Money and Web Design

TOM O’MALLEY: Hey there, fellow freelancers. You’re listening to Tom with Making Money Making Websites and today we’re discussing the money side of web design. I’m opening my books and sharing what I charge; what I make; and how I bill my own clients. Let’s get it going!

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Welcome to triple-M W, ladies & folks; this is gonna be a good one. We’re talking CASH, cheddar, moolah, cabbage, bread. It makes the world go round and, let’s be real, it’s why we’re in the freelance business to begin with. Now, I’m fully aware my listeners might be at different stages in their journey. When you first start out, you’re just kinda testing the waters to see if anyone is actually crazy enough to pay you for a website. This adrenaline-fueled phase is often chaotic, disorganized, and relatively low-paying. But that’s okay! You’re feeling out the market; dipping a toe in; getting some experience under your belt. Eventually, though, you’re gonna want to standardize how you quote projects; what you charge; and how you collect funds.

Over 15 years ago, when I had the brilliant idea to start capitalizing on my rudimentary web design skills, I worked mostly on trades. Getting cool stuff in the mail was enough of a novelty to motivate me at the time. I even got a full drum set once (and I don’t even play the drums). Fun story: that client actually caught me selling the set on Craigslist a week later and was not amused. Oh to be young again…

Although not a sustainable business model, the free swag taught me there was real value in my services to clients. So when the next few opportunities rolled around, I asked for monetary compensation. Ya know, I’m sitting here, wracking my brain trying to remember who my first paying client was… either a day care center, dance company, or modeling agency. Regardless, in the beginning, I was charging maybe $300 per site – TOTAL. Look, as a struggling 22-year old, that was some sweet walkin’ around money. Of course the disconnect between actual time spent and income earned was totally bonkers. This is the freelance precipice, though. Many of you might be on that edge right now. You’ve proven that clients will open their wallet in exchange for your services. Now it’s all about getting real with your pricing.

To this day, I still struggle with what I call pricing shyness. Man, when you’re on the phone with a prospect and they ask for a “ballpark” on the spot… you just wanna win their business in that moment. Logic ceases to exist. Your industry data and formulas are out the window. You blurt out a number and they are easily receptive. You immediately realize you underbid and now the regret sets in. Why does this happen? For me, it’s a lack of confidence. It’s an inherent fear that a higher number will cause them to hang up or chastise me for my delusional self worth. I will say, I’ve gotten better. I actually have been hung up on a few times (and I’m still alive). But I’ve also been paid handsomely for my recent work as a result. Something that has really helped me is realizing the concept of money is completely relative. Sure, a $10,000 infusion might be life-changing for you, but it may very well be a minuscule investment for the person you’re talking to. Do yourself a favor and let go of pricing insecurities. You are worth every penny. If a client can’t afford you, it’s not a good fit.

I know, chances are, you downloaded this episode because you want to hear MY numbers. In the spirit of complete transparency, and because you’ve been so patient, I’m happy to share (and then we’ll unpack it a bit). As I sit here today, my hourly rate is $95. My clients have been trained to expect the meter to run at that number whenever they send me a task to complete, call me, or invite me to a meeting. I bill in 15-minute increments too, so if a request takes 7 minutes, they’re getting charged $23.75. If it takes me 18 minutes, they’re probably still getting charged $23.75 (IF I like them). I know a handful of designers who charge for PROPOSALS, but I kinda draw the line there. The whole slimy attorney philosophy of, “if I even think about your business in the shower, you’re getting billed” tends to offend clients so it’s important to find a reasonable balance. Worth noting, billing is as much art as it is science. I try to think big picture when it comes to invoicing. The lifetime value of a client is almost always worth more than squeezing an extra few bucks out of them in the short term. Trust and mutual respect is earned and, once you have it, the money can really start flowing.

My agenda for an average workday is mostly consumed by chipping away at larger projects with sprinklings of small and/or urgent hourly requests and meetings. When it comes to full website builds or more involved branding & design exercises, I almost always propose a flat project price. Neither of us wanna be focused on the clock when a well-defined end result is really the goal. Still, this number is loosely based on how long I think it will take x my hourly rate + some padding for good measure (it’s never enough padding by the way). Lately, my most basic WordPress builds rarely dip below $4,000 and, as I’ve gotten braver, many come in just under the $10K mark. Personally, I’d love to get to a place where my rock bottom is $12,000. In terms of recurring revenue, I don’t mess around with maintenance contracts much. I do make about $700/mo in hosting, though, and that number grows with every new site we launch. Last year, my freelance revenue was $200k and I’m already on-track to bump that about 10% this year.

Okay, so now you know what I charge—let’s talk about how I charge. Getting myself on a real billing platform three years ago was one of the best moves I’ve made for my business. Before that, invoicing and payments were really sketchy. I use Fiverr Workspace (formerly AND.CO), and it treats me right. It’s not a perfect platform by any means. I have a shortlist of small bugs and annoyances ready to go should they ever seek my opinion. However, for how I run MY freelance empire, I love it. I know it so well and it’s a breeze to operate. You need to find yours.

While we’re on the subject, let’s talk accounts receivable. Back in the day, I would invoice clients as soon as a project or task was complete. Gotta collect those fish while they’re fresh, right? Ehh… I eventually wised-up to that not being the most efficient use of my time (and probably discouraged my clients from sending me small requests too). Now, I send my invoices on the 25th of each month for all charges incurred since the last invoice. My clients know when to expect it and it’s just a more professional look all around. Fiverr Workspace has a built-in time tracker but I don’t use it. I despise time trackers. They are a relic from when I worked at agencies and my soul refuses to go back to that dark, dark place. Instead, I just kinda eyeball it. I simply create draft invoices for clients as requests come in at the beginning of a billing cycle. Every time I complete a task, I add a line item to the draft. By the time the 25th rolls around, I have a decent collection of detailed invoices ready to be sent off. For the most part, I’m quite strict about my billing schedule. One exception is when I’m starting a new flat-quote project; I will ask for 50% to begin work and the remainder to launch. This also gives me nice little cash injections throughout the month. Another exception is if I’m just about finished with something for a client on the 25th, I’ll hold that invoice for another day or two so it includes more. On occasion, I’ll deliver something that the client is not crazy about. This happened to me last week, actually. It can be kinda awkward to throw an invoice on their desk before they are fully satisfied with the task you’re charging them for. Just be mindful of that.

As a freelancer, you’re not just the creative department, IT department, customer support department, and janitorial department—but the accounting department as well. You must create systems that make the administrative portion of your business as painless as possible. The more bogged down you are by that nonsense, the less time you’re spending on billable production.

I’d be remiss (did I use that correctly?) if I didn’t talk about retainers and maintenance plans. A LOT of web designers use these as their bread and butter. In fact, I started a company about six or seven years ago that made websites for bars & restaurants exclusively. Our whole pricing model was based on monthly fees vs upfront costs. Guaranteed recurring revenue is certainly an attractive thing in this world, but it wasn’t for me. I know many agencies and freelancers have found a way to make it work to their benefit, but I can’t help but feel someone is always on the losing end of those agreements. I rarely go that route these days. I still have a few legacy retainer clients but hourly and project billing is where it’s at for me—and that revelation has skyrocketed my bottom line, personally. The so-called guru’s say “don’t trade time for money” but that’s exactly what I’m doing and I love every second of it.

Okay, so it’s time for the bad talk. It’s getting real now. He who must not be named (Uncle Sam). I could fill ten episodes on tax talk alone (and I probably will). For now, let’s stick to the basics. Yes, America is the great land of unlimited opportunity but my goodness they sure make it difficult. After the tax year I had recently, I’m starting to wonder if entrepreneurship is encouraged at all in this country. Look, you have to pay taxes. If you’re earning income outside of a W-2, you must report every penny. My advice: don’t mess around with this stuff; don’t try to game the system—just take your medicine. Besides, I suppose we can all appreciate the modern perks of a well-funded government (teachers, firemen, roads, bridges, and whatnot). I mentioned bookkeeping software earlier. That alone will make your life SO much easier in terms of tracking business expenses and revenue. Get yourself a real accountant too; a local certified CPA. Your days of filing for free yourself online with H&R Block are over. This is complex stuff and you need a professional who knows the in’s and out’s of business accounting. I pay my taxes quarterly now. I opened a second bank account to keep the funds separate and untouched. Ya gotta figure about 30% of your net profit is going back to the IRS each year. It’s a frustrating reality—but also a relentless motivator to earn more.

As you know, I’ve been at this for some time now. With that, comes a touch of wisdom I suppose. How about a few tips to close out the episode?

1. When it comes to big web projects, don’t lose your leverage before getting paid. Be clear that the site launches upon receipt of final payment.
2. Be upfront with all new clients that payments are due on a NET 15 or 30 basis. That’s the number of days they have to make payment or work stops. You can even say payment is due upon receipt of the invoice if you dare be so bold, although that can come across as a bit desperate. Whatever you decide, just be crystal clear about it early. By the way, this guarantees nothing. Some of my clients take their dang time paying, every single time is like pulling teeth. A select few require occasional nudges; frequent nudges; gangsters on their doorstep, etc. I’ve never had to threaten anyone legally. Chances are, if you do that, you aren’t getting paid at all – and you definitely just lost a client relationship. There’s no coming back from billing turning ugly.
3. For website builds, get a 50% deposit. That sounds crazy, right? Even asking for 20% is a little scary. Trust me. It took me far too long to realize 50% is the sweet spot and not one client has given me lip about it. Repeat after me and say it with confidence, “50% down to begin work and the remainder due to launch.” You get assurance that your time spent won’t be for nothing if they ghost you and they get assurance that you’re motivated to actually finish the project because there’s still half a carrot dangling.

Probably the best piece of advice I can give is to have some tact when it comes to money and clients. Never let someone think you need a payment right away. Nobody is comfortable doing business with a desperate service provider. I remember hearing someone refer to this syndrome as “business breath” on another podcast and thought it was brilliant. Demonstrate patience and grace at all times. I’ve had plenty of clients, particularly new (un-trained) ones, that say “send me an invoice” and I always respond with “invoices go out on the 25th.” It exudes professionalism and adds another brick of confidence to the foundation you hope to build with all clients over time.

Now instead of promoting a sponsor for today’s episode, I would much rather encourage you to visit MMMW.CO right away and join my mailing list. It’s on every page – you can’t miss it. Many of my most lucid thoughts and valuable tidbits are sent via email. Totally free, tons of value, and never too often. You will not regret it! Go to MMMW.CO and subscribe today. Oh and check out my Resources page for more info on Fiverr Workspace.

Thanks SO much for listening. Episode two is in the books! No turning back now. We’re on a roll! Be sure to follow along for some epic rants about the inner workings of freelance web design as well as interviews with real people who are killing it on both the business and creative side of things. For notes and extras of today’s episode, head on over to mmmw.co/listen/2. Until next week, fellow freelancers!

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