Have you ever noticed how certain service provides – both agencies and freelancers – can get away with charging higher rates even though they are delivering work that isn’t up to standard? This happens all the time and it’s becoming much more prevalent in a lot of industries.
If you yourself are a freelancer or operate an agency then chances are that you will come across some of the work that these people receive from other providers. They might pay a premium price and still not get exactly what they are looking for, so they have to come to you to remedy the problem.
When it comes to pricing and quality, these two factors have a strange correlation that many people simply can’t understand. Sometimes clients will go with a provider charging a premium rate instead of the standard rate – even if the premium rate provider will produce a lower-quality result. It’s definitely a complex issue.
However, one thing that many people fail to take into consideration is that price isn’t everything. We have become so caught up with the price wars and the fact that we’re in a recession that we have all tried to make low-pricing our unique selling proposition (USP). In most cases, clients will pay a premium price because of how your business is presented, how you conduct yourself, and how you are offering your product or service.
Listed below are some ways that you can alter your service so it caters more towards the client who is willing to pay the premium price, but there is nothing to entice him/her. Ultimately this means that you can start charging what you are really worth.
Don’t know how much to charge?
There are numerous pricing models that web designers have available to them to make their services more attractive to potential clients, this includes: fixed-project pricing, hourly rates, retainer fees, subscription services and so much more.
It’s a good idea to think about these options and find out what works best for you. With that being said, it might be attractive to offer your services for free when you are just starting out but it’s important to steer clear of this. This will only take up time and energy that could be better spent marketing your business.
Working out how much you should charge for your service is something that a lot of people struggle with – by pricing your services too high you will have a lesser amount of clients wanting to work with you, some of them simply won’t be able to afford it. However, if you price your services too low then clients make take advantage, not to mention that your revenue will decrease a huge amount.
One of the most complex aspect of a web designer’s pricing model is that there really is no set amount of time that can be spent on a project. What is meant by this is that a web designer might be spend 10 hours on project-x, but then could spend 70 hours on project-y. This wide range of time commitment makes it much more difficult to come up with accurate quotes.
First, weigh in your costs
The first step in ensuring that you are profitable is doing some accounting and budgeting work – after all, cash flow is the heart of every business. You need to work out your overheads and your cost to produce the product or service to the client. Make sure you charge well above this amount so that you can comfortably cover any bills that you have and pay yourself a comfortable salary.
You will be able to claim business expenses meaning that you won’t have to pay tax on the amount of money that you spend on these bills. Business expenses include: office space, any hardware or software that you use, training courses and materials, insurance and so much more.
You should also consider your personal expenses such as your rent, food, utilities etc. You can take this out of your business by paying yourself a salary – make sure that it’s enough to cover your bills every month.
Lastly, it’s always a good idea to have an emergency fund in the slight chance that you need to pay an unexpected expense. For example, if your laptop breaks down and you need this to operate your business, you might have to dip into this emergency fund to purchase a new one.
Hourly or fixed price
In most cases design projects will be structured on either a fixed-project pricing or an hourly rate. There isn’t much room for retainer fees and monthly subscriptions when it comes to these type of projects. Knowing which pricing model to use is going to be very beneficial.
Clients usually prefer a fixed-project pricing structure as this allows them to understand exactly how much your service is going to cost. With hourly rates, the client won’t know exactly how many hours you will need to spend on the project and thus probably won’t feel comfortable being obliged to pay an additional amount of money.
However, from the perspective of the designer, the hourly rate would seem more attractive as this ensures that you are compensated if you run into any unforeseen problems that would delay the project.
More experienced freelancers and agencies will understand which pricing structure will bring in the most amount of sales and resonate with the majority of their clients. When you’re just starting out however, it’s important to get experience with both of these pricing structures – perhaps asking clients which structure they would prefer would be the best route to go down.
Raising your rates
Keeping your rates low at the inception of your business might seem to be the most logical thing to do – however, as you gain more experience, build up a more diverse clientele base, or ultimately produce a much better service, it’s only right that your rates follow the same path and increase. If you have taken on additional expenses and overheads then this is even more true.
Your experience is one of the major factors that can determine your price point. If you are a newly established business then obviously people will be slightly weary to test out your service as you don’t have a reputation just yet.
If you have been running the business for a number of years and have a strong clientele base then potential clients will know that you provide a great service that is in demand and are thus more likely to become a client.
Always remember not to feel bad about increasing your rates, your service might seem like an easy task for you but for everyone else it’s not. It can be very easy for service providers to feel as if they are charging too much and they become hesitant and self-conscious about their service. Think of it this way, if the client was to build their own website it would take them a lot longer and take up a lot more of their time compared to using your service.
Consider demand a factor for lowering or raising your rates
It’s not just factors such as business expenses and overheads that are going to determine how much you should charge for your service. If your business is going well and you have found that sales are coming in at a steady rate with no sign of diminishing, then mark your quotes up by 10-20% for the next client who wants to work with you.
At the other end of the spectrum, if demand is low and you’re not seeing a steady stream of clients walk through your door then it might be worthwhile to accept a lower quote just so you have something to do. Some revenue is better than no revenue.
Avoid bad clients and sign strict contracts
A large percentage of people getting scammed and ripped on in business, no matter how experience they are of how much due diligence they conduct – sometimes it just happens. However, there are a few ways to protect yourself and ways to recognize bad clients so that you can limit your exposure and your risk.
These are some of the most clear signs:
They are overly excited and make promises that seem unreasonable. There really is no reason for a client to act this way unless you are providing some sort of revolutionary service that will make them a millionaire overnight.
They talk about being a “business partner” essentially meaning that they aren’t prepared to pay you for your services. If this happens, just walk away.
They omit a lot of what they require i.e. they will try to make their project sound much easier than it already is and will then try to get you to do small extras without an additional charge.
With the above in mind, it’s definitely beneficial for both you and your client to draft and sign a legal contract so you are both protected. You should already have terms and conditions listed on your website but sometimes it’s worthwhile to go that step further and get a contract written up for that specific project – this becomes more necessary as your rates are increasing and the projects are more expensive.
Ending thoughts
Pricing web design services correctly is a problem that many people seem to have, it’s often hard to find some sort of middle-ground where both the client and provider and happy. Unless you run into the perfect client of course. The best thing to do is remember that nothing has to be set in stone, you can experiment with your pricing structure and see which one converts the best.
Even though it might seem beneficial to price your services low as you begin to establish your business, you should be very careful with this at low prices will only attract low-quality clients.
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