When it comes to making decisions within your business, pricing yourself might be the most difficult. There’s so much confusion about what to charge, what’s too little, what’s too much, the list goes on and on. So let’s talk about it!
First off, let me warn you that this post probably won’t have a perfect answer for you. I would love to tell you the exact number that you should charge for your services, but there are too many factors that go into it and honestly, everyone is just different. So even though I can’t give you a set-in-stone answer, I’m going to share the lessons that I’ve personally learned, strategies that I’ve tried, AND strategies that I know other designers use. Hopefully, with all of that information, you can figure out what will fit your style the best.
Pricing Yourself Competitively Can be Dangerous
My first mistake as a freelancer was thinking that I needed to be cheaper than everyone else to attract clients. At the time, it seemed like a good idea because I was young and inexperienced. In my mind, nobody in their right mind would hire me unless I was dirt cheap. So I did some research, figured out what other designers similar to me were charging, and purposefully set my prices lower. There are lots of problems with this approach, but let me highlight the two main ones.
- I was intentionally devaluing my work, which is basically an insult to myself. I wasn’t basing my prices off of my actual talent, but solely based on what I thought would get me the most clients. And if I’m willing to devalue my own work like that, how can I expect clients to value it?
- Cheap work attracts cheap clients. Yes, my low prices got me my first few projects and some of them were good. BUT some of them weren’t ideal because the client had obviously chosen me for the price, not because they valued what I was offering. I found that some of them were more concerned about getting a brand that was quick and cheap and less concerned about the thought process and meaning behind it. They didn’t care about my strategies, they just wanted something pretty and they wanted it immediately. That’s not the type of client you want, but low prices tend to draw them to you.
It took me about 3 months to realize how bad of an idea this was. I actually had other designers (who I didn’t know) message me and say that I should double my prices, which was a much-needed wake up call. I know it’s tempting when you’re young to do the same and you may even have some people tell you that you should keep your prices that low. (I had a client who insisted that my prices were appropriate because I was so young, regardless of my talent.) But trust me – you can attract great clients without devaluing yourself. It takes some time, but it’s worth it in the long run and maybe if I had done that, my business would have grown faster.
Methods for Calculating Your Prices
There are so many ways to figure out your rates and I’m not going to say that one is better than the others. So let’s just go through them all and highlight the pros / cons of each.
This approach involves tracking your hours during the project and then charging the client for the total time spent after the project is over. The logic of it makes sense, BUT it isn’t always fair to us as designers. The great Paula Scher said it best: “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.” Just because something takes less time, that doesn’t mean it should cost the client less money.
Flat Rate (Based on Estimated Hours)
This approach is pretty simple – just give the client a single price for the project. You can calculate that rate however you want, but most people estimate how many hours they will spend on the project, apply their hourly rate to that and give the total as their flat rate. This was the first approach that I used – I estimated that branding projects would take me about 30 hours (because that’s what my professor told me to do). My hourly rate was $25, so 30 hours x $25 = around $750 for a full branding project. And since then, I’ve slowly raised my hourly rate. I think my first big jump was up to $50, then $75, and now it’s around $100. But again, this approach is still boiling the value of your work down to how many hours you spend. You might feel comfortable with that, but you also might find it’s not fair if you do things more quickly. Just something to think about.
Income / Needs-Based
This approach shifts your perspective a bit and forces you to think about how much money you need to live, rather than how much your work is worth. You sort of have to think backwards, so let me know walk you through each step:
- Make a list of all your monthly expenses, both business and personal. This total will give you the basic income that you need to bring in every month. If you’re wanting to save money (which you should), then you’ll want to add more to that number. This way you won’t just be making enough to get by, but actually profit from your business.
- List out what services / packages you offer and decide how much work you’re able to take on each month. This is a really important step because you want to make sure that you aren’t overbooking yourself. Be realistic, think about how long your projects take and estimate how many projects you can handle each month.
- Price your services so that your workload will meet the monthly income goal that you set. This step obviously looks different for everyone and you can approach it however you want (find an hourly rate that will make you meet the goal, just do flat rates, etc). But the important thing is that you’re meeting that monthly goal, or even better, going above it! If you want more details on how to calculate all of this, check out this infographic.
So if you have a financial goal that you’re wanting to meet, this is the simplest way to do it. BUT it can be hard to plan ahead sometimes. If you’re just starting out, you might not be getting work consistently yet, which makes meeting those monthly goals a little more uncertain. It’s also been a weird approach for me because with our lifestyle, we don’t actually need much money to live comfortably. So whenever I’ve tried this approach, my monthly income based on my actual needs has been really low. To make a “normal” amount, I need to add a lot of extra savings on top of that, which makes me feel guilty because I’m asking for money that I don’t actually need. That’s all a mindset problem which I talked about last week, but it makes this approach feel a little unnatural for me.
This is the approach that I’m currently experimenting with and it’s pretty interesting. Instead of basing your prices on the hours you spend, you based it on the value that you’re creating for your client’s business. It’s all about the end result and benefits that your client will have from working with you. This generally means that you come up with a custom quote for each potential client (although you can absolutely have a bare minimum price that you’ll never go below). To come up with a value-based price, you’ll need to ask yourself (and the client) these questions:
- How much money is the client already bringing in? Are they a big business bringing in $100k+ or are they a smaller business? How is their income going to effect their budget? (I’ve heard a few people say that businesses should invest around 10% of their income into branding services. I’m not sure where that started, but it’s something to think about and maybe relay to potential clients if they’re wondering what design should cost.)
- What are their business goals and how much of an impact will your services have on accomplishing them? You need to straight up ask the client about this in order to gauge what they’re expecting to get out of working with you. Say they’re launching a new product and you’re designing the packaging for it. They’re wanting to have a $100k launch, so it’s very important that the packaging looks high quality and draws in customers. All of this raises the value of your services because the work you do is going to play a huge role in whether they meet their goals or not. Or maybe they just got a deal to sell their product in a big store, that would just increase the value of your services even more! (Mistake example: I had a retainer client whose product had just started being sold at Anthropologie. She was really concerned about making the product look its best to feel like it belonged there and we worked really hard to do that, but I didn’t raise my rates at all and I 100% should have.)
Value-based pricing can be a little scary because it essentially encourages you to ask for more money and some clients might not understand your reasoning behind it. It also forces you to step into more of an expert role. In order to convince clients that the value is there, you have to really sell your skills and show that you can get them results in a way that other designers can’t. This also means that your process needs to be solid. But if you can do all of that, value-based pricing can give you more control over your income and confidence in what you do.
Words to Remember
Words to Remember
Words to Remember
“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.”
How I’ve Been Approaching Pricing
Like I said earlier, the flat rate approach has been my go-to for most of my career. It’s just been the easiest for me to calculate and seems like what most other designers do. But as I’ve started attracting clients with bigger budgets, I’ve been more and more interested in trying the value-based approach. The thing is that I’m attracting a variety of clients right now – some of them have $3,000 budgets, some have $10,000 budgets. It doesn’t feel right to have one set price for both of those groups, so instead I’m experimenting with having a custom price for everyone. I’m still figuring out what language to use and exactly how to determine that custom price, but I’ll keep you all updated on what I learn 😃
Signs That You Should Raise Your Prices
Since I started Wayfarer about 3 years ago, I’ve raised my prices at least 5 times and I’m about to raise them again. If you’re wondering if you should too, here are a few signs to look out for:
- You’ve just booked a bunch of new clients (3-4) within a short amount of time. If you’re getting a lot of bookings, that means you’re in high demand and can easily raise your rates. It’ll likely lighten your workload a little bit and you’ll get paid more, so it’s a win, win!
- You just changed up your process to make projects go more smoothly. A better process means a more valuable experience for your client. Or maybe you just finished a course and learned a new skill – add that into your offerings and raise your price!
- One of your past clients tells you that they would have paid more. This might be weird thing to talk about with past clients, but I’ve actually had clients insist on paying me more than they were supposed to after the project was over. I had one tell me to add however much extra I wanted to her final bill because she felt like I gave her so much more value than what I had charged. That was obviously really eye-opening to me, so it may be worth considering to have that conversation with your own clients. If you have a feedback questionnaire that you send to clients after the project is over, that might be a good opportunity to ask them what they thought of your pricing and if they would have paid more.
The Big Question – Should You Put Your Pricing on Your Website?
Look, everyone has their own opinion on this and I’ve went back and forth over the last 3 years. When I first started, I didn’t have my pricing listed on my website. It was fine for a while, but eventually I got tired of getting so many emails from people with $200 budgets. So I added prices to my website mainly to steer those people away from me. And honestly, I like being upfront about my pricing and help potential clients know what to expect before talking with me. Pricing can feel like of secretive in this industry sometimes and when I was first starting out, I really appreciated when other designers listed their prices because it helped me gauge what was possible. HOWEVER, I had an experience back in February that made me change my mind a little. My website was down for a month (or two, yikes) because I was updating, so I didn’t have any pricing on it, just a contact form. What do you know, I ended up booking my highest paying client during that time. Because I didn’t have a flat rate up on my site, I was able to be more flexible and charge $3,000 more than what I would have normally.
So like everything else, it all comes down to what feels right to you. If you want to avoid cheap people emailing you, maybe it’s best to have prices listed. BUT if you find yourself attracting people with big budgets, it might be worth it to leave them off and give custom quotes after you’ve talked with the client. I’m actually trying out something in between those right now – instead of listing one flat rate for my packages, I’m showing a pricing range (ex: my branding package is listed from $3,000-5,000). My hope is that this will be a happy medium and give me just enough flexibility to price things based on the client, but still turn those cheap people away. We’ll see how it works!
Words to Remember
Words to Remember
Words to Remember
“There’s no right answer when it comes to pricing. It’s all about finding what strategy fits your business and lifestyle the best. And what feels right now might not feel right next year or 5 years from now. But the best part is that as a business owner, you have the power to experiment as much and as often as you want!”
Some Final Thoughts
Look, pricing is tough and if you’re growing a business, you’ll probably struggle with it for years to come. There’s no right answer, it’s all about finding what strategy fits your business and lifestyle the best. And what feels right now might not feel right next year or 5 years from now. But the best part is that as a business owner, you have the power to experiment as much and as often as you want! If you raise your prices and nobody books with you, you can always lower them again! Remember that this is a marathon, not a race and it’s ok to try different strategies simply to see what happens. No matter what you do, own it. Having confidence in your pricing is more powerful than the price itself.
In the next few weeks, I’ll be talking more about money and things like paying yourself, taxes, etc. If you have specific questions or things you’d like for me to cover, let me know in the comments!