I'm a currently a college student earning a degree in Computer Engineering, so in terms of business, I have no idea what I'm doing. I've asked to create an ecommerce website from scratch.
Here are the things I've decided to do for them: ( If you think I'm missing something please let me know )
1. CMS: Magento
2. Theming ( I'm doing this from scratch so no pre-made themes for me )
3. Product Image enhancement ( they have pictures of products, but they need to be photo enhanced ). At least 60 hours worth
4. I have to input all of the products ( pics, info, etc... ) There's a lot of products!
5. Possibly do a little SEO ( which I'm not really familiar with )
He's become somewhat of a friend of mine so I don't want him to rip his arm and leg off to pay for it. We've vaguely verbally agreed to me receiving a percentage of the profit from all of the orders from the website. I just don't know what percentage is fair or if I should even agree to a percentage type of compensation. I'm not a business partner. This is a manufacturing business already established in LA. They just need a website for dealers and online customers.
I've already read the sticky above and I've already read some of the sitepoint products pertaining this topic, but I'm still unsure of what to charge.
Well, before we talk about how much to charge, I will give you a warning from experience: get everything in writing BEFORE you begin any coding/designing.
As for price, it's hard to give a number. It's probably best to base it on these three criteria:
- How experienced are you?
If you have more experience, you'll likely make a better product and thus it's worth more.
How much time will this project take?
If you charge by the hour, this is slightly less relative. I, however, like to estimate the time it'll take me to do the project, pad it by about 10-20%, then charge them that as a flat rate. Either are valid approaches.
How busy are you?
If you are really busy and your time is really valuable, it's worth more.
The more you are in those three questions, the more I'd charge. I know that doesn't really help your specific numbers, but it's the best I can do as each region is substantially different. I'd say somewhere in the range of $15-100/hr is about appropriate, based on your answers to those questions. Don't try to charge so much you think they may back out, but don't charge them so little that you're basically getting ripped off.
Regardless what you do though, get everything on paper and have you both sign it. Doing deals with family and friends is much trickier than doing it with complete strangers (it's also much harder to be firm). Hopefully everything will go great, but forums like Sitepoint and others are littered with sob stories of people who got ripped off.
As for whether you should take a cut in the profits or not, I'd base it on these two criteria:
- How much effort are you going to have to put in over time?
If you have to constantly be putting in effort (even if it's just to get the check), is it really worth it?
- How much are you predicting they'll make from this?
If each month your 5% cut is only going to be worth $5 a month, is it really worth it?
If you think they'll be making a substantial profit from this site and it'll be easy enough to collect, go for it. If you think it'll be a fairly insignificant amount each month, or it'll be a pain to constantly have to collect from them, I'd avoid it and just ask for more up-front.
Hope that helps give you a little guidance.
1) what is the project value of their business, and your cut of it? imagine some realistic scenarios and put together some crude estimations of this.
2) what is the approximate market value that you apply to yourself?
3) how much do you need, want, have time for, and are excited about this project?
With those numbers, you can put a preliminary number together.
If they are an established business, they should not have a problem getting the money together to pay you upfront, especially with you being a student with (I assume) lower fees compared to professionals. The fact that they are preferring ongoing commission with no upfront payment would ring alarm bells for me, as it suggests they lack confidence in the plan and are not willing to invest money into the project. Instead, they expect you to take the bulk of the risks; if it fails to make money, they can walk away losing nothing, while you are out of pocket for all the time you invested.
What is their reason for not wishing to pay you upfront?
I'm not saying these kind of deals are not worth pursuing, I've had a couple of successful ones, but those involved me being a full partner with equal say in the running of the business.
My most successful project involved an off chance meeting with a sound designer who had thousands of sounds he'd made but didn't know how to market/sell. I offered to create a digital delivery site and sell the sounds for him - but it was my site, I run it, administer it, deal with the customers and I pay hima regular commission on sales (50:50 split after expenses) - I control everything in return for the free investment of time I provided at the beginning and the ongoing time I invest each day. He continues to create new sounds and we make decent money each month. We have a written agreement covering necessary legal gumf and both have access to the relevant financials, so we both know exactly what money is being made.
There;s no way I'd set up a site for a company, leave them to it and then sit back and hope for some promised commission to come in. Just doesn't work that way. It assumes the success of the site is somehow entirely down to your web development skills, when in reality, the mechanics of the site are a small factor in the bigger picture - i.e. ongoing marketing, sales techniques, customer service and support, product quality, product pricing, competition, how they differentiate themselves, etc etc.
Everyone has given good advice so far. I will highlight a couple and make a couple others.
As stated, if this is an established company that already has something established, it's difficult to imagine they have zero funds to pay for a website. Most of the time these "deals" are proposed when someone wants to start a business and are just starting up on their own savings. If they are running a business already, they know how to manage funds for expansion. Any business would like to find a cheaper way to get things done, but that doesn't mean you have to accept (not fully at least).
One thing you have to think about is that you are essentially opening a new business location for them. Just like if they were to open another store in another city / state, you are opening a store online for them. You are "stocking" the store by adding all of their products, you are preparing the look and checkout process for the store and (by the sounds of it) you will probably be in charge of keeping the store open and updated. Is this correct? If so, you have a much higher stake in the company than simply taking 5% of the profit they make on orders (or whatever they would offer you).
Personally I would not work for 100% profit. You are doing all of the work for that part of the business. I have set up ecommerce websites for businesses but because they did not want to spend the money to have me populate the website. So instead I set up the CMS / Data Management and gave them access and told them how to do it themselves. 60 hours of photo manipulation is a huge amount, and based on that number, I'd assume the product entry would be significant as well. A lot of extra work that could be handled by someone in-house I think. If you are interested in becoming part of the business, I would at least ask for a portion to be paid up front and then a percentage of orders after that. The problem here is that if you are not a partner, you will not be privy to essential information (like how much is actually profit vs what they tell you) and also you have no say in how the business is run. Your share is dependent on spending for advertising, costs associated with the website, etc. If you have no say, you are at their mercy and will probably not see much in return. I may be wrong, but there have been more bad experiences with this type of situation than good ones.
Whichever method you choose, the important thing to do is to price out the work you would be doing no matter what. You should price out what it would cost 100% and make note of that cost. Whether you charge them that amount or a portion, you need to factor that in to how much you should be compensated for ... if not more down the road for helping expand the business.
It's really a personal choice you have to decide for yourself. Only way to learn is to try what you think you'll be comfortable with and go for it. It may be a great experience ... could be the worst decision you'll ever make. But at least you'll learn something in whichever you decide! Good luck!
Those are good insights, but it's hard to say things like 'I would never work for 100% profit' until you know the details. I'm currently doing an all-equity deal AND A percent net deal and I'm pretty happy about it - the numbers are good! Taking risks in business can lead to big payoff so it's good to be open minded.
But of course, it all comes down to the numbers. What is the work worth? What is the potential compensation worth? What are you needs?
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