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How to handle pricing as a freelance designer

Postby TZD » July 16th, 2015, 1:30 pm


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Hello everyone,

I am glad to have found this forum as it has already been a wealth of information and I can't seem to help finding myself sucked into almost every discussion I come across. (Nice to find somewhere with an interest I can relate to.)

But let me get to the reason I made it here in the first place.

I currently am employed at a decently sized manufacturing facility (100 plus CNCs) as a Product Engineer. I was hired as a "product engineer" under the pretense that I would be designing a product line for the company. (which currently operates as build to print house)
This never happened, we continue as a BTP house and my job has fallen more as a production engineer.

About a year ago we had a customer that approached us about doing some design/engineering work for a product they were looking to have us manufacture. This is something that we do not do, and I was approached by my manager and asked if I would be interested in taking on this work on the side as a freelance gig on my own. I agreed.

The project started with a napkin sketch I was provided by the customer. From there I developed a product concept presented a few design ideas and we moved forward to a final design. I took care of all the material selections, coatings, finishes, tolerances, conditions, fitments into the assembly. (the part was a speaclized AR-15 bolt carrier for any of you who may be firearms guys/gals) After the final solidworks model was approved I created engineering drawings and submitted a final technical data package to him that was production ready. He was very happy and we ended up producing the product for him and it turned out great.

Fast forward to current. I have just wrapped up the TDP for the third product after the initial work I did with him, all of which have successfully gone to production, all outside of our manufacturing facility. The projects have grown quite a bit in complexity. This package will have 8 deliverable designed components, and additional 5 sourced components, totaling a 13 PN assembly with all components modeled and engineering drawings for all designed components as well as part drawings for all standard components with sourcing ect. This TDP also includes 3 extrusion profile designs with models and fully toleranced engineering drawings that components will be machined from. This also includes photo renderings of assemblies and all material selections, coatings, fitments, tolerancing, fitments and all the applicable needs.

I'm now branching out and looking to get involved with some other customers and I am wondering how you guys are handling pricing a job like this. Up to this point I have been tracking my hours and billing at a hourly rate. It has worked fine for this customer but I am not sure this is the best solution, and I am unsure of the rate. I have also been working with no contract.

So how do you guys handle your pricing? What kind of hourly rate is reasonable for this type of work? Would anyone be kind enough to supply a sample of a contract that you are using?

I really appreciate any feedback that you guys might have and I look forward to hearing from you!

My apologies for being so long winded.

Re: How to handle pricing as a freelance designer

Postby TZD » July 18th, 2015, 12:47 am


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Anyone have any insight? I was very excited to find group of people with such exceptional talent and experience, as reading every cut and paste vauge article I find on the subject.

Thanks for any help.

Re: How to handle pricing as a freelance designer

Postby yo » July 18th, 2015, 9:04 am

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I typically create something called an SOW. Statement Of Work

A document like this outlines key milestones, deliverables, and costs associated with those milestones and deliverables and the timing of payments.

I find it easier to quote as flat fees. How I do that is I estimate how many hours it will take me, multiply that by my hourly rate and generate a price. You will never get the estimation right, and general rule of thumb is that you will under estimate it so round up and include anytime for communications (phone calls, reviews, meetings).

To calculate an hourly fee, figure out how much you want to make per year. Be sure to factor in healthcare costs, rent, savings, things like that. The average work year is 2000 hours, but as a freelancer you might spend half of that time chasing work, so divide your anual desired earnings by 1000 and you should have a pretty good idea of an hourly rate.

Re: How to handle pricing as a freelance designer

Postby TZD » July 19th, 2015, 11:43 pm


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Yo,

Thanks for the insight! After doing a few projects I feel like I have a good enough idea of how long it takes me to do things that I could give a go at quoting a flat fee. Originally that was definitely not the case, and I agree on tending to estimate under rather than over! (which is why I have shied away from it in the past)

I'm not sure what a reasonable number would be for an annual income doing something of this nature. Any thoughts on what that number might be?

Some details to go along with that question:
I have about 4-5 years working experience in related fields.
I am generally working with smaller private clients.
This is currently a part time gig for me but I would really love to transition to full time with this.

Anyone else doing anything different?

Re: How to handle pricing as a freelance designer

Postby yo » July 20th, 2015, 10:05 am

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Try looking at the core77 salary survey for your area and years of experience: http://www.coroflot.com/designsalaryguide

Re: How to handle pricing as a freelance designer

Postby iab » July 20th, 2015, 11:41 am


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Price is determined by what the market will bear.

Yes, I am a broken record but it is true.

Experience does play to that, I'd gladly pay yo $175/hour, but not even near that for someone just out of college.

But experience is not absolute as pricing is a dark art. I try to determine what I can get from a client and go for the max and readjust if they balk. For example, a Fortune 500 will likely pay more than a startup, but not in every case. So the "exact same" project between two different clients would be priced differently.

If they do balk at your price, don't just lower your price to get the job, be sure to adjust your SOW to reflect your reduction of work. If you don't, they will know to always ask for a price reduction.

Then of course price will depend on the services provided. For example, concept development will have a higher hourly rate over CAD work.

You also need to consider the precedent you have made with existing clients. They will not like you raising the price. It is so much easier to lower a price than to raise it.


TZD
 
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Yo, Thanks that was exactly what I was looking for, just trying to get a rough handle of some kind of baseline.

Iab, That is a great point. I have seen many industries where the value of the same job is related to the customer it is for, though I wasn't sure that this would carry over to ID or the like. Also to your note of setting a precedent, this was something I was very concerned about and one of the main reasons that I was searching out this information. Currently I have been working with only one customer, and I'm pretty sure that I under priced myself in this situation, but I want to make sure as I branch out I wont be cutting myself short while still being fair to the customer.

Thanks for all the great pointers.

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sketchstone
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Don't forget to factor in taxes! For freelancers, remember about 30% is not yo money ;)


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depends on your level of experience. In San Francisco, a good freelance rate for a recent grad is around $50-60/hr. If you're a more mid-level designer you can probably tack on another 50% on top of that.

Keep in mind, tax rates are higher, you have to pay your own insurance, you can't bill for time spent on the phone with the client or meetings, you have to pay thousands of dollars for your own software, generating leads, etc. Ultimately, it comes down to what the market will bear (as someone else said), but I would highly recommend starting much higher than you think you should.

A good rule of thumb that I once heard is about double what you'd normally be paid as a full-time employee. So if you want $60,000 a year at a standard entry level ID job (which averages to around $30/hr if you work 50 weeks per year), you should charge around $60/hr as a freelancer if you want a similar pay by the end of the year. The reason for this is that only about half your hours will be billable each week.

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Azrehan
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I did my calculations based on what Yo said and it works out to my hourly rate for freelance work.

Don't undersell yourself. It's the worst mistake you can make in your career.

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ralphzoontjens
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My estimate would be around $40-50/hr for you.
But you will have to determine for yourself based on the kind of projects you are looking to do and what clients would be willing to pay given your experience and specialization level.

I prefer working with hourly contracts where you simply track all hours worked through a piece of software that includes screenshots and written memos, so the client always has an overview of the progress.

For fixed-term contracts I factor in 10% extra work due to iterations needed to be done. You can consider the amount of iterations/revisions you offer to prevent putting in too many hours. I charge non-creative activities such as research and communication at 70% of my hourly rate. You can work with an upfront fee to ensure professional conduct and establish some trust with a client. I also advise you to include a Terms & Conditions document stating your rates, cases where your rate or project fee may be changed, the scope of the project and its deliverables, file handling and legal disclaimers.
http://www.designsoul.nl
Designsoul - Product Design & Visualisation


bcpid
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If you are a design engineer with any competent level of tooling design experience, there's no reason you shouldn't be charging $100+/hr. The product engineers I've worked with have ranged in price from about $85 on the low end for an experienced CAD jockey with solid part design knowledge, to $250 on the high end for someone with extensive experience in mechanical design and part analysis.


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1. It feels like your full-time job is “getting in the way” of your side work.

Jonnie Hallman, Brooklyn-based designer and founder of Cushion, a forecasting app for freelancers, couldn’t shake his passion for independent work even if he tried. He’d race home after his day job so he could maximize time spent on side projects until it became clear that change was in order.

“I’d catch myself daydreaming about side projects constantly. All of a sudden, 5 p.m. – 2 a.m. became ‘my’ time. I’d try to accomplish as much as I could before returning to my real job the next day,” says Hallman. “When the side projects started taking off, I found myself being recognized far more for that work than anything I did at my full-time job.”

2. You’ve learned everything you can in your current role.

There’s a reason why it’s rare for recent graduates to start out as freelancers. Sure, it’s doable, but the experience and professional skills you gain when working in a creative role for a company or agency are irreplaceable.

Becky Simpson, illustrator and founder of paper-products store Chipper Things, comments, “I think working for a company you believe in, whether it’s a few years or a lifetime, is a great thing and shouldn’t be seen as ‘lesser than’ working on your own.” Back when she was in college, Simpson knew she wanted to work for herself eventually. She adds, “That’s part of why I studied graphic design—I figured it would be a flexible career. I really loved my design job, but started to feel disconnected from my work. I felt like I was bursting at the seams with ideas and I wanted unlimited time to pursue them.”

3. You’re okay with living frugally.

I have a frivolous success metric for my first year of being on my own. It’s whether or not I can continue to buy makeup from Sephora, versus switching to less-expensive Ulta. (Yes, this is ridiculous but it’s measureable.)

Visual artist Hannah Rothstein left a communications role to focus on her own projects, including the humorous book Yoga for Bros, full-time. She shares, “If you’re thinking of quitting, make sure you’ve saved up several months of living expenses and are comfortable living frugally. If you like to make it rain, quitting a steady job might not be the best idea for you.” She adds, “Before quitting, it’s also a good idea to decide what your ‘oh-shit point’ is. This is the financial threshold that, once you dip below it, signifies it’s time to start looking into your Plan Bs.”

4. You’ve started to feel more excited by risk than you are fearful of it.

Leaving a full-time job to start your own venture is a form of entrepreneurship, and entrepreneurship is just-plain scary. You’re putting what you have on the line and a wide range of skills, from branding to sales, are required to make it all work. Taking on such an endeavor is indeed a risk, but if you’ve planned well, it’s an intelligent risk to take and it can be extremely exciting.

Simpson shares, “I kept thinking ‘if not now, when?’ When you’re holding back for no reason other than just being scared, it’s worth taking the risk.”

5. You’ve planned accordingly (task-wise and money-wise).

From building up clientele in advance of your last day at the full-time gig to fleshing out contingency plans in case freelancing doesn’t work out, your business plan is comprehensive and answers all of your “what ifs”. Even more importantly, you’ve saved a few months’ worth of cash to help cover unplanned costs during your first few months in business.

Hallman shares, “I’ve had countless surprise expenses that I didn’t plan for, so I found myself scrambling when I thought I’d be coasting. Even though I’ve been solo for a while now, I still have those ups and downs, but I’ve learned to deal with them.” (Quarterly tax filing is a whole different ball game so be prepared for that too.)

6. You’ve been planning this switch for three months or longer.

We all get frustrated with work from time to time, but just because you’re over your current role or company isn’t a reason to go out on your own. Wanting to pursue projects that you’re passionate about should be what’s driving you (not hasty decisions).

Rothstein says, “Quitting spontaneously is seldom a good call. However, if you’ve been feeling the slow burn of discontent for months, sense a deep-seated desire in your core to do your own thing, and have thought about what you’d do if things don’t work out as planned, it’s time to go for it.” She adds, “I knew it was the right decision.”

Even though the idea of leaving the security of a full-time role can be scary, remember that you’re not the only one trying it out! According to an independent study commissioned by Freelancers Union and Elance-oDesk, 53 million Americans are working as freelancers (a number that’s said to rise in coming years). That means there’s a huge network of freelancers and resources out there to help lead the way.

Hallman adds, “Surround yourself with a good support group of people in the same position, help each other out, and learn from each other. You’ll find that the freelance community is strong and full of people willing to lend a hand.”

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BryanBrutherford
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I've only been fully independent for about 2 years now but something i learned pretty quickly is that when you're not an employee and there is no long term commitment from an employer, hourly rates can be a trap.

They make sense for straight forward 3d modeling services and when the client brings a significant amount of the solution to the table and you're just helping them execute.

When you're doing real design work and solving real problems and lending real specialized knowledge pricing should be based on the real value of your contribution. Most companies/clients will pretend this is impossible to quantify because this model is not in their best interest but it's not an impossible calculation and you can cover the unknowns and the speculative part of the projections with an advance/residual pricing model.

As mentioned previously, an important thing to remember is that the value of your contribution to a fortune 500 is not the same as the value of the same contribution to a startup.
Ryan Rutherford
www.brutherford.com

Re: How to handle pricing as a freelance designer

Postby yo » August 3rd, 2016, 8:27 am

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As one of my mentors said to me "don't sell hours, sell solutions. There is a limit to what people will pay for hours, but solutions are much more valuable"

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