Should You Pay Your Web Design Agency a Flat Fee or by the Hour?

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When you’re hiring an agency you end up collecting lots of information about agencies. Some of it is irrelevant, like how many dog mascots they have in their offices according to their About Us pages. Some information is more relevant, like their previous client list and case studies from their previous projects. 

But there is one key piece of information that everyone wants to know when hiring an agency. It’s the answer to the question every prospective client, boss, owner, brand manager, entrepreneur or any other title you can think of, wants to know the answer to…how much? 

Unfortunately, agency pricing can be confusing. Often, when you are shopping around for an agency to complete a project, you don’t have the information to make apples-to-apples comparisons. One agency quotes an hourly rate, another quotes you a flat fee for your project, maybe they even want you to put them on retainer. How do you know how to compare them?

“More time doesn’t necessarily mean better quality work or even more work.”

Below we break down the different types of agency pricing methods so you can have an easier time understanding what’s best for you.

Hourly Pricing

An agency offering hourly pricing is essentially trading their time for money. This can be good when that time is valuable. The downside is that more time doesn’t necessarily mean better quality work or even more work. So you can end up spending a lot on work that doesn’t get you the results you want.

Agency people are constantly debating whether to charge hourly or not. In the agency publication, 99designs, writer Deanna deBara reminds agencies that “A lot of clients like an hourly pricing model because it’s simple, straightforward, and helps them understand exactly how much they’re paying for the work you’re doing”

Hourly Pricing is Best For…

Tactical executions of fully mapped out projects. Think of these projects like data entry. They don’t require a lot of decision-making or creativity. Let’s say, for instance, you’ve got a website fully designed and you want to add a big new section. You’ve got wireframes, designs, and copy, you just need someone to bang out pages. Hourly pricing makes sense for this type of production project. 

“The agency is incentivized to complete the project on time and the client knows what the final outcome will be.”

Flat Fee Pricing

Many agencies charge a flat fee per project. In other words, the agency determines how much a project will cost them to complete, adds a profit margin, and charges a capped price. This type of pricing focuses more on the outcome than the amount of time put into the project. If the agency has to devote more hours to completing a project than they estimated, the client still pays the same amount. So the agency is incentivized to complete the project on time and the client knows what the final outcome will be.

As Jami Oetting wrote for the agency-focused HubSpot blog, “The fixed-fee model works better for clients who have a budget to adhere to and want to know exactly how much a project will cost and when they will need to submit payment.”

Flat Fee Pricing is Best For…

Projects that require strategic and/or creative expertise. Creativity can take time and ask any creative person and they’ll tell you that they make lots of drafts before hitting on the best solution. Flat fee pricing allows you to pay only for the hit, not the misses. 

Retainer Pricing

Retainer pricing is like a hybrid of hourly and flat fee. When you pay a monthly retainer, you are essentially paying a flat fee in return for a set amount of hours per month. Agencies love being on a retainer because it ensures steady cash flow. The onus is on the client to keep the agency stocked with enough work to justify the monthly retainer payment. But you may find that during the “slow” months, you are able to make big progress towards reaching your larger goals.

The retainer allows the client to essentially call dibs on an agency’s time and energy every month.

Clients also appreciate the assurance knowing that even if another client comes along with a big budget project, their work will not get pushed aside or back-burnered. The retainer allows the client to essentially call dibs on an agency’s time and energy every month.

Retainer Pricing is Best For… 

Projects that require a constant effort over time. The effort might not necessarily be consistent. You may have months when you need a concerted effort to, say, launch a new line of products and months when you need less, say, updating a tag on your website. Examples of projects where retainer pricing can be most effective are social media management, public relations, and SEO.

Do What Works for You

The good news for clients about pricing models is that most agencies are flexible. So when comparing agencies, don’t be afraid to ask all of the agencies you’re considering to quote a standard pricing model. By asking all of your agencies to estimate a flat fee, you can easily create your own apples-to-apples comparison. Or, let’s say you’ve already chosen an agency and they quote you an hourly rate, but you’d rather pay them a retainer. There is nothing wrong with asking them to recalculate their pricing, and negotiating a fair rate.

For more on choosing the right agency for you, check out our Entrepreneur’s Guide to Choosing an Agency.