Designers: What to charge

Interesting and useful Post.

This is in case you charge for every possible working hour in a year. What if you can't find enough jobs to fill every hour? Are you going to raise the per hour fee just because you can't find enough clients?

I would say one should charge as much as possible without losing the client. You can start with an relatively high amount and go down as much as it's still viable for you (which is about the number you calculate with Jim's method). Of course the less you get payed for the job, the less effort you gonna put in. For example if the client pays up the first number I ask I may involve some collegues into the design process to improve the quality and split some of the money...

One thing is very important. You should charge more and more with every year you spend in the business. You get better, your work gets better, your product worth more, therefore the client should pay more. Even if you do the same kind of job for the same client, he has to pay more to you in a years time.

No offense buddy, but that sounds great in theory, but in reality I don't see that working for anyone but the most elite and in-demand design shops and agencies.

First off, your rate is your rate. It shouldn't change that much regardless if you have a lot of work or not. How do you go to a client and say "I know I charged you $500 for this ad last month, but I had nothing better to do. Now I'm busy doing work for a new client so I'm going to charge you double"?

Of course a sliding scale for rates can be applied for various clients based on the type of company they are. I have two rates, one is a standard rate, the other is my "discount" rate I offer to non-profits, work for ad agencies and other clients that don't have a budget but I really want to work with. But I use that rate very sparingly, and I don't fluctuate between the two rates for the same client.

I also never put "less effort" into a job just because I'm being paid less. If I set a rate too low, that's my fault. The clients pay for my best work, and they expect nothing less. To give someone less effort because I'm not happy with the bottom line on the invoice is a great way to earn a bad reputation.

I also don't agree with upping your billable rate every year. Of course rates increase to accommodate inflation rates, competitive rates and if you're in very high demand (usually when you land a major client and win several national awards). To up rates "just because" is another way to earn a bad reputation, and not keep clients long term.

I always look to build a relationship with my clients. I would rather make a little less on every job but continue to get work week after week, rather than make more on a job here and a job there a few times a year. If you're constantly upping your rates year after year, you're going to be constantly losing clients and looking for new ones.

I've been freelancing for 20+ years and I've had only 3 rate increases. The first one after about 5 years, due to technology and expected quality of work going up. The last increase which didn't come until about 15 years in was simply to weed out the dead weight clients (clients who I was simply doing work for the money, not because it was great work).

Maybe it just works differently in different parts of the world, but that idea isn't going to work too well in the U.S. I mean, if I go from a small time freelancer with a few no-name clients, to all of a sudden landing a MAJOR account and produce award winning and nationally recognized work, yeah, then clients expect to see a rate increase. Otherwise, they're looking for a partner in their business, not simply an easily replaced vendor that's out for a buck.

indeed. But since it has the potential to adapt to anyone's needs, I guess it's a good formula for depicting design rates.

And if they are not willing to pay what you feel is fair, they can go elsewhere. I always quote per job rather than give an hourly rate. I base the quote on an hourly rate, but never disclose this to the client. If the client asks how i arrive at a figure it can be explained in terms of complexity (full brand versus a single logo) & expertise (research/software/experience) required rather than 'it will take me this long' I agree with Creative Guy. We should become a partner in the business of the client for the time we are working on their job. Always have a debrief about the job and explain to the client if you feel a job ended up being worth more than the quote you gave. If they are a good client they'll understand and often accept a revised billing. If they are happy with the result they will come back for more. It's as much about creating a relationship as it is a piece of work.

Well put Jim,
With me being the only person doing photography, the calculations become much easier with less variables. It's simply cost + % profit margin, and the cost takes most of the effort in calculation.

I do my best to include everything in cost: utility bills + rent + furniture + studio equipment + consumables + salaries. All distributed among 25 days in a month and 8 hours per day, giving me the landed cost of the service.

The man day to me is 8 hours with 6 being at the photo session and 2 hours for processing. I offer two options, full day and half day with added % of a profit margin.

I loose business and win business, but the formula makes a good filter to push aside non-serious business which nobody wants on their portfolio anyway.

Locally, I still face a racial resistance of being an Arab and a Saudi Arabian offering creative work, but hopefully it would go away with time as I'm slowly getting recognized in the market (officially started Jan/2005)

Walleed,

You're in a somewhat unique field, as photographers are one of the few who generally charge by the day, rather than by the hour. This makes it much easier to come up with a rate.

On the other hand, you also have the difficult task (at least some photographers) of being responsible for props, etc... this can add "hidden costs" for every photo shoot. If you're that type of photographer, it's not a big deal, it's just a line item on the invoice, but it does make it more difficult to budget long term.

You are probably one of the ones Ivan commented about that will be raising their rates, because I've seen your work and it's quite good. As you grow in the market and work with more agencies, you're name will get around and you'll soon be turning away more work than you antually do.

At some point, I'll be able to sit around with guys in the Creative department at work looking through C.A.s and say "I knew that guy when he was takin snap shots of his kids!"

Everyone is making some great points. I like Jim's method of calculating to determine a bottom line. While it may be a bit unrealistic for beginners, I also believe that our skills should not be undervalued. We have a specialty that someone is coming to us to provide. Sure they could go to another, cheaper freelancer, but is his or her quality of work the same? Are his or her project management skills up to snuff? Creating a perceived value for yourself will allow you to weed out the work (and clients) you don't want.

I try to use the metaphor of cars. When you go to a Hyundai dealership, you know you are going to pay less, but also get a less refined product. Go to a Lexus dealership, pay more, get a more refined product. Why? Perceived value. Ask yourself as a freelancer, do you want to be the Hyndai or the Lexus? Decide, and do what you can to create an image in the client's mind.

Vinylsofa's method of mixing fixed price with hourly rates has worked well for me. I also take into account the size/billings/education of the client. An identity package is worth more to a $5M company than a $100K company. Understanding some median values for projects can also help you guage how much to charge without breaking the bank of the client.

This post made me dig out an old book, because I knew I had read this same type of discussion. The Graphic Designer's Guide to Pricing, Estimation and Budgeting by Theo Stephans Williams.

I highly recommend this book to anyone starting to freelance. It goes into much deeper discussion on finding your clients budget, setting you rate and managing accounts. It does tailor to a design shop (more than just a freelancer) which doesn't help us all.

I agree with Ivan that your hourly rate should go up with your experience. You can get creative doing this (project based quotes or simply add an hour to a project quote). I am not saying 'be unethical' at all, don't get me wrong here.

I have to say it is very hard to have billable hours every day (I am lucky to bill 4 hours a day) even though I put in at least 8 hours a day.

I personally started freelancing at $20 an hour, and shortly after went to $55 (after reading a few books and realizing the costs). I was very scared doing this, and had to learn to value my time (and the non billable time). Raising my rates got me more work somehow, and I did not loose a single client.

This kind of formulae is all around the place. Really not working here in Hungary but I assume the situation is the same in other countries in europe. Or it just depends on the actual designer. For example I cant count my working hours because i'm thinking all the time. Sometimes I dream up something. So I should charge for my sleeping hours too? Maybe it's my fault but I just cant tell you how much time it takes to do a logo. Yeah, sure I can say like 2-3 days, depending on other jobs priorities, but I cant bill it out like; OK so I worked 9 hours, so this gonna cost you mmm. let me see... 635 USD.

Here's some other links for start, but if you just google "freelance graphic designer price rate" you can find some useful sources too.
http://www.allgraphicdesign.com/start-graphicdesign-freelance-business.html

http://www.sitepoint.com/article/freelance-pricing-1-set-rate

Here's how to build a cost and overhead calculator in Excel:
http://www.brennerbooks.com/howtopage.html

I forget to mention this link which explains the same formula in Jim's article:
http://desktoppub.about.com/cs/freelance/a/pricing.htm

good article... i'll have to give it a read. i'll probably be doing a bit of freelance soon, so this has come at just the right time.

Hi Jim
I just disovered this blog.
I went to go read the article, but the link was gone.
is there any way you can direct me to find the original article.

lou

Sorry. My blog went down a few months back and the old links don't work anymore so you have to do a search on my site.

The article is now here:
http://www.jdempsey.com/designers-how-much-to-charge-how-to-get-paid/

Good read.

CREATING HYPE | ENGAGING PEOPLE

another bump. :)