The web design and development process is a relatively straightforward one. From sketching out ideas to writing code. From managing the project to delivering the final work to the client. The process is routine (but not monotonous), stimulating and rewarding. But when it comes time to discuss getting paid for that work we tend to shy away from discussions about scope, contracts and change requests. Financial issues can be a drain on creativity and can sometimes result in a strained relationship or a canceled project.
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In the past twelve years as a creative web agency we’ve worked with over 100 clients and designed and developed more than 300 web sites. One thing we’ve always striven for is to have all questions and concerns about billing out in the open and dealt with before the project starts. This prevents billing surprises from derailing the project during the design and development process.
When determining how to charge for web design, there are three options — flat bids, time and materials, and retainers. We’ve got our opinions on each of these, based on our experience charging clients.
Flat bid
A flat bid is used when we are billing the client a fixed cost for designing and developing their Web site. Flat bids, also called fixed bids, are not sufficient for custom web design and development. A flat bid requires the scope to be defined precisely enough to account for all the web site’s functionality requirements. The problem is that we won’t know half of these requirements until we start working on the site.
It’s easy enough to add a line item for “three design comps and three iterations of the selected design.” But how do you articulate the detailed scope of a content management system? An eCommerce site? An extranet? We could add a line item that reads “Drupal CMS for creating and maintaining web pages,” but what happens a month later when the client realizes Drupal won’t do everything they needed it to do? You can eat the difference and develop the extra features or you can ask for more money before adding them.
Changes to the project will require parts of the scope to be re-negotiated, if you and the client can agree on what is covered in the scope definition. Flat bids are a great way to lose money by devaluing your hourly rate (working more hours than you are getting paid) and can cause projects to fail because of disagreements over scope (he said, she said).
Time and Materials
The liquid nature of most web site projects makes them a good fit for a time and materials contract. When putting together an estimate for a client we define as much of the scope as necessary to provide an accurate dollar amount to the client. The estimate includes a 15% margin to help convey that the amount was based on our best guess given the information we had at the time. Changes in the project could make the final amount come in under or over.
During the project we monitor the time and budget based on the original estimate and alert the client the moment we notice the project might go over the original estimate. For example, a third party API, which wasn’t selected until the project was underway, might take twice as long to implement due to a lack of documentation. Historically, our time and materials projects are completed within 5% of the original estimated budget.
Time and materials contracts do require that you track your time. We’ve always believed that diligent time tracking is the key to estimating with greater accuracy and successfully meeting deadlines. Time tracking enables us to be more accountable to the client, providing them with detailed reports of how much time each task required or how many hours were billed for a given date range. If you aren’t presently using a time tracking program, we recommend trying out our creative project management software, Intervals.
On the plus side, a time and materials contract provides your client with more freedom to change the project during development and more incentive to invest themselves. We don’t have to worry about enforcing scope or filing change requests. Instead we focus on keeping the client involved in the process, constantly going back to them for feedback as the project begins to take on life. And if you are working with a startup, who’s singular goal is to launch a prototype of their product, you are definitely skipping past the scoping phase and diving right into the design and development work. A time and materials contract will match the flexibility your client needs, right from the start.
Business Resources for Web Designers and Developers
Need help getting started with a time and materials contract? Feel free to download our T&M contract and use it to your liking.
Retainer
Retainers, what we call maintenance contracts, are a good practice for working with clients who have an existing Web site they need maintained, or who want to hire you to design and develop a Web site that hasn’t had much planning or specification. It works out great for the client because they can jump right into the project and get started with little to no estimating. And it works out great for the web design and development agency because they get paid up front.
The time tracking requirement also applies to retainers. The client should be apprised of how much of their retainer has been spent, what it has been spent on, and how much is left on their balance. The retainer agreement may be a monthly or annual agreement, or it may just be a bucket of hours the client purchases in advance. Either way, the client is paying to have a team of web designers and developers on reserve.
Business Resources for Web Designers and Developers
Looking for a retainer contract for your clients? We want you to have ours — download it and use it however you would like.
Our Method for Charging Clients
At Pelago, we would bring clients on with a time and materials contract for the initial web site project. After the project was completed, we would transition them into a retainer for handling the day-to-day maintenance updates and additional features.
A Web site is not in the least bit permanent. It is in a constant state of flux as administrators add content, users interact with the site, and the owners add on more features. A flat bid process tries to reign in this reality by imposing start and stop dates on a living digital entity. Web design and development agencies are much better off managing projects and charging clients in a more continual and iterative manner, just like the Web sites they are building.
Photo credit: You As A Machine, jeffeaton
This is a great synopses of different ways a web company can bill a client. Your method of initially signing clients on with time-based billing and transitioning to a retainer for maintenance is a great way to show your client how much you value them. I recently wrote a similar blog post working through the same methods and how they have worked for me in my company. If anyone is interested – http://blog.stationfour.com/how-to-avoid-pitfalls-of-fixed-bid-estimates/.