Pricing5:31 with Paul Boag
One challenge facing freelancers and agencies alike is determining how much to charge for their services. One debate: fixed price vs. time and materials.
[How to Run a Web Design Business with Paul Boag: Sales and Pitching: Deep Dive] 0:00 So now we come to the subject of sales and pricing and all of that kind of nastiness. 0:04 I don't know whether it's a British thing, we hate talking about pricing. 0:10 It's embarrassing talking about money but we need to do it. 0:15 It's a part of the job and we will need to face it. 0:18 The first thing you need to work out is 0:22 how you're going to go about charging your clients. 0:25 Are you going to be fixed price or are you going to go time and materials? 0:27 Now let's face it we do love to be time and materials. Didn't we? 0:32 It is much easier to manage and you get a much, 0:36 well, you get paid for the work you do basically. 0:40 But, a lot of clients are going to be nervous about time and materials. 0:44 For them, there are no limits. The project could cost millions for all they know. 0:48 And it requires a lot of trust before you get to that point. 0:53 Time and materials does work but it works better with regular clients 0:57 that you built good working relationship with 1:02 and it's great for smaller pieces of work. 1:04 Time and materials should always be associated with a rough estimate 1:07 just to give the clients some sense of security, 1:12 some sense that they know how big this project is going to be. 1:16 If you do go down the time and material route, 1:21 make sure you won the client well before 1:23 you reached that estimate that you've given them. 1:26 If you think it's going to pass the estimate, 1:28 if you got any doubts at all, make sure you talk to the client. 1:31 They really don't like surprises. 1:35 But in most cases, fixed price is the way to go 1:38 especially when dealing with new clients. 1:41 But that does mean you need to add contingency to cover those eventualities 1:45 that you haven't considered and make sure you do add those in 1:49 because it can come back and bite you if you don't. 1:53 The other important thing to remember when it comes to using fixed price pricing 1:56 is to make sure that you don't forget the add on project management time 2:01 because that takes a lot more time than you think. 2:06 Another really important thing to talk about when it comes to pricing 2:10 and I admit this is not easy that you need to talk to the client about budget. 2:14 How much have they got to spend? 2:20 This is a really important question and a lot of clients, 2:23 they really like talking about money. 2:26 They've got this feeling that if they say to you they've got $30,000 to spend, 2:29 then inevitably the project is going to cost $30,000 2:34 even if there's actually only $5,000 worth of work. 2:38 There's a lack of trust there. But, you really need to know. Don't you? 2:41 You need to know how much you've got to work with. 2:45 I used an analogy. 2:50 I talked about houses and I asked the client, how much does a house cost? 2:52 And inevitably the client has to say--well, it depends. 2:57 It depends on how many bedrooms there are, it depends n where the house is, 3:01 it depends on the market at the time. 3:05 There were so many factors involved in buying a house 3:08 and how much a house costs. 3:11 The same is true with web design. 3:14 For website, it depends on the technology that you're using, 3:16 the functionality that's required, the amount of time that's dedicated, 3:20 design or usability testing or whatever else. 3:23 Basically, a website can cost as much as you're willing to spend on it. 3:26 Now, a lot of clients will get it at that point. 3:32 When you explained it like that, they will understand, 3:34 but there are always some clients, there are always those that refused, 3:37 that will not give you even a vague idea of what they're budget is. 3:42 In such cases, the thing to do is give them a rough estimate, a range 3:47 that their website is likely to cost. 3:54 If that scares them off because it cost too much, 3:56 then you're better off finding out then before you go to 4:00 the effort of pitching for the work properly. 4:03 When you do produce your final pricing, 4:07 make sure you break that pricing down into modular chunks. 4:10 Think of it in terms of core functionality 4:14 that has to be on the website and optional items. 4:17 So make sure that every item of functionality 4:20 on the website is priced individually. 4:23 This means that if your budget goes beyond what they are expecting, 4:26 then they can go through and remove items 4:31 or they can say that item was nice to have, 4:34 but at that price, we can't afford it or we can't justify it. 4:37 Break your pricing down wherever possible. 4:40 Also, if there's ongoing costs, make sure to clearly identify that from. 4:43 Things like hosting the main names or indeed 4:49 anything else that's going to reoccur overtime. 4:52 Clients kind of expect those things to be in a proposal and if they're not, 4:55 then they become suspicious and wonder why there are now ongoing costs. 5:00 The damage is the relationship and the last thing clients just despise 5:04 the last thing that they want as prices so avoid those at all costs. 5:10 So what is the secret here when it comes to pricing? 5:16 The secret is a simple one. It's all about honesty. 5:19 It's being upfront and talking about subjects that maybe 5:23 a lot of us would prefer not to talk about. 5:27
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