Clients don’t actually want your hourly rate

Hey I’ve got this site to build and I’m trying to figure out what it’s going to cost. What’s your hourly rate? – Every Client Ever

Yup, we’ve all received that email, or one like it. You may have received one just this week, and if you’re like ‘the old me’ then you sighed loudly and fired off an hourly rate, even when you knew you shouldn’t.

The prospect then randomly guessed how long the job would take and multiplied that many hours by your hourly rate, compared it to the hourly rates of other contractors who responded, then chose a developer based on the total price the prospect calculated.

It was a bad choice.

The real question

What this prospect really wants to know is the total cost of their new site. We all totally understand that, right? Very few of us would purchase something without knowing what the cost of that something is.

If we’re purchasing services, we look at the estimates we’ve been given and figure out how much we’re going to pay for the services.

Here’s the problem though: Do you know how long it takes to build a house? I mean, I have experience in framing, electrical work, and the operation of large machinery. However, I still have no idea how many hours it actually takes to build a house. So asking for an hourly rate of a contractor and then multiplying that by an uneducated guess on the number of hours to complete a job sets the client up for poor expectations (and typically, disappointing results).

It’s simple

Back when I built fancy decks in Toronto, we had a saying that if the customer said ‘round’ then it cost them $1,000.

Hey, I want a round deck with a round railing and a round patio.

See that sentence? That’s a $3,000 sentence — because there are three round components. The thing is, to make a round (curved) railing, you have to laminate a bunch of wood together and then cut out the shape you want.

The round deck takes all sorts of cuts that need to be just right.

The round patio means you have to cut every brick in the proper shape, not merely trim the end off a rectangle to make it smaller.

So while the finished product may look ‘easy’ it’s a lot of work to get it to look right, and many customers would assume that you ‘just made it round instead of square’. (Easy to say, hard to do.)

Your clients are making similar assumptions. They hear about the famous WordPress 5-minute install and think that everything about creating a website is that easy, therefore it shouldn’t cost that much to get their site up and running. These assumptions extend to eCommerce sites, membership sites, and anything else that is built on top of WordPress.

Yes, we can lament these client assumptions, but really, they’re understandable. Most prospects don’t even have the framework to evaluate the decisions or the difficulty of their requirements.

Heck, we do this work for a living and we still estimate wrong sometimes when it comes to the complexity of what a client wants, and what it’s going to take to accomplish their goals.

Time

Another faulty assumption prospects sometimes make is that everyone is going to take the same time to finish the work. So when I say my hourly rate is $250/hour and another person says they charge $50/hour, the client may assume it will take each of us 10 hours to do the job.

I’m obviously way more expensive, but I’ve been doing this for 7 years, and maybe that site the client wants done is the exact type of site I do all the time. If that’s the case, I may be able to complete the job in 2 hours.

That means the other guy and I are actually the same price because what will take him 10 hours to do at $50/hour, I can do in 2 hours at $250 because I’ve been doing the work longer and am faster. However, I may lose the job because the client assumes I’ll cost more.

All because of a bad assumption.

How I answer

Okay, so we don’t think the prospect is a big idiot — we recognize they may be making some poor/broad assumptions and really just need some education.

But how do we answer that email? Here’s what I do.

Hey $client, thanks for reaching out. Asking what my hourly rate is really isn’t the right question. What you want to know is how much will this cost. If I give you an hourly rate then you’re going to guess how long it should take and multiply that number by my hourly rate and then decide how expensive I’ll be.

That doesn’t take into account the fact I’ve been at my job for more years than many of the other people you’ve asked about their hourly rate. I’m likely faster than most of them.

You’re also assuming you know how long something will take, which unfortunately is likely a guess and without years experience building sites.

Below you’ll find my standard questions for new prospects. Please take the time to answer those and then we can get on the phone and talk more about your project. Once we’re through that step I can put together a proper estimate for you and you can know what it’s going to cost without all the guessing.

Most of the time the prospects answer my questions (which you can get in my Effective Client Email book) and we get on the phone and talk about the project. After those two steps are complete, I give them an estimate that’s actually accurate.

We still accomplished their goals and I’m not working hourly.

photo credit: jdhancock cc

4 thoughts on “Clients don’t actually want your hourly rate

  1. Hi Curtis,

    Thanks for the post, I enjoyed it and it’s spot on. I’ve lost a good deal of work that way.

    I’m about to read the related articles in a moment.

    Warmest regards,

    Athlone

    1. I’ve consistently found that the clients I want take it well and the clients that don’t get annoyed. So I just let them go.

  2. I stopped quoting my hourly rate at the beginning of the year for everything except the most basic of maintenance agreements. It took some time for this change to have an effect on my overall business, but what it did do was transformative.

    By framing the context of the pricing discussion differently, I am able to price my work differently than I did in the first couple years of my business. Now the discussion is around the end result, not the imagined cost of the project.

    By giving prospects a single calculated fee for each project, there is no incorrect calculation of how much I will cost as opposed to another service provider. The price becomes a known quantity.
    It also changes the context of a project from a cost to an investment.

    The other thing is it relieves stress and anxiety for myself and my clients. We both know how much a project will be. The money discussion is settled at the onset of the working relationship. No sleepless nights worrying what the final invoice will be.

    This works for me now, with the model of just myself. As I grow, or if I eventually bring other people on, this system may need to be revisited. But it is vastly superior to simply selling my services by the hour, at least for me.

    1. Even for the real basic stuff, I don’t go for an hourly rate. Take a scenario yesterday, which was basically to recover a login for a client who had lost it, well their other developer had killed it. I even sent them links to services that could do the work (WP Site Care) and a link to a blog post on how to get it back.

      They didn’t want to do either, they wanted me. Should I have used an hourly rate for 20 minutes of work? Nope I went flat rate and worked for 20 minutes and made a typical 1/2 day of income.

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