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How do you work out how much to estimate?

over 2 years ago from , Founder of http://functionandform.co.uk

I have recently started a small digital creative studio, and I find it quite tricky to work out how much a good rate is to bill clients. I have a feeling we maybe under charging but I always worry the amount will scare them off. Does anyone have any advice on this?

5 comments

  • Marcel van Werkhoven, over 2 years ago

    There's a lack of transparency in this market. What I try to do is to to be fair to both my client and myself.

    • Charge not only for your working hours but also your overhead (meetings, software, lunch, coffee etc. ;) )

    • I you work with hourly rates, offer a flat rate for anything you do to keep things simple (in my area between 60 - 100 euro/hour is the norm)

    • Be flexible with your rates. For example, you could charge a more demanding corporate client more than a small business

    • Price in risk (riskier stuff is more expensive) and be open about risks with your client (for example, technical risks (bugs during development) are ours to deal with, planning (not delivering copy on time, missing feedback deadlines) theirs)

    • Try to create recurring revenue. Like, support packages, statistics/SEO monitoring etc.

    • Communicate about costs and consequences and stick to the project brief. We used to do a lot of stuff for free that we should've been charging for at my agency and once we started charging the clients... actually didn't care. In fact it's better to have less clients that are happier with your work for fair pay than more clients simply looking for the cheapest solution

    All the free/undercharged stuff usually ends up hurting your bottom line as you grow. You need to deal with this problem before it becomes a 'real' problem.

    12 points
  • Mike Wilson, over 2 years ago

    My advice: if you don't ever scare clients away with your pricing, you're grossly undercharging. Everybody wants to get a sweet deal (ie. more than what they're paying for) so if you're not getting any pushback from clients it means you're giving them one.

    Designers striking out on their own initially come with the mentality that, "hey I didn't make much profit on this one, but it's a portfolio piece and I'll make it up on the next one."

    The problem is that a majority of your clients will inevitably come from referral. And when business owners give your studio's name to their business owner friends, the first question the friend will ask is: how much did you pay?

    Therefore, undercharging clients will rarely ever lead to clients willing to pay more than the job you just did. Hence why a majority of studios are so short lived. If you aren't building a war chest of excess profits to protect against a bad year or to fuel future investment or client acquisition, you aren't building a sustainable business.

    3 points
    • Todd Padwick, over 2 years ago

      This is a great point... I think I have definitely had a tendency to undercharge because I really want to take on the project.

      0 points
  • Steve SunderlandSteve Sunderland, over 2 years ago

    The only way to provide accurate estimates is to track your time.

    Also, you shouldn't worry about scaring clients off. If you're not getting pushback on your rates you're probably not charging enough. You can start high and make it clear that you're willing to negotiate.

    P.S. love your site!

    1 point
    • Todd Padwick, over 2 years ago

      This seems to be a common suggestion so I'd better start upping my rates a little! And thank you, glad you like it :)

      0 points