5 Best Pricing Models For Web Design
There has been a lot of creativity lately with how web design consultants charge for their work. Let's look at the top five different pricing strategies that are popular right now and get some clarity on the pros and cons of each so you can figure out what works best for you. Stay to the end though because there's a fundamental mindset component that a lot of people aren't tapping into which makes all the difference – especially if you're charging high-ticket ($5,000 – $15,000+) prices.
Standard 50/50 Split
The most popular pricing strategy is the 50/50 split where you collect 50% upfront as a deposit to get started. Then you build everything out. Just before you launch you collect the final 50%. Depending on the size of the project (and the responsiveness of the client) development usually takes between one and three months.
The Good
This is a super simple pricing structure that everybody understands. Clients sort of intuitively expect this type of pricing structure. It makes sense to give you some money (but not all) to start. Then, pay the final bill when they take ownership of the work.
Clients also seem to (at least subconsciously) appreciate this pricing structure because they feel like they understand what the full cost is and they can compare your rates to other alternatives. Everything seems pretty much apples-to-apples.
The Bad
Clients feel like there's a big upfront cost to getting a website. Clients get scared and don't say yes – at least not until they “think about it.” So, you'll have to deal with objections like:
- That's a bit out of my budget. Can you work with me on (lower) the price?
- I can't afford that not but let me get back with you. (They really just want to shop around for a better price.)
- That's more than I was expecting, why are you so much more than… (pick some low-budget alternative like Upwork, Wix, some other developer, etc.)
These tend to just be one-and-done projects with no recurring revenue. Any sort of recurring revenue for hosting, security or marketing is an upsell which most clients tend to reject. It's a hard upsell because clients aren't really looking for these services, they feel expensive, and often times they already have some other plan (other than working with you) in mind for their marketing.
You're competing with the whole world. It's not at all uncommon for clients to thank you for your time, take your proposal, and say they need to think about it, talk to their business partner, win a new project first, etc. Then they take the proposal you poured yourself into and shop it around to see if they can get “the same thing for less.” In other words, they think of you as a commodity that they can replace. If you're charging high-ticket rates, they'll probably find someone else who they think can offer the same stuff you are offering and they'll save 50% or more on the project – even if they have to give up a little convenience by working with someone who isn't local.
The down-side of this pricing model is pretty steep and the upside isn't all that great. So why do people do it? Because it's pretty much the mainstream approach. It's what people know and what clients have come to expect. But, when you lay it all out in the sunlight you can see it's not a winning strategy – especially if you're prices tend to be higher than everyone else's prices.
Hourly (Time & Materials)
Another common approach is just trying to estimate hours, publish an hourly rate, and tell the client you just charge for time and materials. Sometimes this takes the form of you pre-selling your time in monthly chunks for discounted rates. Sometimes you just track your time, work until you're finished, then invoice the client.
The Good
You get paid for all your time and virtually eliminate the risk associated with a fixed price estimate. If scope creep enters into the project it doesn't matter because you get paid for your time no matter what.
The client gets the lowest possible price because with a fixed price project you have to pad the price to account for unexpected issues that always arise even with small projects. Most people pad the price anywhere between 10% and 100%. For example, if you think through the project and feel like if everything goes exactly according to plan you can knock everything out in about 40 hours. You want to make at least $85 per hour. So, you do the math (40 hours x $85) and come up with $3,400. But nothing ever goes exactly according to plan so you add another 50% to account for scope creep and other unexpected issues. The final price becomes $5,100. Then, maybe you round down to $4,900 just so the price feels a little better, right?
But what if everything goes a little better than you expect and you don't need the extra 50% of “unexpected” time? Well, with hourly billing, you don't pad your time and the client only gets billed for your actual time. So, they get a $5,000 project for $3,400.
So, if everybody is protected and gets the best deal possible with hourly billing why doesn't everybody just do that? Well, let's look at the problems.
The Bad
Clients don't buy if they don't know the price. Clients have a very hard time agreeing to a project if they don't know what it's actually going to cost. That's it. That's the bottom line. You're not trying to hide the price. The truth is nobody knows the price because you don't know how many hours it's going to take. Then clients ask you to estimate the hours, now you're basically back to the Standard 50/50 Split model.
There are other problems too. Just like the Standard 50/50 Split model, you're still competing against the world on price. Is your hourly rate as good/low as the next person? How is the client supposed to judge the value of your rates vs. other people's rates if they don't know how fast you work compared to everyone else? Furthermore, what about quality?
Hourly rates don't mean anything because they do not reflect total cost and they do not provide any measure of quality. Ultimately, clients just want to know what the project costs.
Also, you lock yourself under a price ceiling. You're selling time for money and there's only so much time you can devote to the project. You can't make more hours and if you start charging $200/hour everyone will assume you're too expensive and move on to the next guy who only charges $20/hour. You're stuck.
Website Leasing
With all the problems that are packed into the two most popular pricing models people start feeling like they need to get creative with their pricing. That's where website leasing comes from. It's an attempt to solve the upfront cost problem in the Standard 50/50 Split model by spreading out the payments over time. So, if you feel like you want $5,000 for your websites, what if you just charged something like $450 per month? Over 12 months that would be $5,400. If the client stays for two years then you're in the five-figures now. Not bad, right?
The Good
You get recurring revenue right off the bat. What if you could get 20 clients paying you $450 per month? Now you're bringing in a consistent $9,000 per month! That's over $100k per year and you're feeling awesome.
You have provided a low barrier to entry. Clients can easily say yes because they only need to come up with $450 to get started.
The price is super clear. You don't have to calculate hours, pad fixed pricing, deal with hourly rates, etc. It just costs what it costs and that's it. It's all totally transparent and everybody knows what to expect.
The Bad
The biggest problem with this model is misaligned incentives. The client wants a powerful site that looks awesome and drives results for their business. You want to get this site built and launched as fast as possible because you're only making $450 while you build everything out. So, you have to get this thing out there as fast as possible because you're burning through your savings while you ramp up.
Along these same lines, you're not setting yourself up to succeed. You aren't giving yourself the time and resources to do your best work. So, how can you expect to generate the best outcomes for your client?
You take on all of the risk. You're doing all the heavy lifting upfront to get the client's site launched. It may take you a full month of time and you're only making $450 the first month. If the client backs out after only a few months you're left empty-handed and there's pretty much nothing you can do about it. Even if you have an annual contract in place the cost of getting a legal team involved is probably not worth the effort.
Rank and Rent
One of the more creative pricing models is the “Rand and Rent” model where you pick a local niche – like small engine repair – then build a website all on your own. You blog and build backlinks so that the site ranks really well – especially for local searches. Then you find an actual business that does small engine repair in your area. Then you basically rent a site that already gets traffic to the local small engine repair company.
You can charge for it in several ways. One way is you just rent the site for some monthly fee based on the traffic you've been able to generate. Another way is you charge per lead you send. So rather than paying monthly for the website the small engine repair guys give you $50 per lead you send their way through the website.
The Good
It's actually pretty fun. It's fun to build a site, do your own SEO, see the traffic grow, etc. You really feel like you're doing something because you can see the results right there in front of your eyes.
It's a fairly easy sell. You can show the client the site and show them how well it ranks for certain keywords they care about. You can even prove that you're able to send them leads by giving them the first month free or something. Once they see they have a virtually guaranteed source of leads coming from you they happily sign on.
This is a great way to generate significant recurring revenue. As good as the Website Leasing idea was for recurring revenue, this idea is even better because you can charge a lot more. For example, what if you're site generates leads for real estate agents and they value the leads at $50 each. Suppose you were driving just 5 leads per week (20 per month). Now you're making $1,000 per month! To put this in perspective, Zillow is basically the champion of this Rank and Rent model for real estate and Zillow charges between $20 and $60 per lead.
You can build a very valuable portfolio of sites. This is a scalable business model. What if you built 50 sites and rented them all? The maintenance is relatively easy, you can even outsource the grunt work. If you're successful you can really build a valuable business with this structure.
The Bad
You take on massive risk upfront. The whole model is predicated on you building a site that ranks and generates leads. That can take at least 6-months of serious effort before you see any revenue at all. It's pretty hard to build sites that rank well for competitive markets. But, if the market isn't competitive then the leads aren't worth much. If the leads aren't valuable then you can't rent the site for rates you need to be profitable.
There's also a long runway before you start seeing money. In the best-case scenario, it's going to be at least 6 months before you have the traffic patterns that will make your site valuable. That's a lot of time and effort to put in upfront with no guarantee that you'll be able to generate the traffic. If you don't generate traffic you'll never rent the site and you've lost all that time.
Lastly, it's pretty hard to find good markets. You're looking for that sweet spot where there's not too much competition so you can get in the game with a site that ranks. But it needs to be a market where the leads are valuable enough and the product/service is popular enough to generate traffic. In other words, you want low competition and high traffic. That's a tricky thing to come by.
The DoubleStack Model
Having looked at the popular pricing models for web sites we've seen a bunch of pros and cons. Is there a way we can get the best of both worlds? In other words, how can we get all the good stuff and avoid the bad stuff all in one structure?
Get All The Good Stuff
- High earning potential
- Recurring revenue
- A pricing structure that is clear and everyone understands
- Easy to sell
- Everybody's having fun
Avoid All The Bad Stuff
- Misaligned incentives
- You having to take on all the risk
- Not giving yourself the time and resources to do your best work
- The long runway to profitability (not making money for months)
- Locking yourself under a price ceiling (hourly rates and heavy competition)
New Pricing Model For High-Ticket Web Design
The way DoubleStackers market their web design business is specifically designed to generate that “best of both worlds” framework. There are two components to every client relationship. We have the pre-launch component where you're setting the stage and putting all the tools in place for your client. Then there's the post-launch component where you then use all the tools you just set up. The pre-launch phase gives you the time and resources to do your best work so everyone's incentives are aligned. The post-launch phase is where you generate recurring revenue through a combination of technical work, marketing, and business development.
The entire thing is bundled together into one system. The recurring revenue is not an upsell you offer the client after you launch the site.
You shift the client's focus off of the individual technical skills you're going to be exercising and, instead, show them the financial benefits of working with you. In other words, the value is on the fact that you've got a system (sort of like the Rank and Rent concept) where you're entirely confident that you can help them generate significantly more revenue. That's where the value is.
When you structure your business like this you also solve the barrier to entry problem because your work is essentially better than free, it's profitable.
Since you're charging high-ticket rates, you don't even need very many clients. Usually, the sweet spot is around 7 or 8 clients to get you to a six-figure income as a self-employed web design consultant.
Start Generating The Revenue You Really Deserve
This is the best way to serve your clients because it means you've got the time and resources to do your best work. That means your clients are going to be getting the best outcomes. That's the jackpot because it means everybody's winning.
In addition to helping you get clarity on exactly how to structure your pricing when you become a DoubleStacker you also get help with your marketing and lead generation so you start attracting clients looking for these high-value, long-term relationships.
If you're thinking that all the clients you attract are cheap clients looking for low-budget work, does that mean your skills just aren't valuable? Or, does it mean you need to change the story you're telling about yourself so people start to see your value?
The truth is there are so many businesses that need your authentic and genuine help. They're not looking for technical services. They're probably not even looking for websites. So, if you're like most web designers you're probably looking for clients in one place and your ideal clients are looking for you in another. You're missing each other.
My mission is to connect you – an outcome-driven web design consultant – with business owners who need your help driving actual results and who are willing to pay you what you deserve for delivering that level of impact.
I'll help you develop the tech stack, the marketing story, and the system for onboarding your clients so you can have the income, the lifestyle, and the freedom that comes with being a high-ticket consultant.
Click here and let's talk because it's time to make this happen ➤
Podcast: Play in new window | Download
