Thread by @study_web_dev

Want to earn more as a freelancer?

Just double your hourly rate.

…wrong.

Here is ALL you need to know on how you charge for a website:

🧵

The problem:

Too many developers are quick to say $'x' for a 5-page website based on what is the “going rate.”

I’m going to share why I think there is a better approach.

I used to think that a website costs as much as I am willing to accept and as much as the client is willing to pay.

It needs to be cheaper than everyone else for the client to go ahead with it – or so I thought.

There are 3 main pricing options:

- Billing by the hour
- Fixed Price
- Value-based

Billing by the Hour

Your income is capped.

Let’s say you’re currently earning $25/hr and you’d like to double your income so you can go on vacation more, invest, etc.

Do you just double your hourly rate?

No.

Clients won’t just accept that you’re now “double” the worth - why?

Charging by the hour is actually harmful to you & the client.

Most clients ask for an estimate on how long the project will take and they budget accordingly.

If you tell them it should take 10 hrs and you bill them for 20, that doesn’t look good and the business won’t be happy.

Charging by the hour discourages efficiency and innovation.

Hourly billing encourages you to not work smart and to drag the hours so you get paid more.

(although unethical, just look at it objectively)

Some websites can be created in a day or two.

🧵 Keep going ⬇️

If you are charging by the hour, why would you rush to get this website done as soon as possible when you could delay it by an extra few days & get paid more for it?

Or maybe there’s a code snippet/plugin you can buy for $100 that can save you 3 days of coding time, but you...

...are hesitant to do this because that means you lose out on getting paid more and you have bills to pay.

Not to mention the administration and arguments with clients to verify you actually worked for the hours they paid you for.

Charging a Fixed Price

This is pretty simple.

You estimate how long the project will take and how much you want to earn.

Let’s say it will take you one month.

So whatever you want to earn, say $5k, you charge that for the project.

Although not the best solution, I do find this better than billing by the hour.

But is there a better approach?

Yes:

⬇️⬇️⬇️

Value-based Pricing

Let’s first start with what is a website?

1 - An off the shelf commodity.
2 - An effective marketing channel that can increase sales for a business.

This is crucial to understand.

What you are selling is something that can potentially increase sales 📈

Let’s say you made improvements to an existing website.

You charged $2,000.

They generated an extra $200,000 in revenue that year from your improvements.

In my view, you undercharged for the project.

Have you ever wondered what the differences are between a $1,000 website and a $10,000 website?

Or a $3,000 website and a $7,000 website?

Answer: it’s often very similar or close to the same thing.

The only difference is how much they charged for it and WHY.

❌ The goal of value-based pricing is that you’re not selling HOURS.

✅ You’re selling potential RESULTS.

Here’s how to do it:

Find out the potential increase in sales value of the project to the client over a year.

Then base your price off of this potential return.

A rough guideline would be 5-8% of the annual sales increase.

Example:

A business sells agricultural drones via their website. They ask you to create an improved website focused on generating more sales.

Your 2 main questions should be:

1. How many sales do you currently get each month?
2. What is your average selling price for a drone?

They answer with:

→ 10 sales per month
→ $8,500 each
 
You then do simple math to figure out how much they make each month ($8,500 x 10 = $85,000).

You look at their current website and see where they are losing sales and you work on a low estimate of what you expect sales could increase by after you make a conversion-centered website.

(This is either based on experience or CRO knowledge)

In this scenario, let’s say you are confident your improvements will generate 2 sales extra per month.

This means the business would make an additional $16,000 per month and almost $200,000 after one year.

You then prepare your proposal with this mentioned inside.

🧵40% left⬇️

For this example, your price could be $10,000 - $15,000.

Would you, ‘as the business owner’ be willing to pay around 5% of what you could potentially make after one year?

Of course.

You won't close EVERY client like this.

But you will get the RIGHT clients.

RECEIVING PAYMENT:

ALWAYS get 100% payment upfront.

It reduces conflict or disagreement.

The main issue for freelancers:

Not getting paid on time.

They do the work, the client is either not happy or the project is never “done” so the final payment gets delayed or not paid.

Just explain that it’s company policy (this works quite often).

If it’s a deal-breaker, then get 50% up-front and decide on the 2nd 50% payment.

Decide on a date for this 2nd payment as a project being “done” is relative to both you and the client.

🔥 BONUS Tip #1:

ALWAYS provide 3 pricing tiers to choose from.

Example:

#1 - $3,500 (Website)
#2 - $5,000 (Website +)
# 3 - $8,000 (Website +++)

For a breakdown why and to download a free proposal template, go to freecodecamp.org/news/free-web-…

🔥 BONUS Tip #2:

The clients wanting to pay the lowest price are often the most difficult to work with.

Hope this 🧵 helps some of you ❤️

I’ve written a lot on this topic which you can read here for further elaboration:

studywebdevelopment.com/how-to-charge-…

studywebdevelopment.com/hourly-billing…