How To Price Design: A Guide For The Creative Entrepreneur

10 Pricing strategies to help you manage your creative business.

As a designer, you may find pricing work to be harder than it needs to be. As a creative, it can be difficult to discuss money, even with clients, but you are running a business. If you want it to be a success, you need to be able to be profitable. The only way to run a profitable business in the long run, is to have the right strategy ahead of taking on any project. I’ve outlined 10 key pricing strategies you can use for your creative projects that will allow you to provide clients with the right pricing strategy for each scenario. This is not an exhaustive list by any means, and there may be others, but these are the most common pricing plans you may want to consider when getting into the finances for a project.

FIXED FEE

The fixed fee is the most common type of pricing strategy in use today but that doesn’t mean it is the best in all cases. Generally speaking a fixed fee pricing strategy will be paid 50% before work begins on a project, and 50% upon completion of the work. Ideally, this pricing structure is best used for small projects, as you do not want to apply it to big jobs, which may have a large time frame from start to the end of the project. This can lead to overwork, bad blood with clients and cut into your business profitability. Fixed fee may be the most common pricing strategy, but it is definitely not the best suited for every scenario.

PROGRESS PAYMENTS

This payment strategy uses a phased payment structure, where funds are tied to the completion of sequential phases of work. You will invoice a client at the successful completion of each phase, regardless of whether the entire project is completed. This pricing strategy is better suited for larger projects, where there may be large gaps of time between starting the design process and final delivery of the completed project.

MONTHLY INSTALMENTS

An alternately to progress payments, in this pricing strategy you will divide the payments into monthly payments. This means that you can be paid regardless of the phase of work you are currently in, meaning there is more recurring revenue on a monthly basis, despite the status of the project. This pricing strategy is similar to progress payments, but the phases of the project are not the drivers of receipt of funds. You may spend more time on certain phases of the project than others, so using this pricing strategy can help forecast your businesses funds into the future. This is a great strategy for large projects with long term clients.

MODULAR

This pricing strategy requires you to divide a large project into a number of mini-projects, each with an assigned price. You will bill each mini-project in a separate invoice, paid upon completion of each module. You could also mix this with fixed fee, so you get 50% up front and 50% at the completion of each module. This is an excellent pricing strategy for related but non-sequential work.

RETAINER

This pricing strategy is similar to fixes fee and monthly instalments. It is almost a mix of the two. A client will be invoiced at regular intervals for a specific amount of work, generally for an agreed upon amount and schedule. This is an excellent pricing structure for on-going publications or repetitive tasks. A great example of this is when you create scheduled social media images or if you are hired by a publication to create images on a monthly basis.

HOURLY

Hourly is a pricing structure we are all familiar with. The client breaks down your payment into an hour by hour rate, meaning you will need to track the amount of hours on a project, and submit it to the client in an invoice. Generally you will need to include your time tracker with the invoice, so the client can view it. Excellent record keeping is essential with this pricing structure, and it can lead to a shock to the client if they receive an invoice that is higher than expected due to the project taking more hours than expected.

DEFERRED

This pricing strategy requires some negotiation up front. You will price the completed project, but it will not be paid until a mutually agreed upon date. This is quite common when you are running an agency, where payments may not be made until up 6 months after the project files are handed over to the client. It puts the client in the driver’s seat but it can be quite profitable, as you can negotiate a higher rate, as you are taking on a higher risk with the time between completion of the project and payment.

PROFIT PARTICIPATION

In this pricing strategy a designer may agree to a certain fee, typically lower than their regular price for a project of similar size. The risk of a smaller fee is offset by the client agree to split a percentage of the profit from the project, or the clients business, with the designer. This ties the effectiveness of the designs directly with the sales of the product. This pricing strategy is popular with start-ups and newer products. A lucky designer can make a larger sum on profit sharing than simply completing a project for their standard rate.

TRADE

One of the oldest pricing structures in business history, trade is when you are paid in-kind with the clients product or services instead of money. While this is less popular today, should you choose to adopt this pricing strategy for a project, make sure your designs are trades for the wholesale value of the clients product or service, and not the retail value, this will make the exchange more equitable for you and your client.

PRO BONO

Simple working for free for a charity or cause as a donation of your time and effort. For this pricing structure, you may be able to write off some of this as a tax incentive, however you should speak to your accountant about this. Also, please be aware that charities have marketing budgets, many smaller charities may not have a large pool of funds, but that should not preclude you from giving a real rate to the organization. Pro Bono work is best provided to organizations you feel strongly for, and never at the cost of profitability of your business.

While pricing and negotiating fees may not come naturally to designers, getting used to discussing money is the only way you are going to run a successful, profitable business in the long run. Keep these pricing strategies in mind the next time you are outlining a price for a project, and don’t be afraid to push back. Your time and expertise is worth more to the client than you may give yourself credit.