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Determining Rates For Design Services in Contracts

Determining Rates For Design Services in Contracts

Mike Lenhart

This article is part of a larger series. Click here to read the entire “The Nitty Gritty on Contracts” series.

One issue that constantly comes up, especially in these times, is about rates for design services. How do the freelancers and smaller design businesses come up with their fees? It’s not always an exact science, but some of those basic business skills need to come into play.

Rates

Of course, the most basic way to come up with a rate to charge, usually a per hour basis, is to add up all of the overhead expenses and what extra revenue is desired to be made in a given month and divide the anticipated jobs, and hours, into that total. A dollar figure will come up and that is the basic rate that could be charged, or at least played around with. Remember, not all jobs will be worth the same dollar value and not all jobs will come into the overall per hour figure that may be desired. However, if a good profit and loss sheet is made, it will be easier to track the revenue, and expenses, that come in any given month. It’s also easier at tax time this way. Don’t wait until the end of the year to add up receipts and invoices. It will only make for more headaches.
Another way to calculate rates is to look at past clients and what they were charged. Many times, a past client may be offered the same rate for a new job in the same year. A client will appreciate that and they may be a little more loyal when it comes to new projects. Of course, upon a new business year, the rate offered loyal clients may have to go up a bit, but that’s part of all businesses. Clients’ costs of business goes up too, so don’t worry about taking care of rising costs in the design business as well. Remember, rates for community or non-profit clients may be slightly lower than those for corporate clients. That’s always worth considering, and promoting, if it’s in the business model of the designer.

Per Hour or Per Job?

Or course, a client usually (always) asks, “What do you charge?” Of course, the hourly fee is the easiest to throw out, but sometimes, a per-project fee may be more appropriate. Maybe a flat rate can be charged for business systems, like stationery and business cards. A flat rate can also be charged for a basic website, with strict restrictions included in the terms of the contract.

What about a flat rate for logo design? That’s tricky one since all logo designs are different and some may take a lot longer to design and produce than others. It’s always good to look at the entire project at hand to see how to charge a client for a logo and also how to still make some money. Another way to do it is to charge in increments, or phases. A phase one price may be for the logo design, another phase price may be charged for the business system, and a third phase price can be charged for the website. Of course, that is considered a volume job, since there is more than one element in it, and a slightly discounted rate overall may be charged for that volume job.

Don’t throw out rates from the hip or pull out rates in the air. If you feel pressed to give a price in the moment, ask the client if it is possible to get back to them once all of the needs of the project are reviewed. It’s OK to call a client back, in a timely manner, to propose the rate. Once the go ahead is given, make sure that the proposal and contract reflect what the job is and that some value is shown for the price charged. Remember, clients need to see something tangible, so a good contract that states all of the extras that are included in the price will go a lot farther.

Some Final Thoughts

Of course, all of this is up to the designer. With time and a list of clients, rates will be more evident and will come a lot more readily. Just remember, be creative and come up with attractive offers and incentives for clients. The time of year, the type of job, etc. should always be looked at to come in line with the business cycle and revenue stream. We all love to design, but we also have to be prepared to talk business when we need to. Some basic business knowledge can go a long way. Bite the bullet and take that business class, either at a community college or local small business agency. The AIGA also offers a Standard Form of Agreement for Design Services. Hopefully, this series has been helpful and will help in the business of design.

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