How to Shift From Hourly Rates To Flat Rates For Your Service

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When people ask me if I  love what I do because I get to create and design, I say absolutely. But the bottom line is if I didn’t get paid for what I do, I probably wouldn’t be able to do it. It’s a basic physiological need to be able to provide food, water, and shelter for myself, and in order to do that I need to make money. And in order to create and design, I need to be able to have a roof over my head, food in my tummy, and of course a handy dandy MacBook Pro. Of course I love helping clients and I definitely do not nickel and dime them to death, but bottom line is I have to get paid.

flat rate

photo credit: 401(K) 2013 via photopin cc

How My Old Pricing Structure Used to Work

When I first started making WordPress websites I had one service, and 1 service only, and that was a customized WordPress theme for $500.  I know…$500…how did I live!? As a newbie I surfed Google on what to charge clients for my time, and I came up with some fictitious hourly rate and applied it to how long it would take me to build a $500 customized WordPress theme. It basically broke down to $25 an hour. It was a modest start and in all fairness it is actually what I was worth at the time, because heck I was a newbie! $25 an hour sounds a lot better than minimum wage!

As I grew I started obtaining clients for little hourly jobs ($25 per hour) , and custom graphics here and there that I would do a flat rate on like headers, banners, etc.

Then, I got better, and I got more clients, and a snowball effect started happening. My workload increased and I was suddenly just too busy. What do you do when you are too busy? You raise your fees of course. I doubled my hourly rate to $50 per hour, and changed my flat rate fee for customized WordPress sites to $750. This got rid of the stragglers who only wanted to hang on for $25 per hour, and cut my work-time in half, but earned about the same amount overall.

Moving forward my skills further increased as well as did my services. Enter the custom theme. I had paired up with a developer so I was now able to go from not only offering customized WordPress themes, but also custom themes. I had dollar signs in my eyes for days, but in order to pay for the developer and make money on my end I had to…you guessed it…raise my rate. I raised my rate to $100 per hour, and completely cut out the flat fee services. I had determined that with the flat fee for custom themes I ended up working more time than I was actually charging for if I was counting up the hours, because with larger scale projects comes more unknown, scope creep, and revisions. I just was working harder and for less money.  So to actually get paid for all my time spent, I switched to an hourly rate for everything. I would quote an hourly range for a project with a high and a low range. Charge 50% of the low end, and 50% was due upon completion.

This fared well for a while until projects became larger and more complex. Clients became irritated with revisions and the additional fees I would have to charge, and the lengthy process of having to track every minute. In this phase of my pricing structure I had more unhappy clients than I ever did in my life. Even with a solid contract, fairly defined scope, budget range, revision limit, and lots of rules about payments, clients still just were finding reasons why they should only be paying the original range I quoted. This is partly my fault in the end because I wouldn’t immediately tell them they are going over budget. To combat this problem I would tell them every time they would ask for something this can have an effect on the budget. While I became extremely responsible in this area, it felt like the project became more about the budget and less about designing something beautiful that they enjoyed. It really became more of a burden for both of us.

In order to find a solution to the client being unsatisfied with the final price almost always being more than the original quoted price due to their revisions and scope changes, I decided to over quote. Over quoting sounds bad, but really it made me look like a hero when I would come in dramatically under budget. I liked being the hero, and building trust with the client to show them I really only charged what I was worth, but there was still the pesky situation of timing myself, pestering the client about scope changes, and still having a budget range that is so vastly over quoted and so broad it was scaring some clients away. For example if I would quote $2,500-$3,500 for a project and a clients budget was $2,500, and realistically I could probably get the project down for $1,700 and look like a hero, they wouldn’t know that until the end and I would have lost the prospective client. Clients don’t give a hoot about hours. They only care about the final product .

Not only would I scare away clients, I had improved my skills and now had become twice as fast as I used to be, so I was actually earning less money because things that used to take me an hour only took me 30 mins. Sure, that would leave me more time to work on other clients projects, but with smaller projects this is especially true you can’t account for every minute so it was wasting more time.

I went back to my drawing board on how to find a solution to this problem.

How My New Pricing Structure Works

Since I had gone through the gambit of flat rate, switched to hourly, increased the hourly, and over quoted, I came back to my original mind set of the flat rate. The problem I had with the flat rate in the beginning was I really didn’t know how long it would take me to complete a project because I was such a beginner. Now with years of experience under my belt, I am able to accurately quote a flat fee for projects large and small. I have 3 set types of services. Customized WordPress Theme, Custom Child Theme, and Custom Theme. These projects all end up being around the same amount of hours per service give or take. I can adjust flat fees based on clients need like if they need a special plugin, or extra graphics. I KNOW now how long that will take me.

Think of it like a menu at a restaurant, except applied to web design. Design is the appetizer and costs X,  Development is the main course and costs X, additions and customizations are sides and desserts and cost X.

I’ve been using this method for a couple months now, and it has been so freeing. There is no going back to the client with daunting news, I don’t have to constantly set my times, and I focus more on the design and project vs. the time.

3 Rules When Switching to Flat Rate to Include in Your Contract

Rule #1 You MUST I repeat must have a very clearly defined scope of work and contract when doing flat rate.

Scopes of work ensure you and your client are on the same page about what they will be receiving when the project is complete.

Here is a sample of what my scope of work for a custom child theme looks like:

  • Custom Wireframes for custom page templates: home and interior
  • Custom  photoshop designs for custom page templates : home and interior
  • Safe and Secure WP Install on development server
  • Custom Child Theme development ( Theme provided by Rachaelbutts.com)
  • Install pages ( list pages here), sidebars, and content
  • Contact form ( gravity forms plugin provided by Rachaelbutts.com)
  • Permalink configuration
  • Newsletter sign up form and integration
  • Social media/ Share integration
  • Facebook fan page feed box
  • Backup Plugin
  • Akismet spam filter Plugin
  • Yoast SEO plugin
  • WordPress 101 Plugin
  • Recent Posts Widget
  • Category Widget
  • Setup and installation on clients domain/host
  • Submit site and xml sitemap to Google
  • Setup Google Analytics
  • Cross browser testing
  • Fresh install of WP on clients domain
  • Setup and configuration on clients domain
  • Facebook fanpage graphic
  • Twitter Graphic
  • Google Plus Graphic

Rule #2 Have an Estimation and Compensation Clause in Your Contract

Here is my clause straight out of my contract in regards to the flat rate:

Client understands that this is only an estimate, and that additional charges may apply for contingent costs such as specialty fonts, plug-ins, themes, pictures or other media the Client may desire.  Additional charges for the Services will also apply as follows:

Enter your out of scope rate here

Company shall periodically invoice charges for Out-of-Scope Work and Expedited Services as necessary.  Payment for such services shall be due no later than ten (10) days after invoice.

Rule #3 Have a Set Amount of Revisions

Always limit the amount of revisions. I set my designs to 3 revisions, and no design revisions after we have approved the design period and have moved to development. This area is up to you, but this is kept within the flat rate fee you quoted.

This is my method that works for me and my pricing structure. What method do you use? Have you found hourly or flat rate works best for you?

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Rachael Butts

Rachael Butts

Founder, WordPress Designer at Rachaelbutts & co.
I'm a self-made WordPress designer who loves running my own shop...and coffee. You can find me at Facebook, Twitter, and Google+
Rachael Butts

@rachaelbutts

I'm a self-made WordPress gal who loves God and running my own shop.
#latergram from our lunch out yesterday and our first Strode family photo. Happy thanksgiving… http://t.co/Kwkp5Xo7X7 - 14 hours ago
Rachael Butts
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