Fair, honest, and upfront pricing policy

I am probably going to become an outcast for coming clean about our pricing formula for web design and development services, but I believe that customers have a right to know that the billing rates are not arbitrary. Additionally, no one can deny the situation that we often find ourselves in, the moment we are required to tell the client how much the project will cost; the tension is thick! Unfortunately, the events that follow the pricing question are often reminiscent of buying a car from a poker-faced and constantly bluffing salesman/woman who will take the most you will give.

I am therefore taking the bold step of disclosing the simple calculation that goes into determining the price that my clients pay for the good work I do.

  1. Base Pay: If you were to hire a permanent Web Developer to work for you for a total of 40 hours x 4 weeks x 10 months you would have to pay between $90,000 and $110,000 (You can check Salary.com/AIGA/Aquent or your favorite resource for current salary figures); that is excluding the cost of benefits, office-space, communication, and other facilities necessary for work.
  2. Operating Costs: Beyond the base pay (mentioned above), facilities are necessary to realize the scope of your project. These are in form of: Project Management tools, office space, telephone, Internet access, Computer Equipment, Software, etc - adds up to $11,760 per annum
  3. Worker Benefits: The cost of providing healthcare, insurance, and other necessary benefits adds up to $13,154.16 per-annum (Based on BCBS-MA for 2009). Holidays, vacations, training-days, sick-days, personal days etc will account for up to 8 weeks every year
  4. Business Stability & Profit: Businesses need to make profits so as to create an operating reserve and grow in the marketplace, this figure is set at 25% of the total figure from the above costs
  5. Calculation: We will add all the numbers and divide the sum by the (10 months x 4 weeks x 40 hours) = 1600 hours a year
    • Healthcare costs: $13,154,16
    • Operating costs: $11,760
    • Gross base salary: $90,000 to $110,000
    • Sub-total: $114,914.16 to 134,914.16 per annum
    • Business Stability & Profit: 10%-25%
    • 126,405.58 to 168,642.70 for 1600 work-hours/yr results in an hourly rate of $80 to $105 averaging at $92/hr

Here are the rates adjusted for the scheduling urgency of your request.

  • $110/hr for assignments confirmed less than 14 days before start-date
  • $130/hr for last-minute emergencies < 6 days