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Eric Lamb on Charging Hourly

In a post on his blog, EE add-on developer Eric Lamb (you might know him by his handle “mithra62”) shared his thoughts on charging hourly for web development projects instead of a fixed price bid.

He sets it up like this:

If you don’t know, the traditional way of pricing out a web development project (at least in my experience) is for a client to contact an agency (or freelancer), tell them what they want and the agency telling the client how much it’ll cost at a flat rate. There’s usually a back and forth over cost and features, time and expense, and shaving features accordingly to meet some predetermined budget, and there’s certainly a lot of minutia in between the parts, but those are the broad strokes (again, in my experience).

I was surprised that people still do fixed pricing on web design and development projects. There are so many variables, information and requirements to gather, scope creep to consider and other mysteries that it is seems impossible to know what the project will cost before work begins. Business requirements change, phone calls add up (you do charge for your time on the phone, right?), stakeholders share their ideas and wishes for the project…the list goes on.

Eric has some good advice in his blog post) if you are in the situation of stil charging fixed prices for projects. I thought the retainer idea was an interesting one:

When I find a new client who’s willing to pay hourly (with a couple exceptions) the first thing I do is get a retainer. The retainer basically gives me the confidence in the client to be able to pay my rate, as well as giving me motivation to start work with the confidence of continued payment.

My approach would be to do hourly billing but give the client an idea of where those hours would be spent (various phases of the project) and estimate how many they would be. This way they can see what the project could cost but know that the dollar amount is tied to you working a fixed number of hours, not you delivering a completed website to them chock full of their whims and fancies.

From what I’ve read elsewhere online, this is how a lot of people also work. Hence my surprise.

Here’s one way to think about it: website design and development isn’t a product. Don’t treat it or price it like one. You’re in client services, which means you are paid for your time and expertise require to build the website, not just for the thing you deliver.

Posted on Feb 17, 2012 by Ryan Irelan

Filed Under: Life as a Web Professional

Mark09:26 on 02.18.2012

I would never hire anyoneon a variable price contract. Fixed price is clearer to everyone with signed specifications, story-boarding, and change control to cover any scope creep.

Bj04:01 on 02.20.2012

Hourly billing with estimates or fixed price where any changes to the original specification are handled as a change request (and billed independently) aren’t really that different.

I like a nice mix of the two. For long-term clients hourly is often best as I don’t have to spend time estimating everything that needs to be done before actually doing it (this time is of course baked into the fixed price offers so in those cases when/if the client accepts he’ll also be paying for any time spent up to the point he accepts).

Clive Portman05:28 on 02.20.2012

Depends on the client. Most clients want a fixed price, but are happy to pay for anything outside the original spec, in my experience. Totally agree on ensuring the client knows they are paying for your time and not a product, mind.