Hourly vs project rates: how should graphic designers price their work?
Vol. 055
Hourly vs project rates: how should graphic designers price their work?
Pros and cons to the two main pricing structures for creative entrepreneurs and how to figure out your flat rate pricing.
A quick bite:
Pricing graphic design work is tricky: it takes experience, industry awareness and self awareness. Below I explain how I charge, the pros and cons of hourly vs flat rate pricing, and most importantly: how to factor your flat rate pricing costs.
Continue reading below…
Another reader submitted question: “Pricing and converting leads”. Well, it's more of a sentence — but I turned it into the question: "How do you price your work as a graphic designer?"
For starters, let's acknowledge that pricing is tough.
It seems to be one of the main struggles that creatives deal with. Sure, there are some things that you should know when pricing your work; however, it ultimately just takes a lot of trial and error as well. I personally have found A TON of value in using the book: Graphic Artists Guild Handbook: Pricing & Ethical Guidelines to help ballpark my project pricing. The book pays for itself the first time you use it.
There are so many ways to price your work, but generally speaking, graphic designers tend price their work in 1 of 2 ways: hourly, or flat (project) rate.
Hourly graphic design work assumes that you have a set rate that you charge, and the amount per project is based on how many hours you work.
Flat rate or project rate graphic design work assumes that you and your client agree on a set rate for the project, regardless of how long the work takes.
There are also Slush Funds and Retainer Agreements, if you’re interested to learn about other pricing methods.
There is a time and a place for each, but when working directly with clients, flat rate pricing (sometimes referred to as value-based or project-based pricing) is accepted as a better way to charge for your work than hourly for a multitude of reasons.
That being said, I still do hourly work sometimes. I have some clients that are larger agencies, and sometimes these agencies only hire contractors by the hour. Additionally, when hiring contractors I always hire them at an hourly rate, oftentimes with a price-cap to avoid surprises. For example, we’ll agree on a rate, we’ll discuss the deliverables, and I’ll note that I don’t want them to go past Xhrs without first consulting me.
When deciding if you’d rather price your work hourly or flat rate, there’s a few pros and cons to both hourly pricing and flat rate pricing for graphic design work.
Hourly pricing
Pros:
The client only pays for the work done.
Because you’re pitching an hourly rate as opposed to a large, lump-sum, the number feels a bit more manageable for the client.
Billing is very straightforward.
It’s more flexible for agencies.
Cons:
You are penalized for working quickly or efficiently.
Your client is more likely to nickel and dime you as you are working through your project.
There seems to be less trust through this method of pricing.
Flat Rate pricing
Pros:
If you’re an efficient worker, you benefit from working quickly.
There is no guessing — everyone is on the same page with what the expectation is for a project cost.
Cons:
Whether the project takes 5hrs or 50hrs, you still get paid the same.
If you don’t have a secure contract, you may find yourself doing countless revisions without a way out.
Because flat rate pricing is oftentimes considered a better choice when working with clients, let’s consider a few factors that you should consider when setting your flat rate pricing. What should you consider when setting flat rate pricing for graphic design work?:
How long will a project take
What are other professionals charging
How much money do you need to make
How long will a project take:
One of the most relevant components to consider when starting to price your graphic design work is how long the project will take you. But how are you supposed to know? EXPERIENCE. Straight up, you need to do a lot of work to understand how long the work takes: it’s as simple as that.
Additionally, you should actually be tracking how long every project takes you. I suggest you use a time tracking app, like Toggl. I track EVERY single graphic design project I work on no matter how big or how small. I track what I’m doing, I track how long it's taking, and I have records of these times so that I can continually adjust my pricing as needed for projects.
Now, when someone asks “how much is a branding project?” I have 40+ branding projects to reference exactly how many hours they took, and I can base my pricing on that time investment.
Once you have an average number of hours for a given service, you also need to know what you want your hourly rate to be. Freelance graphic designer rates have a massive range based on expertise, skill, and geographic location. When I lived in Ohio as a junior designer, my freelance rate was $20/hr. On the opposite end of the spectrum, I know experts in the graphic design field whose target hourly rate is $250/hr. Talk about aspirational!
What are other professionals charging?:
In order to figure out how much you should be charging hourly, you should first start by defining your own success and figuring out what you actually want out of your career. The book mentioned above is super helpful, and simply googling and asking those around you. Figuring out where you fall in relation to them, and price accordingly. On average, Vicarel Studios flat rates are rooted in an hourly rate of $75 to $150 / hr., depending on the work we’re doing.
$150/hr. might sound like a ton; however, you need to consider that so much of what I do is not billable. Admin time, bookkeeping, new business development, etc. — none of these things are billed for. I have a lot of tasks that aren’t paid for. When you’re working hourly for an agency, you don’t have all of these tasks, and simply get paid to work. That’s a beautiful thing!
How much money do you need?:
How do you know how much money you need? Welp, make a budget.
I’m no expert on this matter, but I’ve made a simple excel sheet that adds up my personal (and business) expenses monthly and annually. Shown here, some of my personal expenses. Of course, there is some rounding and some guessing that goes into this—things like groceries, utilities, and life/fun are estimates based on previous months. As shown here in a small snapshot, my annual expenses are around $30,000.
From here, you need to factor how much you want to be saving (I personally do not have a set amount) and how much you want to have “extra” for random, fun, life stuff (there again, I don’t have a set amount.)
I currently have a mindset that stressing and obsessing over the stringent tracking of money builds a bad relationship with money, so I do allow some fluidity to all of this.
I strive to live humbly and frugally 90% of the time, so that when I do ball out, it’s something I don’t need to worry about. For the record, I actually stopped eating cheese and avocados for almost a full year in order to save additional funds to backpack through Europe a few years back. How much did that save me? I dunno, maybe ~$200. BUT, it’s not about that exact money that was saved as much as it was about the mindset shift of not buying anything unnecessary.
To wrap up
Conveying professionalism and experience when pricing your flat rate graphic design work is hugely important. You don’t want to give your clients an opportunity to doubt or second guess your abilities — the second they have it in their mind that you might not be capable, you’re fighting an uphill battle. For that reason, I highly recommend sending over more comprehensive design proposals when you’re quoting work as opposed to simply sending an email with your price listed.
Pricing graphic design work is a tricky animal. If you understand how long your graphic design work takes you, if you know what your colleagues and other industry professionals are charging, and if you have a budget (even a simple one) to understand how much money you need to live, you’ll be far better off in your pricing methods.
