How Much Do I Charge, Anyway?

photo: anonymous flickr member

Yesterday, while we were discussing designers not knowing how to charge for their work, Stu noted that:

first, the “value” of your work at a monetary level is heavily influenced by your location. A designer in California has a lot more overhead to cover than a designer in Kansas. The internet has removed the barrier of having to select from the local guy so Mr. Kansas is going to be able to charge a hell of a lot less.

This is very true. But let’s start one point behind that: how to charge for your work so you don’t go broke. I want to look at Stu’s point tomorrow.

Essentially, the formula for determining the hourly rate you need to make is pretty simple. Do this:

  1. Find all your costs for a month. Include everything, from bills to IRA payouts to savings.
  2. Divide those by the number of hours you want to work each month. (Be honest.)

Voilà. Your hourly neccessity rate.

So, let’s look at an example. Let’s say my monthly cost to keep my business afloat is $4000. Also, I don’t like working because I’m a lazy pampered cow, so to make sure both those things line up, I divide $4000 by 80 to make sure I can work 20 hours a week. Magic number is $50, so I have to make $50 hourly for 20 hours a week to stay afloat.

Now, just because I have to make that an hour doesn’t mean I have to actually use that number in my proposals, but I have to make sure my proposals are actually higher than that number.

So let’s say I have four proposals out for logotypes each month, and I charge pretty low amounts for them, say $5000 per logotype.

I’m actually going to spend 25 hours on each logotype, considering the jobs are smallish. There is no way in hell anyone is going to put in 500 hours on a logotype that ostensibly gets finished quickly, because you would be working solidly every day, seven days a week, and have six hours a day left to yourself. For a month. I’m definitely making money on this.

So since I am a lazy pampered cow, I decide that I can actually stretch myself just a little bit and work thirty hours a week. I will be so tired. But I’m still actually getting through each of these projects relatively quickly, because even if I stretch and work at thirty grueling hours each week, I am making cost.

Anyway. Just wanted to get that simple formula out there so you folks can start making your banking count a little better. More on Stu’s comment about borders and the disintegration of the local, tomorrow. In the meantime, it seems like some people out there might want to look at my “Quit your job!” series from last year.

8 thoughts on “How Much Do I Charge, Anyway?

  1. Kathy

    Here’s how I charge: I try to charge as much as the market will bear, but never lower than I’m willing to walk away from. This bears in mind my expenses, how long the job will take, how enjoyable the job/client will be, whether the client is a non-profit that stands for something I believe in, etc. It’s served me well, and I’ve made a good living off of it.
    As for accreditation, I doubt that will ever happen. In fact, education is moving in the opposite direction with the DIY education route (look up Anya Kamenetz or Khan Academy). There are many paths to professional excellence, and formal schooling is less critical than ever. The best you can do is to provide a great product and outstanding service, and then do what you can to market yourself.

  2. Anilkumar

    Designing is like painting. So each design’s value is depends on the creativity applied in making the design. I think the designers works in a market where “Best dressed comes first” concept applies.

  3. Stu

    Turner makes some great points – most fields have some form of accreditation – the tough bit is how and who decides what is “art” or “design”. Sure you could do simple kern and color theory tests, but depending on your education, influences, and design strenghts, your answers will vary quite a bit. Is the designer a type-guru – with every word kerned to the millimeter or are they more of a found object designer…so many options and answers to the same question. Ask an engineer to solve a problem and he will probably refer to a mathematical formula – ask a designer to create an identity…well things get slightly more complex.
    Amy you’re situation is tough for sure – non-profits are already hurting in this economy and if that’s your bread and butter it may help (much like an investment portfolio) to diversify and take on some for-profit jobs (like you said, pigeon holing or typecasting yourself).

  4. Amy

    Thanks, Stu. Almost all of my clients are nonprofits. They are for the most part excellent, appreciative clients who have referred me often. So I know they value what I do, but in the recent economic climate, some of them literally don’t have the $$. It’s so frustrating to both not be able to work with them AND know they are hiring a cheap imitation. 
    I’m in NYC, and there are a LOT of nonprofits out there, and one is tempted to go quantity. But I haven’t, because I just can’t comfortably charge less than the project is worth. Than I am worth. That just fosters resentment. Not to mention it’s bad business.

    It’s been difficult to cast my net wider (Next topic: pigeon-holing?)

    Anyway, Turner’s point about accreditation is on the mark. I think that would help immensely. Then even my beloved nonprofits could justify buying the $50 T-shirt!

  5. Stu

    I think you need to decide if going “boutique” can sustain your business. Boutique may not be the right term… but think about how other businesses sustain themselves and promote themselves to keep in business when the core philosophy is quality not quantity. Why do people pay $50 for a designer tshirt when you can probably get one that may not be as well designed but is still considered a Tshirt for $10? People need to feel like working with a designer for $50/hr is getting them somthing more that the $10/hr guy. What that difference is can range from how you present and differentiate yourself during the initial bidding process to how you follow up with the clients you don’t get the job with. I send a quick note and business card and have on several occasions gotten the call that the “cheap” guy didn’t work out. I think casting our net wider to pull the cream of the crop clients who do know what good design is becomes necessary. Those borders that have been removed work both ways – yes the lowballer can now reach a wider audience, but so can we as professional designers – it’s just knowing where to look.

  6. Turner

    I’ve been following your pricing discussion, and from the perspective of a fresh(ish)-on-the-market designer, it’s tough to compete with the pseudo-designers despite the fact that my work is of much higher quality and I’m backed by a strong education, communication skills, and a grasp of theory and experience in the practice of effective branding. I dated a pseudo for a stint, and by creating formulaic, generic websites and logos (i have a professor that called it the photo-shop-for-christmas mentality) he was able to do minimal work for cheap rates and make far more than I could doing quality work. 

    Point is there needs to be a strong push from the design community to clients to employ accredited designers, as well as a movement within the profession to band together and create some guidelines for our practice that are taught in design school and enforced through membership in groups like AIGA. I know membership was STRONGLY encouraged at my school, but there were still designers who shrugged it off because it wasn’t required to land that job at IBM that paid well, but I personally saw as soul-crushing. 

    A lot of my architect and industrial friends see me as a second-class designer and they often credit the fact that they have to pass an exam to practice, where-as I could have boot-legged CS5 and gone to town. In their eyes I’m one step up from starving artist.

    Of course, I’m still young and I only know what I see as one major part of a larger issue. I would love to hear from anyone else on how to achieve these goals, especially considering the ever-looming burden of my outstanding student loans and the frustatingly low rates I’ve had to charge just to feed myself in a place like LA

  7. Amy

    I’m with Carla. I have been running my studio for 8 years now, in pricey NYC. I find I’m losing jobs to people who are under-cutting me. They are usually not as experienced or accomplished, but and sad truth is that the companies don’t know the difference. Or can’t afford to care. So what does one do? I certainly don’t want to devalue myself, but I don’t want to go out of business either. Thoughts out there?

  8. Carla

    I run a small graphic design studio in Central London, UK.

    In London i get people wanting a logotype designed for £150!! Naturally they won’t get it from my, but there are designers and pseudo ‘designers’ ready to accept. This attitude has dequalified our profession, so much that now also bigger companies expect us to charge unrealistic rates.
    This very long recession has definitely aggravated the situation even further.

    I’ rather stack tins up on a supermarket shelf rather than sell my skills, knowledge, and time, short.
    My mission is to educate businesses on the value of good design.