Mall Dan - Pricing Design

I WANT TO help you make more money.

Maybe this story sounds familiar. When I went out on my own, after a decade at more than a few agencies, I settled on charging $100/hour, as thats what Id heard most freelancers charged. Clients hardly pushed back. Projects went well, and I raised my ratesI got to $150/hour before customers balked. Agencies would contact me to do design comps for $150/hour, up to $1,500. (I eventually learned this was shorthand for We think this shouldnt take more than ten hours. More on this later.) By then, I could do a round of work in about three hours, which meant 1) Id make $450, and 2) Id leave a lot of money on the table.

So I tried an experiment. On the next project, when I asked, How much do you want to spend? and they said, One hundred and fifty dollars per hour, up to fifteen hundred, I countered with a flat fee of $1,000. I was happy because it was way more than $450 (I was always pretty good at estimating my hours), and my client was happy because it was still less than their budget: win-win.

It worked so well, I was soon booking five months out, and thats when I met Estherand doubled down on this whole pricing enterprise.

Esther (not her real name) came through a friends referral. She was an entrepreneur, with a great idea for a site she wanted to build from scratch. When we talked about her project, I reckoned itd be a six-month effort. Given my existing work pipeline, Id be booked for most of the year, and I didnt want to be that locked down. Worse, what if I agreed to the project, turning down others, only to have Esther bail just before we got rolling?

So I gave her the go away price. You know the one. You quote some ridiculously high number that the client wouldnt possibly pay. To sidestep the slight chance that she would, I added extra repellent. (I know I couldve politely declined, but I hadnt yet developed the muscle of saying no to good projects.)

I emailed Esther a Save the Date contract:

You agree to pay a one-time, additional, nonrefundable fee of $7,000. This ensures that the October date will be held for your project.

Esther never responded.

Five days later, I received a check for $7,000 in the mail.

I learned a terrific lesson that day: people will pay for things they value, no matter how wildly out of reach you might think it is.

This is a book about making more moneyabout knowing your worth, your value. Its a book about understanding what your clients want, and doing the best work you can for them.

Pricing feels fraught, but it isnt once you put some definition around it and put it into practice a few times. Its a crucial part of business, so set your mind on getting better about it. Im here to help you figure out what price to namethe one that simultaneously makes you rich and sounds like a steal for your clients. Ill share examples of pricing gone wrong and pricing gone so, so right.

This book is for you.

WERE LUCKY. Our profession pays well, because weve convinced our clients that design is important (and it is). But few of us price properly to capitalize on that importance. Almost every freelancer and agency owner I talk to says the same thing when I ask why they price the way they do: Its all I know, because thats how they did it at my last company.

For as much as we question and reinvent our processes and project deliverables, few of us take the time to questionto designhow we price. We tend to assume theres only one method, whether its an old way or something a friend tipped us on.

In reality, we can price projects in many ways. Lets inventory the most common and assess each of their benefits and drawbacks:

1. Industry standard
2. Cost-plus
3. Opportunity cost

(Heads up: this book does contain some math. Should you become nauseated or light-headed, math-sick bags are located on the back of the seat in front of you. And dont worry, we all start out this way. The more you practice pricing, the easier the math part gets.)

This is also known as a market rate. As the word standard suggests, this means your rate lines up more or less with everyone elses.

The easiest way to come up with an industry-standard rate is to survey your friends rates. Say you chat with your designer pal Lindsay, who says she charges $125/hour. Then you ask Michael, who charges $90/hour. You also ask Tobias, who charges $80/hour. You average those rates to land at $98.33/hour, and you round up to $100/hour because the math is easier. Presto: your market rate.