I just started a Web-content maintenance business and I am unsure how to price my services. My target market is three-fold: mega-churches, design firms, and medium to large companies using content management systems. Should I stick with an hourly rate or establish maintenance packages? I do not want to get nickel-and-dimed to death.
--F.M., Lithonia, Ga.
Setting a successful pricing strategy is the key to profitability and success for any business, so your thoughtful consideration is well founded, as is your concern about being nickel-and-dimed out of business. "With work like Web-site maintenance, the devil is in the details," says Janet Attard, founder of Business Know-How, a small business Web site.
KNOW THEIR NEEDS. "No matter how you plan to bill, you need to get all the details spelled out and understood by both sides before any work gets started," says Attard. "On your side, you'll want to know not only how detailed the work will be, but also if the work will be so limited that it's not worth your time."
Because your clients' needs will vary widely, you may want to set up a menu of pricing options, several experts suggest. Some sites will need daily updates and fixes, while others will require your attention only once or twice a month. Some clients may expect you to overhaul an entire site or rescue it from a crash at a moment's notice.
The way your clients' sites are structured technically will also affect how much time you'll have to devote to maintaining them. You'll need to ask a lot of questions in your initial client meetings to help you predict how much time you'll be putting into each contract, and then suggest a suitable pricing structure.
EITHER, OR -- AND, TOO. Having the bulk of your revenue come in through annual or project-based contracts will help you with budgeting and cash flow, especially as you get your business off the ground. "A monthly charge allows [your new business] to maintain a steady income stream, particularly in low activity times when the hourly pricing approach would see a major drop-off in revenue," says David Walker, a small-business consultant with Ventis Group of Westlake Village, Calif.
You don't have to establish just one maintenance package price, however. "Take a look at services that are typical for all of your markets and establish two to five maintenance packages," says Sanjyot P. Dunung, consultant and author of Straight Talk About Starting and Growing Your Own Business. "At the same time, you should have an hourly rate for clients who either choose the hourly rate or those who select a maintenance package but need to have additional work done that is outside of the scope of the package."
As you settle on price ranges, be sure to evaluate both your direct and indirect costs and build in healthy margins. Inform your clients that time you spend with them on the telephone and doing research will figure into your prices, and make it clear when you will and will not be available -- nights and weekends, for instance.
SPELL IT OUT. You may want to establish a special price for emergency rush jobs done on holidays or weekends. "Make your best estimate of how long the work will take, then add a fudge factor of anywhere from 25% to 100% of this estimate to allow for unforeseen work and time drains," Attard suggests.
Of course, as a startup, you'll need to be competitive, so find out what your competitors are charging -- then offer select maintenance packages at highly competitive rates for those who sign up with you within a designated time frame, such as your first 60 days.
As you grow, you can selectively increase your margins and raise prices. You should also evaluate quarterly which client contracts are profitable and which are not worth your time or effort to renew.
CRUCIAL DIFFERENCE. Remember that Web content companies are now global, so you'll be competing against a large number of firms that can probably undercut you due to reduced labor costs.
"To compete effectively against companies in other countries, provide some unique service options, such as face-to-face meetings or an understanding of your clients' customers and users," Dunung says. Offering personal service, expert hand-holding, and flexible pricing will encourage clients in your target market to turn their Web sites over to you for capable maintenance.