Pricing for web pros can alternate between challenging, frustrating, and rewarding. Obviously you anticipate covering your expenses and earning a healthy profit — but you also want to find a balance between losing clients based solely on price, and leaving money on the table. Turns out finding that balance can be much like walking a tightrope.
Know this: If you’re landing every client proposal, you’re probably not charging enough. Set a goal of pushing just to (or over) the limit, so that occasionally a client says no or pushes back. Then you know you’re close to the ceiling of reasonableness, and probably not underselling yourself.
As I’ve learned some hard lessons over 22+ years in the biz, I’m sharing what I’ve learned, so you can avoid these same pitfalls. Read on for 10 mistakes that could sabotage your pricing strategy.
Mistake #1: Charging for time instead of value
When I first started out, I kept track of everything, invoicing clients based on time. Sounds easy, right? I thought I’d keep a log, calculate hours times dollars, send an invoice, and wait for the check. However, I quickly learned clients don’t always trust a contractor’s bookkeeping (to the tune of “why did it take this long?” and “I bet someone else could do it faster”).
Remember, you’re not selling the time it takes to build a website. You’re selling a solution that brings your client more customers, and increased profits. Forget about how long it takes: price according to the value your solution provides. And “hours spent” simply doesn’t account for accrued hours of training, experience, knowledge, and problem-solving skills.
A caveat: occasionally an hourly charge is appropriate — especially when both parties acknowledge it’s an unpredictable solution, requiring an unknown amount of time, and resulting in an unpredictable price.
Mistake #2: Not keeping an eye on the competition
Of course you’re keeping a watchful eye on the current market, and your competitors’ pricing, but also consider:
- Is your market local, national, or international? A larger competitive area makes pricing even more challenging.
- Are you and competitors targeting exactly the same audience? Is there ample work to go around?
- Are competitors offering exactly the same package? Hint: probably not, if you’re bundling with other complementary services such as copywriting, SEO, or Care Plans
- What level of customization are you providing? As a custom designer, your competition is NOT the drag-and-drop tools. It’s not even those who tout themselves as drag-and-drop tool experts.
Mistake #3: Assuming competitive pricing will land sales
While many buying decisions are based solely on pricing, we’re not talking about purchasing a chai latte or pair of Nikes. You’re providing a complex service composed of multiple factors, and you’re on the hook to provide an amazing proposal showcasing the many benefits of choosing you.
In addition, you’re offering the value of premium service — including hand-holding, accumulated wisdom, and the occasional bout of business coaching. Premium service is certainly worth more than ho-hum average service, and results from your work lead to other significant benefits down the road: time savings, improved profit, and reduced stress.
Your goal in sales is to convert shoppers from bargain hunters to value seekers.
Mistake #4: Not knowing exactly what income you need to cover expenses
Know your costs, down to the dollar, including both one-time and ongoing expenses. Understand the complete cost of running your business, including:
- Hardware and software, both ongoing and one-time costs
- Sales & Marketing
- Insurance: business, liability, and health, if not covered under another family member’s policy.
- Professional fees such as legal or accounting
- Licenses, taxes, dues, memberships, and subscriptions
- Travel expenses associated with visiting clients
- Office space
- Training, books, dues, and conferences
Then consider the level of steady income required to maintain your standard of living, including:
- Basic survival costs: rent or mortgage, food, utilities, entertainment, clothing, and so on
- Paying off any extra debt, such as college or car loans
- Amount you want to put into savings or retirement
- If you’re supporting a family, add in child care, tuition, dance lessons… and the list goes on.
Mistake #5: Assuming set packages will work for all clients
Web design is definitely not a one-size-fits-all service. Offering limited pre-defined packages means most customers are not getting accurate pricing, and you’ll find yourself with projects that are more time-consuming than anticipated.
Once upon a time, I priced sites as a fixed cost + a page-based cost. I started with $500 to get the site set up architecturally, and then a variable cost of $50 per page.
That quickly proved problematic as pages have a wide range of complexity and functionality. Once I recognized the benefits of project costing — where I did the math based on the number of pages, including complexity, and then presented only a project price — I never went back to the price-per-page model.
Crafting a custom proposal lets you demonstrate value and price far more accurately, while highlighting your skills and the required effort.
Mistake #6: Not balancing your income stream
Most folks start out in this business planning on building sites, but that’s a feast-or-famine situation depending on the time of year, how successful your marketing is, and the general global or national financial situation. Long-term survival involves splitting your income into three strategic buckets:
Project income — Single projects with a finite implementation time-limit and fixed cost can be a big boost to your bank account, but they’re unpredictable.
Recurring revenue — Clients pay a small to moderate monthly fee for an established service, such as a website maintenance plan. While it’s a modest amount per client, guaranteed income rolls into your bank account like clockwork. You’re still doing the work, and you’re not worrying about sales or marketing. Better yet, new design projects provide another opportunity to sell this package.
Passive income — Do the work once, and bring in additional income with little effort. I published a book a few years ago, and now sales are extra money in my pocket, with zero effort. Other forms of passive income include on-demand classes or products, affiliate links, and reseller accounts, where clients purchase or renew services, and you continue to receive dividends.
Mistake #7: Not strategically offering discounts
Discounts sound counterproductive, when it comes to bringing in more revenue, but they contribute to retaining customers, and enticing them to pay for something far into the future. Established clients may deserve some amount of discount on subsequent projects, as you’ve not invested in marketing to land that project, and your client-interaction overhead is more efficiently managed.
My Care Plan clients receive a small discount when paying for multiple months in advance, rather than auto-billing every month. This ensures they’ll stick around for a while.
I use referral bonuses to reward clients who send more work my way. A $25 gift card is essentially discounting $25 on their next invoice, but it’s perceived as a thank-you gift, and is more tangible than just an invisible line-item on an invoice.
Mistake #8: Not using niche marketing to boost pricing
Justify increased pricing by becoming a niche market expert. By positioning yourself as such, and offering services to clients specifically in that niche, you’ll be seen as providing higher value, based on your experience and expertise. Specialists often close more deals than generalists, and can charge more.
Establishing niche expertise also increases the potential for referred work. Many niche markets have their own networking groups, and members count on each other for referrals.
Mistake #9: Lacking a well-defined, comprehensive payment strategy
While your accepted payment methods may not justify raising your prices, they may make or break some deals.
Consider credit cards and digital payment systems such as PayPal or Amazon Pay: accepting them means paying processing fees. On the other hand, demanding payment by check risks losing someone who would rather put large purchases on a card and receive kickbacks or rebates. Once I accepted online payments, I also found that invoices were paid much sooner.
Even more important than how you get paid is when you get paid. Recurring revenue is easily set up as monthly auto-billing. But for projects, how do you split up the payments?
A lesson I learned long ago as a homeowner: never make the final payment to a contractor until the work is finished. It could be landscaping, remodeling, painting, it doesn’t matter. If you make the final payment before the work is completed, there is always the risk that they’ll start working on something else and not be so motivated to finish the last tiny details of your project.
That’s where progress payments come in. As with home contractors, the normal expectation for web pros should be a deposit, followed by one or more progress payments, ending with the final payment after completion. Paying a deposit means they have skin in the game.
Knowing they don’t have to make the final payment until they see the site usually boosts confidence. For websites, I typically request a 25% deposit, 25% after architectural work is done, 25% before launch, and 25% after launch within two weeks. I don’t turn over the keys or passwords until the last payment is received.
Mistake #10: Not having an advance plan for off-script requests
What if potential clients counter-offer? If someone says my quoted price is too high, I’ll discuss it with them, but won’t automatically lower the bid just to get the job. My rationale is simple: if I’m willing to do the job for a lower fee, my first estimate was trying to take advantage of them. My goal is to have the first price quoted be a fair price, commensurate with the value I’m providing.
So after that, my next response is to ask where they’re willing to compromise on project scope. There’s a difference between “I think this cost is too much for what I’m asking you to do” and “I simply can’t afford to spend that much right now.” Perhaps the project can be split into 2 phases, so that they have a site in the same time frame, but with fewer features. Additional work can be addressed later when more funds are available.
Sooner or later (probably sooner), every web pro will be asked to do a pro bono project. There’s always a good story: it’s a nonprofit with a small budget, it’s an organization you really want to support, and so on. I do sometimes take on pro bono projects, but they are well-defined in terms of my role, and response timeframe. So it’s best to know how you’d evaluate such requests, and have a ready response.
Recipe for pricing strategy success
Now that you’ve seen how it’s easy to sabotage your pricing, revise your focus to create a recipe for success:
- Shift your attitude and thought processes away from time, and towards value. Know how, when, and why you provide the best value to clients, then focus on pitching yourself that way.
- Keep a watchful eye on the competition.
- Use your messaging and process to convert bargain hunters to value seekers
- Get a clear handle on all of your expenses. Know your monthly budget inside and out.
- Reject a one-size-fits-all approach, and customize proposals to showcase value and maximize profitable sales.
- Create a long-term plan that provides a balanced income stream through projects, recurring revenue, and passive income.
- Strategically use discounts to keep current customers engaged.
- Leverage niche marketing to increase pricing.
- Define a comprehensive strategy for payment schedules as well as payment options.Create an advance plan to respond to unexpected or unusual requests.
- Create an advance plan to respond to unexpected or unusual requests.
When all is said and done, what’s the payoff for planning and strategizing around pricing?
Profits, naturally. But also, having a plan and a strategy removes the guesswork and stress, and leads to appropriate pricing. And more accurate pricing allows you to be fairly compensated for the amazing work you’re delivering.