We've been on all sides of this, and after 8 years of doing this web design thing we wanted to share a few tips we've learned. At that point I guarantee you you're not doing a great job for your clients or focusing on your craft because you're too worried about how to pay your light bill.
What if you had several months' cushion in your savings account? What if instead of rushing to the bank every time a check came in you could wait 2-3 weeks before depositing it?
There could be contractor expenses if you are hiring out parts of the job that you can't do. We used to just kind of guess what this would end up costing us, especially when we did fixed bid pricing.
For every website you build, there are going to be expenses. Some of these are unique to the project - like the cost of your CMS licenses, plugins and add-ons. Or maybe stock photography or typefaces you need to buy.
Make sure you either spend a good bit of time writing out every single possible expense, adding it up and adding it to the cost of the job or do what we do and set up a specific budget with your clients for expenses.
You're probably using some kind of project management software like Basecamp. Then there's accounting or time tracking/invoicing software.
We have a Typekit account so we can provide our clients with awesome custom typography. Have employees? This gets a whole lot more complicated. There are other costs to running your business. Maybe you have an office you rent. The list can go on and on. Do you know how much all that stuff adds up to?
Between a CMS license, a couple of commercial jQuery plugins and a custom font your expenses for this particular job are about $1,000. This is the one that always gets you if you're not paying close attention. Let's say you have a $5,000 project you're working on.
That's called breaking even, not profiting. But wait, there's more! You paid yourself, your expenses and your taxes, but put nothing in the bank. Even charging $8,000 it's possible you didn't make any profit.
Based on some quick Google searches and talking to a couple of other web shops I think you should shoot for about 20%. How much profit should you be making? Again, we're not looking to gouge our clients, but we need to make sure we have enough money to make payments, invest in new business opportunities and grow our company. You can always go higher if you want - but 20% is a great place to start.