Quality-Price-Ratio in Web Design (Pricing Design Work)

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I’m about to make a bold statement. The quality of a design and the monetary cost of producing or procuring that design have absolutely no relationship whatsoever. It’s a bitter pill to swallow, I know. Many of you are crying foul at this very moment, but hear me out. I’ll explain my radical position – and hopefully give you a few pointers about how to more effectively price and position your design business in this brave new, and uncorrelated, world.

wine
original image by Kris

Quality-Price-Ratio (or QPR as it’s commonly referred to) is a concept that is used extensively in the wine trade. In it’s essence it’s nothing more than a measure of perceived value, of the enjoyment you receive weighed against the price you have to pay. Do you feel that the benefit your gained was worth the price you paid? If you don’t, then the product or service has a low QPR. On the other hand, if you feel like you got away with highway robbery then the product or service has a very high QPR. I’ll spare you the metaphysical comparisons between wine and design beyond this one important point: There is no correlation between price and quality when discussing wine or design.

The Assumptions

Good design is subjective

While most good design shares many of the same basic characteristics, beyond a certain point the perceived value of all design is subjective. What appeals to me may not appeal to you; in fact, you could go so far as to say that you hate it. But, if you were being honest (and the work in question was in fact well done) you would have to admit that it was, at the very least, well put together.

Good design is cheap

Don’t misunderstand me. I’m not saying that good design should be cheap or that it always is cheap. I’m just saying that, these days, good design can be found very inexpensively. Think 99designs, Graphic Leftovers, and even some of the more reputable stock agencies. These services are extraordinarily popular because they bring good design to people on a budget. These services can also be extraordinarily difficult to compete against.

Good design has no correlation with price

From the client’s point of view, the QPR of design falls into four, and only four, categories.

Listed from lowest QPR to highest:

  1. Bad design that’s expensive. As a client, you do not want to be here – it’s a world of pain.
  2. Bad design that’s cheap. This type of design, I think we’ll all agree, has a fairly low QPR because, well, it still sucks even though you paid very little for it.
  3. Good design that’s expensive. This is a tough one. You’ve gotten a great product, but you’ve paid a hefty price. You normally just tell yourself that you did the right thing because everyone knows, “you get what you pay for”.
  4. Good design that’s cheap. This category has the highest QPR because you are getting a great product for a small price! Who doesn’t want to be here?

Your clients are clearly looking for that magic fourth category, while you’re trying to get them closer to the third. This is what makes selling design so difficult – you’re interests and the clients interests are clearly at odds.

Good design is about attitude

A little attitude and a little cockiness never hurt anyone. I would argue that those two qualities have actually helped more businesses than they’ve harmed. Why? Because being confident in your product or service is infectious. If you believe strongly in the value and the worth of what you’re selling, your clients are going see that – and respond in kind.

Good design is about branding

Brand is all about good will. Having high brand equity is nothing more than having a stockpile of good emotions and good response reactions from consumers. What does this have to do with good design? It doesn’t, other than the fact that consumer will give the benefit of the doubt to a design that has a strong brand behind it. They may not know what good design is, but if they respect your name – chances are they will respect your design.

Pricing Strategies

Let’s face it, deciding how to price your creative services is hard. You are, in essence, trying to attach a discrete number to your creative acumen; which makes it seem very much like you are bragging if you charge a lot or like you have no backbone if you charge too little. But it is imperative that you get beyond these feelings. Design, and good design especially, is a very scarce resource and, as such, should be priced accordingly. But how to go about arriving at a number?

A note about premium services

I once heard about a wedding photographer (who charged average prices) that wanted to work less. So, she figured that if she just began raising her prices there would simply be less interest from clients. First she bumped up to $3,000 a weekend, then $4,000, then $5,000. To her astonishment, she actually began receiving more requests from clients. The clients figured that if she was charging such a high sum, she must be really good. Truth being told, she hadn’t gotten any better, she’d always been a good photographer – but the higher price led her potential clients to believe this and, in the end, they were never disappointed. Finally this photographer raised her prices to $20,000 per weekend, essentially pricing herself above what almost anyone could afford. Her potential clients then began offering to fly her to remote locations around the world just for the chance to have her shoot their exotic weddings.

I think you get my point. The old economic adage that higher price correlates to lower demand doesn’t always hold true, and this is especially true of luxury goods. Design is a premium service. A luxury good. It is certainly not necessary to run a business (just take a look at all the used car dealers of the world for confirmation), but results in a definite advantage to the businesses who value good design. Don’t be surprised to find that design and the pricing of design follows a slightly paradoxical pricing relationship.

This little story also illustrates how important market positioning is to luxury goods. You’d be a fool to try and compete on price with sites like 99designs, so don’t try. Compete on completeness, your creative vision and your customer service.

With our new assumptions and the idea that design is a luxury good, let’s take a look at a few tips to help you formulate a sensible price for your design services.

Don’t charge per hour

Design, or any other creative endeavor, should never be charged hourly. I know, it’s an industry standard method, but I whole-heartedly disagree with it – and here’s why.

clock
original image by Scarleth White

Charging hourly works fantastically for things like stamping exhaust pipes or writing legal briefs – any type of job that is characterized by taking inputs and transforming those inputs using a specific process, it’s easy to see the direct correlation between hours and number of exhaust pipes or legal briefs.

On the other hand; with creative pursuits, and design in particular, there is often no time correlation what-so-ever. Sometimes you get that spark and a project takes 2 hours, sometimes you have to batter yourself for days before you feel that you have something remotely resembling a decent design. Should the client in the first instance have to pay nearly nothing for their design while the client in the second pays through the teeth?

Hourly rates are unfair to both the designer and the client. Well then, I can hear you asking, if not hourly, how are you supposed to figure out how to charge?

The cost of doing business

money
original image by bradipo

The first step in coming to a fair and reasonable valuation of your services is to take a look at your cost of doing business. Cost of business is simply everything that it takes for you to operate. The cost of your computer, the cost of all the software that you use, if you rent office space, the cost of your office space. Think of every single thing that you use on a daily basis to get your work done and write them all down. This is your cost of doing business (I find it easiest if it’s written in monthly terms), and you should revisit and revise this number at least once a year. To estimate a per project break even figure you can divide your monthly cost of doing business by your average number of projects completed in a month and you will have an average baseline project cost.

Your cost of doing business serves as a baseline to your pricing equation. This, by the way, doesn’t mean that the average baseline project cost is the lowest price you can ever charge for a project, but, it should, instead, serve as a guide post to help you maintain profitability.

The creativity coefficient

Let’s not mince words, creativity is hard work. It’s not rote production, transforming inputs using a standard process. Design, as with all creative pursuits, is all about creating something from nothing; and because of this, creative work demands it’s own pricing methods.

Price = Creativity Coefficient x Cost of doing business

The creativity coefficient is nothing more than a multiplier that you apply to your base cost of doing business. This coefficient (or multiplier) gives the designer a measure of control to help match the prices they charge with the difficulty and involvement of the projects they work on. The creativity coefficient should be based upon three things:

  1. Difficulty: If the project is difficult or very involved – charge more. This should be clear at this point. If you’re producing one tri-fold brochure your multiplier may be as low as 1.20, on the other hand if you are completely rebranding and redesigning a medium to large company’s image your creativity coefficient may go as high as 10 or 15.
  2. Brand strength: Simply put, if you have a strong brand behind you – charge more. At first glance this may seem unfair but, in reality, it is the simplest and most effective way to separate potential clients into the two groups that matter. The ones that just want to work with you because of your name – but are going to be a major headache (especially over price), and the ones that recognize the value that your brand brings and are willing to pay for that value.
  3. Individuality: If the client is coming to you because you specialize in a certain type of design or in a specific medium and there is no one else out there that can competently perform the work – charge more. Niche work is important and there is value in being different, especially in today’s hyper-homogenized world, clients that come looking for something different will be expecting to pay premium prices for something that they cannot get anywhere else.

The creativity coefficient gives designers a simple and effective way to try and wrangle concrete numbers around the value of creativity. And because you are starting with a baseline amount that reflects your actual cost of doing business you are ensuring that your business will stay profitable.

The Take-away

Finding a balance in the way that you price your designs isn’t just about economics and finding the highest number that you can get away with. These guidelines are just that, guidelines. Hopefully they have given you a new, and inspiring, light in which to view your services and the value of those services – but in the end, it comes down to feeling that you are providing a valuable service to your clients and that you are being fairly paid for those services.

Further Resources

  • Burns Auto Parts
    Leslie Burns-Dell’Acqua is a consultant for professional photographers, but much of her work, and her two podcasts on pricing especially, can be generalized to all types of creative work.
  • 12 Realities of Pricing Design Services
    Good list of points to remember.
  • Harvard Business Review on Pricing
    Just in case you really want to throw down some money to read one of the most respected business schools in the world talk about pricing.

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Jeff Gardner is a business nerd. He loves spreadsheets, graphs and helping companies figure out how to perform better. He also enjoys writing, photography and being outside. You can check him out at his blog.

  1. 1

    Very insightful article. Thank you for sharing!

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  2. 2

    Useful information… thank you thank you thank you.. you guys rock AND ROLL

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  3. 3

    I think i must agree, I’ll share this on twitter!

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  4. 4

    Thanks, very useful!

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  5. 5

    Hmmmm…. a good read and full of great information, v.nice and thank you for sharing this. :o)

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  6. 6

    Good article! When I price design work I find myself thinking about the possibility of that wonderful “spark” of creativity also. I usually give an hourly rate with a set minimum, this also depends on the complexity of the project based of previous talks with the client. Though setting a fixed rate period works out well also, if you get the spark and finish in a few hours you’ve just made an awesome profit.

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  7. 7

    Excellent article! I always have trouble when it comes to pricing my work. I love the comparison between wine and design, I completely agree to that. I look forward to more articles from Jeff Gardner!

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  8. 8

    Correct me if I’m wrong, but doesn’t 99designs.com revolve around getting designers to do spec work for free, on the off chance that they might win and actually get paid for their work??
    http://www.aiga.org/content.cfm/position-spec-work

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  9. 10

    Grace @ Sandier Pastures

    July 14, 2009 6:07 am

    Very timely since I have been looking for web designers to create a new blog theme for me. Sadly I have very little budget and still looking for that “Good design that’s cheap” ones…

    Great article!

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  10. 11

    I charge hourly when I freelance. Just over half of what we charge here at the studio. After sitting down and talking to my clients I, draw up a proposal based on the number of hours I think it’ll take for me to complete a job. If they want something creative, I allocate more hours to the design time, if they want something less creative, or don’t want to spend a lot of money, I’ll allocate less hours to design. Research should also be counted for in any pricing structure, as should client meetings etc.

    Charging by the hour helps clients to visualise where their money is going. Design is a process and as such, parts of it can’t be quantified. It’s important to have a pricing structure in place so that your clients can relate, they need to see where their money’s going. That’s why I won’t be moving away from an hourly structure anytime soon.

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  11. 12

    I find as a creative contractor (writer/creative director) and purchaser of design (animation/graphics) for my clients, the biggest factor they fail to factor in is TIME. The old adage “good, quick, cheap–pick two” generally applies.

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  12. 13

    Onur Oztaskiran

    July 14, 2009 6:20 am

    Pretty good article. Except for the pricing part. As long as we enforce designers to generate pricing as competent as they can, the rates will keep dropping down, and in a couple of years, we will find ourselves doing stuff for $1.

    I never work cheap and never regret because I don’t. I stay hungry but never undervalue my work. So my best suggestion on that is, whatever you think your work is worth, add a few more values to it and send to the clients, because eventually they will try dropping it a little down and at the end you’ll get paid exactly the amount you wanted.

    Golden tip =)

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  13. 14

    Great article. I work as a developer, but handle a lot of the project management and am often tasked with the grim job of “hiring a designer”. In my experience, finding a skilled designer with an interest in your brand is a hard task, and we pay well for our designers too. Far too often we get hyped up by a designer, only to find them slacking and pushing pixels, 1px at a time and charging hourly for it, or over-charging on super simple tasks (Ever seen 3 hours to add 1 solid line and 2 lines of text?). Good designers are definitely a rarity, but sadly, bad designers who think they are good designers are far too common.

    I’m not a designer, “and I don’t play one on TV either”, but I’ve spent -many- years building myself in the industry and I’ve filled the designer boots more than a few times – It’s a difficult job, but far too often it really isn’t -that- difficult.

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  14. 15

    Man, wish i had that article about 5 years ago. Very nice.

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  15. 16

    I generally agree with you. Thank you for sharing this!

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  16. 17

    You’re so right. If I start a website where I do the design and the code work I always charge per project. If I have to do the updates for the website I charge per hour and send the customers one bill per month/year.

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  17. 18

    I think this article misses a pretty critical factor in the QPR equation. When I read the word “Design” here, I don’t know what I’m supposed to think of. Is it pure graphics – color, form, typography, layout, composition? Or is it concept, visual communication and creativity – or is it usability, function and usefulness? Or possibly all of the above? In my experience failure to produce quality comes from ill refined requirements. Designers with strong grasp for design objectives and goals will typically succeed if their skill level and creativity are matched by their talent for visual communication. Good article, but I need more for this to really be useful.

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  18. 19

    I always price by the exposure the finished design will have, and thereby in conjunction, the benefit the finished design will provide to the client. So, if I design an outdoor banner advertisement to go on a small neighborhood street, it will cost MUCH less to design than the same banner displayed at a busy metropolitan intersection. The exposure of the design at the intersection is greater, providing a greater benefit to the displayer, and thus is worth more to the client. This method is per the Graphic Artists Guild Pricing and Ethics Guide.

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  19. 20

    Very useful thanks!

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  20. 21

    yea.. Wish I would have read this years ago…

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  21. 22

    @Joseph With all due respect, that’s a method I really don’t agree with. All clients should be charged the same. Why does the final application of a design affect you at all? Charging based on the benefit that you think your design will give to a client is purely subjective, do you wait 6 months before you invoice them or something?

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  22. 23

    Awesome article! Written absolutely well. Good job!

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  23. 24

    An excellent primer.

    We just re-branded and re-positioned our ad agency to focus more on value-based compensation models. The billable hour is a thing of the past, and totally useless to those of us in creative industries. There is simply no way to adequately bill for the time it takes to come up with a brilliant idea. If the creative spark for, say, the Apple logo took an hour or even a week to come up with, is what it is worth even remotely comparable to that time?

    As Amy says:

    The old adage “good, quick, cheap–pick two” generally applies.

    That has always been our mantra, and we are not afraid to let potential clients know that “cheap” is off the table because we are not willing to sacrifice “good” (and they are usually never willing to sacrifice “quick”). Not every dollar is a good dollar, and not every potential client is a good fit for us. It’s especially hard to turn away business with the economy the way it is, but sometimes you just have to.

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  24. 25

    nice article. Thank you Smashing.

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  25. 26

    @Pete

    All clients should be charged the same.

    I totally disagree.

    What the client is trying to accomplish has a lot to do with how the project should be priced. If they are unveiling a product in an already crowded market, the effort required to create something that will be effective is much more taxing than helping a client who is already at the top of a narrow market keep their footing.

    As the creative energy required for coming closer to the client’s definition of “success” goes up, so must the price.

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  26. 27

    best post i have read on SM. Very good job!

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  27. 28

    Thanks for all the kind words everyone!

    @Jon Fukuda – I agree with your for sure! Ill defined requirements are one of the biggest killers in terms of both quality and frustration over pricing! If you have a very clear idea of what you’re trying to accomplish then the whole issue of pricing is mitigated significantly.

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  28. 29

    @John S
    Thats where an hourly rate comes in handy. If a job is going to take longer, it’ll cost more. You’re still charging a base hourly rate. Some clients demand less time, some demand more, the ones that demand more, pay more.

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  29. 30

    Kevin Monk (Mango Swiss Ltd)

    July 14, 2009 7:02 am

    I entirely disagree that you “don’t charger per hour”. We charge on a daily rate basis and this keeps some financial constraints on designers and stops the budget for a project getting inflated. What’s more – I’ve found that the quality of our design work increases when it’s time limited. We all need some degree of self policing; designers included.

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  30. 31

    I completely agree with Jon. By definition “design” IS NOT subjective. The visual aesthetic can be “liked” or “disliked” since lets face it, not every one has the same taste in color, imagery and so on. However, true design be it interactive, architecture, furniture, product etc is based on the simple premise of solving a problem. I’m not saying that the solution shouldn’t be beautiful, but judging a design solution simply on its aesthetic merits is circumventing the entire purpose of design. At its heart a design solution either solves a problem or it doesn’t, meaning there is absolutely nothing subjective or perceived.

    Let me propose an alternative. When purchasing design there should be a clear goal in mind. It may be the job of the designer/group to help define these goals, but the only way to determine the true ROI is to have something to measure. Left over logos or web templates may look very nice, but by definition these objects cannot solve the individual goals/needs specific to the purchasing party. Anyone who doesn’t understand this concept is unlikely to find any true lasting value to purchasing design.

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  31. 32

    Good design is cheap – I don’t agree with that.

    You may find good designs at a relative small price but experience and talent are achieved only with hard work – and hard work is not cheap. And I don’t want to start talking about services like 99designs.

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  32. 33

    This is is full of flawed assessments of general economics. Actually, it’s hardly addressing economics at all. You’ve completely misunderstood the nature of the business and failed entirely to acknowledge the relationship between clients and designers and the value of it.

    If helping companies perform better is your job and all that’s preached to them is cost-cutting manoeuvrings, you’re under-serving them.

    But, maybe you’re on to something. If it’s all about perceived value, then this article, full of bad advice might be just as valuable as good advice – for you, at least. You’ll irritate professionals who’ll read it, they’ll share the link with their colleagues, hits will increase, and you’ll get paid.

    Rather clever.

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  33. 34

    Well done and straight to the point. I appreciate posts with straight-forward and valuable insight based on experience and practice. cheers!

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  34. 35

    @Pete

    Thats where an hourly rate comes in handy. If a job is going to take longer, it’ll cost more.

    Hourly rate is bunk, as is the “time” it takes to do the work. I can turn out a good design a lot faster than a freelancer or a junior designer, and I would have to charge far more per hour than people are willing to spend for that privilege. It’s a deeply flawed model.

    I believe that the job should be priced based on the result it is expected to produce. If you were going to have open heart surgery, would you care about how much “time” it took the surgeon to get the job done, or would you care about how successful the surgery was?

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  35. 36

    thanks for the great article! i found the pricing strategies portion to be particularly interesting.

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  36. 37

    I disagree with the reasoning on charging by the project. In this business you have to be appealing, you have to compete and you have to work smart. That means being forthcoming about design and anticipating things like when a stroke of imagination will take 10 hours or 3 hours to become real imagery. What revisions will mean, how much trust you get from the client that your design is effective and their changes will cost them.
    I find that many projects you are going to be able to get your designs done just by working through them. The spark of creativity will always be apart of aspects of design, but in design these days, communication is key. And so is using proven tools and techniques, using what’s already out there, working like an assembly line sometimes. Using checklists. Pete the commenter is right on here. Having a minimum is good, knowing what you want to be worth and treating it like a business where sometimes you attract clients on price, perception or not.

    And you’ll get more clients later on because of your efficiency. Let your later clients benefit from your efficiency, even if the last client paid more. Why not reuse something and be transparent. What sounds like being fair actually isn’t. If you “buy in bulk” then your customers should see the discount too. You will be able to price people and feel good that you are faster and less expensive. If you are a company with overhead, surely it gets more complicated and you’ll start to have absolute project prices. At that point you also risk getting undercut by a few of us quality designers.

    I wouldnt’ compare wine with design. It SOUNDS cool to do, but on second thought it’s really just BS.

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  37. 38

    Your article is confusing and somewhat concerning. Putting in references to SPEC WORK websites and saying “good design is cheap” degrades your article severely. You shouldn’t have put in a reference to Spec Work. This is a very touchy issue with those who wish to get paid accordingly and wish to rid our industry of these sites that demean our craft. I think you need to do some more homework on the graphic design industry before writing articles like this. And judging from your Bio, you have very little knowledge on Graphic Design Professionals and the Spec Work issue. Maybe you should stick with Photography references until then.

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  38. 39

    I charge using a mix of hourly and fixed bid pricing. For the more well-defined design jobs for which I have enough experience to know how long it will take, I charge fixed bid based on my time estimate plus perceived value. For poorly-defined jobs or consulting work (such as helping a client define what they want!), I charge by the hour. I track how much time I spend on each type of design/development activity, so I will hopefully be better able to estimate fixed bid jobs over time.

    Well-known software engineering author Steve McConnell does a two-phased approach using the “cone of uncertainty.” He charges one price to get from unknown requirements to a pretty good idea of what to build. Then another bid for the rest of the project once he gets to the point of fairly well understood requirements. See Construx Software.

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  39. 40

    @Dennis M. – Believe me, I’m not in favor of spec work. And it looks as though a few people may have misunderstood those assumptions: I included those because they are commonly held beliefs in the minds of many in the general public. I’m not condoning those view or arguing for them, just pointing out that they exist, and recognizing that they are what makes pricing design inherently very difficult.

    @John S. – I like the metaphor of the surgeon! You don’t care how long it takes, only that the job was done properly. That said, I fully understand and (almost) agree with many of the comments backing using hourly rates, especially those of you that said you charge for the project in a lump sum and then charge hourly for work above and beyond the project (extra edits, collateral materials, etc.).

    Hourly rates bother me because, in the end, I think it cheapens the value of the work in the mind of the client. Too many designers charge too little for a service that is highly skilled! Unfortunately, charging hourly, can also introduce questions like “Is my designer actually working the hours that he is billing me for?” in the mind of the client.

    As a business owner myself, I always appreciate it when a professional (in any field) can know enough about their chosen profession that they can give me a rough total cost from the outset. It gives me confidence because it shows that they know what they are doing and they know how long it will take and what their costs will be in completing the work. And for them, while they take on a little more risk pricing by project, they are left with the upper hand in defining boundaries and terms (which is fine with me as the client, so long as those boundaries are clear).

    As I said at the end of the article though, these are only guidelines and, in the end, you have to make your own decisions about how to bill your clients – and for that, I’m glad that so many readers here have such strong opinions in both directions!

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  40. 41

    Good article! But I’m still not sure how the creative coefficient works exactly..

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  41. 42

    There’s some bad grammar in this article, but apart from that its good :)

    When will people learn that you/your/you’re are 3 different words??

    Im guessing these just dont go through an editorial. But as I say, great article and thanks :)

    My only feedback would be that sometimes overcharging really works. I know of a few companies that intentionally increase their costs against competitors to give the illusion of quality.

    Although a lot of people want a good product at a cheap price, those that actually know quality also know that it needs to be paid for. I think it more depends on your clients than your pricing sheet tbh. If you’re targeting low-end clients then your prices will need to be low-end, irrelivant of the quality of your work.

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  42. 43

    Hourly rate protects the designer from getting taken advantage of though. What if the client cant make up his/her mind and keeps changing and updating non-stop? Than now what your charging all of a sudden isnt worth it.

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  43. 44

    @Meh – Did I miss a few! Dang. I do try hard to catch those grammar errors (and yes, I do know the difference between you/your/you’re). ;-) Thanks for keeping me honest.

    @Steve – That is what the boundaries are for. Limit those edits! Your lawyer doesn’t allow you to just keep changing the contract he drew up for you does he?

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  44. 45

    A+ Article! Would read again.

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  45. 46

    @smick Your views on efficiency and buying in bulk will keep your “business” poor forever. Why do you think Microsoft and Apple charge the same price for the software they CREATE (think, creativity here) whether you are the first person to buy or the 1,000th person to buy? If my client wants a custom shopping cart designed and it costs that client $2,000 and I have another client that happens to want the same thing, shouldn’t it cost the same? Do you expect to pay less for an item depending on how many people came before you to purchase it?

    The author did an excellent job in this article and from my experience as a designer, he is dead on. When I started pricing websites I create at $2,000 instead of $400, my business took off.

    Did my designs get any better? Not necessarily. But you will charge what you feel you are worth. I am guessing Bill Gates and Steve Jobs don’t get paid by the hour, but the people who scrub their toilets do. Which would you rather be?

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  46. 47

    @scott

    It depends on the text and the line; I could quite easily imagine how that could take 3 hours, depending on the psychology that needs to sit behind it and the potentially persuasive purpose of the element.

    Of course you might be being very literal, where no actual thought need go into it; however In many cases those outside of the design world (especially developers ;) ) don’t understand the first thing about the importance of the thought behind the design … even though thats what design IS.

    But as I say, it depends on what exactly has been done (in your case he might of just been a bit of a joker :p). This is EXACTLY the point of not charging per-hour; in that time doesnt relate well to design; in this example, that artist might have tried hundreds of combinations of lines and text to reach what he produced; however the perception is that it took him 3 hours to do a line and some text :)

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  47. 48

    What if the client cant make up his/her mind and keeps changing and updating non-stop?

    @steve, I’ve had that situation occur, and that is when a well scoped contract is invaluable. I had one client come to me with tons of changes after they’d signed off, and additional work outside the scope of the project. Because I was very specific in the scope section of the contract, I could point to that and tell them that we would have to contract separately for the additional work.

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  48. 49

    Great article =) I have been struggling with the idea of accurate hourly estimates and trying to budget projects as the Project Manger at a web design firm. When you try to justify your rates based on sheer hours, competitors can always beat you on hourly rates.

    We target an implicit value in our service that we hope others perceive instead of attempting to negotiate/justify our costs based on the number of hours a project will take. This looses some of the lower-end projects, but when it comes down to it those are the clients that usually under-appreciate what we do for them. When you attach an hourly price tag to your service, you are no different than an exterminator, handy man, etc. Be prepared to negotiate.

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  49. 50

    Great article. Thank you so much for spelling this out.

    The only point I will disagree with is that “[c]harging hourly works fantastically for things like … writing legal briefs.” I’m a lawyer, and I can tell you that this exact same debate is raging right now among law firms and clients.

    Progressive lawyers, in fact, are moving fast and furious away from billing by the hour because their clients are demanding it, and because they see their work to be based on the same type of creative sparks you talk about (see: <a href=”http://www.clientrevolution.com/2009/01/billable-showers.html” this article about “Billable Showers” for example.)

    Again, thanks for the article. I wish more of us (lawyers) were like more of you guys (creatives).

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    @Tim – Wow, that is great news indeed! I actually worked with a lawyer recently who only charges by project and it was really nice. I could call him with questions and not feel like I was getting billed for every single second!

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    Anyone who has a problem with the “design is cheap part” – bloody hell, open your fricken eyes and read it properly!

    When I read this article it gets me in a frame of mind to sell my work, perhaps thats what this article is excellent for – giving us the boost to value our work accordingly without feeling guilty perhaps?

    I agree that charging hourly (although it works for some) is probably not the best way I would take ‘MY’ business. And you can definitely let your clients know how much work you are pouring into the project without this in place….lets not be ignorant people!

    @nateB – basically your an idiot, go away!

    @Jeff Gardner – excellent article. I think you are pretty much bang on there. You have raised my motivation and I enjoyed every minute of reading through your article. Keep up the excellent work, I hope to read more!

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    Great article! I totally agree with you about not pricing at an hourly rate. I think that pricing with a flat fee makes more sense for large projects especially. You never really know how much time a project will take until you start working on it anyways, and most clients are going to want you to give them a set price before you start working.

    I wish that smashing would do a poll of designers and see how much everyone charges per page/ or by the hour. I’m really curious to find out how my prices stack up.

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  53. 54

    Smashing article.

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  54. 55

    A lot of designers underestimate the value of their work and sell too cheap, not realizing they cause a race to the bottom which affects the entire industry. Various template sites exists because designers are willing to contribute work and while many (not all) template designs are worthless or not entirely what a company is looking for, the fact that you can buy a template for $49 or so, says a lot. It gives customers the impression that design is cheap. Doing spec work is even worse! Designers should really learn to become better businessmen/women.

    About the cost of doing business, this depends also on the region where you live. A disadvantage for designers living in expensive area’s since competition is no longer local.

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    right on the money!!! pun intended :)

    an excellent submission

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    This is easy. Most people judge a book by its cover (the way it looks). Also people are attracted to good looking things.

    The design is just as important as the content if you ask me (you need both not one or the other).

    For example I used to use the standard Joomla template for my blog (http://www.NickYeoman.com). Once i switched to a new template, that is all it took to gain 100+ readers a day. The design was cheap, I bet I would retain more readers if I had a professional designer go through it.

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    This is my biggest struggle as a freelance designer. Get deposits. I am now owed invoices from 3 large and reputable companies because they have just decided not to pay. They blame the economy.

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    With respect to you, this article is rubbish and incorrect.. what happens when you told your client they were entitled to three revisions of your initial design concept, and they demand ten? Including some kind of hourly rate for these scenarios is essential in order to survive. Being a freelancer I only scrape a living thanks to this kind of thinking. You do get what you pay for, and it’s important to differentiate between good work, and bad work. You don’t get excellent work for pittance in any industry, and web design should not be the exception because it prevents people from being able to make a living from it and it lowers the standard of work for everyone.

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    You’re right about some things, but it’s foolish to say good design is cheap.
    The work on 99designs and sites like Crowdspring is just average (and most of the entries are way below average) and may absolutely not be classified as great works.
    The clients are most of the time not aware of what design is about and they dont know what they really need. It’s more a game of luck then a game of the best may win. Good design is not cheap, you need to invest in design to make your company/product or whatever work/sell!! Why do you think the largest companies of the world invest so much in marketing/design? If they put their project on 99designs or crowdspring, they would get all kinds of bad works and it’s just a waste of time.. Finally, the work on sites like that is most of time just temporary stuff. It doesnt really got vision or something like that..

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    but when it comes down to it those are the clients that usually under-appreciate what we do for them

    In 13 years of marketing and advertising, I have observed that the clients that haggle on price and are only motivated by cost are NEVER satisfied. They make the most changes, have the biggest demands and are the most difficult to work with.

    That alone is the reason why we choose not to negotiate on pricing or offer “discounts”, because it always sets the tone for disaster. If someone thinks they can get the same service elsewhere for cheaper, they are more than welcome to do so.

    We do not fear the free market, and as a result, a lot of people we turn away come back to us after they contracted somebody else on a budget who failed to deliver. It’s a hard lesson to learn, but a lot of people have to learn that way.

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    @John S. Great opinion on pricing!

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    Nicole Hernandez

    July 14, 2009 10:12 am

    For a long time I wanted to keep prices down on my web development studio to make sure everyone would have the ability to get a website if they wanted one. It took me quite a few years to realize that no matter how great the quality of work they were getting – most non-tech people still associate cheap price with cheap work. I went back to basics on marketing fundamentals, and realized how huge a mistake this was. I realized I needed to charge based on overall experience, not on each individual project. A client isn’t paying for a website – they’re paying for the years of experience we have and how well we take care of them.

    We did a complete rebranding, and every time we have raised our prices – we have gotten MORE work. I also stopped doing the work myself and collected a group of amazing designers and coders to work for me. I also had to finally realize my personal value as the owner (and this was actually rather difficult for me because I tend toward the modest). Now, if a client specifically wants me, as the owner, to do a site for them – the price immediately doubles or more. My marketing manager had to really push me on this one, but I think that he finally got through to me when he asked me this: “If someone walked into a Vidal Sassoon salon – do you think they expect Vidal himself to do their hair?” Granted, he sold the salon chain, but that’s not the point — it got through to me that most people don’t expect the owner to do the work personally, and they would expect to pay a lot more if they did.

    In a nutshell — charge for your overall experience, not just for the project. Anyone can make a decent enough website, your experience is what people come to you for.

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    Very good article! I allways thought like that! And the best part of the article is on your comment:


    “As a business owner myself, I always appreciate it when a professional (in any field) can know enough about their chosen profession that they can give me a rough total cost from the outset. It gives me confidence because it shows that they know what they are doing and they know how long it will take and what their costs will be in completing the work. And for them, while they take on a little more risk pricing by project, they are left with the upper hand in defining boundaries and terms (which is fine with me as the client, so long as those boundaries are clear).”

    This is exactly what I always say: the totalcost is “x”. And I will take care of this job for you.

    Thanks for sharing it!

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    @Nicole Very nice insight on your experience as a owner, I find myself in your shoes too.

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    A former employer charged by how deep the client’s pocketbook was. I still can’t believe the piece of junk one client received for $10K.

    I price jobs based on the complexity and how long comparable projects have taken me in the past. And from now on leave the hours out of the estimate.

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    Not to be a prick, but if you want free artwork from graphic leftovers…

    1.) Find the image you want
    2.) Right click on the image, and select “view image”
    3.) Remove the “_watermark” from the .png file

    ie: http://graphicleftovers.com/images/member/2623/gears_watermark.png turns into
    http://graphicleftovers.com/images/member/2623/gears.png

    They should really do better at securing their user’s art.

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    Hmm. With the three “Coefficients:” Difficulty, Brand Strength and Individuality, I realise I haven’t been valuing the third. If a project is in an area that I specialize in, I usually charge less because my experience will make it less difficult. But I shouldn’t ignore that the quality of my work will also improve.

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  68. 69

    Sounds like you have been lucky as well as skilled in the clients you service.
    My experience is that only a minute portion of clients will even work with a firm that cannot quantify costs on the basis the client usually does, and that is, whether we like it or not, hourly charges.

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    Dogan Arslanoglu

    July 14, 2009 11:26 am

    I sort of agree, but I don’t agree with good design having to be cheap. I think it dilutes and saturates the market. Now in any normal case, this would make the better designers stand out even better. But one thing we have to realize is that client is trusting our judgment and these cheap design producing companies do not have that idea in mind. They just go with what look sufficient, leaving a lot of potential behind and sometimes even creating design crimes without the client ever noticing it because he has trusted that judgment to the designer.

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    @Nicole – Thanks for sharing your experience!

    @Ryan – For sure, don’t forget the individuality thing – that’s a big one! I’m glad you saw my point on that one.

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    That’s a rather interesting article. I myself think that the most of this article is right, a higher price gives a good feeling about quality. I started my own company 1,5 years ago and a little i am a little scared about telling my customers a higher price.

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    A carte blanche refusal to bill hourly seems counterintuitive. The premise that “with design in particular, there is often no time correlation what-so-ever” is almost laughable to those of us producing regularly. Whether working in-house or freelance, part of being effective in this industry is figuring out how to tap into what spurs creativity, not by forcing it, but by knowing your process, knowing your abilities (strengths/weaknesses), & knowing how to deliver according to your workflow. If you’re burning up “days before you feel that you have something remotely resembling a decent design,” then perhaps you’re not cut out for that project (or even line of work) … or you at least need to reassess your abilities before assuming you should get paid for that vocation.

    Or perhaps your ideas are so revolutionary and innovative that clients will happily pay big bucks just for you to stew on a concept for days, weeks, maybe months. It happens, though I wouldn’t bank on it.

    Don’t misunderstand: I don’t expect sausage factory design — cranking out mediocrity, but you have to be able to provide your product in a timely fashion at a reasonable price (and all of that should be considered in establishing your rates, contracts, employment, etc.). Billing by the hour can be highly effective. What’s more, every business, every project, and every process is different. Hourly rates work for some scenarios, flat-rates work for others.

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    This is the kind of information that is so valuable, it is hardly ever given away for free. I commend this author for offering his insight in such a digestible format. I feel very enlightened. A big thank you is in order.

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    Wow, this article has a pretty high bullshit-factor.

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  75. 76

    PLEASE make an iPhone app… thanks!

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    I’m a freelance web programmer (ColdFusion) and find myself in the occasional need to partner with a designer–but where do you find a good one who charges a reasonable price? When you post on Craigslist or listservs most people who respond are not what I would consider “real” designers. Their websites are so generic and frankly, a lot of the time, really, really bad that even I could put a better site together than that. Who has the right to call themselves a designer? There’s no standard or certification for that term. If a wannabe quotes a rate of $X an hour and a “real” designer 3 times that. I have no concept of figuring out the better deal. The real designer obviously would give better quality, but with out knowing–even tentatively–how many hours it would take, then I have to err on the side of caution because I don’t want any surprises for me, the budget, or the client. So, why not offer packages–X number of designs, X number of revisions–if you want more it’ll be at an hourly rate of $X. I’d love to upgrade the services I can offer to my clients, but without knowing a (somewhat) fixed dollar amount, I don’t feel comfortable doing so because a miscalculation on my part would be disastrous to my bottom line–I charge fixed project rates too (and hourly rates for maintenance and piecemeal work)–if there’s a cost overrun it comes out of my profit.

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    What’s more, every business, every project, and every process is different. Hourly rates work for some scenarios, flat-rates work for others.

    That’s right. While our agency tends to eschew billing by the hour, there are definitely circumstances which warrant it and certain clients that prefer it.

    The bottom line is that we like to diversify our portfolio of clientele as far as how we are compensated, and the healthier the mix the healthier the portfolio.

    But overall, having the billable hour dominate your portfolio is a mistake, because more often than not it will cost you money. The billable hour only accounts for the TIME spent creating the work and assigns no value to the results whatsoever.

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    @ Bob You were able to download 500×500 pixel low quality thumbnails of artwork by removing the _watermark.png but that is fixed now. Thanks for pointing that out.

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    Good design may be subjective, but when considering design for the web, good coding skills, or the way that design is made into a template, can make a huge difference, and is worth more. 2 “designers” could make a website that looks exactly the same, and one could get search engine ranking and have a successful site, while the other site never gets visited.

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  80. 81

    I loved this article but I don’t think that any of us inspire to do “good” design, we inspire to do GREAT design. Buying stock logos/designs it pretty hit and miss and you’d have to be extremely lucky to hit the nail on the head. You also have to consider your time as a designer to troll through gigs of stock images praying you find a suitable design when that time might be better spent designing, keeping your skills sharp and having the chance to design that one layout/logo that is brilliant.

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    John S.
    In 13 years of marketing and advertising, I have observed that the clients that haggle on price and are only motivated by cost are NEVER satisfied. They make the most changes, have the biggest demands and are the most difficult to work with.

    Great thought, succinctly put. I just found myself in the saying-goodbye-politely to a client today for the same reason.

    Thank you for the article, it sure is provocative! I can only say that finding myself as a designer previously primarily for luxury brands, I feel the double hit in this economy.

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  82. 83

    This is a great resource I am always in an internal struggle whenever I am quoting a new project, and this is a resource that I will refer back to before my next quote.

    Creativity is such a hard thing to try and put a number to, especially before you begin the work. you want to be fair to win the work but don’t want to agree to design something that will take far longer than you have quoted for…

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  83. 84

    i agree with this article…
    thanks for the insights :)

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    Kathleen Hanover

    July 14, 2009 5:46 pm

    Wow, FABULOUS article on a thorny subject!

    I’m a creative director, marketing strategist and copywriter, but I deal with so many of the same issues as freelance designers. I feel your pain.

    @John S., I could not agree more. I started raising my prices in earnest over the past year, specifically to weed out the kind of vampirish, soul-sucking clients you describe. The last one who talked me into a discount actually stiffed me for half the discounted fee…and she’s a lawyer who bills $275 an hour!

    Never again.

    Now my business terms are 100% of project fee escrowed up front, 50% released prior to start of work, and 50% released in 14 days (I do a lot of work through Elance specifically because of this escrow feature.)

    And I no longer charge by the hour for project work. It’s all flat fee. I agree completely with @JeffGardner on this one. I’ve come up with a campaign concept that generated $250,000 in sales in the blink of an eye…charging by the hour, I’d bill the client 9¢ for that work. On what planet does that make sense? And on what planet would a client not feel that they got a good deal by paying me $25,000 for a concept that made them 10 times as much money?

    The only time I ever bill by the hour is when I’m doing consulting work, and you really are paying strictly for my time and attention on the phone.

    It is absolutely true that the more you cost, the more you’re valued. Sorry, but it’s human nature. I have clients who have paid me the equivalent of $900 an hour for a copywriting gig, and I never hear a peep out of them. They LOVE my first drafts, are a joy to work with, and do not nit-pick. They’re awesome. The cheap ones are like bloodsucking little no-see-ums, constantly on the phone, wanting instant revisions, and still managing to feel slighted even when you kill yourself to please them!

    Re quality of design work. We are not artists, writing or designing for our own amusement. We’re hired (I assume) to achieve a stated business goal. And that end isn’t “come up with a logo,” it is “create a way to instantly visually communicate our brand attributes to help us compete against established companies in our vertical so the company gains market share and we earn stock options and raises.” Creating a new logo is the means, not the end.

    Most hack designers (and hack copywriters) do not have the training or expertise in direct marketing, public relations, marketing communications, etc. that you’d need to create a strategy to achieve the end. They are about the means. They can execute a skill set (that is, they know how to use Photoshop or Microsoft Word) but they’re doing it outside the context of an overall marketing or communications strategy. That’s why they’re a dime a dozen.

    So…deliver work product that no one else can, and you can charge what no one else does. End of sermon. :)

    Kathleen Hanover
    http://www.twitter.com/KathleenHanover

    @John S. said,

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    I have such a hard time with this. What if you have never had a client before? Where do you even start? I always feel like I am going to get ripped off or ask for something outrageous, and nobody will ever give even give me a general middle ground.

    Say I design a tri-fold brochure and do an average job and they are happy. I wouldn’t even know whether to charge $100 or $2000. And for the life of me no designer will even give me a clue. I understand everything artistic is subjective, but……

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  86. 87

    Design is subjective? I don’t think so. Art is subjective. Good design is measured by the ability for the designed thing to do its job, in promotional/advertising design its the ability to convey a message, a website could be how well it works etc etc.

    The primary goal of business is: Make a profit. That means that if you offer good design for cheap, unless you have a huge team and a monopoly, you’re probably not going to be very profitable. So in undercutting every other professional designer out there in an attempt to try and make a buck, you’ve just shot yourself in the foot.

    Of course the underlying problem is that most lay people think they know better about what looks good than an experienced designer, but what’s worse is that this disease means that inexperienced designers ALSO think they know what looks better than an experienced designer and hence open up shitty little design shops or freelance and that ruins us all.

    Regulation is what is needed. Perhaps making all designers do a four year apprenticeship after uni before they are allowed to do any freelance work, or run a business is what is needed.

    The article was ok, at the end of the day two things rule what you can (or should) charge: your brand equity and the law of supply and demand.

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  87. 88

    Design is art. A really bad design can accidentally work out really well for a business, and well crafted one by an experienced design artist could have no effect (or even a negative effect) on a business’ sales, so it is all subjective. Like you said the primary goal is to make a profit, the same commercial that outrages a conservative makes the next person want to buy the product that much more.

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  88. 89

    Thanks for this…

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    Jeff

    This great article goes a long, long way towards a better way of delivering value and pricing accordingly. However, I would pull you up on one point.

    The “cost of doing business” should never be a factor in setting your prices. It is only of use in determining your “walk away point”; the point where you know you cannot agree a fee that is both a bargain investment for high value for the client and highly profitable for you.

    You need to help the client articulate to themselves, and thus to you, the value of having their (design) problem fixed, and then set your price accordingly.

    Pete

    You just don’t get it, do you! The client just couldn’t care less whether it takes you an hour, a day, a week or a month to fix their problem. They just want their problem fixed. Given that, they’d rather you only took an hour – not because they think they’d have to pay less (wrong!) but because they’d start reaping the benefits a lot quicker.

    So stop charging for your time and start charging for the value of your result.

    And secondly it’s legal, ethical and morally right to charge different customers different prices for different value! Period!

    Alan

    “What if you have never had a client before? Where do you even start?” Whether it’s your first or your millionth client, you start by talking with them, helping them reach their own perception of the value of having their problem fixed; and then charge accordingly – subject of course to the test of whether it is highly profitable or not for you to do that project at that price.

    Andrew

    Design, like everything else is of course subjective. Value only exists in the eye/mind of the client, and clients will only ever pay for value!

    And no. Supply and demand doesn’t apply in this or any similar cases. No supplier of “professional services” ever tried to increase demand ad infinitum. Supply and demand only applies to commodity markets.

    Hope this helps.

    David

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    Lets try your suggestions plus coding skill variable. thx

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    @Big Buddy,
    You seem to like to demean people. You must be more like Steve Jobs then.
    Just curious. Is that your website bigbuddymedia flagging as malware in my browser?

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  92. 93

    Great article!

    If people agree or not up to them self to decide, but I am pretty sure this article made a lot of people rethink the way to do your price.

    @Nicole is right, your experience and good reputation is a very important factor.

    Best

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  94. 95

    Great article! And, I am not shy to say, one that reflects my current work ethos and beliefs superbly. I think I do actually fall into that “magic 4th category” that clients are looking for .. but yes, I am obviously striving for the third!

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    I always start by asking the client what their budget is for set project. People will probably say this is the shortest way to being under-paid but hear me out. Clients always have a number in their head. They rarely come in without knowing how much they are willing to spend. Once they tell me what their budget is I can tell them my hourly rate hence how much time I can spent within the budget. This means they now have a clear overview of what their money will actually buy them. Also it gives me a idea of what can be achieved within the budget and therefore makes it easier to advise them. Next is the negotiation which, because both parties now know the value of the work and the money, runs a lot smoother. I see this approach as the best of both worlds. I have a project price and they have an hourly rate.

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    @yetanother

    I freakin lol’d. Now google warns me its mall-ware. What a douche.

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    Great comments all around – I really like the discussion that’s going on!

    @David W – If you’re using cost of doing business as a determining factor in your “walk away point”, you are effectively using it as part of your pricing calculation. Maybe not directly, but indirectly. I think we were both trying to get across the same point. You can’t, under any circumstances, charge below what it costs you to create. I will have to call you out on the supply demand thing though ;-) Supply and demand exists and applies in any and all free-ish markets. If designers become the next celebrity chefs I guarantee that you will see prices sky-rocket. Why? Because there will all the sudden be high demand for a service that is in (relatively) shorter supply. The law of supply and demand is exactly that, it’s a law. It always applies, unless the market is very tightly regulated (ie, government price fixing).

    Please keep the discussion going everyone. It’s great to see so many ideas and hear about everyone’s experiences.

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  98. 99

    I dont agree with most of your assumptions:

    1.- Good design is not subjective. Just the aesthetical part is subjetive.
    2.- Good products need research, skills and hard work, if you are a pro this mean MONEY.
    3.- Sites like 99designs.com degrades our profession, I never would say website contests offer good design, 99% of the designs are useless (I bet its because they pick that name) and very random.
    4.- Stocks are stocks, I can buy good stock design for cheap, my competitors too. You are missing the exclusivity.

    The rest of the post is not that bad but stop saying things like this or you will loose your credibility.

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    @David W – What Jeff Gardner said! I was going to say the exact same thing in response, but I only just got home from work. Every free business on the planet is bound by it and its the second thing they teach after “make a profit”.

    @Alan & @David W – design is NOT subjective and design is NOT art. Young graphic designers, tend to think that design and art are the same, they are not. Art is an expression of human emotion which the artist expresses in any number of forms. Design is something that is created to fulfill a purpose, more often than not it is paid for and more often than that it is paid for by someone who thinks they know better than the designer; and a combination of poor business acumen, inexperience and/or stubbornness on the client’s part means that the job gets done poorly, or does not fulfill the purpose; or bad design. You don’t go to a doctor to ask what’s wrong with you, only to TELL THEM what you have and then haggle on the price of the consultation?! They’re professionals, they’d laugh you out of the office. So why is it different with designers? Because everyone thinks they’re a creative, and gets art confused with design, and no body has the balls to set them straight. All the best design comes from places where the professional is allowed to do their job, give their own interpretation to solving the problem.

    I’ve experienced this in my years as a designer and I’ve found, as I’ve grown older, that the more accurately you define your costs and the more confidently you present your quote/estimate to a client the more likely they are going to pay it. If a client turns around and says “That’s too much, I won’t pay it”, then you tell them you can reduce the cost at the expense of one of their requests. If they respond and say they’ll go to someone else, then you remind them of your Unique Selling Proposition (USP), just as any other business operating in the world. What’d your USP? Its your experience, your style, who you know, what you studied etc. For a web job, a well defined proposal with a quote that breaks down the costs of the job, presented in a meeting so the client can discuss is probably the best method. If they are happy with the quote, they can sign it then and there. If not, then you have them face to face to discuss.

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  100. 101

    from the get-go, there is an assumption of what qualifies good design. I think that is the biggest weakness of this article. I couldn’t get past that, i felt like I was on a completely different plane. If we’re talking strictly about the visual aspect, forgetting markup architecture or user-testing or research or several key factors to a well designed website, then OK. Sure, lets update a blog page. But that is just a fraction of what good design is. I quote St. Steve on good design: “Design is not just what it looks like and feels like. Design is how it works”. With this in mind, I’m sorry, but it is expensive and almost entirely associated with time/money.

    Sorry

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  101. 102

    I’ve felt the same way about charging per hour for some time now, but it seems its rare to run into anybody with that same opinion.

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  102. 103

    @Andrew
    Thank you. You’ve summed up what I wanted to say far more eloquently.

    Design is not art. Art exists to justify its self, design always exists to serve a specific application.

    At Door4, when we work with our clients, we sit down and find out what they want to get from their project, what their budget is and what can be accomplished within the confines of that budget. We HELP them, because it puts us on a professional level. It ensures their repeated business. Any professional should know what he/she can do in a set number of hours. A builder would not sit down with one of his clients, factor in the cost of his own time and materials, then add an amount onto the top of his quote based on how much money he thinks his client will make out of the building. Need I remind everybody of the 80/20 rule? If 80% of your business is supposed to come from regular clients, and you’re ripping them off, how do you expect to grow your own business.

    I’m sensing two very different approaches to design on here (possibly cultural, if any of the companies in Manchester charged for their time the way a few of these posters are suggesting, they’d be out of business in months). One group seem to want to provide a service to their client, then get on with the next job. The other group can’t seem to stand the fact that they’re ‘just’ designers and not artists.

    Let go of your egos and start treating your clients the way they deserve to be treated: Inflated pricing schemes, pricing based on the depth of clients pockets and pricing based on the projected success or exposure of a creative (I’m standing by my guns on this) wouldn’t wash in any other industry and it’s what’s setting ours back.

    Apologies for the rant, but this is something I feel very strongly about. We’re here to serve our clients, not the other way around.

    @Jeff – You’ve opened up an interesting can of worms here.

    2
  103. 104

    For the most part, I am in total agreement with your statements. I often find hourly billing to be the bane of my creative endeavors. But there are some things that I feel you didn’t answer in your post. How does one determine a base line for different types of work, be it brand design, consulting, web design, web development etc..?

    Your formula doesn’t account for contingency. Contingency is what allows wiggle room in the price that you quote your client and can get you out of a sticky situation.
    I personally like to give the customer a range of time, so that they know what the maximum and minimum is for a project and then if you come in under that is savings to them, but then they aren’t surprised if you hit the top.

    We all know the adage that your time is money, and that is naturally why hours are billed, even though this may not be the best way of tracking the energy or thought that was used.

    I agree that price does not always equal quality, many agencies take advantage of their name to rob the client blind. But at the same time, someone who has had a lot of experience can manage and deliver projects without as much trouble as someone newer to the industry. And of course they charge more based on their experience.

    So while I do agree with the don’t bill hourly concept, fixed bidding is not always a good answer either as you will be roped into something that you may not like.

    0
  104. 105

    @Pete

    pricing based on the projected success or exposure of a creative (I’m standing by my guns on this) wouldn’t wash in any other industry

    We’re not like many other industries. We don’t manufacture a standard product that can be mass produced, and those that try only dilute our industry and cheapen it. Every project is different and every execution needs to tailored specifically to meet the objectives for which that project was intended to do. In most industries, the objective is never in question – either the product does what it was intended to do or it doesn’t. Beyond that, there are only slightly varying degrees to which consumers will measure the differences that determine how well that objective was met.

    The major issue we face is that more often than not, we have no real mechanism for measuring how we meet our objectives. And even worse, many of us don’t really care. If your company charges $10k for a website that was supposed to increase sales by $50k and fails deliver, and my company charges $15k for the same website, BUT if it fails to deliver will only cost $10k but will cost $25k if it performs, which do you think a savvy business would prefer to go with? The expenditure offers no link to the ROI, or the one that offers to tie the risk to the reward?

    Performance based compensation is not about ego, it’s about results. And in order to get those results the clients we work with have to serve OUR interests as much as we serve THEIRS. Risk, reward and respect are all two-way streets and for far too long those of in the creative fields have ceded our equal footing with our clients out of fear of the consequences. I appreciate that your opinion differs from my own, by I too feel very strongly about my position.

    0
  105. 106

    The Cranky Knight

    July 15, 2009 8:39 am

    Even though I may be relegated to being the sunk at the picnic, I can not agree at all with the application of QPR to site development. Granted, you do not have the luxury of ignoring the client, BUT the client is not the consumer. The site visitor is the consumer. That being the case, you have to contour the site to the expectations and behavioural characteristics of the true consumer. On top of that, the site has to be developed in such a way that it is marketable in itself in order to attract visitors.

    To accomplish those goals, a lot of effort has to be expended on stuff the owner never sees and/or doesn’t consciously recognize (such as information architecture, typography and vertical rhythm, usability, and all the rest).

    In short, in my view, there is a direct correlation between price and skill which translates into a direct correlation between quality and price.

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  106. 107

    ariel sommmeria

    July 15, 2009 8:46 am

    I don’t know soo much about design, but I do about wine. And good wine is expensive and often the quality is correlated to the price. ;-)

    1
  107. 108

    Yes, let’s remove the voodoo from the design process. But to oversimplify the definition and value of things like brand equity just show you’re oblivious to the strategic component of design. “Pretty pictures” are one thing, but when a design accomplishes a goal, that’s what the client is paying for. It takes time and expertise to develop a strategy (design or otherwise) and if it’s good and on track (hopefully #3 under your pricing scenarios), it’s worth every penny.

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  108. 109

    I can’t believe you even hinted at the idea of 99designs.com being ‘good design?’

    Good design is not cheap, it is not easy, and it is definitely not subjective.

    Not Cheap/Not easy – great designers take time to talk to clients, understand their problems, and solve them.

    Not Subjective – I think you’re confused on the difference between design and decoration. Designing is the act of solving visual problems, decoration (what you’re talking about in this article) is throwing a bunch of junk on a page to make it look cool.

    This is the only article I’ve ever read on Smashing that I really really hated. But I guess it’s ok because everything else I’ve ever read here has been amazing.

    1
  109. 110

    Good points however I disagree in some respects. I charge a top dollar hourly rate for my experience & expertise in the industry but also some similar ongoing projects I can usually just give an approximate overall value too and notify the client.

    My clients don’t complain as they know at the end of the day `You get what you pay for’ and the best bit is they keep coming back and not only that recommend me to their friends. But keep in mind these clients are long term and we’ve built up a very good relationship over the past decade or so. That is the critical part as your article seems more directed at getting new work.

    However as I stated you make some very good points that will work in some cases but isn’t the be all end all.

    0
  110. 111

    Awesome article!

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  111. 112

    Price = Creativity Coefficient x Cost of doing business
    punch line

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  112. 113

    99 design is the cheapest way to get best design … all you have to do is pay about 100 USD to 99 design (you can put any prize you want like 700 USD coz after all, you gonna win the prize) to do the contest and you can get all the best design idea (since idea can not be own only the implementation) … after you find the one that you like …. you login as designer and make any design that you as contest holder choose to win that is youself so the money or the prize will be back to your pocket.

    by doing it you can sell your design idea expensive while keeping the cost low .. about 100 USD plus some banking fee. I do that often and my clients always satisfied with my work.

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  113. 114

    First off, this article has MANY assumptions not based on real day-to-day business practice. I can say with absolute certainty that much of the so-called advice in this article is very wrong and it carries with it much misinformation.

    1. Deciding how to price your creative services is not hard. First off, you have to be honest and decide if your skill level is average, very good, or top-end. Compare the design work you do to top-end designers such as 2advanced, 24-7media, and Agencynet and be honest about where you fall. Believe me, these top-end designers are charging a min. $100-$200 or more per hour for their design work!

    2. The don’t charge per hour comment is completely wrong! Up front, people want to know two things: How much? and How long? And you have to be able to tell them how much and how long. If you are an average designer you should be charging $50-$70 per hour. If you are a very good designer you should be charging $75-$95 per hour. If you are a top-end designer then you should be charging $100 or more per hour. You price out every aspect of the design and programming process. For example, we designate 12 to 16 hours for three home page comp designs depending upon complexity. You must price out the site page by page depending upon complexity. You do not say, well I charge per hour on a day-to-day basis and I don’t know what cost we will end up with. NO! Your client has a budget and wants to know up front an accurate cost range, and you have to be able to give them that range. And the only way is to pre-price out the job up front using an hourly charge based on complexity.

    3. Hourly rates are not unfair to the client, because they are to be used to create a cost proposal, not to be used as a day-to-day, hour-by-hour rate based on your “creative spark”. You give the client a cost proposal up front and work hard to make good on the cost proposal you made…move it!

    4. The comment on the cost of doing business is all wrong! Your operational costs are your own problem, not your client’s. If you rent out a plush $10,000 dollar a month office space because you think you need it and it looks cool for clients, well that’s your problem and perhaps a poor business decision on YOUR part.

    5. You should also have pricing levels based on technical skill and code complexity, for example:
    XHTML and graphic design = $75 per hour
    Programming and Forms = $100 per hour
    Database programming = $125 per hour

    Sadly, this article was NOT written from a real business perspective and fails to properly inform.

    5
  114. 116

    @99design – sorry champ, but you’re an idiot. essentially your asking designers to do spec work with no guarantee of payment and that hurts the industry. no payment = no work, that’s all that matters. i bet you get paid a heap load from the dumb arses using your site and i bet you don’t trickle any of that money down to the 40,000 designers that are on there. you should be shot for this blasphemy, its digusting and i spit on you.

    sorry for the rant, but seriously, this ain’t on. check out no-spec dot com and give your support.

    5
  115. 117

    The pricing model that I was taught and has served me well as both a designer and developer is to look at the salary you want to make per year then divide by 2000 hours which is roughly the amount you would work on a 52 week yearly schedule @ 8 hours per day.

    That gives you a baseline hourly rate. Then pad that by some percentage as you see fit to account for downtime as a freelancer, the difficulty of the project, and the client bringing you the work, cost of doing business, etc. Then take that rate and evaluate it against your market to see how you fare. A great resource for this is http://www.designsalaries.org/calculator.asp

    You should never, never, ever, work spec projects. You’re just selling yourself short. it doesn’t matter if the design takes you five minutes or five days, you’re being paid to come up with a solution and should be paid accordingly for the knowledge and research that you put into it. The idea that a client shouldn’t pay for the time it takes to evaluate different design options is ridiculous, if that’s the attitude of the client then the client can take their project somewhere else.

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  116. 118

    An interesting, provocative article, and great for stimulating discussion and debate — I agree with many of the ideas.

    But in the context of pricing for the real world business of design, I think it’s simplistic and a little naive.

    Whatever terminology you want to use (“value-based compensation” or “creativity coefficient (X) cost of doing business”) essentially what you’re talking about is either:
    a) quoting a fixed-price before the work is done
    b) quoting an hourly price before the work is done
    c) some combination of the two.

    Either way, the client needs agree on the value of what they’re asking the designer to do before they’ll even give the designer the job.

    And that’s the difficulty with fixed-pricing (aka “value-based compensation”): clients are notoriously bad at understanding and agreeing with the ultimate value of design until the work is done and has proven itself successful (and sometimes not even then!).

    So, while the work on the Apple logo may have ultimately proven to be vastly under-valued at the time it was done, on what planet would the client have agreed to pay its ultimate value BEFORE the work was done? And for that matter, how would the designer even concretely define that value in a way the client would understand and agree to?

    The only thing that both a designer and client can concretely know before the work is done is the value of the time it will take to do the work.

    If you’re a casual designer or dabbler then this is probably an academic discussion without much consequence to you. But if you earn your living primarily by doing design, then how you set your pricing is serious business.

    And in serious business, time is money.

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  117. 119

    First off, I admit that I did not read every single comment entry. So whatever I say may have been covered above.

    I think the discussion (and the creativity coefficient) fail to adequately consider two things: opportunity costs and correspondence time. Opportunity costs deal with the issue of the best way one’s resources can be allocated. If you are spending time on one client there is a chance you are denying other clients because you have allocated your resources (namely time) towards the current client. This client may be less-than-desireable and the project may be mentally taxing, but you have committed to it, so you have to resolve it. The financial implications of this business decision are not clear-cut, but need to be considered.

    Also, the no one appears to be mentioning all the time that goes into correspondence with the client that is not normally billed out. As we all know, this can eat up a large chunk of non-billable time. And correspondence time varies a lot from project to project. Somehow, this time must be recouped.

    Both of these factors make it even more difficult to give a clear-cut calculation to billing.

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  118. 120

    The note about premium services is incredible. Not to say that I’m going to triple my prices just yet, but it gives you a good insight into how the industry works. Those few paragraphs completely changed how I look at the economy, as my introduction to economics class never got into luxury goods.
    Thanks for the article!

    0
  119. 121

    Paying through the teeth? Sounds painful.

    0
  120. 122

    Andrei Gonzales

    July 16, 2009 3:00 pm

    Nothing out of 99 designs or other crowd sourcing companies is good. “Pretty” != good design. Please avoid such misinformation. It only devalues the work required.

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    • 123

      I would just like to mention how harmful crowdsourcing sites are to the design industry – many people don’t agree- they make people work for free – what was free labour called again? S- something – anyways If you are opposed to these kind of sites – designers take action – Please report the guilty platforms exploiting designers to the Better Business Bureau.

      0
  121. 124

    GRAMMAR NAZI!!!!

    ” >>you’re<< interests and the clients interests are clearly at odds.”

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  122. 125

    Wow. I am shocked that you mentioned 99 designs.

    As someone who runs a blog that represents our field, you sure do have no idea what you’re talking about.

    Welp, now I know what blog I won’t look at anymore, I can find “100 greatest whatevers” elsewhere.

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  123. 126

    99 is a swetshop of desperate volunteers … it whores design to a level it should never be taken.

    Great article and response. Lets face it there is only one thing you can base your cost on that is quality of the work you produce and track record. Experience = charge more …. simple

    0
  124. 127

    Great article… good comparison…

    but, authors website says “don’t use IE, use FF”, but in Firefox itself, I’m getting horizontal scroll bar…lol

    and it works fine in IE…lol

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  125. 128

    I found this article very interesting and I believe that I agree with most of it, but after reading everyone’s points, I feel I still have much experience to gain. I have worked as a freelancer and I had many problems, as a student in North Florida, no one wants to pay for design.

    But like many people have brought up brand equity, ROI, and marketing, I also am learning (currently earning a degree in advertising) that these things can really help you understand how to deal with pricing. It is hard to think of your work as design, not art, I agree but your unique selling point is still creativity and can add to your quality of your work.

    Since I have been trying to find something other than sales to measure return, I find this an interesting measurement. I would love to find a case study where this is put to use and shows some kind of measurable objective in a real life situation.

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  126. 129

    I could see how its necessary to charge by the job but you also have to give the client an hourly rate to account for any revisions to their requests. I can’t tell you how many times I’ve designed something exactly to what the clients wants only to make 80% changes. A job that I forecasted to take 4 hours easily can turn into an 8 hour job. And the client always has revisions.

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  127. 130

    The “don’t charge by the hour” comment is pure ignorance coming from an amateur. The author even admits it goes against what everyone else is doing. “I know, it’s an industry standard method” – author. Yes it’s an industry standard, because it works. You can’t base your pricing model on IF you get or don’t get a creative spark. If you can’t crank out 4 or 5 logo designs in an 8 hour period then maybe you aren’t that good or fast of a designer. If you can’t crank out 2 or 3 home page comp designs in 16 hours then again maybe you really aren’t that good or fast of a designer. I can put all of this another way. If it takes you all day to create a single logo then you are too slow and not that good of a designer and you should seek a new career. If it takes you two days to create a single home page comp design, then again you are too slow and you need to seek a new career. Most all studios I know, including my own, charge by the hour based on the project complexity. It’s a common sense model and works well. If a client wants more designs or has a lot of revisions, then those requests are marked as outside of the original project scope and AGAIN you simply charge by the hour of how long it’s going to take to make the new updates; simple, easy, and effective. Clients constantly want to know how much and how long. You must be able to provide that information up front and the only way to provide that information is to estimate the hours it’s going to take and then multiply that hourly estimation by your rate of complexity. In your complexity model, XHTML and graphic design will always be at the lower end of your per hour charge while more difficult and complex services like database development or 3D animation will be at the higher end of your per hour charge. I could put it like this, database developers make more than graphic designers, because database design is much more complex and less people are skilled in it, therefore that service comes at a premium price.

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  128. 132

    I completely disagree with the author. Finding the right price-per-hour that fits you workflow is a must for every designer, expecialy if you are a freelance. You need to schedule every work you do, so after 2/3 years of work you have a complete report about your common timigs over projects, so you can accurately extimate your prices.

    0
  129. 133

    Great article! Excellent points, I don’t charge by the hour very often, but it still gives me a lot to think about!

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  130. 134

    I’ll try charging $10,000 per project and let you know how it goes.

    Maybe some fools will believe I am worth that much like this lucky photog.

    0
  131. 135

    Very interesting points – I’d love to have a chart of “creativity quotients”

    In the end, Creativity Quotients are almost like hours – but more subjective. That means we’re basing projects on perceived difficulty/creativity. For example, a trifold brochure for one person might be considered difficult – but because it’s harder for one person, I guess that means it costs more. It’s almost similiar to hourly. The better and faster you are at something, the cheaper it costs a customer. A slower designer who is just starting out would consider a simple brochure to be a 10, whereas we might consider it to be a 2. The person with the 10 ends up with a higher price point.

    We charge hourly, but this article makes it very compelling to change. But what about revisions, change orders, scope creep? Do you tell the customer some arbitrary numbers? Flat fees for each?

    0
  132. 136

    Great article and really good discussions within the comments. It’s very interesting to find out other creatives thoughts and experiences.

    0
  133. 137

    Great Post! Inspiring and Helpful. As creatives it is our duty to find a way to continue to progress in our endeavors and that means we have to properly price our services.

    0
  134. 138

    Excellent post, and well-aligned with my thinking. An issue I wished was addressed was how to educate / convince / persuade potential clients that good design is not a commodity and why your rates are what they are. It’s really hard for me to send a proposal to a prospect explaining that it’ll be $4,000 to design and build their web site when they have no knowledge of what it really takes, how much time is involved, or why the $350 web site the kid down the street will make is ultimately a bad decision.

    It’s cute to just “charge a lot”, scare away the tire-kickers, and get premium rates for your services. But in the current economy, I don’t want to say “no” to any potential work. So how do I target, find, pitch, and win those clients who “get” creative design and the cost / value ratio?

    0
    • 139

      I think if you’re working with people all other the world, it’s still easy to find premium gigs, despite the economy state

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  135. 140
  136. 141

    I enjoyed reading your blog and have subscribed to your rss, the points you make are all very insightful!

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  137. 142

    I charge by the hour and it has worked great for me. There is too much nonsense, “business talk” on these blogs, if you get paid by the hour at a regular job, then it makes sense to charge by the hour as a freelance, only a little more, because well you have to pay for the internet, computer, phone and office space.

    That’s about it. If you get the “Creative Spark” in the shower in 2 and a half seconds, who cares? is the time that you spend putting the idea to work that counts.

    Is about kickin’ ass more than business talk.

    Thanks!

    Camilo

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  138. 143

    Well structured and written. Thank you.
    :)

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  139. 144

    Great article. It helped me understand the important things in my work.

    I also agree with Camilo, its creative work but also implementation work which is, very often, more important.

    Thanks.

    Mario

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  140. 145

    Thanks for the excellent article! I was feeling stuck trying to decide what to charge for my services—there is NO concrete information about this topic on the Internet—and this helped me immensely. Now I can cross pricing off my to-do list and start worrying about building the actual business!

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  141. 146

    I was going to write something clever, but this board is crowded.

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  142. 147

    Many Thanks. I run a Web Design Firm and I was looking for a basis of working out how should I Estimate a work.
    Our Designs are good, liked by our Clients, but we are not highly paid for that.

    0
  143. 148

    I have read the article, along with most of the replies. I think the biggest misconception (like some of you have mentioned) is the fact that most people see the design as just a pretty image, which is completely unnacaptable in this day and age.

    Fir example: you can have the nicest looking website with the lowest conversion rate on one hand, and on the other, a design that simply performs/converts (which might not even appear “easy on the eye” to some). Difference? Even if the client paid more money for the 1st one, the 2nd client has gained a greater return on investment.

    Another huge problem that I see is that graphic designers believe in providing several mockups up-front, and what’s even more frightening, ACTUALLY listen to their clients! Really? Why? You are the professionals! You, out of all, should know what’s best for your client; you should educate them instead of bending over and doing what THEY tell you to do! This hurts the industry so much in my opinion.

    I will use the good old heart surgeon explanation: you don’t tell your heart surgeon how to do his work, nor does he provide you with 3 ways he can operate on you. There is only one way to fix you, and that’s by doing it “right”.

    1
  144. 149

    C&C InfoTech with expertise in PSD to XHTML, PSD to wordpress, PSD to Joomla, PSD to Drupal, e-commerce website development, search engine optimization, Online product entry.

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  145. 150

    Thank you for making available this information & advice. It is invaluable to web designers who are starting up a freelance business.

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  146. 151

    Good article, but question… What amount do you charge up front? A certain percentage? I currently have a client that’s looking for me to design and build them about 15 websites. I charged them hourly for their first website done (but I didn’t design it) and they paid me $650. I’ve been looking to raise my prices but never know the right time.

    1
  147. 152

    Excellent article. It help me understand the valuable things in my work.because we are a team of website design but our charges starts from only Rs. 1499/-. your article is really help full for me…thanks again… :)

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