven’t done these tasks often enough. It may also be a project request for an area in which you have little or no experience. You might be doing web design, but also logo design and brand identity, designing apps, making animated prototypes, creating concepts for social media campaigns, etc. Exactly then it will be difficult for you to have enough practice in all these areas to be able to properly assess what is coming up.
This is also why I recommend positioning yourself in one area especially for starters and building your niche.
But if you’ve done the concept, design and implementation of a website 20 times in the past, you’ll eventually get a feel for what the client needs and how long it will take you. And when you are ready, a fixed price can be very profitable for you.
Nevertheless, with a fixed price you should certainly integrate a higher safety buffer in order to be able to work off unforeseen events.
With a fixed price, the result remains the same for the customer. In the end, he has a website that is individually tailored to him and that best achieves his goals. Only you have just refined your process in the background and come faster to his desired result.
Method 4: Work on a retainer
As soon as you have created websites for several clients as a web designer, it may well be that your first client already has further tasks for you to implement. This is not the case with every client, but especially larger companies regularly update their websites or have product pages that still need to be maintained.
Even though it has become insanely easy to have a company website updated by your own employees these days with tools like Webflow, there are quite simply those who don’t want to do that. Especially then, a retainer as a pricing model could be a good option.
With a retainer model, you’re like an insurance policy for the customer, so to speak. If there is a sudden emergency, you are there when they need you.
In a retainer-based pricing model, your client pays you a fixed price each month and you work on specific tasks. This can be lucrative especially in the months when there may be no tasks and you still get paid. And it’s not unfair, because as a web designer you’re “freeing up” time for that client each month, so to speak.
However, a retainer also comes with its problems. You have to somehow legally define the framework and monthly scope, and that usually leads to a company having X number of days available to you, where we’re sort of back to an hourly rate.
Another problem I see is that with a retainer, you’re more likely to be working off tasks. So it’s very likely not a super creative new website project every month that you implement from scratch. It’s often rather smaller tasks and administrative activities.
Whether you want that and find it good, you have to decide for yourself.
Possible retainer options you could offer as a web designer
Option 1: Simple support
Contains for example:
- All content updates that occur monthly for a customer including adjustments for texts
- Replace images
- Edit SEO descriptions
- Likewise, you could also add CMS elements like blog posts or team members
- If they have questions about Webflow or the website, you are there to answer them
You could also arrange for updates to be incorporated within three to four days. What is not included here are design adjustments to the website.
Option 2: Advanced support
Quasi everything that is included in option 1 plus:
- You create new pages for the customer
- Design adjustments to the website
- Updates to the existing website
- Solves any display problems or bugs that may occur over time
Option 3: Premium Support
Everything included in option 1 and 2 plus:
- Monthly Google Analytics reports and analysis including improvements to the website that you could present to the client based on the results.
- Monthly search engine optimizations
- You could take care of blog posts and more traffic
- A nice bonus with this option would still be a faster delivery time. E.g. conversion or implementation within one day.
- You could also set up an extra number where a decision maker can reach you 24/7.
It is risky to include creative design work in such options, as they often cannot be estimated well in terms of time. So if you want to make adjustments not only to the website but also to the layout for your clients, your price for this option should be accordingly much higher.
Method 5: Value Based Pricing
Value Based Pricing is the most difficult, but at the same time the fairest method when it comes to pricing your services as a web designer.
Think about it: When you work at an hourly rate, you want to work on a project for as long as possible so that you earn as much as possible. The price you end up with only has something to do with you, and really nothing to do with the client.
Value Based Pricing, on the other hand, is value focused. The focus here is on the customer, his goals and the result you build for him. And the price is also linked to this.
VBP is a complete rethinking of the approach. You don’t ask directly how many subpages, which plugins should I include, which elements should be on the website, what do you want to see here, what do you want to see there. With VBP you start with a conversation that focuses on the value of a project.
- Why is this website important to you?
- What do you want to achieve with it?
- What does a home run look like for this project?
- Why do you want to work with me in particular?
So a lot of these questions are first about the why and the business behind it.
So why is this pricing so fair for both sides? Only by helping your customer get more value can you earn more yourself.
Your price is only a fraction of what your client earns with your result.
However, I can’t recommend you start with this pricing model until you’ve tried the others. To really dive into value-based pricing, you simply need to understand the pros and cons as well as the problems of the other pricing models.
With which customers can you apply Value Based Pricing?
You can’t apply Value Based Pricing to every customer. There are just too many problems out there that you realize early on would give you trouble on a project and also don’t have the right mindset.
If a customer comes to you with a website project request and you ask him why he needs this website and he doesn’t have an answer or just something like “everyone has a website and I need one too”, then this customer will never want to spend a lot of money on the website because it simply doesn’t have enough value for him. Other things are probably more valuable for his business. And that’s ok. Your job then is not to make those customers change their minds, but to filter those customers. That’s the only way you can eventually reach a customer base that has the right background and the right mindset.
Would you spend a lot of money on something that you don’t really need? Probably not.
So Value Based Pricing is absolutely not for everyone. Especially if you are still in the beginning and working on your craft, you should rather start with one of the other pricing models.
You need to understand your craft and design process for sure. That’s the foundation. You need experience.
And when you start with value based pricing you will probably lose some customers that you would have won with a different pricing strategy (own experience). Vbp is not easy. Definitely you should not start with it.
The big topic at VBP is value. What is value? What is worth something to you, what is worth something to your customers?
How much money do you spend on an architect, on a new jacket, on a car, on a shoe, on a website? You probably have a different relationship to all these topics in terms of value than I do. And it’s the same with a website.
How does $10,000 sound to you? Like a lot of money?
The only answer you can really give to that is: Related to what?
In terms of a lemonade that costs $10,000, it’s a lot of money.
Next to a customer’s website that brings him $50,000 a month, $10,000 suddenly doesn’t sound like so much anymore. Wouldn’t he like to invest $10.000 to make $60.000 monthly afterwards? Probably yes.
The problem here is that for many, a soda is a tangible, physical object. You’ve bought it many times and you’ve drunk it many times. You know that $10,000 would be totally absurd for it. You have a certain value that you would give to this object.
But how is this different from selling services like web design? Likewise software development, marketing, video production or text production. These services are largely intangible, so less tangible. So what should our clients best compare them to in order to give them a price tag?
Maybe with how long you need for a website? With a price that the competition has quoted? With the difficulty of the task itself? No! The only thing your client should compare a price you quote with is the perceived value of your contribution to the result they want.
He needs to see your job as an investment, not an expense.
Where does he want to go? What can he achieve with the result and to what extent is it worth it to him? All of this is exactly what you need to find out in an initial conversation on the topic of VBP. And this is definitely the hardest part of this pricing strategy and needs a lot of practice.
The price is independent of time and duration
Example: Let’s assume the customer has a running platform and sells a SASS software. Many interested parties would also get the software if a certain feature would be implemented as well. The customer has found an expert in you who can do just that.
Of course, he is now interested in you implementing this feature as soon as possible, because he can then also make more sales. He may even pay a surcharge for it because it is a faster delivery time. So your price is independent of the duration.