The question of how to price services is age-old. Web designers and developers generally charge by the project or by the hour, or use some combination of the two. I believe that whenever possible, you should charge based on the value you deliver to your clients. That value is based more on your skills, experience, and the finished product than the time you spent. Here’s a brief story to illustrate my point.

The Mystery of Picasso

Image from The IFC Center

Picasso was in a park when a woman asked him to draw her portrait. Picasso agreed and quickly sketched her. When he handed her the sketch, she was pleased and asked how much she owed to him. Picasso replied, “$5,000.” The woman screamed, “But it took you only five minutes!” Picasso replied, “No, madam, it took me my entire life.”

Picasso didn’t charge for the five minutes, but for the value of the sketch, which represented his skills and the experience he gained over his lifetime. This story and more on this topic can be found in the post Picasso, Paula Scher, and the lifetime behind every second by 37Signals.

The number of billable hours in a year is fixed, so the only way to increase your income when charging hourly is to keep raising your rates. This is possible, but I think it’s better to increase your income by charging for the value you deliver, and delivering more value.

Although I often use value-based pricing for projects such as building a website, I do loosely base the cost on an estimate of how many hours it will take, because that’s a factor in the final project’s value. I also charge by the hour for post-launch changes to websites, small jobs, and consulting. What about you? What’s your pricing strategy?

Comments

  1. says

    This is brilliant so on many levels! My pricing strategy has always been hourly at its core, though I know in the back of my mind I am trying to equate my effort to the value provided.

    Does this ever backfire and force you to talk the customer into a less-valuable solution because you know you would have to spend more time on it than they are willing to pay?

    I like it, and I may try to think more like this for the next job.

    • Chad Warner says

      If customers want to pay less than I’m asking, but I still want to work with them, I tell them I can reduce the project’s scope to match their budget. They may choose fewer or simpler options, or agree to a future Phase 2 at a time that they can increase the budget. They key is a mutual exchange of value.

  2. says

    The market sets the price. In the case of a designer with a lot of experience they still need to be competitive in order to garner a necessary level of business. As a cost accountant, I do think it’s worthwhile to spend more time qualifying what you define as value and insuring that aligns with the clients needs.

    • Chad Warner says

      Good point about market competition. We don’t live in a fantasy world where everyone can charge what they think they’re worth and get it. The economic reality is much more complicated.

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