The Dark Art of Pricing


(The Correspondence – fuente no verifica)

Iknow many of you went to art school and I’m assuming most of the people reading this article are designers, illustrators or others working within the world of what we reluctantly call “communication art”. When we graduated from art school, a career was promised to us. We wouldn’t spend our days covered in grape jelly, masturbating before crowds to win a spot at the Whitney Biennial—we would live normal lives, work at offices, bask in the glow of our computers. We would have stability and wouldn’t have to worry about how our “art” would pay the bills. Our parents were happy, we were happy, our fine-art friends called us sell-outs and all was right in the world.

We found our first job. After a couple years we wanted a change of pace and found a new one. Things were good. Life was easy. Mornings were spent perusing cute overload before the coffee kicked in. We designed without ever having to really deal with clients, invoicing, negotiating—all the icky businessy stuff that bums everyone out. Our left-brain atrophied.

Then one day we woke up with the itch. It became more and more powerful as we dragged ourselves to work on blizzardy days or suffered through hangovers under fluorescent lights and drop ceilings. At 7am, half awake under the weak arc of water emptying from our shower head we said to ourselves “I’m going to do it! I’m going to go freelance!” We threw on a towel and the world felt sparkly and new. We’d make our own hours! We’d sleep until noon if we wanted to! We’d no longer worry about using up all of our sick days. We’d be in control! (The freelancers reading this are without a doubt rolling their eyes at the naiveté we all once possessed). We gave notice at work and a few weeks later our dream was a reality. As time went on though, we realized this reality was not always a dream come true.

Now we were more than creatives, we were business people. If we were one of the lucky ones, we picked up enough client work to keep us from retreating, tail between our legs, to our previous lives as employees. We completely fucked ourselves over on those first few jobs but eventually cobbled together a relatively good standard contract and learned to say enough is enough after the 10th round of revisions. This is not the stuff we learned in college. If you even thought about contracts and invoices before that art school diploma hit your hand I commend your professors, but most of us were off in la la land developing identities for fictitious products, complaining about how we only had seven weeks to get that logo right.

You can learn a lot of the business end of design and illustration by trial and error and reading articles and books, but one thing that is seemingly impossible to get a grasp on is pricing. Whether you are a student, a young designer, or a seasoned pro, pricing jobs can be one of the most frustrating parts of the creative process. The cost of creative work is shrouded in mystery and very subjective. While it makes some people uncomfortable to talk about art and money together (as we all know creatives are really meant to suffer through life and die penniless), they are incredibly similar when you think about it. What is money other than dirty rectangles of pressed tree pulp? Because we all believe it has value it is valuable.

I know you’re all dying for me to get down to brass tacks and explain how to price for each and every design situation, but what follows won’t be anywhere close to a definitive guide, just some of my own opinions and words of wisdom on how to avoid screwing yourself and the rest of us over by doing too much work for too little pay. We’re in charge of assigning value to what we do. Alright, here we go!

 

Pricing hourly punishes efficiency  >>

So this is a pretty bold statement and like any bold blanket statement it should be taken with a grain of salt. Hourly pricing can be incredibly advantageous in certain circumstances, like when you receive that first email from a potential client and, through their thousand word introductory essay lousy with emoticons and unnecessarily capitalized words, they paint a clear picture that they are completely batshit insane. You know that there will be many rounds of revision in your future and that over the course of working together you’ll be as much a therapist as a designer. Totaling those 500 hours at whatever your hourly rate is will equal a pretty good pay day.

It’s more than just crazy people that can make hourly pricing worthwhile though—pricing any long term design project hourly can be advantageous, as long as you communicate clearly along the way what kind of hours you’re devoting to the project. If the first time your client sees your total hours is on the job-concluding invoice, a world of hurt awaits. It will be like being audited except somehow more unpleasant. Be prepared to forward them every approving email, to itemize every minute spent on the website / book / whatever.

Pricing hourly seems much easier than flat rate pricing, but because you have to give clients a ballpark full-cost price upfront (the total hours you plan to work x hourly rate), you can end up in a very tough spot if you don’t have a firm grasp on how long it takes you to do things. You’re nearing the halfway point in the project and are already over the total hours you’re contractually committed to. What does this mean? It almost never means that you’re paid double your original fee. Even if you can eek out a little extra money from the client, by the end of the project your hourly rate will look more like the one you were earning at the Blue Comet Diner at age 16.

So once you have a grip on your work flow and become more and more efficient, hourly pricing makes perfect sense, right? You know how long it will take you to do something, you price for it, everyone is happy. Unfortunately this is a half truth. Sure you’re getting paid well enough and certainly making more hourly than you probably were at your old day job, but I’ll paint a picture as to why this is a flawed pricing model: Two designers are hired to produce posters for a music festival. Both have the same hourly rate of $100 per hour (a reasonable rate for someone that’s been in the biz for a few years and has a few accolades under their belt), but one designer works much faster than the other. Both are equally talented, but one is far more efficient. At the end of the job, the designers turn in their invoices—he worked on it for a total of 18 hours and she a total of 7 hours. He is paid a respectable fee of $1800 and she $700 for producing the same result. Your rational mind says “Well, he did work more hours than her…” but part of you knows that this isn’t completely fair, and that part is correct. This becomes epically clear when working for big name clients.

Here’s another scenario: You’re hired to do a monogram for a giant international company. They’ll want to use this monogram on everything from price tags to billboards to TV spots and they want to use it forever (in perpetuity until the sun explodes). They have a pretty clear idea of what they want and you know that it will take about 10 hours total with the initial exploration, back and forth revisions, and finalizing. Even if your hourly rate is $250 / hour (a pretty high rate), the total you’re earning for that logo is $2,500. If you think that is a good price for a professional designer to earn crafting what is essentially a logo for a huge company, you are mistaken. So if you aren’t pricing hourly, how DO you price?

 

Licensing and Rights-Management

So while pricing hourly has its disadvantages, it’s a good place to start. Most designers take into account the hours they’ll put into a project when coming up with a price, but the seasoned professionals use it as part of the way they quote a project, and not as the only defining factor. Once you feel comfortable with your hourly rate and can somewhat accurately predict how long it will take you to do something, there are a few other things to consider that will boost your prices and turn this design hobby of yours into an actual sustainable career.

As a designer, when you hear the term “rights-management” it takes you back to your intern days doing photo research, trying to find non-awful royalty-free images after your boss told you all the rights-managed photos were way too expensive. How does rights-management apply to a designer or illustrator? Photographers aren’t the only ones able to manage the rights of their work. You inherently own the rights to anything you create, this is why it’s incredibly important to read every contract for every job. Often times clients want more rights than what they are willing to pay for—the biggest red flag word being “work for hire”. This means that the client owns all the rights to anything you create for them. They essentially, legally, become the author of your work.

As a graphic designer, work for hire is a bit more acceptable in many situations since you’re not authoring new content as much as creating a beautiful context for other people’s content (speaking specifically about any sort of layout design). Where rights management usually comes into play is in the context of identity work, and this is why logos are priced the way they are. It’s understood that the clients will need the rights to the mark you create so that they can trademark it and use it on unlimited applications, so when pricing for a logo you should take that into account. In addition to a fair hourly rate, clients pay for the rights to use that logo in an unlimited capacity.

Aside from giving away all the rights to your work for an additional (hopefully ginormous) fee, you can give them away for limited periods of time or for limited applications by licensing work to clients. There are fewer ways to do this as a graphic designer, but licensing is an incredibly (incredibly!) important part of being an illustrator or letterer. Of the couple hundred client projects I’ve done over the past few years, very few of them have required a full buyout of all rights, and the ones that have required them paid my rent for the better part of a year. Here are some factors that go into pricing a job based on licensing:

How long does the client want to license the artwork for?

One month? One year? Two years? Five years? In perpetuity?

In what context is the artwork going to be used?

Do they have the rights to use it on anything? In print only? Web only? Broadcast? Tattooed on their faces?

If the job is reprinted, will there be an additional fee for a reprint?

Do they want an unlimited license or do they need to own the rights?

Are these rights transferrable if the company is sold?

What kind of company is it?

Is it for a Mom-and-Pop business, a multi-billion dollar corporation or something in between?

By now your head must be spinning. This is some complicated stuff right? Maybe, but this is how you can actually make a living doing illustration and design and maybe even eventually quit your but-they-give-me-health-insurance barista job. What follows is a fictional pricing example to show how powerful licensing can be. I’m going to write it in the context of lettering, which is priced essentially the same as illustration. Graphic designers should still pay attention though, because when I talk about buyout pricing, that’s essentially what you’re going to be thinking about when pricing logos. My price points will be higher than what a fresh faced n00b can probably charge, but should at least illustrate how much of an impact licensing can have on the cost of artwork.

The Correspondence

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