New and Improved for 2008!
If you haven’t noticed, there’s a flurry of concerned conversation surrounding pricing for web services like design and development these days.
We’ve talked about it before, other people have talked about it before, and I bet our potential clients sit around talking about it, too.
Even though pricing your project should be a crystal clear process (we try hard to make this magic happen), it’s often not. You (the potential client) worry you might be taken for a ride and we (the agency/designers/consultants/geeks) have a hard time pulling what you want from your requirements lists and RFP’s. Yibber.
After receiving lots of comments on a bite-sized post I recently wrote on a related subject, I got to thinking: Maybe I should spend some time talking about how we decide what to charge you (even though Keith has already done so, in our pricing guide). So here are some basics:
What We Charge (Our Estimation Rate)
In general, we calculate costs based on a $150/hr rate. This is how we initially price out our projects to generate an estimate, so I’ll call it our estimation rate.
It’s important to note, though, that this is not the same as a flat hourly rate. A flat hourly rate doesn’t fully capture all that’s included in our process, and doesn’t necessarily reflect all the work we do. We often do more work than a flat hourly rate implies (we don’t pad our estimates, for example). Similarly, we don’t bill for every single hour we spend. Biz Dev, consulting and advice, and related internal meetings or phone calls are all examples of added value associated with our estimation rate.
Our Bread and Butter
As you might know, a typical Blue Flavor project involves the following phases:
- Discovery (figuring out the deep ins and outs of your application or website, so we can work on it)
- Information Architecture (with navigation structure, sitemap, and wireframe deliverables)
- Visual Design (with photoshop comp deliverables, usually 1-4 comps)
- XHTML Templates (web standards-compliant build out, usually 2-5 total)
- CMS Integration (often Expression Engine, with template integration and configuration of special features you want)
- Project Management (with weekly updates and a hands-on-but-not-smothersome approach)
Now, we definitely do other things (usability testing, consulting, etc.), but this is our most common project outline.
Fine. But What Do I Actually Get?
No matter what, you can expect current, standards-compliant design and development. A quick look at our work will give you a good sense of our style and client history. You can also expect us to spend a good deal of time discovering how to tailor our design to fit your company’s goals and needs. Knowing how to work with you to extract the right information is a huge part of doing good design, and it’s what we’re good at.
The specifics of what you get, however, depend on a number of intersecting — and sometimes conflicting — variables. This is where pricing your project can be tricky for us, and sticky for you. Here are some basic factors that affect pricing:
Deliverables: No matter what, we’ll probably give you photoshop comps in visual design and XHTML/CSS templates in template development. But the rest can vary. Depending on whether you have a site or application, for instance, you might get a navigation structure, a site map (for the former) or process flows (for the latter) etc. in the IA phase. There are analogous examples in other phases as well. The gist is that your price will change according to whether you need all of these deliverables, or just some.
Rounds of revision: We generally don’t do more than two rounds of revision for most deliverables, unless we’re having trouble capturing your vision, which is rare, but we can often cut costs by limiting your input to one round. In many ways, this can be an idea to help cut costs, but this really depends on your process, how many internal stakeholders with buy-in power you have, and so on. We sometimes cut back on rounds of revision for clients who have small budgets but need all our standard phases.
Your scope: This is where things can get tricky. The depth of what you need will affect the cost of what we deliver. Obviously. The important part here is to determine how many pages or screens we’ll be redesigning and what kind of development work you’re looking for — and up front, before we begin work. Sometimes, however, we run into the dreaded situation of discovering halfway through a project that (for example) you actually need three more pages architected and designed than we originally outlined. Let’s assume this oversight is significant, and not Blue Flavor’s fault. In this case, if the work required to address the problem exceeds ten percent of the original price, we create a change order request and tack the cost on to the existing job order.
Reality: If you have a stakeholder pile-up and your CEO refuses to sign a job order unless we cut $400.00 from the total cost, we’re probably going to cut $400.00. $5,000.00 is another story.
There are definitely other factors beyond deliverables, rounds of revision, scope, and reality that affect how we price a project, but these are the main contributors. So if you’re wondering why we’ve priced something in a particular way (and we haven’t sufficiently explained it) feel free to reference one of these when you call.
And again, you can visit Keith’s pricing guide for a more complete and direct picture.
No Padding, No Superfluous Work
We understand that every client worries about this. So you should know that any ‘padding’ we do is accounted for in our $150/hr estimation rate. We do not, like some agencies, add to our initial calculated rate to account for additional time we might potentially spend. This is included within our rate already. And if we find that we’re going well above and beyond what we’ve outlined in a job order, we either address it directly via a change request, or simply decide that this is what it takes to get the job done.
We also don’t, under any circumstances, add in additional work (like deliverables and rounds of revision) we feel is not necessary to completing your project. Assuming you’ve communicated your needs clearly, we have a solid sense of what we can do and how long our services take. We simply don’t do superfluous work.
The Bottomline.
The bottomline is, we decide what to charge you by multiplying (A) the number of hours we think it will take to complete a set of deliverables or features by (B) our 150.00/hr estimation rate. Or, in other words:
A X B = The Price of Your Project.
Beyond that, we look closely at everything we’ve got swirling in the mix: Scope and deliverables required to meet and fulfill your hopes and aspirations, rounds of revisions we think you’ll need/want to correct potential errors, and constraints your timeline, financial situation, and stakeholder situation impose (reality).
I hope this un-muddies the water for our beloved potential clients (and everyone else), but if not, you can always get in touch. Let us know what more you’d like to know!
Interesting process. That seems like some very proprietary information.
I am wondering if BlueFlavor will do single aspects of a site? Such as just restructuring navigation for a site. Or just porting a site over to expression engine. Does BlueFlavor do this or is it mostly a “whole package” deal?
Secondly how you scale your pricing when a new memeber joins or leaves the team? Is there a certain rate or does it vary from employee to employee. Forgive me if I’m prying, you don’t have to answer what you aren’t comfortable with.
Dylan, here are some short answers for you (Keith or Tiff amy want to expand on them);
Blue Flavor definitely would consider a project that involved just doing a portion of a site if it was something we thought we could help the potential client with and would be worth our time financially. Usually we do more “whole package” type deals, but we’re definitely open to other situations. Your first example (restructuring navigation for a site) is probably something we’d consider because it’s really our core area of expertise and something we feel like we can really help a client improve upon. Your second example (porting a site over to expression engine) may be less interesting to us. We are, first and foremost, a design firm. We do development as well, but design is our core competency — and a project that doesn’t include design is likely to be less enticing to us.
Our prices definitely doesn’t fluctuate based on the size of our staff. Our price may change over time, but it’s not directly tied to employees coming or going. Blue Flavor employees are full time salaried employees, not contractors or a loose group of freelancers. We get paid the same no matter how many projects we land.
We use a surprisingly similar process for pricing out projects. Do you use a single rate for every task? We used to but it seemed strange to be charging over $100 an hour for basic things like content entry and image processing and likewise charging the same for that as business consulting and application development.
All in all this post is well written, I think I’ll put together something similar as part of a leave behind for prospective clients.
Cheers.
@Chris - We use a single rate for estimating out every task, yes. That’s one of the tricky aspects of estimating out a project. It’s important to note here that what we give our potential clients initially are estimates not a final price. We do negotiate and adjust as we being to understand more of the scope.
When we do per-project work we no longer need to worry so much about hours (although we do track them) as the final price has already been set. This usually works well, provided we don’t have scope creep, etc., regardless of the tasks we’re performing.
As well, something like content entry is something we usually suggest our clients do as it’s labor intensive and probably not cost effective for us to do for them.
Think of it this way, while it’s not as “hard” as the other tasks we do (creative consulting, marketing, design, information architecture, CMS customization) things like production or content entry take up a whole bunch of time. Time that can be spent working on the “hard” stuff. There is an opportunity cost there for us. We don’t have lower level people and we don’t have people who only do production, for example.
Having said that, we honestly don’t do much of that kind of work, and if we were to start, we might hire someone one to do that, and then be more inclined to use a lower rate for that kind of work.
I hope that makes sense.
Keith, how do you handle instances where, in the end, you are either grossly under or over the amount of hours you estimated at the outset of a project.
And do you disclose your estimation rate and number of hours to your clients, or do you simply give them the flat estimated price?
Thank you so much for your candidness on this topic. It really helps us small guys out a lot!
@John - Good questions. So far we’ve never come out grossly under, but then again, we’ve not been doing per-project for all that long. When we were strictly hourly we often came in under, but usually not by a lot. When we did so, we usually had our clients ask for extra work to get it to what we estimated.
We have come in slightly under a couple times. Usually what we do is keep track of our hours (as best we can) and if we find we’re trending lower we’ll either reduce scope (and thus the final price paid to us, we’ve done this once) or offer up more services if we can (we’ve done this as well.)
Usually though we’re pretty close and I think more often than not we’re slightly over - which is fine. The stress relief we get from not having to worry quite as much about “hourly work” is worth a few extra hours for our clients here and there.
What happens more often is we come in early. Clients love that. :)
As far as disclosing our estimation rate, well, we’ve done that here, haven’t we? :)
So, yeah, we’re pretty open about it. But, again, that isn’t the same as the rate on an hourly project necessarily. For example, we just estimated out a smaller project; low risk, very short turnaround and time frame and that will come out to probably about $100/hr. We used our estimation rate and added a few hours extra in because it felt right to do so and because that fit within our clients budget. Had it been a larger project, we may have done the same, but it wouldn’t have resulted in as much of an “hourly” (and I use those quotes very lightly) cost saving.
It might seem like some kind of alchemy is at work here, but it’s not really. It’s just negotiation and trying to come to a spot where it’s a good fit for everyone concerned. That knowledge of how much things are going to cost is one of the benefits of per-project pricing.
We’re still willing to do hourly when needed, it just doesn’t seem to be preferred by most of our clients.