I like Stay Youth’s tip with the local small business admin office. I meet with a business adviser once a month to discuss non-design related business issues.
Thank you for the responses, even the ones who’s who think I’m in over my head. I do know what the project entails and I’m very comfortable with doing the work. It’s what I’ve been doing within companies for 12 years; including budgeting for projects and setting time lines, allocating resources, etc. What I don’t have is experience with budgeting, and contract creation, for working as a contractor.
If it was as simple as doing the math on what my time costs while working for projects within my company the budgeting thing would be easy, and maybe that’s as simple as it needs to be. However, I don’t want to be way off (high or low) on what the going rate for this type of work is in my area (Chicago).
I suspect the consulting rate would be higher since people working on their own, outside of a company, have other costs that people working in an organization don’t.
Hmmm…I fail to see the logic behind this statement. Pricing has no effect on ability to perform the work. I’ve done similar projects for free many times for friends in the past all of which were successful.
If this made sense, no one could ever start doing independent contractor work no matter how well they could perform the work.
I believe there are some guides at to what people are making in your area. I know AIGA publishes one for graphics, i cant remember for ID. Basically you have to think what is the minimum I want to take in profit and then determine the scope of what your overhead is ( both in general for operating and for each specific project) Its all a hypothetical, you will only be able to know if your charging the right amount if you have your overhead covered and the clients accepts your proposal. Basically I started off charging way too little, figuring i just wanted to get the work. Now I take into consideration what my yearly profit goal is subtract COGS, indirect expenses. I promise you will not get the right rate at first.
Hmmm…I fail to see the logic behind this statement. Pricing has no effect on ability to perform the work. I’ve done similar projects for free many times for friends in the past all of which were successful.
If this made sense, no one could ever start doing independent contractor work no matter how well they could perform the work. >
If you don’t know what to charge by the hour, or how many hours it takes to do something, then no, you can’t do the work unless your business plan involves being a starving artist or going out of business in three weeks (unless you have a trust fund), which is totally useless to the client you can no longer service due to lack of funding.
some of those books look like good buys - the Pricing Strategy one especially
I had a friend who was a local design company GM help me set my initial rates and I’ve slowly raised them. He also helped with some of the initial contracts I used. Maybe you could call upon a friend that hires freelancers with your experience… as said before, it varies depending on experience, location, clients, type of work, etc
Some other Random Advice: Plan for taxes from the beginning, and it’s cool you already mentioned CPAs - keeping good records and opening up a relationship with a local tax profession keeps confusion and that kind of stress/workload down. Plus if the government ever questions your figures they will be well worth their cost
It’s written from the perspective of a graphic designer / illustrator, but thought it was interesting, particularly the discussion of “rights-management” for her clients’ use of her work. In the wold or product design, we don’t have the luxury of placing such limitations on our work.
On a somewhat related note, it is part of my contract that the rights and ownership of the IP I create for my clients is transferred in exchange for payment of my fees. But I have never “withheld” such rights until I received final payment from the client since my terms are generally 30 days and the client typically has a tighter production deadline.
Have any of you held back on that final deliverable until receiving your final payment (or the check cleared)? What happened when that final payment never came? Did you hold the final database for “hostage” until receiving payment, or use the client’s acceptance of the final database as acknowledgement that the project was complete and payment was due?
Fortunately I’ve never run into that situation and hopefully never will (knock on wood).
I had a client where I had gotten in the habits of sending over the deliverables and iterating them until they were correct (technical drawings). At one point, the client got the drawing they needed and decided they were not going to pay me.
Since he was not going to pay me, I was not going to return any of the collateral or documentation he gave me on his “top secret” idea until he did.
Instead of doing what a normal person would do with paying and moving on, they decided to hit me with a summons suing me for $10k for espionage and intellectual property theft, all kinds of fun stuff.
It went back and forth for a while and I had to lawyer up. Both lawyers realized the guy was off his rocker, and finally agreed to settle. What is annoying is the legal fees ended up being more than the couple hundred bucks for the last round of drawing changes. I had a provision in my contract/Master Service Agreement which said he would have to pay for legal fees in the case of us going to court, and I probably would have easily won. But it simply was not worth the time or money or headache.
Chasing money with lawyers is hardly ever worth it. Only the lawyers get paid at the end of the day.
Best way to avoid this is to carefully pick your clients. Saying no or doing due diligence up front is a far better strategy. In 7+ years doing this I’ve never had an issue getting stiffed. A few delayed payments from startups with cash flow issues but at the end of the day they always paid as they appreciate the work I do and understanding as believe in both my work and the client. Funny enough, but biggest issue/delay was with a huge multinational corp I had to chance for a long time. Smaller clients I get good terms (50% deposit and payment on presentation) and less issues even if the bills are larger.
I try not to make it an adversarial relationship. You may get paid but likely won’t work with them again. Most of the time, if you have good clients, there is a reason they may delay payment. The more you can be understanding the better for the relationship. You can also then adjust terms next project to compensate (larger deposit, etc) and clearly explain it was due to the last payment issue that occurred.
It shouldn’t have been a big deal, but this guy was just on a high horse of self greatness, and when I started trying to go after him to get him to pay he flipped out.
I would’ve just let it go but once I got summoned I knew I didn’t want to go into court so I had to pay the lawyer just to settle it.
I found another related article on FastCo Design which proposes alternate methods of “valuating” design services as opposed to merely charging by the hour:
While some of the numbers the author comes up with are kinda outrageous, I do think it fair to consider the value of design to the client company and the return on that investment. Using comparisons to other costs that client may incur in their business can be a useful method of adding some perspective.
Is it me, though, or is that article and the numbers inside crazy? Sure, you could base your rate on some extrapolation of your client’s business, but how does that make sense or have anything to do with what is involved in the job on your end?
Might as well make something up, like your rate is equivalent to the price per pound of all the copper wiring in your client’s house. Make as much sense.
And if the design budget for rebranding is $500,000 I surely hope it’s more than a logo and some new business cards.
Comparisons make sense, if they are directly involved with ROI. Price of design = X units sold or at sold at higher price
Like I said in my post, the numbers are outrageous. But I would like to see more discussion regarding how we might make a more powerful argument with regards to that ROI. Of course this depends on so many criteria, but attempting to quantify the value good design adds to an organization’s bottom line is a worthwhile endeavor. I rarely ever quote an hourly rate because that number can be so misleading to a client who may not fully comprehend exactly what happens during each of those hours and the talent and expertise that’s being brought to bear.
I’d like to hear more from other designers on their methodologies (maybe it’s not something that should be discussed on a public forum), but I think it’s a worthwhile discussion.
Things like hours and sketches have limited value. A solution has almost unlimited value however. As designers we are in the solutions business. Sometimes solving problems the client didn’t even know existed.
I use an hourly rate though to help calculate a flat fee though. A friend who was a former account manager recommended adding 10% to that rate with each project to see how far it could go. Solid advice. I was following it until I got to my current role where I don’t really have the mind space to take on extra work other than for Icon which is more of a passion project type of thing.
That’s why royalties are so nice, since it says design is worth X% of the sales price of the product. That’s very easy to get one’s head around, because it’s how all costs are calculated- materials are 40%, packaging is 5%, design is 3%, and so on. If you do a good job and it sells better, you get paid more.
As long as you’re working for clients you can trust (ideally you should be anyway), and the cash flow works, it’s a nice arrangement.
I don’t think there’s anything bad about quoting an hourly rate. Shows where the money is going and sets up the turnaround expectation of how long it will take. Also makes it clear how much it will cost on extra changes and how much you are worth in experience to other professionals they pay hourly like their lawyer, accountant, etc. Ultimately most of those other costs (materials, production, etc.) boil down to hourly rates for extraction, assembly, anyhow.
I use a combined approach usually for larger projects. Outline the budget by phase with hourly estimates and rates, but invoice as a fixed cost. This way I don’t have to track hours (I’ve worked enough to know how long it takes), the client can see where the money goes (I didn’t just pull a number out of my head, and harder for them to lowball, as I can go back to the budget and ask what hours they’d like to reduce). If they take your word about how long things take as you are the pro, there’s very little negotiation tactic on their end. Also allows me to give a bulk discount for a new client or special project on the bottom line while preserving my rate for future work. Upping the rate also easy and clear as s year to year cost of inflation.
End of the day, there are many strategies. What works for you may not work for others and it depends on your type of clients, projects, industry, etc. one thing for sure is that as mentioned better to push your rates and see your limit even if losing some work, then under charge.
Also, pick work and clients you like and the rate doesn’t matter as much mid rather make less on work I love then more on work I hate. Best to make more on work you love, of course