Pricing Your Services As A Designer, An Overview
Signage for Coleman Intellect, designed by Green Tree Studio.
The pricing of your offering is a fundamental part of your business model — but I probably didn’t have to tell you that seeing as though you’re reading this article. This isn’t unique to creative service providers. But I’m a brand & web designer, so let’s talk about how to price your services as a designer or creative service provider.
The most popular pricing models are: hourly pricing, value based pricing, and productized services.
It’s important to note that these pricing models are not exhaustive and the way that your offering is priced doesn’t have to necessarily fit neatly into anyone of them.
But in general, these are the most prevalent pricing models for service providers; especially for designers, strategists, and creatives.
Hourly Pricing
Hourly Pricing is the most common pricing model among new designers. Hourly Pricing is pretty straight-forward: if you work, you get paid a fixed-rate for the time spent to complete that work.
Using Hourly Pricing, especially early on in your design career will also help you to navigate how long certain projects might take. This type of information is actually extremely important, no matter your pricing strategy.
Don’t get me wrong, there are veteran designers who utilize Hourly Pricing as well. But the number of veteran designers doing so is extremely small in comparison to the designers who don’t. That’s largely because of the drawbacks that Hourly Pricing usually comes with.
Drawbacks To Hourly Pricing
You need to be tracking your time consistently and accurately. This may not necessarily be a drawback but I personally just want to design, not time-track. 😕
Also, if your client relationship involves you, who wants to bill more hours, and your client, who wants to be billed less hours, there’s bound to be tension when it comes to pricing.
If you use Hourly Pricing then you are getting paid for your time. This is perhaps the biggest drawback to Hourly Pricing. That’s because you aren’t rewarded for getting more done within the same amount of time.
If Designer X charges $100/hr, he can only ever make $100/hr. He won’t be able to make more than that. Additionally, charging hourly gives a perhaps unhealthy transparency to your client about your pricing.
In that same scenario, let’s say Designer X is talking to a potential client. The client is the owner of a small business, so they ask for a timeline and cost estimation for their website project.
Designer X says it will take 10 hours to make the needed edits to the client’s website, and that he estimates the total cost of the project will come out to $1k.
The client says to Designer X, “Someone else said that this project would take them 8 hours, not 10”. Now Designer X is going back and forth with his potential client justifying his pricing in an effort to actually book the client.
So with Hourly Pricing it’s possible (not guaranteed) to be penalized for working too slow and to go unrewarded for working faster. Lame.
Hourly Priced projects also seem to be more open-ended & causal than other projects with different pricing models. Usually if a project is hourly, designers aren’t getting paid until after the project is over. An open-ended & casual project is the gateway to scope creep and unpaid work. Super lame.
Another drawback Hourly Pricing has is that it can extremely difficult, or sometimes impossible, to estimate how long a project will take. This means sometimes you don’t know how much money you’ll make and if a client asks, how much they’ll have to pay.
It’s always to smart to receive a deposit before starting a project (usually 25%-50% of the project’s total cost), especially with a client you haven’t worked with before. That’s largely because if someone has invested money into something, they are more likely to see it through to the finish. But with hourly pricing, you can’t really do this, because you haven’t done any work yet!
You could, of course, require a deposit for a project that you know is going to be long in duration. So if you know the project is going to be more than 10 hours, you could require the first 8 hours to be paid up front, but for projects where the scope is unknown, this is impossible.
So if you’re engaging in projects that are priced on an hourly basis, or any other way, make sure to have the client sign and official contract with penalties for non-payment and late payments documented. Because for hourly pricing specifically, other than the withholding of deliverables, you have no security for payment apart from a contract.
Benefits of Hourly Pricing
With Hourly Pricing, when you get paid, you know you’re being fairly compensated for your work. Every second that you’ve spent on the project will be monetarily compensated at a rate that you’ve already dictated.
Another benefit to utilizing hourly pricing is your flexibility. If this is an extremely complex project that has a lot of scope changes, or just any other factor that you can’t necessarily prepare for, hourly billing might be the way to go. This way, if something new happens during the project, you can just keep working. On the flip side, if something new happens during the project and you don’t want to keep working, you can just stop, and still be compensated for the work you’ve done (super important to consistently track your hours btw).
Concluding Thoughts
If I got to choose, no service provider would ever utilize hourly pricing unless it was in the context of an already existing project and they started to charge for out-of-scope add-ons or revisions that they and the client didn’t originally account for before the project started.
If you are currently or are thinking about using Hourly Pricing, just ask yourself what you stand to gain from it in comparison from other methods.
With that said, I’m not the owner of your business, and profitability is the goal. So if Hourly Pricing is proving to be a profitable and effective way to price your offerings, Godspeed homie! 🤟
Value Based Pricing
Value Based Pricing is the most common pricing model for creatives in general. This is especially true for the brand & web design community. I think this is slightly due to the industry push back towards Hourly Pricing but Value Based Pricing actually has a lot of merit in its own right.
Value Based Pricing is when you price your offering according to the value it will provide your prospective client. For example, let’s say that Designer X is designing a brand identity for their local thrift store for $3k. If they were to be approached by The North Face for the exact same service, they might charge The North Face $3M.
This is obviously a stark contrast but the point is significant. The thrift store doesn’t stand to gain all too much from a brand identity; even if the identity is extremely well-done, the client probably doesn’t stand to gain millions of dollars in revenue a year because of it. This is a different story when it comes to The North Face. The company is publicly traded and their new brand identity will have a significant effect on their company’s revenue.
Value Based Pricing for creatives must involve specific deliverables and outcomes that are communicated to the client (and hopefully documented in a signed contract!). You and the client come to a conclusion of what deliverables are needed for the client and agree on how valuable ($) these deliverables will be to the client. This fixed-rate/flat-rate price is the price of your service.
Drawbacks Of Value Based Pricing
It’s funny — the design community is in extreme support for value based pricing. But in order to utilize this kind of pricing model, you have to know how much value your offering is going to provide your client. With design, a largely qualitative industry, this can be next to impossible.
For example, Designer X designs a new menu for their favorite bakery. How is it possible for Designer X to know how valuable these new menus are going to be for this bakery? It’s not! This brings us to the first drawback of Value Based Pricing: you need to know how much value your service is going to provide to your client.
Granted, you probably don’t need to have a down-to-the-decimal value to properly price your offerings by value, but a general idea is absolutely necessary. And because it’s difficult to determine the financial value of design, Value Based Pricing isn’t usually the best way to go for designers.
Furthermore, if you don’t establish a minimum level of investment for projects, it’s hard to maintain high-end positioning with value based pricing in an intimate niche where customers are talking to each other. If you work with Customer A on a $1k project, it’s usually not as easy to sell a $10k project to Customer B who was referred to you by Customer A, even if Customer B would be otherwise willing and able to invest $10k.
So if you don’t have a minimum level of investment for new projects, it’s extremely hard to position yourself from the standpoint of pricing. You could use other anchors for your positioning in that case, but not pricing. Without a minimum level of investment, it’s hard to position yourself as a “designer for luxury brands” or something similar if your offerings are priced purely with a value based pricing model.
Benefits of Value Based Pricing
With Value Based Pricing, you’re always being fairly compensated for your work and you aren’t limited in your earnings like you are with Hourly Pricing. This is the foundational concept behind the industry’s support of this type of pricing model.
You’re also extremely flexible in how much revenue you can generate from each service. This maximizes the amount of people you can work with. If you use hourly pricing, then prospective clients may choose someone else who has a lower hourly rate. Since someone is always going to have lower rates than you, this results in the loss of potential business.
However, with value based pricing, you’re always pricing your services specific to the project and client you’re working with. Let’s say you’ve gone through your sales process and educated your prospective client on how your designs are going to benefit their business. Now your client is fully willing to book your services, but they are limited by their budget. If you’re using value based pricing, you don’t have to turn them away.
All you have to do is scale back on the deliverables of the project to be commensurate with their budget. If their budget is $5K, then you provide $5k worth of deliverables. If their budget is $500, then you provide $500 worth of deliverables.
Note that with value based pricing, you have to have a good understanding of how much your deliverables are worth to your ideal client. In the above example, the $5k client would not get the same deliverables as the $500 client.
For example, if the $5k client is getting a full website for that price, the $500 client might get a template customization. That’s because you’ve already deemed that a full website is worth more than $500 to your audience and a template customization is worth around $500. (These are imaginary numbers.)
On the other hand, value based pricing allows you to maximize the price of your offering to whatever your client is willing to pay. This way, the client is getting a bang for their buck, no matter what. This is probably the best thing about value based pricing.
And because you’re usually going to be on the higher-end of your client’s budget, this contributes to your client’s belief in the perceived value of your services, something that value based pricing relies heavily on.
Projects that are priced based on value usually have smoother sales conversations as well. There’s no tension about prices and timeline, because you as the service provider have no pressure to alter the prices or timeline of your offering to win the business of your client. Instead, you’re just adjusting your deliverables to match the client’s budget, whether that’s an increase or decrease in deliverables.
Of course clients can ask for discounts and to receive $5k worth of deliverables for $500 (don’t do it bro), but with Value Based Pricing, you’re not competing with other providers on who can get it done faster and for less money, at least not directly. So value based pricing does not guarantee that you will convert more of your sales prospects to customers, but it does make it all the more likely.
Concluding Thoughts
Although designers aren’t actually utilizing “Value Based” pricing (it’s like an inexact science), using this process to determine an approximate value of your offering while remaining flexible with your clients is super beneficial.
And while it’s hard to determine the exact value that your designs will give to clients, value based pricing works really well with subjective, higher-value services because it aids in giving your client an understanding of the uniqueness of your offering. That’s because value based pricing really leans into your client’s perceived value of your services. That’s why this pricing model relies so heavily on you educating your client on why your designs are going to be valuable for their business.
They stop comparing your services so directly with the services of other providers. For these types of projects, the client focus is shifted from “how can I get this designer to lower their prices” to “how much value can I get from this designer with the money that I’m willing to spend”. I think the latter focus isn’t extremely different from the former but it’s absolutely favorable from a designer’s perspective.
Productizing Your Services
Productized services have definitely gained traction with service providers within the past year or so. That’s because it kind of takes Value Based Pricing one step further, at least in my view.
Productizing your services means predetermining their timeline, deliverables, and process. Pretty much nothing changes from project to project. This isn’t an absolute, but it’s the general idea.
Benefits of Productizing Your Services
By productizing your services, you can eliminate (almost) any need for adjusting them on the fly. This doesn’t mean you can’t, it just means you usually won’t have to. Practically speaking, this means you can automate your systems, create templates, and truly perfect your client process. That’s because you already know what’s going to happen with this offering.
You know:
How much the offering costs
How long the process takes
What steps are involved in that process
What you need from your clients and when
What deliverables will be provided
And if you’ve been through this project a couple of times, since the variables are virtually unchanged from project to project, you’ll also know:
What mistakes to avoid during your introductory call
What steps to take to ensure you’re project’s timeline is uninterrupted
What the best way to ask for a testimonial is and when to do it
If your services aren’t productized, you can still get a grasp of these things but with productized services, you’ll understand each of these a little better because it’s going to be generally the same every time. Whereas if your services are priced based on time (hourly) or value, your deliverables can change, which changes the entire project.
Productized services are also easier to sell to clients than services using other pricing models. Remember, everything is predetermined for productized services. That means the majority of your selling doesn’t have to be specific to each prospective client. Rather, because these services are productized, you can sell to the ideal client for that service through your sales page, socials, email list, or however else you’re marketing your biz in an evergreen way.
Note that productize services aren’t a guarantee for a “buy now” mindset from prospective clients, but it is easier to sell productize services through content because of the clarity you can provide your audience without having to know about their specific project.
When productizing your services, you aren’t penalized for completing work faster, like you are with hourly pricing. But it gets better. Productizing your services allows you to systemize and automate, well, everything. From proposals & timelines to invoices & contracts. This is extremely beneficial if you’re coordinating with subcontractors and employees. You can make sure that everyone involved in the project is well informed and equipped with the information they need to keep the project running smoothly.
So if you’re a brand designer working with a web developer, you can equip that developer with all the information they need. How can you do this? Because you already have the information! Why do you have that information? Because you’re the one who created the service in the first place — you already determined the details!
On top of that, being able to clearly communicate the scope, process, and cost of the project to clients and subcontractors conveys a sense of serious professionalism and expertise, for real.
Drawbacks of Productized Services
Productized services are a lot like, well, products. They will have a certain packaging to them. We call this packaging your positioning and messaging. Just like with products, the packaging of your productized services is paramount to getting that sale. It’s tough to say that it’s the most important factor, but it’s up there.
If you don’t get your positioning and messaging right in relation to the needs of your audience, it’s very possible for your productized services to not do so well. Though this is true for any type of service, no matter the pricing model.
Another drawback to productized services is that you inherently limit the range of prospective clients you have. Not every prospective client within your industry will need the specific offerings at the specific price points that you provide. To combat this limitation, it’s best to have an ecosystem of offerings that seamlessly work together to sell for you.
Also, productizing your service only works if your service can actually have set deliverables. A lawyer for example probably shouldn’t productize their services. They can’t make any commitment to deliverables, process, or scope. A web designer, on the other hand, could.
Concluding Thoughts
Productizing your service is probably the best way to go for most designers, the benefits just outweigh the cons.
Though, productizing your services involves a lot more than pricing your services other ways. In order to productize your services, there is a lot more upfront work to be done, but it’s worth it.
Which Pricing Model is Right For You?
These aren’t absolutes but in general, if the bullet points are true for you, then that pricing model is probably best for you and your business:
Hourly Pricing is best for you if
You work in a market where the scope of a project is unknown, unknowable, and has constant changes
You can afford to charge less than competitors while still operating a profitable business
Maximizing the profitability of your business isn’t the most important factor to you, you’re just chilling
Value-Based Pricing is best for you if
You have a lot of customer feedback and audience data to inform your pricing — you know what prospective clients think about your offering
You want to work with as many people as possible
Maximizing the profitability of each project is the most important factor to you
You’re in a niched market with significant competition
You’re able to have in-depth discussions with the client, educating them on the value of design, and discerning what they’re willing to pay for the deliverables they need
You have a minimum level of investment, even if it’s not an exact number
Productized Services are best for you if
Automation, easy selling, and systems are the most important factors to you
You are an agency owner, you work with subcontractors, you have employees, or you want to
You want to be seen as an expert who gives clarity to those involved in the project
You have or are able to have multiple different offerings within the large ecosystem of your offer suite
You have a solid understanding of your positioning and messaging
You aren’t interested in working with as many people as possible, just as many people who need your specific offerings
You have set deliverables that have little to no variation from project to project
Effective project management and working with a lot of clients at the same time are important to you
“But Joshua, what if maximizing the profitability of each project AND effective project management are important to me?” you ask.
Well, rule #1 is that there are no absolute rules in business (that’s not logical, ik). So don’t take these three different pricing models as buckets that your business model absolutely has to fall into. In fact, it’s more than likely your business won’t fall into anyone of these specific buckets, rather it’s likely that your business will have aspects of all three.
That’s totally cool and its to be expected. If it helps, try thinking of these pricing models as different types of clay you can use to form your offer suite rather than thinking each different pricing model is a pot in and of itself. When these pricing models work together, it can help to eliminate some of the models’ drawbacks while retaining their benefits.
How Much Should You Charge as a Designer?
This probably isn’t the answer you’re looking for, but it depends. Probably more than you think though.
How much you should charge as a designer depends on your:
Your niche — the combination of your offering, its pricing and deliverables, and the audience you provide it to [Importance: 50%]
The prices of competitors in your market [Importance: 20%]
Your unique expertise, experience, and skill-level [Importance: 30%]
Your Niche
Niching down isn’t super easy but it’s extremely beneficial. If you haven’t found your niche yet, I highly recommend you focus on that before figuring out how to price your offering as a service provider.
Finding your niche as a designer deserves an article all on it’s own, but in the context of pricing, you should understand what the rates are for your industry and what your target audience is willing to pay for your services. It doesn’t have to be an exact number but you should have a general range.
For example, as a brand designer, I know that my target audience is willing to pay $2k-$7k for a full brand identity. There are designers who charge less than that and there are designers who charge much more than that. However, those designers aren’t really in my niche.
Apart of my niche is the price point that my target audience is willing to pay for my services, so the audience I’m targeting are only clients who are comfortable paying amounts within that range for a full brand identity. Of course there are exceptions to this, but you get the general idea.
Competitors Within Your Market
Your prices should be comparable with competitors within your industry. You don’t want to be too extreme, whether high or low in your pricing, unless your pricing is apart of your positioning i.e. “super affordable” & “high-end luxury” offerings.
This is the least important factor though. That’s because as designers, we work in a largely subjective industry. So if someone is interested in working with you and your messaging, positioning, and portfolio have really resonated with them, hopefully at that point they want to work with you specifically and they aren’t price shopping too much.
Your Unique Expertise, Experience, and Skill-Set
You are unique. Because you are unique the services you provide and your business as a whole is unique. That’s true whether you’re a freelancer, with your business being yourself, or an agency/studio owner of an actual entity.
Use your uniqueness as the anchor for your pricing.
