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*Positioning yourself
- Quality, speed> price high
- Good, cheap > not vast
- fast, cheap> bad quality
- time, money, quality
- competition, marketing plan, costs, strategy, speciality, target customer
*pricing factor
- Internal: your expertise, people, scheduling, quality, cash flow.
- External: economy, business climate, clients
- pricing scheduling
*pricing philosophy
- strategy to place a value on your work
- driven by:
>Client demand: many revision
> design: exceed plan time
> financially: pay per change
> altruistically: make the world a better place. believe in good karma, small financial needs
* pricing strategies
- time
- project type
- value: estimation of the importance, worth, usefulness
- wild card factor: good instinctor of cash flow situation, wild gas
* Time-based pricing strategy
- include revisions
- hour rate: keep record of time sheet.
- Day rates: motion graphics, animation, interactive or web design
- previous client experience
*Project-based pricing strategy
- type of project
- the client and business size?
- price per page design. Add-on pricelist
- published by professional organization, ex. Graphic Artists' Guild Handbook of Pricing and Ethical Guidelines
*Value-based pricing strategy
- impacted by supply and demand, are there lots of designers supply/client demand this or not?
- big demand + limited supply = high price
- low demand + big supply = low price
- research what people are paying for a project like this?
- GAGPEG
- analyse impact will have on client business, ex. sales go up, generate new customer lead, but not easy to get this data
- value as a filter to apply, by another pricing strategy
* Wild-card-based pricing strategy
- ask client's budget
- best: time-based pricing approach
- lower than client budget> get the deal
- higher than client budget> increase budget or reduce work
- gut instinct: experienced designer give estimate after meet client, not for beginner
- Cashflow need: base on your bill/debt, not strategic in time, specifications, value
- serendipity: pull numbers out of thin air. many designers use
* hourly rate
- sometimes you take project without your full rate, because:
> accept pays low to build portfolio/client
> didn't understand the complexity/time of work
> poor time management
> push things creatively
> different rate structure for clients/types of work
> Bottom line: get for every hour you work on
* freelancer rate
- based on actual financial needs
> total month expenses=personal operate cost
>total billable month hours
> 40h/week, but 25% work is non-client billable activities, actual work 54h
> hourly break-even rate = month expenses/billable hours
> published rate= (income taxes & profit) + break-even rate= break-even rate*3= client rate= amendments fee
> 1/3 income, 1/3 taxes. 1/3 profit + savings
> will clients pay? Will other designers get this paid in my market?
* design firm rate
> Total monthly expenses
> total billable hours
> Get break even rate: must achieve this hourly rate for planned amount of hours to pay monthly expenses
> published rate=blended rate =break even hourly rate*1.2 (taxes, sales tax may required)
>watch: Petrula Vrontikis' Running a Design Business course called Freelancing
> watch: Running a Design Business course on Designer-Client Agreements
* industry standards rate
- US Dept of Labor's Bureau of Labor Statistics, bls.gov
- for designers: AIGA, staffing company Aquin - annual salary/ 1500 year billable hours=hourly rate
*marketplace rate
- business records
- published project pricing
- ask client budget
- ask fellow designers
- bid sites for graphic design
* estimate a project
- Ballpark: rough initial estimate on high level client objectives, large margin uncertainty, price range, kind of high, don't know project details, what the client can pay?
- budgetary: on clear scope of work, fix budget, contain X items, Y functions, re-visit estimate, once approved work description
- definitive: detailed estimate, full project breakdown, design process phase chart, fee for each phase, outside expenses, basis of agreements
- watch: Running a Design Business: Designer-Client Agreements.
*Fees and expenses
- time and materials
- Fees: designer's payment, fixed, if change order, increase
- expense: pre-purchased specifically for project. industry standard markup 15~25% on all expenses, stated in agreements.
* Break down project
- estimate = forecaste financial implications
- Work required: outline of phases, hours need*hour rate
- people blended/collective hourly rate: paid rates depends on experience and expertise, ex. junior designer price lower, or average rate of all designers
- estimate the time to manage supplier as your fee
- Contingencies
* P&Ls: Evaluating estimates
- evaluate after complete projects
- compare estimate to actual cost
- profit on labor=estimate fee-(actual hour rates*total hours)
- profit on change order labor=estimated change order fee-actual labor
- actual expenses.
- total markup= profit on expenses, ex. profit on labor
= big design fees x= big profits
* pricing challenge
- prices project
- know your hourly rate
*Ex. neighborhood coffee house> create a unique and memorable identity system. experience with design and printing, idea for the color scheme. need max impact for limit budget. Serious competition for big national coffe shop brand with 20% market > logo consist of a icon and logotype, 8 b/w thumbnails, client choose 2 different logo concepts, 2 different color options for each logo concepts. create business card, an exterior sign, postcard > estimate time for each phase*hourly rate. challenge: filling in the blanks
> Phase 1: Concept Development. black & white thumbnails, $505.
> Phase 2: Design Refinements, the colour comps $485.
> Phase 3: Finished Art for Logo, $630.
> Phase 4:Application Design & Production of Finished Artwork for the sign, postcard, business card, $1,510. Total fees: $3,130.
> markup at $454.
> project total $3,584
> Solutions: runningadesignbusiness.com
*payment strategies
- Fixed Fee. common strategy. invoice 50% before work begins, 50% upon completion. Bill expenses at the end of the project. smaller projects with clear deliverables.
- Progress Payments: project is break to sequential phases, fees invoiced once completion of phase. larger projects. helps cash flow
- Monthly Installments: kind of progress payment. divide total fee to monthly payments. based on calendar, not work completed. big projects.
- Modular payments: Divide large project to smaller project modules, bill as separate jobs. for related, not sequential work. ex. design company corporate identity in Jan, do website in June. Bill 2 separate jobs upon completion.
- Retainer: designer agrees to fixed fee for specific amount of work, invoiced weekly/monthly/agreed schedule. for ongoing publications, clearly defined repetitive tasks. ex. develop new rotating image for website weekly
- Hourly: Good record keeping is essential. clients may ask not to exceed certain budget.
- Deferred payment. designer negotiate higher fee than normal, with payment is deferred until mutually agreed date. risky for designer, good for startup client
- Profit Participation. designer to be paid a certain fee, lower than standard, + profit participation in client's business. ties design effectiveness to sales/business results, for startup clients, new products.
- trade: designers are paid with the client's services/products, not money. succeed if clear value established of designer's work. design traded for wholesale, not retail value of client's service/product, make it equitable.
- Pro Bono=for good: designer works for free, charity/nonprofit
*Raise rate/fees
- reason
> drop difficult/demanding/unprofitable client
> don't want to do certain kind of work any more
> lower than your peers
- If existing clients resist new prices
> what new rate/fee structure? design industry standard? availability?
> discussion if particular proposal won't fit in their budget
> Highlight great results in past
> what you can accomplish in the future
> great working relationship
> want continued business
*Win business
- designer relevant experience
- referred
- reliability
- trustworthy
- diligent
- time frame
- luck
- estimate accurately: too low isn't good, client may think you are substandard
- competitively priced: judged on your talent/experience
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