Congratulations — you've just about landed a freelance job, but now you're wondering how to price it. Pricing can be the most difficult thing in the design business — even harder than coming up with new, good ideas. There are a lot of folks with differing points-of-view on this topic, too, and I encourage you to absorb and reflect on all of them — there are a lot of smart folks out there with a lot to say, so dig for it. A great place to start is the AIGA's most recent salary survey when it comes to fees. Hopefully the below can serve as a bit of a brief guide on how to best to structure the engagement..
Remember that people will often approach you because you're talented (yay!), but don't have a lot of experience (doh!), and will consequently be more affordable. There's no shame in this on either side — all professions have their "beginners": dentistry, real-estate, cosmetology — even medical test subjects get higher rates with more experience. Design is no different. People are taking a risk* on you and for that they'll pay a bit less, but even then, how to begin?
Once you jointly figured out what would be considered a successful project, then you can go about trying to exceed those goals and really impress them (and outlining this in your estimate and reflecting on it in your creative brief). You can now establish the phases that work best for their project, generally broken down into areas like: Consulting, Research, Ideation, Refinement, Extension and Production. It's important to note that not all projects will have all phases and you might jump into a project later in the game — at the production phase, for instance.
When looking at the phased approach, some phases could be estimated as a fixed-fee and some are better approached as a per-hour. Even with a per-hour job, you'll still need to estimate the time needed to complete the task and an agreed-upon time (usually 75% of the way into the project) where you'll both re-evaluate what you have accomplished thus far and adjust accordingly.
Looking at the list above:
Consulting:
[per-hour]
Many folks just need advice and this is a great place for you to step in and provide that at limited time on your side and limited expense on theirs. I've done this professionally as well as taken advantage of other professionals offering the same and it's a great way to share ideas and be compensated fairly. Some folks will charge a bit more (+25%/hour) for consulting vs. production as it takes a bit more "brain space" and leverages the conceptual expertise you've built more than the design-muscle. Others prefer to leave their hourly rate as flat (I do this) as it's hard sometimes to separate the "thinking" from the "doing". It is your call as to how you break down your rates and it is something that you might approach differently with each client until you get a firm grasp on your own working style.
Research:
[per-hour or grouped in a comprehensive fixed-fee project]
Sadly, while this is often the most important part of the job (and it's your job to eloquently communicate this), many clients are simply unwilling to pay for research — in part because they (think they) have done it already. This might be a make/break decision on whether or not you'll work on the project as it opens up a greater discussion of the value of design and design thinking with your client. Just like good wine is often wasted on someone with a greater affinity to diet soda (that would be me), good design — the kind of design you've trained for — is not valued by all folks. There's nothing wrong with that, but it might not be a relationship you'd want to enter into if your values don't align. It's good to identify this early and proceed accordingly.
Ideation:
[fixed-fee]
This phase is where your value as a designer will shine — it's where you come up with ___ number of ideas (normally 3-5 and this would be worked into the estimate). This phase doesn't work as well at per-hour because it's hard to bill thinking about a project while on the freeway or in the shower. It's also where the greatest amount of your training and talent will be used, so billing by the hour doesn't account for the years it took to prepare for that fifteen minutes of brilliance. There's a great story about a woman who asked Picasso to quickly sketch out something quite simple: "Picasso was in a park when a woman asked him to draw her portrait. Picasso agreed and quickly sketched her. When he handed her the sketch, she was pleased and asked how much she owed to him. Picasso replied, “$5,000.” The woman screamed, “But it took you only five minutes!” Picasso replied, “No, madam, it took me my entire life."… You wouldn't want your client to scream, so, again, be fair and communicative with your client. If they don't understand or value this point-of-view, it might be telling as to their overall value of design — and you might look to this as an indicator as to your fit for the project. The last thing you want to do is to underbid a project for a client who will continue to question costs, fees and value... so at least price it accordingly. I've often priced a project higher than I might otherwise if I suspect it might not be fun.
Refinement:
[fixed-fee or part of the above phase]
Depending on your client, they might just want raw idea (for which you'll billed them fairly) or they might want you to refine one to a finished state to either hand off to another team or continue on with yourself. Again, this is where clear communication between you and the client is key so that you can prepare an estimate that is best suited for them. Typically ideation and refinement are coupled, but I've worked on successful project where the designer hands off a few unrefined ideas and another team takes them and runs with them. Again, if you've billed fairly this shouldn't upset you.
Extension:
[per-hour, but possibly fixed-fee if the deliverables are finite]
Once you've established a basic look and feel, you can then extend it to the rest of the brand/product line/associate collateral. This might be something that the client has their in-house team do, in which case, you'll want to be clear about what you provide in the phases above insofar as final documentation (style guides, etc.). However, if they would like you to continue with the job, it is again important to get a scope of the work involved. Generally, extra things always come up and what started as a design for one piece of packaging turns into a packaging assortment, a trade show booth and seven web banners. Again, good communication is key.
Production:
[definitely per-hour]
As students, you don't have enough experience to know exactly how long it will take to get something press-checked, coded or built and it's best to be honest with the client up front and invite (and pay) for any outside help you'll need. Projects can quickly spiral out of control and the worst place you want to be is to have a client expecting you to personally code and implement a website and you're now just getting friendly with GoLive. The same goes for press checks that might carry you to another state (or even another country). A good involvement with the local AIGA network will provide you with a host of folks in the printing, mailing and even digital production worlds, so it's good to make friends at the AIGA events and even volunteer to get to know people better. In the end, as stated many times, you want to be very clear with your client about who is responsible for what and how you're going to get there. Remember, they're paying a lower fee, so that can't expect you to have all of the answers at your fingertips, but with the fee that they are paying you, they rightfully expect that you'll be able to find out those answers. Most importantly, remember that production can be the MOST expensive part of the job, so you really need to pay attention here.
So, in the end, when a client says: "I have $10,000 for this project**" a lot is involved and it's your job to work with them to get to an agreeable and fair solution.
* With risk, comes... risk: the possibility or error, missed deadlines, less than stellar results, etc. .. and for that risk, the client is paying, in some cases a 50% fee. If a client cannot accept such risks, my advice would be to hire a seasoned professional at professional rates which would, of course, come with far less risk.
** Specifically, for this kind of thing you need to figure out if this is for design — or for design AND production of the final product. $10,000 is a great design fee, but not nearly enough to get 25,000 brochures to Phoenix in two weeks.
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