As a freelance web developer, setting your rates is one of the hardest things you’ll have to do. It’s confusing to have so many aspects to consider, but it doesn’t need to be a complicated process. The more work you do, the better you’ll get at estimating the effort and time required when taking a job.
When you are doing web development, how to charge is a tricky thing to nail. Let’s take a look at some of the most important points you’ll need to remember when setting your rates.
Begin with some basic numbers to give yourself something to work with.
If you’ve been working as developer for a while, you might already have a rough idea of your base rates. If not, look it up on salary.com to get an idea of the average annual salary in your area. Using this info as a guide, you can break it down into weekly and hourly rates.
Taking into account the hours you’ll need for communicating with your client, programming, design and admin related to the project (invoicing, etc.), work out how many hours you think you’ll need to complete it. We’ll talk about padding-out your estimate later, so for the moment just use these hours and multiply them by your base rate.
This is just a rough starting point – now for the fun stuff.
Not all of these points will be non-negotiable for each quote you write, but they definitely need to be considered in every instance.
As a freelancer you’ll probably be paying a much higher rate of taxes than you would if you worked for a company. This means taxes must come into play when setting your rates. To be safe, plan on paying 30-40% of your income to The Man, and make sure you’re comfortable taking home what’s leftover.
FREELANCING COSTS MORE
While you might be uncomfortable charging higher rates than you would make as an ordinary employee, there are several reasons why this is fair.
As a freelancer, you relinquish a lot of the perks that come from a steady job, like health insurance or a 401k plan. You also have to cop the costs of things like rent, electricity and equipment, which would be taken care of if you were a standard employee.
While there are plenty of perks in working for yourself (what normal job lets you work from a coffee shop or at home in your PJs?), freelancing also lends itself to a state of constant flux. Your availability for short-term projects or minimal ongoing contracts means you can charge more to offset the lack of stability.
YOU’RE MORE THAN YOUR SKILLS
As an employee, you are generally employed for your skills and experience.
As a freelancer, you have a lot more to think about: your rates need to cover the cost of your accountant, your programmer, your designer, your marketing team, your sales team, your office manager and your receptionist. In other words, everything you do to run your business needs to be considered when quoting for a job.
Agencies don’t employ volunteers to do their advertising or answer the phones, and neither should you.
CHARGE FOR THE VALUE YOU PROVIDE
For each website you build, you are offering much more than simply the hours it takes to put together. Each client you work with receives ongoing value from the site you’ve built, and this should come into play when deciding how much to charge.
Consider the type of project you’re working on and how much value you are providing to that client. Are you developing a hub for their entire business, or simply a static page to house their contact info?
The amount of value provided by a project may differ for each client, so keep this in mind.
ESTIMATES, HOURLY RATES AND PROJECT FEES
There are several ways to charge a client for a web development project. Ultimately, you want to be working from an estimate only, as this gives you room to move once you’re stuck into the work. Using the basic process we began with, you can take
your estimated hours x your base rate + any of these non-negotiables that you need to add
and offer this as an estimate to your client. Offering an estimate means the client has an agreed figure in mind for the project cost, but you can renegotiate if it takes longer than expected.
If you’re not comfortable (or your client isn’t) with using an estimate only, you can move from an estimate into a contract with a set project fee. Clients are more likely to appreciate this method, as they can hold you to this set figure despite changes in the project requirements.
You might also consider…
Depending on the project and the client, you may want to think about these points as well before offering a quote.
If your client is a close friend or family member, you may want to offer a cheaper rate. This is purely a personal choice, but it can be a good way to encourage referrals.
You may also think about offering cheaper rates for non-profit organizations or companies that you support.
To avoid the instability of freelance work, a long-term contract or client can be a welcome addition to your books.
Offering a discounted rate on long-term projects or for recurring clients is a good way to encourage more work or referrals after the job is done.
MAKING A PROFIT
There are a couple of reasons to pad out your estimate. One is simply to add a profit margin. If you’ve calculated a fairly tight estimate, you may want to add a neat 15-20% on top to ensure you’ll make a profit once your costs are covered.
The other important reason to consider padding your quote is to give you room to move, especially if your client wants a set fee to work with. If you’re not working from an estimate, you’ll be in trouble if you find out that the project requires more time than you budgeted for once you’re halfway through.
In this case, padding your estimate provides a buffer.
How much do you need this client?
To begin with, setting your rates will have a lot to do with how much you need a particular project. As you develop more experience and a greater portfolio, this should be less of a factor, giving you room to push your estimates towards the rates you really deserve.
For a great example of how to breakdown an estimate, see Anthony Damasco’s post.
What other points do you consider when working out how much to charge for a project? Leave a comment below and let us know.