I recently got an email from a young guy in Hong Kong. He's just getting started in graphic design and emailed to ask me about pricing techniques. Ah, It seems like just yesterday I was sitting in graphic design class asking my professors the same questions about the dark art of pricing. A dark art it is, my friends. Don't let the dark arts scare you though - you should keep pressing in and figure out how they work.
Learning to price things can be a brutal process, but like Ron Burgundy, it's kind of a big deal.
Kudos to this guy, for trying to get his head wrapped around it early. Here's the email with a few tiny edits for good measure:
Hello Mr. Matt,
I'm from Hong Kong and a beginner in graphic design.
While I’m planning to do some design-related "work" for this summer, I got confused about the thing with "money." Therefore, seeing that you are a professional and a well-experienced UI/UX designer, I have some questions for you :P
How do you estimate the money you should receive for a project? By number of screens, the content, or…?
Given that it’ll be a fixed price payment, do you prefer payment at last or by milestones?
For a scrolling screen (which sometimes would be long), do you consider it as one screen, or two?
How do you report your progress to the client? By email, Skype, Invision App, or…?
For you in particular, how fast do you work? 1 screen per hour, or 1 screen per day?
Do you mind to provide the following information? Number of screens and the amount of payment you received? (If its confidential or you don’t want to provide, it’s k :P)
The "thing with money" is an easy thing to get confused about. It's something that I still struggle with and experiment with even after a decade of experience. It helps to think of it as an art rather than a science.
There are definitely a few guidelines you can use as a rule of thumb, but ultimately it comes down to a personal decision based on a number of factors. I'll try to break it down accordingly.
1 - How do you estimate the money you should receive for a project, by number of screens, the content, or…??
When does the client need the work finished versus how soon can you realistically complete the work? In other words, is this a rush job or is the timeline a reasonable one?
If you are estimating a project based on a fixed price, you also need to have a fixed timeline, and a fixed payment schedule. It's not fair to you as the service provider to work on an indefinite schedule without a definite payment plan. Not only do you lose money by spending unaccounted time on a project, you lose motivation, resent the client, and lose opportunities to pursue other projects that could be scheduled during your unaccounted time-spillage.
If you estimate the amount of work to be 2 weeks of heads down design, you still need to factor in client reviews (Skype, Google Hangouts, or in my personal favorite - in person) as well as revisions, etc. I like to factor at least a day or two after a design presentation, for the client to provide written feedback to solidify what was discussed during the meeting.
You need to lead this process, otherwise the client will just do what comes naturally and start saying, "What if we did this? What if we did that? Can you try that? What about this completely different concept?"
If you don't have a process in place, you'll start to squirm in your chair, unsure of how to deal with this feedback and mountain of unexpected work the client is proposing.
They are honest questions from the client, so be prepared to tell him or her that it is out of scope. Or alternatively, that you could do the extra work but it would require a change order (change in price and deliverables).
Use your best judgement when handling these cases. Sometimes you can create some really high value by throwing in a little extra work on top, but let it be on your terms, not theirs.
Before you begin on a project, make sure you to take the lead as the project manager clearly outlining the timeline, the scope, the deliverables, payment plans, etc. Otherwise you'll have a never-ending spiral of emails, time wasted, and more. You'll end up making exponentially less money that you originally thought.
Number of screens is a good starting point for figuring out how much time it will take you to complete the designs.
Most of the time the client will be curious about your hourly rate or if you prefer to give an estimate for the project. Think about it from the client's perspective. If you were hiring a designer to create a certain number of screens, would you be willing to pay an hourly rate without having a idea of how long it would take?
Whether you're billing hourly or on a fixed rate, you'll need to come up with a realistic estimation of how long the project will take. Your estimations will probably suck at first, and get progressively better as you gain more experience.
It's a good idea to start with smaller projects (1-2 weeks) at first, so you don't completely screw yourself by doing a horrible job at estimating a 3 month project with a fixed rate, when it actually takes 5 months. I've done that before and it totally sucked.
I'm not sure about design wages in Hong Kong, but in the US, hiring a designer can cost you anywhere from $15-$150 per hour and beyond, depending on experience, proficiency, etc. A good rule of thumb is "you get what you pay for."
I'd suggest thinking of an hourly rate you'd be happy with earning for the project and use that as your multiplier. If you'd be content with receiving $20/hour (insert any hourly rate) for a project you'd estimate at 1 week or 40 hours, you'd be looking at $800 for the project. Just be sure to think about how you're willing to handle revisions, reviews, etc.
2 - Given that it’ll be a fixed price payment, do you prefer payment at last or by milestones?
This depends on a few things. How bad you need the money? How much do you trust the client? Is this a huge expense for the client of a small expense? Is this a huge project for you or a small one?
If you need money quickly then you should absolutely ask for half up front. This also serves as earnest money from the client that will let you know he or she is serious about hiring you for the project. The project is not a project until you have an agreement about payment or preferably, money in the bank.
If it's a small project from someone you trust, then you should feel comfortable doing the work, sending an invoice, and collecting payment afterwards. Even so, you still need an agreement about when you get paid. It's best to say X amount due by X date, with no strings attached. Make it simple and straight forward. You and the client both need to know the payment plan.
I've done projects based on a pie in the sky estimate which was verbally agreed to by the client, but I had no plan in place for deliverables or payment. I got most of the way through the designs, the client became non-responsive to emails or phone calls. I sent him the final invoice and never got paid. I blame myself for not having a solid agreement and process in place.
The same goes for your design deliverables. Put in writing what you'll be responsible for, when you will deliver the final version, and what format it will be in. This way there is no confusion over what the client is expecting and what you're planning on delivering.
You can break up a fixed rate fee into 1/4 payments, but it really warrants a discussion between you and the client. It may be a hassle for the client to have to write 4 checks instead of 2 or 1. Likewise, it could be a hassle for you to send four invoices, especially for a project with a short timeline.
3 - For a scrolling screen (which sometimes would be long), do you consider it as one screen, or two?
I wouldn't tie your pricing or estimate to a general "screen" as this could vary wildly depending on the content. Think about it more contextually and make sure you have solid definitions for your terms. One scrolling screen could take 1 day or 30 days depending on the content.
It's fine to call it one screen, but not to estimate it as such. You'll need to break it down into sections. And even further, do the sections need custom illustrations or icons? Will you need to do any photography, copywriting, or gasp stock photo searching? All of these tasks need to be factored into your estimate for each section, which will ultimately add up to be one screen.
You'll also need to ask about making it responsive and providing a mobile design. Things like this increase the scope quite a bit.
The bottom line is this, make sure there are no grey areas in your communication with the client in terms of defining things. Iron out the details of the content you'll produce as well as the payment you'll receive.
4. How do you report your progress to the client? By email, Skype, Invision App, or…?
Mostly email for standard communication of dates, progress, notes, questions, meetings, etc. and sometimes Basecamp for larger projects. I'm not a big fan of having open Skype communication from the very beginning unless it's a trusted client who has earned the right to have direct access to me and knows how to respect that.
Invision is good for showing prototypes, but it depends on your project. A one page scrolling site doesn't really gain anything from being inside of Invision as the client can just scroll up and down a big jpg.
My go to for storing files and having a client review them is Dropbox. I have a project folder with a "For Review" sub folder. Inside of that are dated folders that I save out design comps to. I'll email the client a link to the dated folder as opposed to sending email attachments.
5. For you in particular, how fast do you work? 1 screen per hour, or 1 screen per day?
The biggest thing to remember is that quality work takes time, no matter how experienced you are. I don't like to give myself less than one full day to work on anything substantial. It's typically better to allow 2-3 days as a minimum to work on any one project, as you get to sleep on your decisions and get ideas about better treatments, implementations, etc. over that stretch of time.
In general though, I do work very fast, but I also see that as being extremely valuable as opposed to being thought of as an efficient and cheap laborer. This is where billing hourly versus billing for value comes into play. My friend, Dan Mall, wrote a good article on value pricing and curated lots of resources on the matter. Definitely check that out.
6. Do you mind to provide the following information? Number of screens and the amount of payment you received? (If its confidential or you don’t want to provide, it’s ok :P)
It would be nice if there was some magical design menu that everyone could pull from and grab prices, but unfortunately it doesn't exist in the real world. I wouldn't mind sharing the details of a project plus payment I received, but you wouldn't have a strong context for the scenario surrounding the deal for it to provide any real value.
Even in the case, I wouldn't have enough information about your project to give a good estimate and you wouldn't know enough about my pricing process for it to provide any real value to you.
To paraphrase Seth Godin, "Asking me about my productivity secrets are like asking Richard Branson what he had for dinner last night. It doesn't matter."
You have to ask yourself, "How much money will I be ok with making on this project and for what amount of time?" as well as "How much money do I think the client is willing and able to pay for?"
It never hurts to ask the client what their budget is up front. Lots of times they won't tell you, but you'll never know until you ask.
Pricing and negotiating is much more of an art form with a small amount of science behind it. You have to consider every factor. I've lost lots (more like LOTS) of projects by quoting way too high, but it usually didn't matter. I quoted higher prices when I didn't necessarily need the work. If I get in a situation where I need to bring work in, then I will lower my prices. It's a case of supply and demand.
If you're just starting out, come up with a price that feels comfortable for you, covers your expenses, and lets you walk away feeling good about the project.
You can incrementally adjust your rate up as you get new projects. Just keep in mind that there are always multiple factors when quoting a project. Your time and availability is only a piece of the equation. You need to account for opportunity cost, positioning for the future, monetary needs versus monetary aspirations, and more.
From the clients perspective you need to factor in their timeline, budget, willingness to pay you, ability to pay you, when can they pay you, and more. Focus on the value you can provide for them in exchange for their money. Don't just focus on the designs and the screens when talking about pricing.
If you can focus on the client's hopes, fears, and dreams you will do well. Good luck!