Pricing your creative work is a balancing act. Too high, and you lose clients. Too low, and you’re devaluing your work. We reveal how to get it right.
The recent furore over the design of the London 2012 Olympic symbol and, more controversially, the amount paid to Wolff Olins for its creation, highlights again the painful balancing act that is money and design.
Faced with a highly competitive marketplace, designers struggle with practices such as free pitching and clients who fail to appreciate not only the process of design but its worth to their brand.
It’s little wonder many designers spend sleepless nights worrying over how to price their work. While a one-size-fits-all approach doesn’t work across the broad spectrum of creative professionals, there are some general considerations to getting the price right.
KNOW YOUR WORTH
Whether you’re a freelance designer or run a small design studio, establishing a billable hourly rate is a vital step to pricing up your services. A simple formula for working this out is: (Salary + expenses) ÷ hours worked per year = hourly rate.
First, decide on a reasonable annual salary, then add to this a figure for your expenses. These will vary, but start by estimating your overheads, rent, bills such as electricity, gas, phone, Internet, and post.
Add in computer costs and other equipment, travel, promotional activities, banking and insurance charges. It’s wise to consider things normally handled by an employer, such as pensions and national insurance.
Next divide that sum by the hours worked per year. Remember, though, to make it billable hours only, allowing for bank and annual holidays, sickness, pitches and meetings, travel and so forth.
As an example, a freelance mid-level designer may aim for a salary of £35,000 and her expenses equate to £8,000 a year. If she plans to bill for 1,060 hours a year, then the formula works out as: (£35K salary + £8k expenses) ÷ 1,060 hrs = £40.56
Of course, a great number of factors affect these rates, from where in the country you work, your level of personal comfort, to staff costs and overheads. But, it’s a good starting place to determining your charges and pricing your work.
KEEP IT COMPETITIVE
Alongside working out an hourly rate, keep an eye on what clients are willing to pay for different types of service and skill levels. Check with designer friends and colleagues what they get paid, scope job ads for salary details, consult salary surveys by industry magazines and organizations, such as Design Week and the AIGA/Aquent Design salaries sites.
Don’t be blinded by the big bucks some top- level branding agencies can charge their blue-chip clients. Be honest, but not too modest about your own skills and reputation, and weigh that against each client’s request and the impact your design work will have on their business.
CHARGE BY THE HOUR
As with most forms of service, one of the key factors in pricing design work is the amount of time it takes to produce. Leaving aside skill levels and experience, charging by the hour has a tangible quality appreciated by some clients.
If you decide to price a client’s project on this basis, you first need to estimate how long a job will take, factoring in carefully the level of complexity.
If, for example, you’ve been asked to come up with a price for four examples of a logo design, first determine how long it will take to complete each one and times that by your hourly rate – then times by four for a total price.
One of the benefits of hourly billing is that the client is responsible for increases in the project’s scope. If it suddenly becomes a 30-page annual report instead of 20-pages, or a four-page, four-colour flyer instead of just two pages, the designer can feel comfortable charging more.
If you choose this billing method, consider using a time-tracking software package. There’s a huge range to choose from including CaptureWorks’s Job Capture (www.captureworks.com), FunctionFox Systems’ TimeFox (www.functionfox.com) and DesignSoft’s StopWatch (www.designsoft.com).
CHARGE BY THE PROJECT
Hourly billing can, however, make you look more like a plumber than a designer, and many clients prefer to pay by result rather than for your time.
The most common form of billing is per project – for example, the client asks for a Web- site design and build, or a 30-second animation and you get paid on completion (or in stages).
The key to succeeding here is to fully understand the scope of the project at the pitching and commissioning stage in order to accurately estimate the amount of time it will take to complete.
Get a clear written brief from the client detailing exactly what is expected of you and establish an agreement early on states that should the need for extras arise then the final bill will reflect this.
In an ideal world, you could name your price and stick to it. But in today’s competitive industry, pricing is a game of bluff. As the late, great Alan Fletcher once advised, “If you quote a price and the client immediately agrees, it’s too cheap. If the client winces, that’s the right price.”
One of the biggest problems to pricing a project is getting some clients to reveal their budget. Many avoid it simply because that, once stated, design proposals magically come in just a smidge under budget.
Sometimes however, the client simply doesn’t know the costs of involved in, say, creating a customer magazine or designing and building a Web site.
If you’re faced with this situation, avoid throwing out a ballpark figure during the early stages of pitching and commissioning.
Instead, a good way to start awkward financial discussions is to talk about similar projects you have completed and the costs that were involved. This will help establish the scope and level of a project and what a client expects.
WRITE A CLEAR COST PROPOSAL
When pricing a job, it’s important to listen carefully to what the client wants. If possible get them to provide a thorough breakdown of a project’s elements. Then provide a price for precisely what they requested.
Avoid adding extras they haven’t requested, as this will simply bump up costs. Be clear about what you will be providing in order to keep expectations in check.
TO PAD OR NOT TO PAD
Working on the basis that you can always negotiate down, but rarely do you get the chance to negotiate up, most designers pad their pricing a tad to give some room for negotiation.
If this feels a little too dishonest, try specifying a range of options in your pricing proposal, such as three to five mockups of a design, to give yourself the opportunity to do lesser figure should the final fee be lower than expected.
If reducing your fees is the only option to landing a job, do it only on a case-by-case basis and try to recoup any losses through concessions. For example, if you have to lower your rate, ask for something in return such as additional work at a later time (get this in writing if possible), an accelerated payment schedule, the right to include the work in your portfolio or use it to publicize your skills (as not all clients permit this) or inclusion of a credit line in printed pieces or a link to your Web site from theirs.
BARTER WITH SERVICES
One way to avoid lowering your fees is to negotiate with value-added extras that can benefit your client. For example, you can offer credit towards a project further down the road, offer to complete the project quicker, or offer to source imagery or photography for free.
There are many minor ‘services’ that can be considered as having added value by a client but, in reality, don’t impact too heavily on the designer’s or agency’s costs.
IT’S ALL ABOUT QUALITY
While you may need to be flexible to keep yourself or company afloat, never market yourself on price or compromise your reputation for high-quality creative output. Put the emphasis on the quality of work you do, not on the great deal you’re offering.
Lowering your price may help you win a client’s business, but if that client turns out to too demanding, cut your losses and look for other clients, otherwise you may get stuck in a nightmare relationship that will cost you more in the long run.
AVOID WORKING FOR FREE
There are many good reasons for doing pro bono work, but treat it as seriously as any other contract and be selective. Once you give away your design services, and even gain a reputation for pro bono work, clients may not want to pay a proper rate even if they like your work.