What Should I Charge? Finding Your Own Right Answer

By Patty J. Ayers

money-questionsThis cry is heard from many a new web developer. Having stumbled into an industry with very few precedents, traditions, or business standards, he finds himself facing a daunting decision: what to charge for his services.

Whether or not you plan to charge your next client by the hour or by the piece/project, it’s crucial to know what you consider your own hourly rate. Even per-project estimates need to be based upon what you need/want to be paid for X number of hours of work. When working per-project, you may decide not to share your hourly rate with the client, and this is perfectly fair. But you need to know what it is.

And sooner or later you will need to work by the hour, and when you’re asked what your hourly fees are, you’d better be ready to sing them out in a confident tone, because otherwise clients, like animals, will perceive your fear.

So just tell me what I should charge, I can almost hear you saying. And I really will make some suggestions, and even throw around some numbers. But first, a crucial point.

We charge for our work. New web developers often under-value themselves. And from many conversations I’ve had with startup web developers on this subject, it seems that a great number feel that the best way to adjust for the lack of confidence they feel is to donate a lot of their time for free to clients. They decide on a reasonable hourly rate, and then proceed to actually charge that rate for only about half of the hours actually worked. This makes no sense, unless you want to double your hourly rate to make up for it. You must charge for the actual hours you work.

You’re either on the clock or you’re off the clock. You’re either doing something for a paying client, or you’re doing other things you want or need to do. It’s not hard to tell the difference. When you’re on the clock, you need to charge for it. And in order to charge for it, you need to keep a record of the time you’ve worked.

Record-keeping is important, but it’s no use for me to tell you to keep a record of your hours if you think it’s fine to spend 45 minutes tweaking your client’s graphic on your own personal time. Merriam-Webster’s dictionary defines “professional” as “participating for gain or livelihood in an activity or field of endeavor often engaged in by amateurs”. The fact that you think enough of your work to actually charge for it is one of the things which distinguishes you from your client’s nephew in college who offered to make him a website for free. Repeat after me: We… charge… for… our… work!

Now that we’ve established that, let’s get back to the question at hand. Ideally, your hourly rate will be a happy intersection of something in the typical range in your geographical area, and the amount you need to earn to thrive financially.

A common formula. A common formula has you decide what yearly salary you want to earn (Y), determine the number of hours you’re going to work per year (N), and divide Y by N. But there are several problems with that formula. Number one, guess who came up with it? That’s right – lawyers. Okay, we can’t really consider that a problem, but I thought you might like to know. Number two – more important – you might want to make $200,000 a year by only working 10 hours a week, but the that would probably put your hourly rate outside of the range of fees which exists within our trade.

But it’s still a useful exercise, for perspective and financial planning if nothing else. So I’d suggest that you go ahead and write down what you would like to earn in the next year, realistically, but with a little audacity thrown in for good measure. Then, write down the number of hours a week you think you’ll be able to put in on the clock, and multiply by the number of weeks a year you plan to work – 51? 50? 49?

A word on hours per week – I suggest that you don’t be so optimistic about this number. You’ve just heard me say that I’m a believer in charging for my work. I am a fairly diligent, focused person, and I charge my clients for all the time I spend working on their projects. And yet, after five years, I still find my on-the-clock hours to be about 1/3 of the actual hours I spend in my office. That’s right, one-third. The rest of my time is spent on seeking new business, marketing, networking and advertising efforts, bookkeeping and accounting, and a myriad of other non-paying tasks that have to be done to keep a business afloat. So, assuming I work something like a 60-hour week, I tend to average about 20 hours on the clock. I’m not happy with it, and I’d like to change it, but I haven’t found a way to alter that proportion much. If you can, more power to you, but I’d suggest that you not assume something unrealistic like 40 hours a week on the clock – it’s very difficult to manage in the real world.

Do the long division and see what you come up with. Now at least you have a number.

What do independent web developers charge? Now let’s look at the other end – what do independent web developers charge? First and foremost, please always keep in mind that what a web design company (which is what you represent) charges per hour bears almost no relation to what a web design company might pay an HTML programmer or web page designer. So those charts which show typical salaries for various web-related jobs are useless to this discussion. The difference is crucial: a web design company’s hourly rate needs to cover not just the salary of the person doing the work, but (1) the cost of all the hardware and software he uses, (2) the cost of the space he uses to work, and the electricity and phones necessary to his job, (3) the cost of paying someone to go out and find new clients, and to otherwise market the company’s services, (4) the cost of doing accounting, bookkeeping, buying supplies – everything else necessary so that the business exists, and (5) every other expense incurred by the business. It must cover much more than just the salary of the designer/developer, if the business is to succeed.

At the time that this article is being updated, typical rates for freelance web developers in the U.S.A. are between about $50-$100/hour.

Having said that, another important factor arises: your geographical location. If you live in Bent Fork, Idaho (I don’t know if this place exists, but it was always my family’s way of saying “a very small, remote town”) you’re not going to be able to charge the same fees that a web developer working in a major urban area can. So consider that.

And finally, yes, you should consider your own level of expertise. If you are proficient enough to charge money at all, you should put yourself somewhere in the “normal” range for your geographical area, but you may want to start on the lower end and work your way up as you gain skills and knowledge. But don’t simply choose an extremely low rate to compensate for your lack of confidence; this communicates the wrong message to the clients you want to attract.

A few closing thoughts. Although I hope you are chanting “We charge for our work” along with me, I want to clarify that I certainly don’t mean that we shouldn’t do charitable work. Everyone should give some of their time and energy away to good causes. If you choose to donate web design work, just be sure to handle it just as professionally as any other work. Provide estimates, have a contract, keep track of your hours, and send a statement with the value of the work and the fact that it is being donated. New independent web developers are notorious for getting into sticky situations with their church or girl scout troop or coin-collecting club when they give away their services without any clear understandings or boundaries.

Whatever you do decide to charge, go forward confidently, knowing that you’ve thought it through carefully and that you deserve to be compensated for your work, as well as for all of the expenses involved.