Standard small agency billing rate
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- SUBTEXT
I have a small agency and we have one main client and about 5 or 6 smaller ones. 3 people on staff, myself included and everything else is freelanced out. I'm trying to figure out what the going range is for agency time these days. We do mostly print campaigns and brand direction, consulting, and general creative direction for all forms of media. Up to this point I have been billing my own time as creative director at $150 an our, the art director at $100 an hour and the junior graphic designer at $75 an hour. Do these rates seem fair or am I way off? Any help would be appreciated.
- doesnotexist0
kind of high for a junior designer
- Amicus0
I only bill my smaller clients at an hourly rate – larger clients get charged something closer to the true value of the work.
An hourly rate can never really account for years of experience or the increase in revenues that good design generates for a company. That means I can make anywhere from $75 – $500ph depending on how smoothly a job runs. Corrections are charged at $50ph with a $30 minimum.
BTW - I'm a freelancer based in Melbourne.
- akrokdesign0
for a small agency that seams a bit low.
which means, you can't pay much to the freelance designer. probably around $25/hr.
- Amicus0
ie. do great work and charge more - lots more.
:)
- tOki0
Just make sure you factor in your hard costs, generally speaking a staff member should be pulling in 3x or more their salary or hourly rate to the company.. I think lol. Put a cost on your time as well - not just the work you do.
- SUBTEXT0
Thanks a ton for all the input, it is extremely helpful. Thanks for taking the time guys!
- Continuity0
On a related note, Teehan+Lax did a blog article a while back on them switching from the cost+ billing model to value-based pricing, which is worth a read:
http://www.teehanlax.com/blog/20…
And the follow-up:
http://www.teehanlax.com/blog/20…- good article... but I'd love a lot more in depth thinking on their process.Amicus
- Amicus0
Been thinking about this a lot lately.
some thoughts....
I'm against the idea of billing by hours model full stop. Sometimes everything runs smooth as silk and you are done in a quarter of the estimated and time, and other times it takes 4 times as long.
It really doesn't matter.
What really does matter is the value your work is bringing to the company. If you build them the next facebook or google in 1000 hours is that work really worth 1000 x $x?
I'd say – not necessarily.
If your work brings the customers and the profits jump hugely then so does the value of what you have done.
An example – you rebrand a $Billion company that has broken even the last 3 years, and it makes a $500 million profit the year after the relaunch. Is that worth $200,000 due to Hours x $XXX or is that worth $5,000,000 (or more!) ?
Obviously this model isn't without it's flaws – what if it takes 3 years for a profit to show up. What %age is due to the rebrand etc. etc.
The Teehan & Lax Tiered Value-Based Model only goes part way to what I'm proposing which is to actually partner a company and take a share in any increased profits. I'm looking working this way with a couple of my clients, but it's tricky and needs the involvement of lawyers and accountants.
Clients Pros – The upside for the client is they have lower costs now and there designer/developer has more incentive to provide quality.
Clients Cons – potentially much larger bill in the long run (offset by larger profits)
Designer Pros – potentially much larger returns. Potential for a longer term passive income from past work. More buy-in from the real decision makers. Potential to leverage brand ideas in a more concrete way throughout an organisation than just marketing materials.
Designer Cons – lower initial payments only cover costs. risk that work won't pay off and no profit is made at all.
If you've heard of firms doing this I'd love to hear some information.
- d_rek0
Our firm does $150/hr for design, strictly speaking, and upwards of $500/hr for strategy sessions for companies. We are always trying to sell design thinking + strategy much more these days because ultimately those are the things that can be much more valuable to a company.
I can see the merit's in Amicus' thinking, however, it seems like a rather risky venture. How does partnering cover your hard costs and your overhead for day-to-day operations? At what time do you actually see the ROI from the value-based model? 6 months after partnering? 1 year? 2?
- Amicus0
I was thinking upfront costs cover the basic costs rent, hardware, software, utilities, payroll so you aren't out of pocket.
Ongoing partner payments would have to be agreed upon based on the objects of the project(s). Could be a bonus model based on $X amount per % revenue growth above current growth, or a profit sharing model where you get a % of ongoing profits for a 3 or 5 year period.
Profit would probably start to come in after 3-6 months and then on a quarterly basis.
- mydo0
Interesting.
We bill on a project basis, the cost is estimated based time, on who will be involved from our team and how difficult the client will be.
We then charge a flat rate of about $100 per hour on anything outside the project scope. but this isn't a real number.
I'm able to re lay out a doc in say 20 mins, but a junior might take a whole day + me 30 mins helping them. even at 5 times the price, a junior would be more expensive. So we would bill at 2 hours.
I find hours are irrelevant if you're not a freelancer, you just decide how much it's worth, and divide by your hourly.... "erm yeah, it's took us... hold on.... 4 hours?"are larger agencies the same?
- Amicus0
I'm guessing there are a whole lot of freelancers who pick a number and work out a really rough estimate of time just to check they will be happy with it.
That's not such a bad way to do it... if you are guessing large numbers and everyone is happy with that.
:)
- d_rek0
@Amicus,
No argument that the potential for huge profits exist. I was just curious how you would handle the partnership profiting... ie: quarterly, bi-annually, annually.. seems like you could get into a lot of gray areas with a value-based model like that.
- Continuity0
Value-based pricing for services isn't a new concept, although it's not widely implemented at all in the advertising and design industry. That said, Amicus us right in that the T+L articles are woefully lacking on details, but I would suggest that some guidance probably exists out there regarding the balance of overhead and hard costs, along with profiting from the partnership and ensuring the agency gets what it feels is a good percentage of the ROI.
Perhaps a discussion with an account familiar with value billing would be in order.
- Accountant*. This is what I get for trying to type intelligently at 5.30 in the morning.Continuity
- Amicus0
@ d_rek
Quarterly sounds about right. Large corporates tend to report to shareholders on that timescale, so it would fit into their way of doing things, without you going 6-12months without a cheque.
It's the grey areas that the accountants / lawyers would deal with. I think it would be a bit of hard work in the beginning, but I think the upper end of the design industry could definitely benefit immensely in the long run.
@ Continuity
As I get my head further around this idea I will definitely be speaking to the bean counters and legal wranglers out there. Just need to find some that could use a rebranding in exchange for helping me with this – and a share of their profits :)
- mydo0
I hear the girl that did the nike logo still get's paid. as does the dude that did the vitamin water logo.
but i can't imagine i'd get much in the future for the layout of a annual report for a ball bearing factory.
- d_rek0
@mydo,
But is that related to a value-driven solution or a rights-managed one?
I've heard it's not uncommon for designers/firms to attach specific rights/royalty contracts to brands and identities that get large amounts of media use/exposure. A logo continually running in a publication, or a publisher outputting large amounts of publications with a logo, where the designer/studio gets a royalty per publication.
Would that fit the value-based model? Or is that strictly a rights-management / royalty issue?
- imagine getting 1c for every time the nike/apple/microsoft... logo was viewed....
happy daysAmicus
- imagine getting 1c for every time the nike/apple/microsoft... logo was viewed....
- mydo0
I think the issue would then be trying to sell that to a client.
As an example you can design a logo for $2000. Let's say you could offer the same package for $1000, but the client has to pay royalties in the future....If you were the client what would you go for?
Could be very interesting for a start up client who thought he might fail though. likewise create better motivation for you to try harder. but as amicus says, the legal side of things 5 years down the line would be a bitch.
- mydo0
with value based. let's say you design a shit logo for a good product and it does well despite your poor effort. how would you determine how much you get paid?
what if they client has a mate who works for vogue and their "thing" gets featured as the must have for summer, profits increase by 900%.
give my my fucking 20% or i'll delete your website?
- monNom0
@Amicus
From the client perspective, I can see the whole profit sharing thing really rubbing me the wrong way.
.
1: it's an administrative and liability headache. How much did the logo add to the bottom line? how much was due to the new products and services that were rolled out around the same time? how much was market conditions and would have been in there otherwise? If your design firm has some loose claim to an unspecified share of my profits, am I going to end up in court to settle it?2: Your design firm takes none of the risk, why should you share in the reward? Rebranding, for instance, is an expensive and dangerous undertaking for any business. Just as many will end up alienating clients and tarnishing their longstanding reputations as will improve them. Does your design firm guarantee success to the point that you will reimburse lost profits? Of course not, no business can do that and stay in business. As such, there's no good argument for a client to agree to share their profits over and above paying the fee for services rendered.
I can understand the pitch in that it's like a guarantee of quality, but I think the logistics are difficult, and it doesn't compare well with competing quotes that are 'no-strings attached'. I'll pay extra for no strings any day.
- Good points, and there are a lot of % question to be asked and proved to make it work, no.pillhead