Ask WWD: How Do You Charge for Your Time?

WWD recently received a great question from a reader regarding contracts, terms and pricing. Celine Roque and Aliza Sherman partnered to address this question:

I’ve been a contracted web designer for 3 years now. I have two steady contracts, both paying me monthly and I work remotely for both out of my home. One of the contracts pays me based on the idea that I will work up to 25 hours a week for them. The other company I work for pays me based on me doing repeated monthly projects (web updates + newsletters). I have problems with both. The first one who pays me to work 25 hours a week expects me to do what they say when they say (which is hard since I don’t just work for them). There’s also no real way of proving I did 25 hours of work which bothers me because if they ask me to do more and I can’t prove it. My problem with the other company is that I don’t get compensated for my work all the time. I could charge more, but not all months I am taken advantage of and I don’t want them to feel like they are being gouged.

I have a chance this January to re-new my contracts and change the terms. I was thinking of saying to both that I will work for a set amount of hours during the day. So like 9am-1pm for company A and 2pm-6pm for company B. They could make sure I was online and working through gchat. I’m hesitant to do this because I don’t like the idea of being tied down every day and losing my freedom.

What’s the best solution for managing how I charge for my labor?

Aliza Says…

How to charge for the work you do seems to be a constant question on every Web worker’s mind, and I think we all come up with our own formulas on how to handle pricing issues.

Personally, I’ve moved away from the hourly model as much as possible for several reasons:

  1. My time tracking deficiency. I’m terrible at estimating or even tracking hours. I’ve tried time tracking widgets, and while they work great, they only work if and when I remember to use them which is never.
  2. How do you count dream time? There is much more to the work I do than just hours of actual labor. My clients are also paying me for the value of my years of experience, my ability to perform tasks quickly and efficiently, and my strategic and creative thinking. Even before I sit down to do the actual work, I’ve been ruminating on client projects and issues for hours, days or weeks so that when I do sit down, I can hit the ground running. How do you charge for rumination??
  3. Avoiding the pain. I hate being micro-managed and having to account for each and every hour of my time is painful to me. I do my work the way I do it so I won’t be experiencing that kind of pain. The bottom line is that I deliver what I say I’m going to deliver, I do what I say I’m going to do.

So even in my contracts, I list the specific things I will be doing for my clients and set a timeline. Then I put a cost to each part of the project – each deliverable – and set my payments in increments throughout the duration of the project, either as deliverables are met or as percentages of the overall project cost paid over time until the project is complete.

In terms of when clients can call me, I can only work 10:30am until 4:00pm due to family obligations so I turn my phone off or do not answer it before that time frame, after that time frame, or when I’m tied up in the middle of a project. I also lead clients, by example, to use email far more than the telephone which cuts down on time-consuming calls.

Celine defines several solid solutions and explains more of the nuts and bolts of how to carry them out.

Celine Says…

As Aliza mentioned, one solution is to shift the focus of both your contracts from a time-oriented way to measure work, to a results-oriented way. This means that your deliverables should be based on what you accomplish rather than how much time they took. There is a set list of tasks that you have to finish each day/week/month, and your ability to commit to the list is how they’ll measure your performance.

The tasks that need to be accomplished should be mutually agreed upon, so that you won’t feel exploited and your client knows what to expect from you. You should also discuss the pricing for each task, as well as projected average total cost for each month based on your client’s previous requests.

This entails a lot of initial work, especially since you’re currently being paid by the hour. You’ll need to have a long discussion with your client about these changes. Also, it’s difficult to implement a solely results-oriented approach, especially if the tasks you do each month vary greatly. Ideally, this method should work fine for simple projects.

Another approach is somewhat halfway between your current arrangement and the results-oriented arrangement above. First, you can define the tasks covered for the 25-hour period. You can start with the regular tasks they ask you to do such as text changes on the website, addition of a few images, sending out the newsletter, etc.

The defined tasks could even include a set time each workday where you will be available for consultation. You can make yourself available twice a day for each client, where they can give you feedback or make additional requests. Whether you use email or the phone, having a fixed schedule to communicate will be more efficient.

This might be tough to propose, especially if they’re used to having you at their beck and call. Let your clients know that this change is for their own benefit, because implementing this will allow you to spend more time actually doing the work. Tell them that this saves them time as well. Instead of calling or email you multiple times at irregular intervals throughout the day, they can batch their requests.

Since there is still time measurement involved in this approach, it helps to send the client a daily or weekly report of what you’ve accomplished and how long each task took. You can use time-tracking tools to provide the information in your report. Most clients usually underestimate the time and effort needed for some tasks, which is probably why your client tends to demand more of you. Seeing this regular update will allow the client to have a better idea of how long certain tasks take, and they’ll know what to expect in the future.

For the heavier work you’re asked to do, such as, say, the creation of a new sub-page, creating forms, making changes to the layout, you should quote separately for them. Discuss this with your client when negotiating your new contract so that they will expect the quotes, and even ask for it when they request these major tasks.

The Bottom Line

You need to create a fee structure that best serves you and your business but that is acceptable to your client. As you change over to a new way of pricing, develop a “handout” or fact sheet that outlines the new structure, giving an explanation in writing to your clients and offering them the opportunity for discussion before changing the contract.

Present your change in pricing and billing as an entire restructuring of your business, not as a way to right any wrongs with the previous pricing structure and contract. You’re not trying to “punish” your clients. You are trying to get the new year off on the right path to strengthen and grow your business. If you have a good relationship with your clients, they should be supportive of the new move – as long as they can see the mutual benefit. They are ultimately looking out for themselves. You need to do the same.

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