This is Why You Should Stop Charging by the Hour

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Why You Should Become Value Based, vs Hourly.

One of the biggest challenges designers and agencies face is giving a price quote that is both fair and easy to understand. Certain pricing methods are complicated and confusing. But if you stand back from a distance and break it down to the prospected clients. You will have a far much easier time convincing them and justifying your cost.

How you approach your answers to why you charge what you charge is what is going to make or break the acceptance of your bid or proposal.

Hourly Doesn’t Work In Design

I have quickly learned to switch from an hourly base to a value based model. I know my worth, and I typically can understand what things are going to cost. It makes it a lot easier to justify the cost of the project as a whole, rather than breaking it down into segments or hours. Not only does giving an overall estimate beneficial to understanding exact numbers, it also allows you to give yourself a cushion in the event something goes wrong (something always goes wrong.) and you won’t have to justify the amount of hours or effort that was placed to get the end result.

Project Estimates that Will Set You Free

To give you a general idea of how to value base your project you will have to do some math and calculate your cost to do the project in total.

Let’s assume we have 6 people medium sized project.

A common team of six people needed to design a medium size project.

  1. Project Manager
  2. Backend Programmer
  3. Graphic Designer
  4. Copyrighter / Writer
  5. Front End – UI/UX Developer – Website Designer
  6. Photographer

If you were to bid hourly for the project how would you go about estimating the amount of time it would take for all six of these individuals to be compensated fairly? Each one of the individuals is going to take more or less time than the others to complete. This is where it’s okay to get the individuals assisting the projects full rate. It makes them happy and you can be better equipped to deliver the project.

Calculating the Cost of Design

How would you get proper rates to formulate your proposal cost? Easy, you would simply ask them what their full rate for the work that needs to be done for their portion of the project in order to get it done on time.

Let’s just use a simple estimate, something that isn’t too uncommon in standards of design projects for utilizing these individuals below.

  • Role –  Actual Cost – Cost to Client
  • Project Manager – $2,000.00 – $4,000
  • Backend Programmer – $3,000 – $6,000
  • Graphic Designer – $1,500 – $3,000
  • Copyrighter / Writer – $5,000 – $10,000 ( might not be needed )
  • Front End / UI/UX Developer – $3,000 – $6,000
  • Photographer – $1,500 – $3,000

The actual cost to you would be $16,000.00 in total to complete. You in return would then ask your client $32,000.00 double that cost. I know this number is probably shocking to some. Some individuals could only dream about getting a project that big – but I assure you it happens many times a day for agencies around the world.

The reason to double the rate is so you can have a cushion in case something goes wrong, and it is also your way to cover other expenses and time that you have put in to acquire the project. Remember it’s going to take many bids to land just one project and you have to cover that downtime somehow.

Don’t Get Discouraged

Not everyone is going to take the proposal. But if you don’t bid you will never know. Don’t take anything less than what you are worth or barely break even.

If at the end of the day you feel bad or like you are getting screwed over – chances are you are not charging enough. It’s okay to ask for more money, more money comes better results. It eases tension as long as the value of what you are doing is at or greater than the end result.

Don’t be desperate – go with the flow. Let people know you have their backs. Building up a rapport with these clients takes time. No one just hands over any money without a bond being made or trust being earned.

You can do it. Be patient, be persistent and always improve.

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