Do you know your internal base rate?

Effective pricing begins with time. Regardless of whether you bill your clients by the hour or quote a project fee, you need to understand how much time is invested in an average project and the base rate you need to charge per hour to cover your costs. Your business has an overhead (or burden) rate – the amount of money it takes per hour to pay all the bills and keep things running smoothly. This isn’t profit – it’s just the minimum amount per hour to get you to the “break even” point financially. You calculate this burden rate by dividing your total monthly expenses by the number of productive hours you work each month. (Pro tip: Hours you spend marketing or doing administrative work do not count here. Just hours doing work you bill to clients.)

Total monthly expenses / total hours doing client work = hourly burden rate

Your burden rate is the lowest amount you can earn per hour of billable time without losing money. It does not include any profit… just expenses. But it is the absolute lowest you can go when billing a client before you’re in big trouble.

Now, let’s talk about profit. Profit is the amount of money you want to earn per month after all of the bills are paid. This is the money you pay yourself or put away for later investment into your business.

The difference between your burden rate and your internal hourly rate is profit.

Calculate your internal hourly rate using a similar formula – one that combines monthly expenses and monthly desired profit and divides the total by productive hours you work each month.

(total monthly expenses + desired monthly profit) / total productive hours = internal hourly rate

Not sure how this works? Here’s an example. Let’s say your total monthly expenses are $1,000 and you want to generate $2,000 per month in profit. You typically spend 15 hours per week on client work which means you have 60 total productive hours in a normal month.

($1,000 + $2,000) / 60 hour = $50/hr

This number is your “internal” hourly rate because it is intended for internal use only. This is not necessarily a number you quote to your clients. It is just the amount you should bill for each productive hour in order to earn the level of profit you desire. You need to understand your internal hourly rate in order to price effectively – in either an hourly or a project scheme.

The case for hourly pricing

The lovely thing about hourly pricing is the simplicity. We all understand how it works… you bill $X for each hour of work you do for a client.

You can sell the client prepaid time blocks (10 hours @$X/hr, etc.) or you can simply provide the work and send periodic invoices. You can even create some kind of retainer system in which the client pays you a set amount each month in exchange for X amount of your time.

As a creative entrepreneur, you don’t have to worry about estimating time when billing on an hourly scheme. You also don’t have to struggle with scope expansion or holding a client accountable to the initial project plan. You simply do the work and get paid for it.

Of course, there are drawbacks to hourly pricing as well. The big ones include talking about your hourly rate with clients, scheduling issues, and client estimate requests. Let’s look at each of these…

Discussing your hourly rates can cause problems with clients due to the perceived value of money. Quoting an hourly rate to a client opens the door to a discussion of value that can get petty.

I’ve found that most clients have an opinion about what I “should” charge for my work, and it often isn’t exactly the same as mine. Instead, it is often based on what they pay in-house creative employees or what they earn themselves. This can create an awkward situation… especially when you quote an hourly rate that is significantly higher than what the client makes in his role.

Scheduling issues arise with hourly clients. When you book a big project, you typically block out time in your calendar to do the work. This is pretty straightforward, but something surprising happens in an hourly scheme. The client often comes to believe you are available quickly for their additional requests. After all, they pay you for your time… they ought to be able to use it when they like.

Time estimates can be difficult to navigate when you’re billing hourly. It’s natural for a client to ask how long something will take to complete. In an hourly pricing scheme, however, this estimate is tied to a monetary value. If you casually answer 2-3 hours and then discover the work takes 4 or more, the client may respond with a concern. Your time estimate became a promise in their minds, and they expect your billing statement to keep that promise.

The case for project pricing

Project pricing (for purposes of this discussion) is defined as setting a complete price for a project when quoting based on the scope you set with the client during the proposal process. In this scheme, the client is not concerned with the number of hours you spend doing the work. The amount you bill isn’t based on time at all (from their perspective) but rather on the deliverables you provide. Project pricing:

• Allows clients to budget properly because they are aware of the total cost in advance.
• Allows you to systematize your work (becoming more efficient) while protecting the amount you charge per project.
• Removes time from the conversation, allowing both you and your client the freedom to explore options and be creative inside the set scope.

Project pricing is often the most profitable option for creative work. However, there are a few concerns associated with it. Problems arise when you (a) fail to consider how long something will take, (b) estimate time incorrectly, or (c ) allow scope to expand without charging for it.

When you fail to consider how long something will take you give up control of your own profitability. It feels safe and easy to simply charge what others are charging for similar work, but this is a big mistake. When we arbitrarily set a dollar amount without calculating the time required to do the work, we nearly always lose money.

Incorrect time estimates are equally problematic. You quote the project price based on a time estimate that seems accurate. But, then you discover that the project requires much more time than you thought. Oops! Not much you can do to correct an issue like this… unless your client is surprisingly gracious.

Scope expansion happens inside creative projects. The issue comes when you fail to charge for them. Clients ask for “just one more thing” often. Your profitability depends on your ability to respond with a quote for additional fees.

How should you price? You decide based on the situation

Unfortunately, there is no “right way” to price your creative work. Evaluate the situation and make a decision based on your comfort and the client’s needs. Just make sure the pricing scheme you use is communicated simply, clearly, and confidently.

Michelle Hunter is the founder of Michelle Hunter Creative. She provides custom marketing strategy to web designers and white label copywriting services to their clients. Elevate your Brand. Become a Strategic Partner.

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The post How to Price Web Design Projects Effectively – Hourly vs. Project Pricing appeared first on Mark Hendriksen.

But, during difficult times this marketing channel isn’t enough. When the money runs out and the projects end, it can be difficult to figure out what to do next to market your business.

In moments like these, it’s tempting to discount your work or quickly create some “new offer” or tempting package that just might generate enough money to get you through financially until the next project arrives. I understand, but you need to resist.

Desperation is not a winning marketing strategy. Instead, I want you to follow this plan to get yourself a few new clients – both now, and well into the future.

Simplify your marketing strategy

Marketing is – essentially – a conversation between you and your potential clients. This is true regardless of the platform, marketing channel, or method you choose to engage your audience.

Find it strange to think of marketing as a conversation? The reason for the confusion is this → You fail to factor in both sides of the dialogue. There’s always a response from your potential clients – even if you don’t hear it.

 When I read your social media post, for example, I engage with it in my mind. I react internally and form an impression… even if I fail to indicate my engagement with a like or a comment.

The marketing conversation exists to make your potential clients aware of a problem, define the problem and the solution, and present yourself and your work as the ideal solution for the problem. This is marketing strategy in its simplest form, and this is how it maps out:

• You have a problem – Identify the problem in a way that your potential client can understand and feel emotionally.
• Define the problem – Make sure your potential client knows that this problem can be solved, but it’s too important to tolerate or ignore.
• Define the solution – There are often multiple solutions to a problem. Focus on the solutions that align with your services and work.
• Present YOUR solution – Talk about your work and the aspects of your business that make working with you ideal. Invite them to learn more.

The key to effective marketing is to keep everything simple. Don’t overcomplicate things – just focus on your main offer or service. For example, imagine I operate a food cart in your neighborhood. My marketing conversation with you might go like this:

• Hey friend! You look really hungry. (You have a problem.)
• Feeling hungry isn’t any fun. (Define the problem.)
• You need something quick and tasty to eat. (Define the solution.)
• I have these great street tacos. Want one? (Present solution and invite.)

Your marketing strategy can be just this simple. Chances are good that you’re overcomplicating it with fancy language or lots of extra features and add on details. Don’t do that, okay?

Instead, simplify your approach using this formula. Once you do, you’re ready for the next step.

Renew your outreach efforts

It seems pretty logical, right? Effective marketing means outreach – making sure people know about your business and your work. So, why aren’t we more consistent in our efforts to reach out to potential clients?

We have plenty of valid excuses – from lack of time and lack of clarity, to a failure to understand exactly who needs or wants our services. We look for answers to our questions before we take action… it’s simply human nature. As a result, our outreach efforts are likely pretty anemic and we rely on work that comes our way more passively.

Here’s the issue: During difficult times, passive measures don’t work as well. They fail to provide the volume of leads you need to generate consistent revenue. Unfortunately, you have to get serious about outreach if you want to attract new clients.

Want results quickly? Let’s keep this simple. Make a list of people who:

1. Worked with you in the past 12 months and might need more of your magic or…
2. Have contacted you in the past but for some reason weren’t quite ready yet or…
3. Know you in some way and also have the problem you solve or…
4. Know you really well, but don’t have a clue what you actually do.

Contact people on your list – in order of the priority I shared above – and share your conversation with them in a casual way.

What do I mean by casual? Send a quick email. Grab the phone and call them. Talk to them while you are together in person in a social setting.

Not sure what to say? Use the conversation you mapped out earlier and let it guide you. Here are some examples to get you started…

Email a former client with a message like this:
Thought of you today. When we worked on your project, you mentioned . That problem is pretty easy to solve by . I’ve got a few openings in my schedule right now. Should we get together and talk? I’d enjoy working with you again if you’re ready.

Email those who contacted you in the past but were not yet ready like this:
You contacted me in the past and mentioned . We discussed possible solutions, but the timing didn’t seem right for our work together. I have a few openings in my schedule currently, and thought it made sense to reach out to you. How has the problem changed since we last spoke?

These examples demonstrate the tactic that works the best. Reach out personally and put your simple conversation format into the context of your relationship with the potential client. Your goal is simply to start a dialogue about your work… and then the rest should flow naturally for you.

Be consistent, persistent and don’t quit

This simple marketing plan is extremely effective if you use it. When you reach out to people personally and connect with them to discuss your business in a clear and concise way, they naturally respond.

 The key is to be both consistent and persistent. You can’t give in to panic or give up when you get a few negative responses. Here are some things to remember…

• The first few conversations will feel awkward. The next few will feel a bit less awkward. After that you’ll get more comfortable. But this will never be easy, you’ll always have to try.
• Many people will not be interested or ready yet. You’ll get “no” answers. That’s normal, and you should expect it.
• You only need a few new projects. If everyone on your list was ready to work with you and wanted to book a project immediately, you would likely be overwhelmed. Just one “yes” is enough.

You may get discouraged or distracted by a desire to do something complex that has worked for a colleague or peer. You may be tempted to simply complain about your situation or bury your head in the sand and ignore the problem. Resist all of this and force yourself to consistently take action.

Decide to contact five people on your list each day… or three people on the list each week… or just one person today and one tomorrow. Decide on the action you will take and then hold yourself accountable to take it. Continue taking action until you get your first yes… then you’ll be excited to try for more.

Want quick results? Be intentional and consistent.

Michelle Hunter is the founder of Michelle Hunter Creative. She provides custom marketing strategy to web designers and white label copywriting services to their clients. Elevate your Brand. Become a Strategic Partner.

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• How to Price Web Design Projects Effectively – Hourly vs. Project Pricing

The post How to get more clients during difficult times appeared first on Mark Hendriksen.