Case Study: Two companies have a website they each need designed, developed, hosted, and maintained (small changes to prices and new products each month). Each requires a home page, 4 interior pages (about us, services, products, contact us), a form for the contact page, and a small gallery for the products page.

Company A goes with a design firm that charges a project cost of $4,200 with 50% due on signing and the rest upon completion. The design firm submits an itemized contract showing the cost for each item ($1,500 for the home page and design, $250 for each additional page, $100 for the form, $250 for the gallery, $150 for hosting for 1 year, and $1,200 for a year of maintenance). They promise a completion date 5-weeks from the date the contract is signed.

Company B goes with a recent graduate who charges an hourly rate of $45/hour. He submits a bill for 20 hours each week and takes 4 weeks to complete the project. He charges the company $10/month for hosting and does the ~2 hours of monthly maintenance at his normal hourly rate. He bills monthly for the hosting and maintenance.

How Much Did Each Company Really Pay?

At first glance it seems that Company B is getting the better deal. They only pay $3,600 for the design of the site, $10/month for the hosting, and $90/month for maintenance. Where as Company A pays more than $4,000 for everything. But wait … did Company B really get the better deal? Let’s see:

That’s a $600 difference!

Why Do So Many Companies Pay Hourly Rates?

Hourly rates are how companies are accustomed to doing business. They don’t pay employees their entire annual salary in a single payment; they pay incrementally over 24 paychecks. This method has one main advantage: the company maintains employment of an individual by providing a powerful financial incentive for the employee to keep coming back and to keep doing their job well.

Why Do Most Designers Like Being Paid Hourly?

When a consultant is paid hourly, they are in control. Since they’re in control of the outcome they aren’t done until they say they’re done; they can continue billing for as long as they deem necessary.

We’re not saying that there aren’t honest consultants who bill by the hour out there, but unfortunately they are an increasingly rare breed.

Who Charges What?

Generally less experienced individual contractors tend to bill by the hour, whereas companies generally express themselves in terms of project costs.

Which is Better for Your Situation?

It depends on your unique project, how long it will take and how many people will be involved.

When is a Project Cost Ideal?

A Project Cost is ideal for any project that involves multiple people and more than a day’s work (e.g. a website).

Pros: A project cost is straightforward and time-independent, which means the client knows exactly how much they’ll pay at the beginning of the project regardless of how long the project takes.

Project costs are more flexible. You don’t pay extra if more time is required.

Designers who issue project costs also tend to be more confident about their skills, are able to give more accurate (and realistic) time estimates, and are able to present you with solutions that are right for your situation. Because they aren’t being paid hourly they tend to do what you need rather than what will give them another week’s pay.

Cons: Sometimes a project cost can end up being more than the same project billed hourly. The obvious issue with project costs is that there is no ongoing incentive for the designer/firm to stay in contact with the client.

When are Hourly Rates Ideal?

Hourly Rates are ideal for any project that could be limited to a single individual and can be completed in less than a day (e.g. a logo design).

Pros: Hourly rates allow you to get small projects completed quickly and usually for a few hundred dollars or less. They also allow companies to have projects completed without an extensive contract.

Cons: Hourly rates vary greatly and the client usually doesn’t know how much they have to pay until the final bill comes in; hourly projects have a habit of running over budget. As mentioned earlier, the contractor is in charge of how long the project takes and how many hours are billed (whether or not those hours are accurate).

How does OpenUX Charge?

We choose whichever method is most beneficial for the completion of your project, which usually ends up being the best financial option as well. Call us today to schedule a consultation on your project at (314) 225-5881!