Calculating Rates
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- dMullins
I'm freelancing again full-time now. My rates I used years ago no longer seem to represent my experience. I'm looking at how other people calculate their rates both hourly, and their project prices. Someone I know has a very a la carte style for projects, and I'd like to development something like this for my studio: http://dylanmullins.com/dev/pric…
- Continuity0
Hourly is good for quick jobs you are very confident will take x-number of hours.
For longer jobs, I've found the best practise to be to also factor into the value to the client. If the client reasonably expects to turn over a couple of million, for example, as a result of your work, is it really fair to you to simply bill a couple of thousand? Nope. And it's not fair to the client for you to bill by the hour until this long job is finished.
So the balance between the two would be to give a reasonable estimate, based on your hourly fee, how long you THINK it's going to take (which almost always ends up being underestimated anyway), plus a percent of what you feel would reflect the value of the work (I'm going to pick an arbitrary range, and say 3% to 5%); also, adding a caveat in the crontract that would clearly state that any work beyond the scope of the project, and over and above the agreed estimate will be billed X/hr.
- 3 - 5%??? 30–50% minimum markup for decent size companies... as long as your design work reflects the goal of the work.Amicus
- Like I said, it was an arbitrary figure meant to illustrate the formula. :DContinuity
- But you're talking about mark-up, which I see as cost-plus, not adding a value figure on top of that.Continuity
- 3 to 5 times. now we talking. lol.akrok
- hmm.... note that the 3-5 times is NOT due to "ripoff" but due to the EXTRA service some bigger clients may be used to....vaxorcist
- Continuity0
^
The point of all that being that I think you're selling yourself short by doing a generic rate card, as you can't necessarily easily pigeon-hole projects all the time, and you end up absorbing some loss, sometimes, by virtue of not getting the most sales value out of any given project.
Also, I'm a firm believer in value pricing (along with or, if appropripriate, replacing hourly fees), and I think freelancers need to get on board with that, as well as educate their clients as to why that's done.
- Continuity0
Check this post out from Teehan+Lax:
http://www.teehanlax.com/blog/20…
Obviously they're a proper agency, but in principle, I'm sure their method can be adapted for freelancers.
- "Very early on Geoff and I struggled with some of these ideas. For starters, we never tracked time at Teehan+Lax. We learned a long ago that time sheets were a fiction. People just made them up. I know because for years I made mine up. What’s the point of a time sheet if the data is false? It’s not telling you anything. Don’t do them."juhls
- ...We learned a long ago that time sheets were a fiction. People just made them up. I know because for years I made mine up. What’s the point of a time sheet if the data is false? It’s not telling you anything. Don’t do them.juhls
- ...mine up. What’s the point of a time sheet if the data is false? It’s not telling you anything. Don’t do them."juhls
- Not really true. You can definitely estimate the time you've worked on it. Not everyone heavily embellishesjuhls
- but sometimes 1 hour = random shit and 10 minutes = sheer brilliance...vaxorcist
- Continuity0
Just to clarify, I think going with straight value pricing - as opposed to hourly/mark-up-only (cost-plus), or a combination of hourly and value - is most apporpriate when there is a very clearly ROI mapped out on the part of the client.
So, for example, you could imagine this when you first start scoping a client's needs before coming up with a fee and starting the work:
'Our goal is to have sales of 1 million in the first year, 2 million in the second year, and 4 million in the third year.'
And that forms the basis for you to come up with a fee that directly reflects the value of the project to them, thus keeping it fair for all parties. You get a respectable fee for a project that is intended to be a direct source of revenue for the client, and the client doesn't get shafted by cost-plus. The key is to ask the sorts of questions of your client when you're getting to know them and their needs, so that you can use an appropriate pricing method.
That said, value pricing probably wouldn't be so appropriate for identity work or things of that nature, cos you can't really attribute a financial goal to it.
- The example client comment was meant to illustrate the goals for a web shop project. Doh.Continuity