How to Price Lettering Projects - Part 1
In this post, I'm sharing some thoughts and calculations around pricing, and will offer up some questions to help you figure out what works best for you.
I'm not a lawyer or accountant, and you're all responsible for your own pricing decisions. Thanks.
For many first-time freelancers, or mid-career switchers, or hobbyists-turned-entrepreneurs, finding the right pricing strategy for creative projects is as much an issue of confidence and self-esteem as it is of value and exchange of services. Thoughts and feelings around being insecure about my skills as a designer and wanting to behave in a professional manner constantly vie for attention in my brain. It is through reflection, conversation with other designers, and by consulting industry standard literature on the subject that I find a balance.
Finding that balance is a constant work in progress.
Reflection / Mindset
Here are some thoughts that make me want to charge less than I should.
“If I can do it, anyone can. It’s nothing special.”
Is this true? Yes, in a way it is. I came to lettering as an adult, having no creative background whatsoever, and I managed to learn it. If I can learn it, so can you. However, can you learn it in time for your big event or to finish the project you want to hire me for though? I also know how to make bread, yet I still choose to go out and buy it, because a baker does it better, faster, and it's much more convenient. And I'm willing to pay for that.
As for my style being nothing special, while we can probably all copy or mimic what we see, the way we hold the pen and the choices we make on paper are all unique to us. Copperplate calligraphy, for example, has rules and guidelines, but not all hands end up looking the exact same. Every calligrapher adds a bit of flourish and swing to the strokes that is unlike any other.
“I’m having so much fun doing it.”
I’ve grown up with stories and experiences that instilled the mentality of “work sucks and is for money, fun is what I have on the weekend”, so it feels weird taking money for doing something I actually enjoy.
I’m overcoming this by reminding myself of the monthly rent I pay in my co-working space, and by standing up to my friends who ask me to “just doodle me something pretty”.
Repeat after me: “This is not my hobby. This is how I make my living.” It would be like expecting anyone else to go into the office on the weekend and do a few hours of lawyering or doctoring or accounting for free. (PS I’m super lucky and grateful my friends get it, by the way. One person asked for a huge freebie, but I explained why that wouldn't work, and there was no bad blood or anything. Phew!)
Also, to quote a legendary Picasso story, when he did a 5-minute drawing of someone and charged $5,000, Madame was not paying for the 5 minutes, but for all the years of experience and practice that it took the Master to become the Master.
“I know the really good guys charge this much, but I’m not quite there yet so I should charge less.”
This one is a little more difficult to argue with, but hear me out. Charging in the same ballpark as your idols might seem like heresy to you personally, but for the industry as a whole, it is important to maintain a standard of care and a level of professionalism. (Actual industry standard numbers next week, this post was getting too long!)
Sure, there are certain band-widths you can operate in. But undercutting prices to appease your own low self-esteem is selfish, and a difficult hole to climb back out of. For everybody. Besides, the really good guys are few and far between, and there are more jobs out there than they can handle. When their schedule is full, you want to be ready.
Having a proper price tag on your services also helps scare you into paying extra special attention and doing a fabulous job, so you will absolutely go above and beyond to provide the value, right? If you’re following a solid design process with transparent communication, presenting sketches along the way, and getting approval for each step, the likelihood of your client coming back and hating what you did and demanding their money back is really quite low. If they do, give it, take back your work, and learn the lesson for better vetting next time.
Conversation with other designers
The friends and colleagues I've spoken with haven't given me permission to share their actual numbers, but there are some themes that can be identified.
Pricing can be approached from various angles:
- How much do you need to make to cover your business expenses?
- How much do you want to make as a salary?
- How much can different clients pay? (i.e. who's your audience?)
Let’s say the average Graphic Designer employed in corporate America gets paid $60,000/year. After taxes and health insurance, that’s about $45,000/year.
Divided by working 40 hours a week for 48 weeks, that’s about $24/hour net, or $32/hour before tax. (In reality, many designers start at $35-40,000, they work more like 50 hours/week, and don’t have four weeks off, but this is supposed to be a rough baseline.)
Calculating your Freelance hourly rate
[(Business Expenses+Salary)/Yearly Hours]+Profit Margin=Hourly Rate
- Figure out all of your direct and indirect business expenses per year
- Decide on a salary you want to pay yourself per year
- Divide the total by the amount of hours you expect to work in a year (a realistic average is 900-1,200)
- Add a profit margin (the average is 10 to 15%)
Doing this kind of calculation, working backwards from what I want to earn, and considering how long it takes me to design a lettering and calligraphy piece, has been really insightful. It helped me to move away from selling custom stationery and greeting cards at flea markets to going after design, logo, and wedding projects instead.
$92/hour might be three times what an employee makes, but remember, freelancers only get paid when they do actual design work.
In other words, all the hours you spend writing emails, networking, marketing, posting on social media to attract clients, chasing late payments, waiting for feedback, balancing your books - all those admin hours that in a company are covered by colleagues in different departments, they don’t make it into your bank account as a freelancer.
The hourly rate for actual design work, for working IN your business,
has to cover the time you spend working ON your business.
The proportion of time you spend working in and on your business will vary over time. If you don’t have a steady client stream coming in, and well-established systems to move through projects smoothly, it can be as low as 1:4, i.e. one day designing and four days doing everything else. Sticking with our mathematical example above, your hourly rate then would need to be four times higher, i.e. $100/hour net, or $125/hour before tax.
A slightly more sophisticated differentiation, if you want to provide 110% transparency, is breaking down hourly rates by task, e.g. charging less for the time you spend in meetings with the client and more for the time you spend designing. I did this on a recent invitation gig, where I charged $30/hour for the time I spent walking to and from the shops to buy the specific stationery the client asked for, the emails we exchanged, and doing test runs at the printers, and $75/hour for the time I spent lettering and designing.
Advantages: Hourly rates make sense when you’re not sure how long a project will take, and if the client is likely to change their mind a lot. You have to know how long different tasks will take you, and if you do, hourly rates provide a nice basis for calculation of day-rates or what a total project fee should be.
Disadvantages: If you’re experienced and work fast, this type of payment strategy isn’t working in your favor - unless you have a significantly higher hourly rate than the average designer (i.e. it would take them four hours at $100 but it only takes you one, so your charge is $400/hour).
Some designers quote a lower hourly rate and then “pad out” their invoice, charging for more hours than they actually spent. Personally, I think this is disingenuous and would advise against it. Also, if you’re not a fan of micro-management, having to keep track of all your hours and how you spend them might get a bit tedious.
Project Rate / Flat Fee
For projects where you know exactly what you’re doing and how long it takes, projects that are easily doable, scaleable, and maybe even reproducible, a flat free will provide maximum transparency and easiest invoicing. For example, you could sell a custom logo type at $2,500/each. You'd have to sell 24 logos per year, or two per month, to reach $60,000 gross.
Advantages: Clients can choose from different packages you define, e.g. basic logo, two concepts, no vector $2,000, premium logo, two concepts, vector $2,500, and the whole enchilada - three concepts, vector, illustrative elements, a website and complete branding package for $5,000. You’re still providing options to fit within their budgets, and might just need 12 of those big clients to cover your yearly expenses.
Disadvantages: Project Fees have to come with a crystal-clearly defined scope to protect your time. In reality, scope often changes as you go along.
This is where you charge the client in accordance with the value your design adds and / or generates for them. The more prominent the client, the higher the price is going to be. The amount you charge is not only based on the time you spend or the expenses you need to cover, you also take into account "what’s in it" for the client.
Especially when designing for clients who will reuse the design on products they sell, I make sure my agreement covers specific usage rights and licensing information. For example, prominent lettering artist Jessica Hische offers national rights for one year at 100% markup; unlimited international for a year at 200%, and a complete buy-out at 350%. I've also spoken with designers and photographers who don't charge their clients any extra usage fees at all.
Advantages: Value-based fees are potentially a lot more lucrative than using your hourly base. You have a chance to clearly communicate your understanding of the client’s business, which you will have researched, and you're able to properly articulate the value your design would add.
Disadvantages: Unless your client is open about their budget, there’s a good amount of guess-work happening on your end, and you may miss the mark and lose a few bids.
If you’re operating in a small market and your clients know one another, I imagine there might also be room for misunderstandings (“why did I pay $3,000 and you only charged this other guy $2,500?”).
In her CreativeLive class, Dina Rodriguez has a great way of combining her price calculations for logo projects - she adds up her expenses, her varying task-based hourly rates, and then she adds a percentage on top according to the client’s visibility and proliferation.
In other words, for a mom and pop shop, there may be no mark-up at all, but for a company that has been in business for 3 years, has 15,000 social media followers, and significant revenue, she might mark it up 20%.
I’m not sure I would add all my expenses to every single client, but she insists she only works with one logo client per month, so it makes sense to her. If you’re doing a logo project and a custom greeting card and a custom design for an agency, you could go even further and split your expenses up according to the time and effort your services take for each client.
This hybrid-approach with mix-and-match hourly rates according to tasks is something I'm using right now. I still offer "friends and family" and non-profit discounts for projects that excite me, and for clients with whom I really want to work.
For me, negotiating my fee is part of the transparent communication value with which I run my business, and if your budget doesn't quite stretch to what I need, we can talk about adjusting the scope and maybe reducing the number of concepts I present. In other words, client is king, and I have a set of boundaries.
Come back next week for an overview of graphic design industry standard fees, and some thoughts on services like fiverr and 99designs. In the meantime, let me know if you have any specific questions or comments below!