Why Fixed Prices Are Better Than Hourly Billing - RD169

How do you charge for design work?

[sc name="pod_ad"]Do you offer fixed prices to your clients or is hourly billing your pricing strategy of choice? I'm not interested in how you come up with your rate or your price. What I'm asking is, do you or don't you know how much a design job will cost before beginning the project?

Today I want to share my opinion on why you should stop billing by the hour and start offering fixed prices instead.

Changing my pricing strategy.

When I started my design business in 2005, I prided myself on the fact that I didn't offer fixed pricing. Everything I designed was billed by the hour for the exact amount of time it took me to complete the project. It was my most prominent marketing feature.

I landed plenty of clients because unlike other designers who were charging "outrageous" fixed prices for the work they did, I only charged for the actual time I spent on a project.

For years I traded my time for money. And it worked. In no time at all, I grew my business to dozens of recurring clients. I thought I had made it big.

Now, however, when I look back, I realise I was doing a disservice to both myself and the design industry because I was treating myself like a commodity.

But you can understand my thinking, can't you? Most service industries bill by the hour after all. And lots of business people, the people who hire freelancers think in those terms as well. It's familiar to them. They pay their employees by the hour so why shouldn't it be the same with you?

It took me a few years before I realised that creative people like you and I, we aren't selling our time. No, we're selling our talent, our skills, our experience and of course, we're selling the final creative product that we're providing to our clients. We're not selling the processes involved in creating those designs.

For a business person used to paying people by the hour, it may seem logical that the faster you can produce your designs, the less it should cost them. However, it's false to think that designers should be paid based on how long a project takes to complete. Instead, you should be paid for how much the final design you deliver is worth. It has nothing to do with how much time you spend on it.

I've spent days working on a logo concept before getting it right, and other times, I've designed the perfect logo in less than an hour. Why should I be paid less just because inspiration hit at the start? I shouldn't, and neither should you.

Hourly billing causes opposing interests.

Charging by the hour for your design services creates a designer/client relationship with opposing interests. If you are billing by the hour, it's in your best interest to take your time. Sure, you need to take the necessary time to complete the project to the best of your abilities, but you still know that the longer you take, the more money you'll make.

The client, on the other hand, has conflicting interests. The client wants the best work you can deliver, but at the same time, they want you to complete it as fast as possible, so it doesn't cost them as much.

Why fixed prices are better.

Charging a fixed price for your services alleviates this burden of opposing interests because the final price is set at the start and agreed upon by both parties. The client is no longer worried about how much extra it will cost them with every revision.

By agreeing on a price beforehand, it puts both of your interest in perfect alignment. You know how much you are money you are making, and the client knows how much it costs them.

Time, the conflicting notion with hourly billing, is no longer part of the equation, and you and your client can work unencumbered by conflicting interests.

With fixed prices, the faster you come up with and execute your idea, the better. You end up getting paid more for your time, and the client receives their design more quickly, at the agreed upon price. You're both happy.

Should you end up taking longer than expected, you get paid less for your time, but you still know how much you are making. And the client is ok with the extra time since it doesn't cost them any more.

The trick with fixed pricing is determining a price that is acceptable to the client and yet still covers you should a project take longer than expected.

Removing conflicting interests strengthens relationships.

When I stopped charging my clients by the hour and switched to charging fixed prices, I felt the relationships I had with my clients deepen because there was no more give and take from both sides wondering what the final cost of a design project would be.

Justifying your fixed prices

When offering fixed prices, you are sure to be asked questions such as "why are you charging $800 for a logo when services are offering $20 logos?" Here's what you can tell your clients to justify your prices.

When you design something, you are creating from a marketing perspective. In other words, you are developing a marketing tool for your client, a tool that will represent them for years to come and help them grow and generate income.

Those offering inexpensive design services are only providing pretty images with no thought or research behind them. That's it. Those people don't care about the client beyond wanting to make something cute for them, collect their money and move on to the next client and project.

Marketing tools created by professional designers, especially those around branding, involve a well-developed strategy and therefore cost more. To create the right piece for a client, you need to take the time to get to know that client, what they represent, how they operate, and how they think. This discovery process is the real value behind the design process and is not something offered by cheap design suppliers.

Cheap design suppliers don't take that time because they don't care about the client; they only care about pumping out designs as fast as they can.

If your client questions your prices, ask them what they think their business is worth? Their company's representation starts with its branding and continues with every marketing piece and design they put forward. If they feel that representation is only worth $20, so be it, you are not the designer for them.

However, a professional, well thought out design that is a good representation of the company and everything it encompasses should be worth more than that.

Do you charge by the hour or do you offer fixed prices?

Let me know by leaving a comment for this episode.

Resource of the week Adobe Color

Adobe Color is an excellent resource for choosing colour pallets for your design project. You can create your perfect palette by selecting a base colour and apply their various colour rules. Once you have your pallet, you can convert it to Pantone swatches and then download it for use in your desktop applications.

To check it out visit https://color.adobe.com