How much should you charge your clients for identity design? It’s a question that every designer struggles with at some point. So if you don’t know what your skills are worth, rest assured you’re not alone. It wasn’t until I was in business for about five years before I felt comfortable that my pricing was doing me justice. There were—and still are—jobs I lost because I quoted too high. There were even a couple I almost lost because I quoted too low, giving my clients the impression that I mightn’t have been up to the task, so it’s a balancing act that you only truly learn through experience and through your knowledge of what you have to offer. That said, there’s advice I can share that’ll make things easier as you lay a benchmark for your own value.
Talk first, quote later
You can’t accurately price a design project without first understanding the needs of the client. Designers who advertise a list of predetermined prices for x amount of concepts with x rounds of revisions are, perhaps unwittingly, advertising themselves as a commodity and leading potential clients into “shopping” for price instead of value. But design isn’t a commodity with no regard to who produces it. Designers vary enormously in terms of experience, knowledge, skill, curiosity, and a host of other traits, and it’s these traits that play a role in the value of the outcome.
In addition, every client is different, so every design project will be, too. It makes no sense to pigeonhole your clients into a specific price bracket. What works for one won’t work for another, and your time—and profits—take a big hit when you limit yourself to a set range and attract clients on the basis of price alone.
The design pricing formula
Pricing design is far from an exact science, and even when you think you’ve covered every possible factor for determining your costs, another one will crop up and force you to recalculate. But it’s still important to consider what affects the amount you quote, and how you can ensure you actually make a profit.
Pricing generally varies depending on a number of factors:
• Your expertise
• Project specification
• Expected turnaround time
• Additional service and support
• Level of demand
• Current economy
Let’s take a closer look.
Only you can determine how much your skills are worth, and this value is the result of your experience in dealing with clients. I’ve often asked myself if I’m charging too much or too little. I think that’s common among designers. But the main goal is to make sure you’re adequately compensated for your level of experience and education; your reputation; the overhead you incur for office space, equipment, electricity and heating, health care, and living costs; and the expenses you will incur as a result of working through the design project with your client (travel costs, your time, and so on). Clearly these elements will differ from person to person.
Let’s say you’re working with two clients at the same time. One is a local shoe store owner who is just launching his first business, and the other is a 500-person-strong multinational company that has been in business for 50 years and needs a rebrand. You won’t need to research the shoe store’s company history. Nor will you need to prepare an identity style guide, since most likely just the owner will be dealing with the application of your design. And you won’t be traveling internationally for brand meetings. So the shoe store project will obviously cost you and your client less than the multinational project. As much as I’d love to give you specific figures, only you can determine how much less.
Expected turnaround time
If a client is under pressure to have a job completed within a tight time frame, you should consider applying a “rush job” markup to the project. Accepting the request means that you, too, will be under increased pressure to get the job done, and it might result in a rescheduling of your existing projects. The markup could be 20 percent or 50 percent, or a different amount, depending on the urgency of the deadline.
Additional service and support
When a client needs a new website to go along with her new logo, stationery, and vehicle graphics, consider it an opportunity, even if such a service falls outside your skill set. It’s situations like these that allow you to provide that extra level of service and support that is most useful to your client.
You can approach other designers—those who specialize in web design and development—to see if they might be able to provide their skills. Then negotiate a finder’s fee with the designer, whereby each project you send his way equates to a percentage of the total bill. Ten or 15 percent seems like a fair cut to me.
You might even want to start a partnership with these designers, creating a new business identity that shares project responsibility and potentially attracts larger, more lucrative clients.
Something to think about.
Level of demand
Let’s say you’re snowed under with work. Your calendar is filled for the next six months with a steady stream of clients, yet you still receive new inquiries and are reluctant to turn them away. This is your opportunity to significantly raise your rates. If the client says no, it’s not hurting your bottom line, but if the client says yes, you’re happy to put in some overtime because you’re getting paid more than usual and can reward yourself when the project is complete.
Put simply, if lots of clients are demanding your design services, it’s time to charge more, because it’s definitely a sign that you’re worth it.
Many company owners and CEOs aren’t keen on spending a lot for design during an economic downturn, so during these times you’ll probably find there are fewer potential clients getting in touch. Some designers will lower their rates as a result, but I recommend charging what you normally do, because there’ll still be those clients who wisely see the downturn as an ideal time to spend on branding. When competitors are cutting back, that’s a great opportunity to increase market share by attracting new customers.
If you find business hard to come by in tougher economic times, don’t take it as a prompt to lower your rates. Instead, use it as an opportunity to improve your own marketing methods. You could give your portfolio a more professional edge. Or draft a list of potential companies to target with a sales drive. That way, when the market swings, you’ll be in a much stronger position to take advantage.
Comparing the design profession to any other is by no means exact, but the “How much for a logo?” question is a little like asking a real estate agent, “How much for a house?”
By the hour or by the project?
A question I’m often asked is whether to charge clients by the hour or by the project. The following short story is the best answer I can find in favor of the latter.
Legend has it that Pablo Picasso was sketching in the park when a bold woman approached him.
“It’s you—Picasso, the great artist! Oh, you must sketch my portrait! I insist.”
So Picasso agreed to sketch her. After studying her for a moment, he used a single pencil stroke to create her portrait. He handed the women his work of art.
“It’s perfect!” she gushed. “You managed to capture my essence with one stroke, in one moment. Thank you! How much do I owe you?”
“Five thousand dollars,” the artist replied.
“But, what?” the woman sputtered. “How could you want so much money for this picture? It only took you a second to draw it!”
To which Picasso responded, “Madame, it took me my entire life.”
Think about it. You’ve spent $100,000 on a design education, spanning five years of your life, so that you’re able to accomplish in just a matter of minutes or hours what once took weeks or months. In the similar words of Pentagram partner Paula Scher, “It took me a few seconds to draw it, but it took me 34 years to learn how to draw it in a few seconds.”
If you try to quantify what you’re worth into an hourly figure, you’ll either send your potential client to another designer because he doesn’t believe you’re worth it, or you’ll unwittingly undervalue your talent in order to clinch a deal.
The choice is easy. Offer clients a set fee.
Handling print costs
An identity project is likely to contain a range of print design, such as business cards, letterhead paper, a promotional brochure, and so on, but it can be difficult to determine how and what to charge your client when you provide this service.
Designers and studios normally charge a markup on the total print costs when they handle this side of things. It’s their way of recouping the time and effort spent liaising with the print company. There’s no industry standard percentage, but a markup of between 15 and 25 percent is a good starting point.
Put simply, if a project needs you to supply your client with a small promotional brochure, and your commercial printer says it will cost you $10,000 for the print run, then you should consider charging your client between $11,500 and $12,500 (not including design costs—where you will be making the majority of your profits). And keep in mind that unless you have a long-established relationship with the printer, you’ll probably need to pay for printing in advance.
My preference is to advise clients to deal directly with a local printer. This helps clients in two ways: They save money that is otherwise spent on my markup, and they build a business relationship with someone local, which can save a significant amount of money on future print runs. And if your clients take the time to ask a printer how to make the most of the money they plan to spend on their printing project, they’re likely to be surprised at the advice and help the printer delivers. Printers want to be involved in the process, because it saves them and their customers a lot of headaches.
However, your clients won’t always want to deal directly with a printer, which raises the question, “How can you pay the printer in advance when you haven’t received any money from your client?” And that leads us nicely to the next piece of advice.
It’s essential that you receive a down payment prior to commencing work—especially when dealing with a client with whom you have no prior relationship. If you don’t get a down payment, it’s easy to be taken for a ride.
I made a mistake of falling into this trap in my early days of self-employment. I once worked with a client with the understanding that full payment would be made after I sent my initial design ideas. I dutifully supplied the designs, but almost immediately after, my client contact evaporated, and I was left with nothing.
I asked Jonathan Selikoff of New Jersey–based design studio Selikoff+Company how he normally charges his clients.
“It depends on the client and the relationship, but initially, all my projects are based on a flat fee, per project basis, with a defined scope,” said Jonathan.
“I usually ask for a third or 50 percent of the fee up front, depending on the size of the fee. Hourly rates never benefit anyone. The client doesn’t get a true idea of the value of the work and risks getting overcharged. I prefer to deliver a desired outcome, not work for x amount of hours and hope for the best. If it takes too long to achieve the goal, then I either underpriced the service, or I didn’t work efficiently enough, neither of which is something the client should suffer from.”
I, too, normally ask for a 50 percent deposit of the total fee prior to starting the project. Getting this payment up front helps in two ways: First, I know that my time is compensated for, and second, the client has that additional source of motivation to see the project through to completion.
The money exchange
After a while working with overseas clients, I began to wonder about fluctuations in exchange rates, and whether I should factor these into my initial quotes. It’s worth considering, because there might be a sudden dip in the exchange rate before you receive full payment, potentially leaving you out of pocket.
Today I do factor currency exchange into my design pricing, and, given that I’m based in the United Kingdom, I keep the British pound as my consistent monetary figure. In every quote, I show both the client’s local currency and the pound figure alongside it, stating that my pricing is based on the strength of the pound at the time of the initial quote. Including the client’s local currency saves her from having to perform the conversion herself. I determine exchange rates using the currency converter on xe.com, which provides real-time updates of rate changes.
But what happens when the rate dips? Say, for example, that I’m working with a client in Japan, and the British pound becomes weaker against the Japanese yen during the course of the project. It’s important to keep in mind that I’ve already agreed upon a set fee for the work. In these cases, I need to take whatever loss occurs on the chin. Not only do I risk disappointing the client, but I also wouldn’t consider lowering my fee if things swung the other way and the value of the yen dropped dramatically.
You could always factor fluctuations into your client agreement, but it’s something I don’t bother with. The important part is getting paid in the currency I use to pay my overhead, because then I know my expenditures are covered, regardless of the exchange rates.
Avoid spec work
Basically, spec work is any kind of design work that’s given to a prospective client before taking steps to secure both your work and a fair fee. Under these conditions, we’re often asked to submit work under the guise of a contest or as a “test” of our skill. And far too often, the clients use this freely gained work as they see fit without fear of legal repercussion.
I often hear from young designers who are tempted to take part in design contests on “crowdsourcing” websites so that they can earn some money. They ask if it’s a good way to break into the design profession and build their portfolios.
The reality is that only one party truly benefits from these contests. It’s not the designer, nor the client, but the website hosting them. Designers have just as much of a right to get paid as any other professional, so don’t believe the hype that these contest websites push. They make a profit by persuading you to give your work away for free. By doing so, you devalue the time and effort you’ve spent in getting where you are.
If it’s money you need, focus on your business rather than a daily lottery ticket.
If you want to build your portfolio, a much more effective way is to contact local nonprofit organizations and offer to work pro bono (in other words, donate your work for the public good). This gives a variety of benefits over the contest approach: You’ll deal firsthand with your client the whole way through the project, which is ideal for building confidence; you’ll gain local business contacts, which can help you to attract future clients; and you’ll be much more likely to actually see your designs in use, which is great for your portfolio.
Everyone makes mistakes
Making mistakes is an important part of the pricing process. Every designer makes them at one point or another, and you’ll never truly know if you’re pricing your services accordingly until you make a mistake. Here’s a case in point. A couple of years into my self-employment I was approached by a company that would have been my biggest client at that stage in my career.
After I learned about the company’s design needs, we came to an agreement on price. Midway through the project, my contact asked me to supply design work that was outside of the original agreement. So I sent a new quote. But I was let in on a secret: What I was charging was well below what the company typically paid for a similar service. In fact, it was so far below what was expected that my client almost hired another agency. I was quoting so little that I gave the impression I wasn’t up to the task.
This was a good lesson. I learned that clients expect to pay a premium for a premium quality service, and by charging a lower rate, you label your service as lower quality. So be very cautious about underselling yourself. And remember that once you set a price, it’s almost impossible to negotiate it upward.
As much as we loathe them at the time, mistakes can be incredibly helpful in the long term, but only if you learn from them.