Why Web Designers Fail #1 – Undercharging
“Perhaps I should do this full time”
Ahh … if only I could go back in time. It was 1995 and the web was still young. I had a full-time job, but every spare moment was devoted to messing around online. That obsession eventually spilled out into my very first website. I dreamt of the day when I could give up sales and do this full-time.
That day eventually came and although I don’t regret making the decision, with the benefit of hindsight, I would have done things very differently. My biggest mistake and that of many other web designers, was undercharging. At best, this is a case of ripping yourself off. At worst, it will destroy your business. Let’s have a think about why this is so common and what to do about it.
Challenge #1 – Too Many Competitors
There aren’t that many businesses left that you can start for almost nothing, but go on to make a 6 figure income. This is both a good thing and a bad thing. The good is outweighed by the fact that there are millions of web designers worldwide and if you’re not careful, you can find yourself competing with “developers” at less than 5 bucks an hour. You can easily develop a mindset that says you have to charge as little as possible in order to survive.
Challenge #2 – Web Design is a Commodity
Clients are increasingly viewing websites as a commodity. Their thinking is all websites are the same and as such they’re an expense to be purchased at the lowest possible price. Web design contests have done great harm to the industry as they accelerate this belief. Of course, you and I know there can be a vast difference between one website and another. However many clients just don’t want to hear it, which can force you to charge less than your ideal rate.
Challenge # 3 – You Need Work!
At the end of day, it doesn’t matter the reasons behind low pricing, you just need to pay the bills. I get that. You might not be desperate as such, but you need clients and many make the mistake of charging as little as possible to win business. This not only means you make little, if any profit, but it attracts the worst clients.
Many web designers find themselves creating $500 packages without considering the long-term ramifications. If that’s you, it’s time to seriously look at the big picture.
Start with the end in mind. How much do you want to make a year? This will, of course, vary between countries, but let’s say you’re happy with $50,000. If you’re charging $500 per site, you need to create 100 sites a year. 2 a week! Even if you could get that many clients, there is no way you can get through 2 sites, each and every week.
What if you’re charging $2000 a site? That is still a significant challenge. 25 sites a year means you’re pumping out 1 a fortnight. This should be achievable in theory, if the sites are fairly basic. But it is still a big ask. The development time isn’t the hard part – it’s everything else you need to do. Find the client, sell them your solution, plan the site, testing, some post-sale training as well as accounting. You need a really strong system in order to make this happen twice a month.
Producing cheap websites is simply unsustainable. There is little profit, so you can’t grow the business. I haven’t even talked about expenses. You’re essentially stuck in a job, but with far more stress. You can’t sell the business because you are the business. Once you’re removed from it, you’re left with nothing.
I wish I could tell you that I never suffered with this problem, but this was my greatest challenge for years. I struggled with the thought of charging more because I wanted to provide a service that was great value. Ironically, it is that word – value – that is the answer to this dilemma.
Forget about charging by the hour or the project. You need to be charging based on the value of the project. I’m not talking about if your price is good. Instead value in this instance means what the project is worth to the client. Let’s look at a couple of examples.
A photographer doesn’t charge based on the time it takes to take a photo. Their work, the part that they’re actually charging for, might only take 1/2000 of a second. Even if a photographer were to charge $1000 an hour, all they would earn in this example is 0.000139 cents, for the time it takes the shutter to open and close. Of course nobody expects that. Any reasonable person would understand it might take many shots to get the right one, that the photographer has a significant investment in their equipment and it takes a lot of practice to be able to produce great photos. A good photographer charges based on the value of the final result.
Here’s another example of a model that I don’t think exists so much these days, but the principle still applies. Utility companies, in Australia at least, used to have a firm grip on the market. Everyone pretty much paid the same amount and there was little, if any competition. However there was a way to negotiate better rates, if you knew how. People in the know approached businesses with a very simple proposal. If they could save them money on their electricity or phone bills, would the business give them half the saving? For example, if they saved the business $50,000 a year on their utility bills, they kept $25,000. At first this might seem outrageous considering the little work involved to simply negotiate a saving. However the value it brought to the business was substantial and so these folks were very successful.
How does this relate to your business? You need to stop selling web design and instead start selling solutions. Here’s the vital difference. Your website needs to produce a measurable goal for your client. This might be a certain number of leads or sales or a reduction in expenses. At first, it can be difficult to determine the value of a project, but with time and practice, you will learn to know what this value is and charge a lot more. Isn’t that ripping off the client? No, you’re actually doing the opposite. You are producing a solution that produces a return on INVESTMENT. Most clients see a web design as an EXPENSE. This is not a subtle difference. Once you approach prospects with the mindset of how you can make them, or save them money, it can result in a dramatic improvement for your web design business.
If you have any questions or feedback about this thinking, please leave a comment below.
Hey if you’re brand new to web design then consider my training course – Kickstart Your Web Design Business. This online, self-paced course takes you through all the basics to help you get your web design started and off to a solid start.