How Much Should I Charge
From NZ PHP User's Group
A common question that people ask often is "How much should I charge to do this site or How much should I charge an hour?"
The following page will go some way to explaining the answer.
As at 25 Nov 2008 there is some discussion going on in our mailing list: See: Website Pricing (Off Topic - But need help) in our mailing list archive to understand more about this issue.
How to calculate your hourly rate
To work out what you should be charging for a job you need to know what you should be charging per hour.
You also need to consider how many hours per week are realistically billable.
See this spreadsheet: Costings(.ods)
Factors for consideration: (You'll need to see the spreadsheet to understand the following.)
1. Desired Income - Look around at job ads to get an idea of market rates for the work you're doing.
2. Market Impact - When considering what you charge, and considering what you set your desired income to, you need to consider the impact your rate will have on the market. You are taking part in setting market expectation by making your services available. If you're a student today, you might be a parent with a family with 2 kids in 10 years. The people who are parents with 2 kids today were students 10 years ago. If you under charge in the market place, because you can, you might be making it harder for yourself in 10 years time, is that what you want?
3. Competence - If you're new to PHP programming you may find that it's taking you twice as long to do something as someone who has been programming for 20 years. You reflect this in one or two ways, your hourly rate and/or your billable hours. If it takes you 20 hours what it takes someone quicker 10 hours to do, then you can bill 10 hours @ $100 and they can bill 10 hours @ $100 because 10 of your hours are learning time. You get paid the same final amount - the finished work is the same, hence it's worth the same, but you will effectively earn half as much as the more effective programmer as you will only be able to complete half the number of jobs they will.
4. Expenses - I've proposed a range of expenses. If you're a student then you may feel that you don't need to allow for some of the items I've considered. However you need to think about what you may need to consider in 3 years time. You also need to remember that even as a student your work related expenses are tax deductible. You might not feel like you earn enough money to even pay tax, but remember that a tax loss can be carried forward. This means that tax loss you make while you're a student can be stored up to when you make more money. This is why I included accountant fees. Remember, you're a professional. Get used to the idea of using other professionals and paying them for their time. See: IRD for more information.
5. Billable Hours Per Week - If the job you're costing will keep you busy 4 weeks solid and you know every hour will be 100% billable, such as a "time and materials" contract, then you would set the billable hours rate higher but not at 100%. You need to remember that while you might be working a full 40 hours there are normal jobs that you are not doing. On a normal week, where you may only be billing 20 hours, you'll be spending a few hours working marketing. When your current contract is finished you might have 2 weeks where you've got 5 billable hours and you're spending all your time calling potential customers.
If you have a number of small customers who are giving you regular small jobs, resulting in lots of small invoices each month, you may find that you're spending quite a bit of time following up late payments. You may consider a lower rate for payment in advance or prompt payment.
How to cost a job
To cost a job you need to understand the process your job will go through.
See: System Design & Construction Steps
This was produced for a specific task, to it may need some adjusting, however it will make you realise the steps you're going to have to go through just to get the job done. There are often many tasks that we over look when costing out a job.
Next I will attempt to make a spreadsheet (this time in Open Standards tools) that will be a template to help you cost your proposal.
... more soon...
Cheers Don
