Do you know what to consider when pricing your work? Are you charging enough for your work? Do you worry if your price was right after sending an estimate? There are many ways to figure out how to price a project, and how you do so and present it can affect how the client perceives the value. Either you will be perceived as an expert and command respect, or you risk be seen as not understanding (or underestimating) the scope of the work and your work being perceived as low quality. Here are 12 pricing mistakes to avoid to be more profitable.
- Marketing Mentor’s Overhead and Hourly Rate worksheet (PDF)
- 17 Questions You Must Ask During a Design Consultation
- Client Relationships Are Like Dating
Mistake #1: Not Knowing If You’re Profitable
To be profitable, you don’t need to charge big bucks.
When it comes to pricing, you should first figure out the minimum you need to charge in order to cover your expenses:
- software and subscriptions,
- phone and internet,
Then you need to calculate a minimum hourly rate. Ilise Benun of Marketing Mentor has a great Overhead and Hourly Rate worksheet to help you realize what you need to consider for all of this. The worksheet is available for download free of charge.
This helps you establish a baseline. You should know what your baseline is to get paid enough to cover your time and expenses and make a profit. Without understanding these figures, you won’t know how to price to be profitable. If you’re not profitable, why bother doing the work? You won’t be freelancing very long if the work costs you more than you get paid.
Having said that though, just because you figure out a baseline hourly rate doesn’t mean you should charge hourly.
Mistake #2: Charging Hourly for Creative Work
I think it’s good to estimate, for your own reference, the number of hours you think a project will take you. Plus, it’s helpful to track your time on projects because it helps you estimate similar work in the future, and it helps you understand if you’re becoming more efficient over time as well—making more in less time!
But charging a client by the hour has only one advantage I can think of, and that is when the scope is not well defined. In that case, charging an hourly rate ensures you get paid for all your time. (A paid discovery session for a flat rate with the client could resolve that, and that would actually position you as an expert, gaining you more respect and more money. But that’s a topic for another episode…)
There are so many disadvantages to pricing work on an hourly basis:
- You get paid only for your time. You don’t get paid for your creativity, expertise or the value of the work.
- If you work quickly, you are punished by getting paid less. (And shouldn’t you get paid more if you’re more efficient and can deliver faster? Hello!)
- It can position you poorly and give off—and even encourage—a “nickel and diming” vibe in some cases.
- It can cause sticker shock. If you never estimated a range of hours along with your rate, the client may end up with sticker shock when they receive the final invoice. They might have assumed in their head it would be x number of hours instead of y. Unfortunately, in these cases, the designer is the one who unjustifiably sucks it up and reduces the invoice to meet the client’s expectations, to please them only so they can get more unprofitable work from them in the future.
- You usually don’t do your best work because you’re focused on time and staying within the range of hours you conveyed to the client (if you did that).
Now, a lot of clients will request estimates based on your hourly rate. Forget it, especially if it’s for creative work, where you’re getting paid for your ideas, or even if it’s for non-creative work that you’re really efficient at (again, should you get paid less for doing work more efficiently?).
If you need to, just say you don’t have an hourly rate or you don’t price work that way. On that note, you don’t need to reveal the breakdown of your pricing (you know, how you arrived at that figure, how many hours you might have taken into consideration) to the client. (I’ve been asked that before!) It’s simply not their business.
Ironically, a lot of clients don’t realize that hourly rates hurt them too:
- They’re writing a blank check unless you have provided them an estimated number of hours with your hourly rate. Otherwise, they don’t know how much they will be investing in their project.
- They won’t get a better result if you or they are focused on hours. In some cases, such as branding, you can’t rush that; in other cases, rush work should cost more, not less.
Let’s look at an example. A more advanced designer might charge $60/hour and take 20 hours to get something done, while a beginner designer might charge $20/hour and take 80 hours to get the same job done. In this situation, just speaking in terms of monetary costs alone, the more advanced designer costs less, while the beginner costs more, by $400. Most of the time, clients shopping around based on hourly rates don’t take that into consideration, so they often go with the lower rate. (But that’s fine, we don’t want those clients.)
That example doesn’t even speak to the quality of the work. Let’s assume that the designer who charges less per hour doesn’t do as good a job as the advanced designer. Is it worth it to the client to spend $400 more to get higher-quality work? Maybe, maybe not. Or would they rather waste time redoing the entire process later with a second designer, costing them more money and time?
Let’s look at an example with a logo design. If you come up with a brilliant logo design in 15 minutes, is it suddenly worth less? No. If it takes you 10 days, is it worth more? No. Doesn’t that sound ridiculous? Now, should the client pay you more if it takes you a long time to come up with an idea? No.
So, pricing work by the hour punishes you for working faster and reinforces that “time for money” mindset to the client, instead of expertise; and it can leave the client wondering how much they will spend.
Mistake #3: Charging All Clients the Same
In cases such as branding work, the size of the client matters because well-known brands have more at stake and have more to gain as well. They also expect to pay for that.
Just think if Target approached you for a new logo design. What do you think they pay for that? Tens to hundreds of thousands of dollars maybe, right? If they approached you for pricing, and you said $500 or $1,500 because that’s what you’re used to charging, wouldn’t that sound silly? They expect to pay more because they understand the value, so your pricing would be out of alignment with their expectations.
Many large brands sell merchandise with their logo on it. It’s the reason millions of people buy it—for what that merchandise says about them, the consumer. The value the consumer perceives is enhanced. Think about Louis Vuitton and Tesla as examples. To the consumer, it’s no longer just a suitcase, just a car, etc. It’s the statement it makes.
Size can also play a factor when companies or organizations—well known or not—have a lot of employees. In terms of branding, they need a more extensive brand guide, so they know how to maintain the integrity of the new branding across multiple offices.
I know the next question will be, “How do I know how much they make or how big they are?”
You can sometimes find out how big a company or organization is in terms of employees and their revenue by checking their annual reports. For nonprofits, you can search on Guidestar. For businesses, search Manta.com.
Mistake #4: Not Demonstrating the Benefits of the Work
When a client needs an estimate, most designers are just going to say, “Oh, you need a brochure. It’s this much.”
But if, before starting a project, you’re asking questions such as “What are you looking to achieve? What are your goals?,” then you instill confidence in the client because you’re showing you care about their business. You’re not just providing an estimate; you’re taking the lead. You’re being the chef, not the short order cook.
By the way, if you’re unsure what questions to ask a client in a design meeting, download my free guide, “17 Questions You Must Ask During a Design Consultation.”
So when presenting your estimate or proposal, include details of what the client will be getting: the benefits, the results. Don’t just present an estimate with the project name and price, like everyone else. Tie in the benefits of the work to their results, such as:
“Design a logo that makes the client appear more modern and relevant in the industry to help them increase sales.”
So, let’s say they’re a large company and you can help them increase their sales by 10% and you check out their revenue, what is that worth to them?
The point is to demonstrate that the value of what you’re offering—what they’re getting—is much more than what they’re paying. How many more sales will they make as a result of that? You’re justifying your worth. You’re justifying your fees.
They will stop seeing you as “just a designer” and start seeing you as a marketing expert, a business expert, a trusted consultant.
Mistake #5: Selling Quantity Over Quality
When it comes to the number of designs, some clients may request, or you may specify, a set number of designs. You may also specify the included number of rounds of revisions or time for revisions. Those are good to define the scope well, so it’s clear if and when the work exceeds that.
I always like to say “up to x number” of designs because usually there is a front runner when you’re trying out different ideas, and you don’t want to present, say, three, just to present three. Then you’ve got two good ones and a crappy one just to fulfill the promised number.
I also say “up to” for revisions because I’ve actually had a client tell me they had one round of revisions left after they had just rewritten an entire brochure, and that was nonsensical. They actually felt like they were getting more of their money’s worth by finding more edits to make! Unbelievable!
Now, if you’re designing a website, the number of different pages you might have to design for would be a factor: home page, blog, landing page, etc. More pages, of course, add to the cost of the work. (By the way, you’d only to need to present the initial designs for the home page and then create the other ones later once the home page design is approved, as opposed to providing multiple designs for each up front.)
Mistake #6: Not Charging for Native Files
When it comes to deliverables, does the client want low- and high-res PDFs (one for their website, one for print)? Or are they asking for native files? If it’s a logo, of course, they should get the native files as part of the work. But for all other types of work, charge for those native files separately or build it into the price. I’ve charged anywhere from 30% to 100% of the fee.
Some designers and agencies just hand them over, but, unless it’s government work or it’s a work for hire, you have every right to charge for these files. They are your tools that contain proprietary information. I mean, you wouldn’t ask a contractor to build you a deck and then ask that he leave his saw and hammer? Of course not. You paid for the service—the act of building a deck, not the tools.
Mistake #7: Not Charging for Rush Work
The schedule for the project can be a factor in pricing. Is it a rush? Do you need to do the work same day? Do you need to be on call all day in case of last-minute changes? I’ve had that happen. Charge for that! You can charge a “day rate” of several hundred or a thousand bucks in addition to the work needing to be done. After all, you’re making yourself available at their beck and call and possibly turning away other work to do so.
Mistake #8: Not Valuing Your Expertise
Expertise can be in terms of the quality of your work, any specialized knowledge you may have or results you get for clients.
Is the quality of your work higher than that of other designers? Do you pay attention to details such as double checking edits you make for the client so they don’t have to babysit and tell you you missed a spot? Well, that saves them time, and it can save them the cost of outputting new proofs, reprinting a job, and it keeps them on their delivery schedule. That has a lot of value.
Maybe your designs usually hit the nail on the head nine times out of 10 because you ask good questions up front, do the necessary research and only then start designing. That serves their needs well and it saves time. That has a lot of value.
Maybe you specialize in a certain type of work, such as logo design or publication design. If you’re a specialist, charge more for that. It’s your unique expertise. Specialists charge more than generalists, generally speaking (no pun intended). Think of it in terms of the medical field: a specialist charges more than a general practitioner, right? Why? They may have completed more years of study in a certain area. They deal with just their specialization every single day.
Here’s another example: My husband builds performance transmissions. They’re not for everyday cars. They’re for muscle cars, for people who want to race, or who have street rods. Recently, someone asked the company he works for for an estimate for transmission work on their Mustang. This person also got an estimate from a local general transmission company that is part of a national chain.
The estimate from my husband’s company was more than that of the general transmission company. My husband reviewed their estimate and told the guy, “This estimate includes parts you don’t need for building this transmission, and it leaves out two parts you definitely need.”
Because my husband’s company does this work 100% of the time, they are specialists and have a better understanding of the work involved. This generalist company doesn’t do this all the time and therefore they weren’t aware their estimate had discrepancies. So this “higher” estimate by my husband’s company is accurate, the other one isn’t.
That company’s lack of expertise in this area would end up costing the customer more money and more time–in ordering parts they hadn’t anticipated, waiting for them to arrive, and taking apart and putting the transmission together a second time.
So, if you have expertise with a certain type of work or even experience in a certain industry (especially a very narrow niche) and understand the needs of clients in that industry, you should charge for that. You’re bringing that knowledge with you. You’ve already unknowingly done some of the work, even though it came with the territory of past projects and wasn’t “active” time that you researched or went to school for. You acquired that knowledge through your experience, and you can help clients in that industry more than a designer who doesn’t have that knowledge.
The story of Picasso and drawing a woman’s portrait is a good example to illustrate that (no pun intended!). A woman wanted him to draw her portrait. He agreed. After he studied her for a bit, he drew a single pencil stroke and then handed her the sketch. She said it was perfect and he had captured her essence with that one stroke. Then she asked how much she owed him, to which he replied, “Five thousand dollars.” The woman is in awe and asks how could he possibly charge that much when it only took him a second. Picasso responded, “Madame, it took me my entire life.”
Another factor to consider in terms of expertise is how your work has helped clients. Make it a regular practice to follow up with clients and ask them what results they got from the work. Sometimes they’ll tell you and sometimes they won’t. Sometimes they don’t know.
You can ask them, if you did event design work: Did they get more attendees to the event? Did they get more sales or donations after you redesigned their site?
With their permission, you should includes those results on your website and in all of your proposals. That helps justify your rates because, for example, a client isn’t looking for “event materials”; they’re looking for how those help them.
Mistake #9: Lacking Confidence
I see a lot of designers who want to charge more—maybe $5,000, not $500—for a logo. There are a few factors that can affect this.
One, it could be a marketing issue, meaning you’re attracting clients who don’t see the value in a logo at that price point, using that as an example. Second, it could be a positioning problem, meaning how you present yourself on your website and social media. I go into a lot of detail about this in episode 21, Client Relationships Are Like Dating.
What I think is the reason for some designers not getting more for their work, in many cases, is—wait for it—lack of confidence. Lack of confidence often comes from fear, and a lot of time fear comes from what’s worked in the past. You might tell yourself, “I can’t charge $5,000 for a logo because I’ve only been paid $1,000 in the past.” But that’s irrelevant. Perhaps your work has improved, you ask better questions now, you have more to offer now than you did then.
So don’t let your mindset hold you back. You must believe in yourself and your work and how it helps your clients. If you don’t believe it, clients won’t either. Without confidence, you won’t be excited when you talk about your work and how it’s helped other clients. When you have confidence, it instills confidence in the client. You may know you can do the work and do it well. You’ve got to have confidence when talking about the work—and that means your pricing too.
I speak from experience. I can look back and see how lack of confidence—or at least conveying that to the client—held my business back years ago. Imposter syndrome all the way. But participating in online groups and forums, writing and sharing blog posts helped combat this, because I saw that others were learning from my sharing just as I was learning from them.
We take for granted how much we really know. When you share with others what you know, you will quickly realize how much you do know because people will ask you questions or tell you how much they learned. That justifies your expertise.
Mistake #10: Pricing Too Low
Pricing too low has a plethora of disadvantages.
First, you will alienate your ideal clients who are shopping based on value, not price, and expect to pay for it. So your work will be perceived to be low value.
Second, low pricing may come across as “This designer doesn’t understand all that’s involved.”
I had that happen once. A prospect had gotten three estimates, one from me and the others from larger agencies. They loved my work, so they decided to ask me for an explanation about my pricing, saying it was much lower than the other two. Of course, I didn’t have any information about the other two estimates or what they included in them. I told them I had very low overhead and could keep my rates competitive.
But that’s not how they saw it. They didn’t think I understood the work, which I totally did and made the case for. But they expected to pay more for it and because my pricing was too low, I didn’t get the work.
Third, pricing too low often results in you not doing your best work and resenting the client, even though it’s not their fault that you underestimated the work.
Fourth, when you compete on price—not value, not your special skills or insights—it’s always a race to the bottom. Folks, t here is no winner in that race. There is always someone willing to do it cheaper. Again, what’s the point of “winning” the work only to be unprofitable?
Mistake #11: Not Talking Money Up Front
When you talk money up front on the call, it not only shows you’re a professional, but:
- It can help you screen the client and see if they’re even worth pursuing. The project may not be possible to be done at that price. I once had a medical professional contact me to ask for a slide presentation to be designed. For what she described, I told her that similar work had been about $1,000. She said, “Oh, I thought it would cost $100.” Thankfully, I didn’t spend any more time on that nonsense!
- It can help you establish their expectations. If they refuse to provide a budget, you can ask expectation of cost: “$500, $5,000 or $50,000?” I mean, it’s like them asking for a car. Do they want a Kia or a Ferrari? Another option would be to say that it sounds like it would probably “start at x amount,” “That usually ranges from $x,xxx to $xx,xxx” or “Similar work has run $x,xxx.” You don’t want to give a quote without all the info. You’re just feeling out the situation.
- It also prevents the price from being a surprise in your estimate or proposal.
Mistake #12: Reducing the Price to Meet Client Expectations
Just because a client claims they have no budget or that they can’t afford it does not mean there is a problem with your pricing and that you should lower it to meet their expectations. It will appear as if your fee was inflated to begin with.
If they cannot afford it, you have a few options:
- Move on to the next one or ask them to get back in touch if they get the budget for it. I’ve had that happen, if you can believe it!
- If it makes sense to, offer to do it in phases to spread out the work and their investment.
- Reduce the scope and, as a result, the price.
- Consider reducing the price in exchange for a more lax schedule, especially if the project was going to have a tight schedule.
One strategy I’ve used in the past—to give me an “out,” a way I could reduce the price by reducing the scope if I wasn’t sure of their budget—is include more revisions or designs than usual. If the client balked at the price, I reduced the scope—the amount of designs or revisions—along with the price.
What to Charge
So, after all this… how the heck do you figure out what number to charge? I hate to break it to you, but pricing is not an exact science. However, understanding all these factors should help you come up with a price for your work.
You can estimate (for your reference only) the time you think it will take you plus account for time for managing the project (answering e-mails, requesting proper files, invoicing, etc.), any meetings, any research, etc. Then add a few hours to that to account for anything you didn’t think of. And add some for profit (about 20%) plus account for the factors I mentioned earlier.
It’s helpful to get to know a few other designers that you can bounce pricing off of from time to time. But understand that the scope of work, your skill level, your geographic area and the client’s industry are all factors in pricing. So just because someone else charges twice as much as you for a website design doesn’t mean you’re justified in doing that. On the other hand, just because they’re charging less doesn’t mean you shouldn’t charge more.
Also keep in mind that there is a direct correlation between what you charge and the quality of client you attract. Good clients understand the value and are usually low maintenance. The ones who are pennywise and pound foolish mentally exhaust you, want to art direct, question your invoices, request too many revisions and are high maintenance and difficult to work with.
Putting Pricing on Your Website
You may wonder whether or not you should include pricing on your website. Well, the advantage to this is that is can eliminate tire kickers, the ones shopping only on price. On the other hand, there are a couple disadvantages:
- Your competition will see your pricing, which could lead them to change their pricing to match yours. That’s not to say that they offer work of similar value, of course.
- It could lead prospects to believe that their project, which may vary greatly in scope, will be similar in price.
It’s definitely something you can test out. If you decide to, I think it’s safest to use a phrase such as “Starting at $x,xxx.”
If you have a niche whose needs you understand well, then package pricing can be effective and profitable. You can create packages around these needs. It sets the expectations right away and it eliminates time-consuming estimates and proposals.
A colleague of mine created specific web design packages for a certain niche of crafters. She has a set WordPress theme she uses that she customized to serve this audience. She can just drop in the brand elements and images, make a few tweaks, add the client’s social media links, and launch the site. It’s very profitable for her because she spent time up front understanding that audience and putting in the time to create this productized service, which she can repeatedly make money from with little continued effort.
But if you’re offering, let’s say, a branding package and you’re offering it to anyone and everyone, as opposed to a certain type of client, then a larger company may come along and expect to pay that, when they should be paying more.
So I definitely think when you serve a particular audience, you can do this more effectively. You can offer different levels of packages, and you can consider add-ons, so that clients aren’t boxed in (no pun intended!) by a package that wouldn’t meet their needs.
I want to leave you with this: It’s important to remember that your goal is not to convert all prospects into clients, not to win every job. Not every client or job will be the right fit. That’s ok! The goal is to be profitable and attract the right clients, who will understand the value and happily pay your fees, the clients who see paying you for your work as an investment, not an expense.