I am especially pleased that Jessica Hische has made time in her schedule to join us at CFC this year (June 22-24, 2013 in SF) to expand her popular article, The Dark Art of Pricing, into a presentation to kick off Day 2.
Here’s a taste of what she’ll be talking about, with her infamous foul mouth, no doubt:
So this is a pretty bold statement and like any bold blanket statement it should be taken with a grain of salt. Hourly pricing can be incredibly advantageous in certain circumstances, like when you receive that first email from a potential client and, through their thousand word introductory essay lousy with emoticons and unnecessarily capitalized words, they paint a clear picture that they are completely batshit insane. You know that there will be many rounds of revision in your future and that over the course of working together you’ll be as much a therapist as a designer. Totaling those 500 hours at whatever your hourly rate is will equal a pretty good pay day.
It’s more than just crazy people that can make hourly pricing worthwhile though—pricing any long term design project hourly can be advantageous, as long as you communicate clearly along the way what kind of hours you’re devoting to the project. If the first time your client sees your total hours is on the job-concluding invoice, a world of hurt awaits. It will be like being audited except somehow more unpleasant. Be prepared to forward them every approving email, to itemize every minute spent on the website / book / whatever.
Pricing hourly seems much easier than flat rate pricing, but because you have to give clients a ballpark full-cost price upfront (the total hours you plan to work x hourly rate), you can end up in a very tough spot if you don’t have a firm grasp on how long it takes you to do things. You’re nearing the halfway point in the project and are already over the total hours you’re contractually committed to. What does this mean? It almost never means that you’re paid double your original fee. Even if you can eek out a little extra money from the client, by the end of the project your hourly rate will look more like the one you were earning at the Blue Comet Diner at age 16.
So once you have a grip on your work flow and become more and more efficient, hourly pricing makes perfect sense, right? You know how long it will take you to do something, you price for it, everyone is happy. Unfortunately this is a half truth. Sure you’re getting paid well enough and certainly making more hourly than you probably were at your old day job, but I’ll paint a picture as to why this is a flawed pricing model: Two designers are hired to produce posters for a music festival. Both have the same hourly rate of $100 per hour (a reasonable rate for someone that’s been in the biz for a few years and has a few accolades under their belt), but one designer works much faster than the other. Both are equally talented, but one is far more efficient. At the end of the job, the designers turn in their invoices—he worked on it for a total of 18 hours and she a total of 7 hours. He is paid a respectable fee of $1800 and she $700 for producing the same result. Your rational mind says “Well, he did work more hours than her…” but part of you knows that this isn’t completely fair, and that part is correct. This becomes epically clear when working for big name clients.
Here’s another scenario: You’re hired to do a monogram for a giant international company. They’ll want to use this monogram on everything from price tags to billboards to TV spots and they want to use it forever (in perpetuity until the sun explodes). They have a pretty clear idea of what they want and you know that it will take about 10 hours total with the initial exploration, back and forth revisions, and finalizing. Even if your hourly rate is $250 / hour (a pretty high rate), the total you’re earning for that logo is $2,500. If you think that is a good price for a professional designer to earn crafting what is essentially a logo for a huge company, you are mistaken.
So if you aren’t pricing hourly, how DO you price? Read the rest of Jessica’s article here (what comes before and after this excerpt).