Infographic

(Cheat Sheet)

Download the Infographic - A 30,000-foot view of the process that plots when to provide estimates and fees, for what services, and when to collect.

The Complete Guide For How To Confidently Price Medium To Large-Sized Website Projects

The Complete Guide For How To Confidently Price Medium To Large-Sized Website Projects

And How To Bill Your Clients (When To Charge, When To Collect)

And How To Bill Your Clients (When To Charge, When To Collect)

How should you price your web services? Discussions with your client have progressed, and they're eager to know the price for the project. They trust your agency is capable of doing the work.

  • Perhaps your organization did a fantastic job demonstrating competencies and showcasing past work. 
  • You likely provided education and consultation in the discovery.
  • Or maybe the client came from a trusted referral.

Either way, they are excited to do business with you. The hard part is over, right? Well, not so fast. The right customer will happily compensate you for a sizable project endeavor. However, assembling and presenting the appropriate service fees can often be a more difficult challenge.

How should you price your web services? Discussions with your client have progressed, and they're eager to know the price for the project. They trust your agency is capable of doing the work.

  • Perhaps your organization did a fantastic job demonstrating competencies and showcasing past work. 
  • You likely provided education and consultation in the discovery.
  • Or maybe the client came from a trusted referral.

Either way, they are excited to do business with you. The hard part is over, right? Well, not so fast. The right customer will happily compensate you for a sizable project endeavor. However, assembling and presenting the appropriate service fees can often be a more difficult challenge.

With over 20 years of industry experience and a certified project management background, I can assure you that getting the correct pricing for a large website project is a challenge for everyone. It is common for pricing to be a little clumsy. Nonetheless, everyone is attempting to avoid a tremendous mobilization of resources and work output that brings in revenue with little to no margin. You will do a great job and deliver a fantastic product, and the customers will be happy to pay you for that and the experience you provide along the way. But if you're going to make a profit, apply a method to how you price your projects to fully understand your costs and expenses to produce the work with desirable margins. The good news is this document walks you through the process from end to end and ensures that you plan and deliver profitable work that avoids going into the red. Let's start with some primer tips.

Primer Tips

If this is your first time learning this process, it will look complicated and intimidating. But like anything else, repetition builds muscle memory, and the more you familiarize yourself with this process, the more it will become natural to flex this new competency. One thing is for sure, if it's complicated to you, it will be complicated for your customers. So take the time to review it enough until you thoroughly understand the process.

To help demystify the approach, familiarize yourself with some essential concepts. Let's start with the acknowledgment that it is impossible to know everything there is to know about your project immediately and all at once. Now consider these tips to orient your thinking around the method.

Tip 1:
Get familiar with the concept and language of estimates and fees.

Tip 2:
Get familiar with the primary process groups for the project.

Your project moves through phases; it is not one seamless process. Which estimates and fees to present and when will depend on where you are in the project.

Tip 3
Get familiar with the difference between cost and price.

Bonus Tip:
Know your cost.

We will go into detail about these concepts throughout this documentation. If you haven't had great success in pricing your website projects in the past, understanding these concepts and their relationships will likely unlock what may have been missing in your approach.

Primer Tips

If this is your first time learning this process, it will look complicated and intimidating. But like anything else, repetition builds muscle memory, and the more you familiarize yourself with this process, the more it will become natural to flex this new competency. One thing is for sure, if it's complicated to you, it will be complicated for your customers. So take the time to review it enough until you thoroughly understand the process.

To help demystify the approach, familiarize yourself with some essential concepts. Let's start with the acknowledgment that it is impossible to know everything there is to know about your project immediately and all at once. Now consider these tips to orient your thinking around the method.

Tip 1:
Get familiar with the concept and language of estimates and fees.

Tip 2:
Get familiar with the primary process groups for the project.

Your project moves through phases; it is not one seamless process. Which estimates and fees to present and when will depend on where you are in the project.

Tip 3:
Get familiar with the difference between cost and price.

Bonus Tip:
Know Your Cost!


Who is this article intended to help?

Web or Marketing Agencies: Any agency (marketing firms, web agencies) selling medium to large-sized website design or development projects.

Independent Contractors: As an Independent Contractor/Freelancer, you will undoubtedly have less overhead than agencies. But don't underestimate your cost and your value.

Project Managers: While this article targets web projects, the reality is Project Managers and organizations can apply this process to any medium to large-scale project endeavor.

 

Why does it matter?

Why should you take the time to understand how to price web projects correctly? You (or your Team) will…

  • gain a high degree of confidence in your pricing
  • gain clarity in your pricing
  • deliver transparency to your clients
  • protect your margins and ensure profitability on projects
  • If you're an agency, your people learn valuable career skills throughout this process (and all career-minded professionals desire that).

 

*Note: The level of rigor in this documentation ventures into project management knowledge areas and can be overkill for small projects. The larger the project, the greater the complexity and risk, and more process will need to be thrown at the job.

Website Pricing Method Breakdown

This documentation guides you through the method for both pricing medium to large custom projects and how to determine payment for the work effort. Let's start high level to ensure we grasp the concept of the method. We'll then proceed with increased levels of detail in their respective sections.

You'll need to execute these nonsequential overlapping processes throughout the project.

Choose the proper estimation techniques

You can develop quotes, estimates, and pricing using numerous estimation techniques. The technique depends on the project's type, size, and stage.

Know Your Cost

Spend time knowing your cost by understanding the "total" work effort and resource demand. You cannot develop pricing confidently without knowing the numbers.

Design Your Price

Now that you know your cost, design your price by considering the target margin. These will be estimates based on the understood scope and associated costs earlier in the project. Estimates will narrow, becoming more precise as you move from initiating, to planning, to executing.

Choose Payment Model

Depending on the size of the project and your business structure (independent contractor, small team, large agency, or enterprise), the suitable payment model will benefit each business model differently.

Although there are numerous pricing and payment models for large projects, they typically cover five general pricing models.

  • Time and Materials Model (T&MM)
  • Retainer
  • Fixed Price Model (FPM) - Milestone
  • Iterative Dedicated Teams Model
  • Mixed/Hybrid Model (incorporate any of the above)
  • Bonus option: Project Financing (spread the price for work out across more extended periods, typically 12 to 18 months, and add your financing fees into the monthly price).

While there is no "perfect" model, a good recommendation for a large custom web build would be to use a Fixed Price Model based on milestones. With fixed pricing, the client can benefit from more predictable billing. However, this means you better know your cost so that you can price with high confidence.

Common estimation techniques explained

Do you know what the customer is asking you to do, and does the customer know what they are asking you to do?

Know your cost before designing your prices. There are numerous estimation techniques you can use to understand your cost better. Let's briefly look at each to understand what they are and when you might use them.

  • Expert Judgment
  • Three-point estimating
  • Analogous estimating
  • Parametric estimating
  • Top-down estimating
  • Bottom-up estimating


Expert Judgment:

Expert judgment is a skill earned through significant subject matter experience. It assumes close alignment between your experience and the project you are evaluating. It is a guess; if you can genuinely claim expertise, you can land within a reasonable estimate range.

When to use: Use if you want to take the client's pulse. Throw out an estimated range to the client - They'll either catch it, drop it, or throw it back. Clients don't always head into projects with a defined budget, so this can be a worthwhile game of catch to see where the client is comfortable. Use early in discussions before planning or mobilizing resources. Once you understand what they are comfortable spending, you can tailor project planning, scope, and execution accordingly.

When not to use: Do not use expert judgment to price your projects - This is particularly true for medium to large-size projects. Expert judgment is still a guess. Take the time to know your numbers so that you can design pricing with confidence. Consider there is still significant room for error with medium to large size projects that will require monitoring and change controlling over the scope, requiring the calibration of tasks and budgets throughout the project. So, while you may be an expert, it's just the wrong technique to apply when you need a methodology - don't take it personally; you're still an expert.


Three-point estimating - PERT

PERT is a technique used globally to estimate project durations or costs. It combines statistics and probability theory to predict a likely average. Its formula is a "weighted" average for an approximation using the Beta Distribution equation: Optimistic (O), Most Likely (M), and Pessimistic (P). The formula looks like this: (O + 4M +P) / 6

When to use: PERT is handy if you have a body of work that will allow you to apply experience to the formula. Use when predicting task durations rather than project costs. For instance, similar tasks typically take us 10 hours (M), but we've seen it take as little as 4 hours (O) or as long as 16 hours (P).

When not to use: While PERT will furnish more accurate estimates than expert judgment, it is a technique that still produces an early-stage estimate. Our goal with pricing projects is to arrive at an actual cost, not an estimate. PERT also considers more static projects with fixed scopes and durations, making it an impractical choice for agile projects or projects with iterative sprints. Or even larger "fixed" projects that will almost certainly experience some change control requiring the calibration of tasks and budgets throughout the project.


Analogous estimating

Analogous estimating is a technique that uses durations and costs from past similar projects to assume the similarity closely indexes with the new project. With a portfolio of similar projects, you can consider that the time and cost will align without overly rigorous pricing of the new project.

When to use: This technique provides clients with a quick estimate or, in some cases, can be used for pricing smaller projects.

When not to use: Even if you have completed similar large web projects, it would not be wise to price those projects using this method. Use it to throw out an estimate or range to take the client's pulse, but understand that a more extensive project should have much more customized pricing that considers all factors and risks and calibrates throughout the project's progress.


Parametric estimating

Parametric estimating is a quantitative approach that uses statistical relationships between historical data and the new project's parameters to calculate estimates. Here is how the formula works.

E_parametric = (a_old / p_old) x p_curr
(1 minute / 4 pages) x 40 pages = 10 minutes

When to use: Use this method when parameters between both projects don't change, where the volume of work, effort, and costs scale succinctly - meaning the parameters are fixed regardless of the unit quantity.

Example: If it takes one Bricklayer two hours to lay one hundred square feet of bricks, it will take two bricklayers four hours to apply four hundred square feet.

You can also use this method to estimate portions of a project with historical data on the exact work execution.

When not to use: Use this method with caution. Unless you have controlled parameters that don't change, the cost likely won't scale accurately once implemented in actual projects. In the example above, it might be good to use as an estimate ranges for the square footage a Bricklayer can lay but not for pricing the job, ultimately. Consider - is one Bricklayer more experienced than the other, is the brick composite the same, are the tools used by both Bricklayers equally efficient, etc.?


Top-down estimating

Top-down estimates are generally used in the beginning stages of a project when all details of the endeavor are yet fully known. This approach delivers a Rough Order of Magnitude (ROM) to the project and can bring in other numerous estimation techniques to arrive at your estimate. For instance...

  • Start at a very high level by looking at each process group for the project.
  • Given what you currently understand about the project, you can use analogous estimating and expert judgment to arrive at a consensus on the time and effort required to deliver the work.
  • The results should be broad conservative ranges to present for each process group.


As the project progresses through the planning process group, details of tasks and durations will become more elaborate, and more narrow bottom-up estimates will replace your top-down estimates.

When to use: Use top-down estimating early in the initiating stage of the project, where all project details aren't fully known. Nonetheless, you still need to communicate estimate ranges to the client for your services. It would be best not to introduce too much rigor into the process at this stage, as you seek quick and broad estimate ranges. The purpose is to help both parties establish whether or not to continue in the relationship and elaborate further on the project.

When not to use: Do not use top-down estimating when details for executing the work are understood. If the project has progressed to the planning stage or later, it will have a complete work breakdown structure detailing tasks, resource assignments, and a full schedule of work needed to deliver the project. The WBS should be considered an output that becomes an input to your bottom-up estimates.


Bottom-up estimating

Bottom-up estivating uses the work breakdown structure (WBS) as an input to aggregate the sum of activities and resource demands necessary to deliver all work packages for the project. This approach provides more narrow and accurate estimates.

When to use: Use bottom-up estimating when planning for the project is at or near completion and has produced a work breakdown structure (WBS) for delivering the project. A WBS provides elaborate detail on the task schedule and resources required to execute the work. Bottom-up estimating eliminates guesswork, allowing you to price your projects with higher accuracy and confidence.

When not to use: Do not use bottom-up estimating too early in the project. In many cases, you simply won't have enough detail to use this approach effectively. Additionally, bottom-up estimating is a rigorous process that is meticulous and time-consuming, making it an impractical choice in the early stages of a project when quick and broad estimate ranges are ideal.

Understanding the thirty-thousand-foot view of your project

In the beginning, the view from above is blurry with less detail. Consider that there is still much to be learned in the project's initiation and planning phase. "Progressive elaboration" suggests that more definition of the project scope (and approach to achieving the expressed objectives) will become more acute as the project moves forward - What solutions are recommended and agreed to by the client, at what cost, and at what timeline. Those details are rarely fully understood at the project's onset, and both parties must work collaboratively towards that definition.

In the immediate, you can start by framing the project's contours. Large projects are executed in five major process groups, regardless of industry. Let's review the process groups now.

Project Process Groups:

  • Initiating (ideating with clients, arriving at the scope, etc.)
  • Planning (dialing in scope and planning for who, how, and when work happens)
  • Executing (producing work product)
  • Monitor and Controlling (ensuring execution of work aligns against all baselines and constraints)
  • Closing (delivering the project)

*Note: that doing the work (executing) is only one process group, and there is a tremendous amount of infrastructure and resources dedicated to delivering a project to scope, on time, under budget, and at quality. We will get into this later.

With each process group defined, we now need to understand when and how to apply the appropriate estimation technique to each process group. Let's consider each of the estimation techniques.

How to price your web project and get paid along the way

We know the project has major process groups that serve as significant milestones. We also now understand the estimation techniques to apply to each. The client has officially commissioned the work to proceed into the Initiating Phase. Now let's go through individual process groups for fulfilling the project end to end while getting compensated for the work.

Process Group 1 - Initiating phase

The client has paid to officially move the relationship forward into the Initiating Phase. You'll now need to provide the client with the following fees and estimates.

  • Present the client an estimated range for the project's Planning Process Group early in the Initiating process. *Once you move through the initiating phase and learn more about the project details, this estimate should narrow into an actual fee.

  • Present the actual fee for the Planning Process Group by the end of the Initiating process.

  • Present the client an estimated range for the project's Executing Process Group by the end of the Initiating process.

There will be a lot of unknowns early in the project. The definitive tasks to be assigned and scheduled in the executing process group will be less detailed, to begin with - you may still be consulting with the client on the scope and approach to delivering the work. So, for now, you'll need to use broad estimates based on what you know. Generally, work is to be produced, reviewed, and ultimately approved. However, as the project progresses into subsequent phases, the level of detail becomes more acute. Thus, the precision of the estimating tool should become more precise. For instance, the outline below starts with Expert Judgment and ends with Bottom-up estimating.

  • Initiating Phase (Expert Judgment or Analogous Estimate)
  • Planning Phase (Top-down Estimate)
  • Executing + Monitor and Control Phase (Bottom-up Estimate)
  • Closing Phase (Collect any balances due)

Let's start with the first phase to produce a fee to initiate the work and separately estimate the total work effort.

PART 1 / Initiating the project - What is calculated?

You are providing a fee to initiate the work.

Before initiating the project, the client should pay a fee to officially move the relationship forward and commission your time. The Initiating Phase is the shortest of the working process groups, so there will be less opportunity for this process to get off track. You'll systematically guide a customer through discovery to better understand their desires and goals for the project. You'll synthesize that intake into a project charter and start identifying project stakeholders. Despite the project size, these tasks are standard, and there isn't much variance in work in this process group. The size of the project and its complication can lead to more questions or consulting. But remember, in this guide, we already assume this is a large project. Analogous estimating will allow you to consider previous large projects and determine how much time and resources are needed to produce a project charter.

What estimation technique to use?

As we are in the project's earliest phase, the analogous or expert judgment estimation technique will be the most practical. Refer to the analogous estimation technique referenced above and be slow to use expert judgment, which should be a fallback if and when all other estimation techniques either aren't available or impractical. You're aiming to present the client with a fixed price for committing to initiating the project.

When to present this fee to the client?

Present the fee to the client early in your discovery discussions.

What does this fee cover for the client?

The client is paying to move into the Initiating Phase and continue elaboration on the project details.

When to get paid from the client?

The client would pay upfront before committing to moving into the initiating phase. This fixed or "flat" fee retainer funds the initial expenses of the working relationship.

What Payment Model Should You Use At This Phase?

Use a Fixed Price Model (FPM) at this phase.


PART 2 / Planning the project - What is estimated?

You are providing an estimate to plan the work.

The project charter is an output of the initiating phase and becomes an input to the planning phase. In the planning phase, you use the details of the project charter and scope to develop a work breakdown structure (WBS) of tasks, schedules, and assignments to begin planning for the resource demands of the project. Ultimately you are planning the entire project effort to clearly understand what work is being done, by who, and when.

What estimation technique to use? (top-down estimating)

Remember, you are still in the initiating phase, so you haven't begun the work of building out the WBS. Given what you've learned in discovery, you need to use top-down estimating to first arrive at a price range for the customer. However, as you move through the initiating phase and learn more about the project, that estimate range should narrow into a fixed price by the end so that the client can sponsor moving into the planned phase.

When to present this fee to the client?

  • Present the client an estimated range for the project's Planning Phase early in the Initiating Phase.
  • Narrow your estimates as you elaborate on the project. Ultimately, present the actual fee for the Planning Phase by the end of the Initiating Phase.

What does this fee cover for the client?

The client is paying for the relationship to proceed into the project's Planning Phase.

When to get paid from the client?

The client would pay upfront before committing to moving into the Planning Phase. This fixed or "flat" fee retainer sponsors the continuation of the working relationship.

What Payment Model Should You Use At This Phase?

Use a Fixed Price Model (FPM) at this phase.


PART 3 / Executing the project- What is estimated?

You are estimating the price range for the entire project.

You are estimating the project's total cost to the client - You'll need to provide a broad estimate for the entire work effort. Start with your major process groups. Rember those groups include...

  • Initiating
  • Planning
  • Executing
  • Closing


What estimation technique to use?

You should use Top-down estimating. Here you need to take a client's pulse and ensure alignment between the two parties before progressing into the planning phase. You should present the broadest ranges of any estimation techniques, so here's where you want to be generous in your estimates. In later phases of the project, you will have less freedom to use general estimates as it will become critical to be more precise. Refer to the analogous estimation technique referenced above and be slow to use expert judgment, which should be a fallback if and when all other estimation techniques either aren't available or impractical. Remember, you're pretty early in the process, so we don't want to apply too much rigor to the estimate at this stage. Here is how your breakdown might look.

  • Initiating Phase: Analogous estimate or top-down estimate
  • Planning Phase: Analogous estimate or top-down estimate
  • Execution Phase: Top-down estimate (for now). *Note - Once you move into the planning phase, where you'll elaborate more on the approach to satisfying the work, you should switch to bottom-up estimation, which will dial in this range. For now, a high-level range will be the most practical.

Example:

  • Initiating Phase (Flat retainer of $10,000)
  • Planning Phase (Between $15,000 - $25,000)
  • Execution Phase (Between $75,000 - $95,000)

Total price range between $100,000 - $130,000

*Ensure these price ranges are inclusive of your desired margins. See the section on margins later in the article.


When to present to the client?

Present the estimate for the entire project to the client at the end of the initiating phase.

What does this fee cover for the client?

The client is paying for the relationship to proceed into the project's planning phase.

When to get paid from the client?

Collect fees from the client before beginning work in the planning phase.

What Payment Model Should You Use At This Phase?

Use a Fixed Price Model (FPM) at this phase.

Process Group 2 - Planning Phase

Now that you've collected fees for initiating and planning the project and received a commitment from the client who has agreed with your broad estimate ranges for the total work effort, it's time to fully develop the scope and begin planning the execution of work. We'll use the bottom-up estimation technique to arrive at more narrow estimates in this planning process. To gain a more comprehensive view of the total work effort, you'll progress along the following steps to arrive at that understanding.


Step 1: Create the work breakdown structure (WBS).

Given what you know of the project, you can begin building out the various tasks associated with producing the work. A significant portion of the work will be in managing the total effort itself, not simply producing the work product. So, you'll have a decent amount of work to be later assigned and scheduled even without knowing the complete statement of work. That's fine. Start populating the WBS with what you know, and then leave placeholders for what you can anticipate coming. Include planned time and duration for each task. You'll be applying estimations to the assumed work (defer to which estimation techniques we outlined earlier to determine which technique makes sense given the work task). You'll need to populate estimated times and duration to calculate the cost of work, which we'll get to later.

Building Your Milestones Into The Project

It is typical to include milestones in projects with extended execution durations. They are essentially mile markers along the journey, appropriately. The distance between these milestones can vary. However, they should index against significant achievements along the project's route.

Alternatively, you can base milestones on the percentage of project completion. Percentage milestones are particularly useful when there aren't numerous distinct achievements planned throughout the execution phase. For example, this might be true for a website without much functionality but with a considerable content volume that demands production. In this case, it could be much more meaningful to understand whether you're halfway through that effort, two-thirds, etc.

Milestones will also come in handy if you choose a fixed payment schedule based on milestone achievement, which we recommend. In these cases, the client will make payments that will sponsor your team in moving towards each milestone. Thus, the final milestones should proceed closing of the project. That is to say, completing the project is not another milestone; it is the finish line. Just like there are no mile markers at the start line of a race, there are none at the finish line either. Instead, all milestone markers reside between the start and finish lines. The milestone placements also have implications for the final balance of the project, ensuring the client doesn't fully pay before all the work is complete. Here's how this would look as an example.

Let's say there are four major milestones in the execution process group. The result is five payments.

  • Milestone 1 Payment: Sponsors work towards the first milestone (production team works through all project tasks up through the first milestone)
  • Milestone 2 Payment: Sponsors work towards the second milestone (production team works through all project tasks up through the second milestone)
  • Milestone 3 Payment: Sponsors work towards the third milestone(production team works through all project tasks up through the third milestone)
  • Milestone 4 Payment: Sponsors work towards the fourth milestone (production team works through all project tasks through the completion of the project)
  • Closing Payment: Settles the remaining balance for working through the fourth milestone, which completes the project.

Note: If your milestones are not set at a percentage of project completion but instead anchored against significant achievements along the project, this can sometimes result in relatively adjacent milestones. That is fine. Not every milestone has to trigger an invoice. Seek to distribute the invoice triggering milestones evenly throughout the project as reasonably possible. In ideal circumstances, the invoice triggering milestones will track closely against the percentage of project completion (but they do not have to). Here is how this will look.

Milestones as percentage or project completion...

  • Milestone 1 Payment (indexes closely to 20% of project completion)
  • Milestone 2 Payment (indexes closely to 40% of project completion)
  • Milestone 3 Payment (indexes closely to 60% of project completion)
  • Milestone 4 Payment (indexes closely to 80% of project completion)
  • Closing Payment (indexes closely with a 20% remaining balance for the project).

Milestones as significant achievements...

  • Payment 1 at Milestone 1 (indexes closely to 20% of project completion)
  • Payment 2 at Milestone 3 (indexes closely to 40% of project completion)
  • Payment 3 at Milestone 4 (indexes closely to 60% of project completion)
  • Payment 4 at Milestone 7 (indexes closely to 80% of project completion)
  • Closing Payment (indexes closely with a 20% remaining balance for the project).


Step 2: Assign your hourly cost for each role working on the project.

Assigning your hourly costs is a critical step that will allow calculating cost and resource demand on any project. A good project management tool (PM Software, spreadsheet, etc.) will allow you to add resources (both by role type and as specific team members) and their respective costs to the organization. Choose your tool of choice. We recommend finding solid PM software to help make this process easier and reduce errors.


Step 3: Assign tentative resources (either by user or role - user assignment is more accurate)

Although resources have not been negotiated for the project yet, remember that you are building your cost at this stage, not committing to cost. So, assign resources tentatively. The temporary assignment will also support negotiating resources with their functional managers, so they clearly understand the demand, when to surrender resources, and when the project would return them. Once all resources are associated with each task, your PM tool should populate the costs accordingly.

Step 4: Design Your Price

We are moving from broad estimate ranges to more precise costs at this stage in the process. Now that the scope is defined and the work breakdown structure assigns resources dedicated to all the scheduled tasks, you can calculate actual costs. Your PM tool of choice should be able to provide you with a total cost to the organization by adding up the absolute numeric value of resources as an expense. Remember that the project expense your PM tool has furnished is only one side of this equation. You're not simply passing expenses on to the customer; you're also trying to run a profitable business. You now must determine the retail price you present your customer with the desired margins you've designed for your services. So let's break this out into two parts - Know your costs. Know your price.


Step 4A: Know Your Costs:

With a complete work breakdown structure built into the PM tool, you should have a total picture of your expenses to execute the project. You've done the meticulous work to schedule the task, negotiate the resources, and assign them to work, and you know the organization's expense for each resource. Whether your PM tool is a project management platform, an Excel sheet, or something else, step back from the tool, question the numbers, think of the big picture, and challenge the math. Once confident in the numbers, start pricing your project with the desired margins. But before you do, let's consider other expenses often missed when calculating the total cost.

  • Should you charge clients with expedited fees to accelerate the production of their website?
  • Should you consider team bonuses or other compensations within the website's cost?
  • Should you include Project Management into your website's costs?

In short, the general answer to these questions is yes. Yes, include these services in your costs. Jump down to our frequently asked questions to learn more about these costs.

Understanding The Value and Function of the Monitor and Control Process

The "Monitor and Control" process is where much of the real-time governance of the project will be executed and enforced. The workload in this process should index with the volume of work effort in the "Executing" process group. If there is more work to produce, there is more to monitor and control. The easiest way to plan for the time and effort in the Monitor and Control process is to make each subprocess a percentage of total hours in the "Executing" process group.

For example, if we add the fundamental sub-processes to monitor and control, the percentages might look like this.

  • Measure ongoing project activities [5% of the project's total "Executing" hours]
  • Monitor project constraint variances - cost, timeline, scope [5% of the project's total "Executing" hours]
  • Identify corrective actions to address risks and issues [10% of the project's total "Executing" hours]
  • Manage changes using the change control process [10% of the project's total "Executing" hours]

*These percentages can vary based on the type of work but should be a predictive muscle that can improve over time. Having this as a start is already 99% better than guesswork.


Step 4B: Know Your Price:

Once you know how much the project will cost the organization to deliver, you can now build the retail price of the project. Consider the following...

Desired Margin:

Now that you know your cost, consider your margin point value - How much profit do you seek on the project?

How To Attach Your Margin To A Website's Project Pricing?

To attach a margin to the website cost, go through this mathematical sequence (logically) to arrive at the retail price. A good spreadsheet will simplify this quickly.

  • Step 1. Cost of Delivery x Desired Margin = Profit
  • Step 2. Profit + Cost of Delivery = Retail Price

The formula written out would look like this...

Cost of Delivery + (Cost of Delivery x Desired Margin) = Retail Price

Cost of Delivery

Initiating = $10,000
Planning = $25,000
Executing = $85,000

Desired Margin (as a percent)

Initiating = 35% (of Cost of Delivery)
Planning = 40% (of Cost of Delivery)
Executing = 45% (of Cost of Delivery)

Result

  • Initiating: $10,000 (Cost of Delivery) + $3,500 (Desired Margin of 35%) = $13,500
  • Planning: $25,000 (Cost of Delivery) + $10,000 (Desired Margin of 40%) = $35,000
  • Executing: $85,000 (Cost of Delivery) + $38,250 (Desired Margin of 45%) = $123,250

Total Retail Price = $171,750

Now that you know the price for your services, you can present these to the client.

When to present website pricing for the execution process group to the client?

Present the pricing for the execution process group to the client at the end of the planning process group and before the execution phase begins.

  • You should include the fee to sponsor work towards the first milestone.
  • You should include a calendar of expected payments and payment dates for each invoice triggering milestone through the project's lifecycle. Seek agreement on these fees before moving forward into the Execution Phase.

What does this payment cover for the client?

The client commissions the organization to commit resources to execute the project, sponsoring work toward the first milestone.

When to get paid from the client?

The client should pay before the organization mobilizes resources to begin the execution of work.

What Payment Terms Should You Use At This Phase?

Use a Fixed Price Model (FPM) - Milestone at this phase.

The initial payment in the execution process group sponsors the work towards the first milestone. Projects can have numerous milestones; not all must anchor against a fee. Carefully walk through your work breakdown structure and determine which of the significant milestones should trigger an invoice. You're attempting to spread out the payments throughout the execution phase to cover your cost while making money along the way. You're also conditioning the client to sponsor the work effort regularly.

You need to be very considerate of the client when implementing your billing practices. Billing needs to be as predictable as possible. Your clients may often have an Accounts Payable team where vendor payouts are planned far in advance. In many cases, you will be submitting an invoice with a net 30 days on payment terms.

Each business is different, and we can't tell you whether to proceed with work at the invoice issue or at the invoice's payment. If you are financially capable, our recommendation would be to proceed with work at the issuance of the invoice. If you have a net 30 on that invoice, you can expect your client to submit that full payment accordingly. Ensure that your contracts and agreements on payment terms are well defined and understood, protect both parties, and keep you from overextending your labor resources.

It would be helpful to your client if you provided a payment calendar that maps the planned payment milestones to expected invoicing dates so the customer can anticipate project invoices. Depending on the cadence of the project, dates should give them a view of the payment cycles allowing them to plan accordingly.

Process Group 3 - Executing Phase

In the execution phase, your team completes the work according to plan. It is pretty standard for large projects to have multiple milestones throughout the executing stage. It is common practice to anchor payments against these major milestones throughout execution. The milestone payments keep regular cash moving into your organization without enduring extended work durations while not collecting revenue from the project.


When to present the next milestone invoice to the client?

The client already paid for work to begin in the execution phase towards the first milestone. Once you've arrived at that milestone, that should trigger an invoice to sponsor the effort towards the next milestone. It would be best to be a good communicator no matter where you are in the project's journey, so the milestone payment doesn't blindside clients. If you're regularly communicating with the customer, do them the courtesy of not just providing progress updates but what that progress means as you near the next milestone that would trigger payment. Good communication allows them to anticipate upcoming invoices.

*Note: for projects with numerous milestones, repeat this process for the additional milestones in the project.


What does this payment cover for the client?

The payment sponsoring work toward the second milestone.

When to get paid by a client?

Ideally, you would want the client to issue payment upon receipt, provided you have been a great communicator and have kept the client up to date on when to expect the invoice. Nonetheless, a net thirty days is generally a well-received window for the client. Whether the client pays on receipt or not, you should plan to continue work towards the next milestone to not slow progress or impede the continuity of work, productivity, and efficiency. Few events disrupt the rhythm of work, like starting, stopping, and restarting. Suppose there are one or more late invoices ultimately. In that case, it will be wise to pause work to protect the project from resource overuse. Consider implementing a restart fee to remobilize previously assigned resources - a condition that should be included in your contracts and communicated to clients early.

Process Group 4 - Monitor and Control (Change Control)

With large projects, changes are almost certain to occur. The monitor and control process overlaps the execution phase, ensuring that all tasks are to specification, on schedule, and under budget. Your Project Managers must be excellent change management agents to help control costs. Some changes will likely occur after the project's full planning and execution begin. PMs should implement a well-understood change request process that gives customers the freedom (and not guilt) to submit or inquire about any changes to the project they desire. The role of change management is to provide governance over how changes are surfaced, considered, approved, and implemented. The rigor of that process should depend on the size of the project, stakeholders' influence, expertise within your team, etc.

  • Generally, the PM considers who to consult to fully understand the impact of changes on the project timeline and budget.
  • A PM (in consultation with the team) evaluates what effect change has on the overall project, including whether the change is a reduction, modification, or addition to scope.
  • The PM will submit those findings to a change request committee to be approved, modified, or rejected. "Scope creep" is unnecessary if you resource your projects with capable project managers. That is not to say that scope can't increase but that if and when it does, that increase is understood, agreed to, and, if appropriate, sponsored. When customers grow confident in the experience, your capability, and the quality of work delivered, it is not uncommon for them to want more than their original ask. The endorsement is a win-win for both parties.


What estimation technique to use for website change requests?

When evaluating a change request, use Bottom-up estimating to determine the cost impact on the project.

When to present to website change request fee to the client?

Present the change request fees to the client only once changes are fully understood. It's essential to present the fees along with all their impacts on the project before committing the changes.

What does this payment cover for the client?

The payment covers the PM committing the changes to the project scope and integrating the change into the executing process group.

When to get paid from a client for a change request in a website project?

Generally, iterative changes are treated as new fees and can be attached to the next milestone payment. However, more significant changes in scope may require an upfront payment.

Process Group 5 - Closing Project

Closing a project is the process of concluding all activities to the satisfaction of the project sponsor. Formally closing the project ensures that all the work is satisfied, delivered, and everyone agrees the project is complete.

Typically, you would reserve handing over any remaining deliverables until the final balance on the project settles. That would also be our recommendation. However, you can use your judgment having gotten to know your client over the project.

Voila!

Congratulations! You've completed the project. The client is thrilled. And you executed the work profitably.

Author
John "Zehn" Baskerville

Zehn is the founder of Bnevol, LLC. As a certified PMP and product developer, Zehn has spent a career wielding numerous proficiencies to help organizations grow and thrive, including product development, project management, product management, digital marketing, team building, and leadership. This intersection of competencies has been especially valuable to startups who typically cannot afford five executive-level hires or Contractors to tackle a growing organization's demands. To learn more, head over to the "About Us" page.

Frequently Asked Questions - FAQs

Below are some common questions asked about website project pricing. If you have questions about your project pricing, don't hesitate to contact us; we'll be happy to share our knowledge.

Should I Price A Website Project Based On Page Count?

Page count is simply a detail. Its use in calculating the price for the project is minimal. Instead, you will calculate the solution's volume, complexity, effort, and value. Consider the types of features and functionality, integrations, connections to other systems, how data is collected and used, any eCommerce components, what user experience visitors will have, the content volume, the copy needs, and who will be producing that content, etc. Let's expound.

  • If a website requires a hundred pages - consider if half of those pages need forms, and the others don't, and of the fifty pages that require form builds, are they all the same form, or will you be creating a unique form for each page?
  • A team page can have four employee bios or forty, sprawling multiple departments.
  • A contact page can have a map with a single location, or twenty locations plotted across more extensive geography.

The parameters can vary significantly even for pages that share the same topic and purpose; thus, the work effort does not index by page type alone. As you can see, the page count is just a detail in the project.

Should you charge clients with expedited fees to accelerate the production of their website?

Was the client promised expedited service that will disrupt your production queues? Will your PM teams reschedule currently planned tasks to accommodate the work?

Sometimes, clients need to move quickly and have a legitimate urgency. Most agencies are eager to accommodate expediting services. However, far too often, agencies fail to recognize the cost impact of accelerating projects on the organization's profitability. If you have the structural resources to allow for organized disruption, remember that it is a superpower that should come at a premium to the customer - a markup that any reasonable customer would happily pay. Otherwise, you are sacrificing margin (across the organization, not just the single project) by becoming a sponsor of your expedited services.

Should you consider team bonuses or other compensations within the website's cost?

Will anyone be working overtime to get this project done? Are you assigning your most expensive rockstars to the project, and are they (as an expense) accurately accounted for as a resource in your WBS? Did the Sales executives earn extra kudos for rescuing the sale? These considerations don't demand that you build bonuses into your project, but if your client benefits and your team has earned it, don't consider it "business as usual." It's a win-win for everyone when clients receive an exceptional product and experience, and your team feels valued for being excellent.

Should you include Project Management into your website's pricing?

Managing projects is a valuable competency that benefits clients with large projects. Because project management is a service, it would be best if you built it into the project's cost. Consider a 5%-15% cost on smaller projects. Larger projects (100K+) should start to fall below 5%. You can develop a scaled model for this to further dial in project ranges.

Aside from planning and structuring the project, overseeing and managing the work input and output as part of the monitoring and control process will absorb much of the project management time.

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