If you’re in the business of making money, I think it’s time to increase the hourly rates you are charging and start paying attention to inflation so you know how quickly and frequently to do so. The debt downgrade is going to place an inflationary premium on lending, which will increase the cost of doing business and therefore the cost of living. Personally, I think we’re looking at 5-10% minimum in the next year, between QE 1 and 2, a possible QE 3 package, and the debt downgrade (even though the US will never default). So adjust billing rates and spending expectations accordingly. No need to get unnecessarily screwed.
I don’t know, you can raise your prices but it doesn’t mean your clients will pay for the increase. Price is determined by what the market will bear, not by cost. Cost will affect your profit and only you can determine what profit level is acceptable to you. I don’t think my clients would accept a price increase without added value.
On the other hand, pricing is very subjective. I have never had the exact same project between 2 or more clients. But if I did, I know prices between my clients would vary. There are some who are willing to pay more than others. Not much, but I bet it would be in that 5-10%.
As for S&P’s downgrade, I doubt that will have little if any impact on borrowing. US treasuries were flying off the shelf when the stock market was tanking. Also, inflation is up, but it is nothing like the 70s.
I understand all that. The point, however, is to remind designers that in inflationary times, they have not only a right, but an obligation to themselves and their peers to demand higher prices for their work.
The treasury is keeping interest rates on short term loans at nearly zero through 2013… BTW…
Design company A, like many, uses a revolving credit line to supplement payroll payments. A rise in interest rates has a direct effect on their margins.
Design company A, as a few do, relies heavily on physical presense with clints and contractors. Fuel costs under great inflationary pressure (food is the other inflation driver as core prices are stable) and effect their margins.
Design company B, as some do, has enough cash reserves to supplement payroll payments. A rise in interest rates has no effect on their margins.
Design company B rarely uses anything but a virtual presense. The largest drivers of inflation have no effect on their margins.
It is possible the current economic climate has no effect on a company’s margin. Especially a service-based one like design. Demanding an increase in price without an increase in value would put design on the same level as a commodity. I prefer for design not to be a commodity, where cost and price are independent.
I read the other day that due to the drought down south, the price of meat is going to rise dramtically in the near future. It is my option to eat less meat.
I can only state that we were able to rise the median price of our
products a nice margin this year.
Customers are never exicted when they have to pay more for the same, but
most of them understand, that nobody can cut into his profit for a
long time when costs of basics rise like they have done through the last
It can be a little hassle sometimes, but I strongly believe in the polititcs
of constant price administration against the other politics of waiting till
near death and having to spike prices suddenly then.
For the company where I now currently work, technically, the list price has gone up. But due to competitive pressures, the sale price has not increased in 10 years on any of the SKUs. The customer just receives a “larger” discount.
Our margins have pretty much also have remained unchanged. This was accomplished mostly by process improvements - investment in automation (bought with cash reserves instead of borrowing), and somewhat by engineering improvements to reduce part cost and cycle times.