web projects: the smarter you get the less money you make. why?
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One of the most common debate in the website world is should I charge by the hour or by the project. What if I told you that you could work less and make more money rather than getting more efficient and making less. I will show you what I did on every project I would scope as well the four reasons on why not to bill by the hour. http://JasonSwenk.com/playbook/TRANSCRIPT
SMARTER = LESS $
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Work less & make more PROFIT!
What if I told you…
JasonSwenk.com/Wordcamp/
Common debate
Hourly by the Project
For about half of my agency life, I charged by hourly.
If you’re charging by the hour,
you’re going to lose profit!
JasonSwenk.com/Wordcamp/
If you’re charging for each hour you work, you’re going to hit a ceiling of earning potential.
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You charge based on the
amount of time it will take.
100 hours @ $50/hour
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Then another customer wants
the same, and you charge hourly.
75 hours @ $50/hour
-$1,250 for the same projectJasonSwenk.com/Wordcamp/
Fully Burden Rate
(Employee hourly wage * # of hours available per year) + Other total expenses
# of actual hours of work per year
($25 * 4,160) + $50,000
2500
Assume you have 2 employees that make $50,000 / year
= $62.60 (Your cost)
Effective rate =
Amount earned in a set time frame
Amount hours worked in a set time frame
JasonSwenk.com/Wordcamp/
I was able to increase my effective rate to 50% to sometimes 500%.
!
This meant I went from $100/ hour to $500 / hour.
JasonSwenk.com/Wordcamp/
By the numbers1. You charge $100 / hour 2. 40 hours in a week 3. You’ll make $4,000 per employee, per week 4. You have 5 employees at 40 billable hours a week
• Increase effective rate by 50%
• You’ll make an extra $10,000 / week
• That’s an extra $40,000 / month
Charging by the hour…
1. Penalizes you for your experience
2. Cripples billing potential
3. Makes client nervous to not know what it will cost
4. Encourages lower productivity
JasonSwenk.com/Wordcamp/
“Most savvy buyers are trying to get the Best Value, and not the best
price.”
JasonSwenk.com/Wordcamp/
Lifetime Value of the customer = AVG Spend * AVG Buying * How long client
Here’s what you can do…1. Figure out what the issue, impact and importance. 2. Look back at past similar projects for amount spent. 3. Make sure to pad the hours by 25% profit. 4. Make sure to pad the hours by at least 25% for risk
5. Sell the value of the result to the client. 6. Look for ways to deliver more efficient & reward
employees on this.
JasonSwenk.com/Wordcamp/
