An excerpt from the Graphic Artists Guild Handbook, 16th Edition
This week we are thrilled to publish the Graphic Artists Guild Handbook, 16th Edition: Pricing & Ethical Guidelines. Throughout its forty-eight year history, the Graphic Artists Guild Handbook has often been referred to as the communication design field’s “industry bible” by those who work in the graphic art industry. This sixteenth edition represents the most ambitious revision and redesign in over a decade, providing both artists and clients the very latest information on business, ethical, and legal issues. As the graphic art marketplace continues to evolve to meet the needs of both digital and print media, the new edition offers professionals an essential guide for keeping up with rapidly changing technology, and sustaining one’s practice in these times of economic uncertainty.
Keep reading below for an excerpt describing options for pricing a project, and learn more about the book here.
Pricing your services
Graphic art is commissioned in highly competitive and specialized markets. Prices for each job or project are negotiated between the buyer and the seller. Each graphic artist sets his/her own prices, and no two jobs are exactly alike. The price for a job usually depends upon many factors, including how the buyer intends to make use of the art, the size and prominence of the client, the client’s budget, the urgency of the deadline, the complexity of the art, and the graphic artist’s reputation. Both historical and current practices reveal that the factors often considered in pricing decisions vary from discipline to discipline.
You may wonder whether you should charge by the hour, the day, on a fee-per-use basis, or by the project. There are pros and cons of each, depending on the particular type of project.
By the hour
First, you need to know what it costs you annually to live and conduct business, so you know whether the fee offered for a particular project amounts to profit, breaking even, or loss. Calculating the individual cost per hour of doing business enables you to evaluate your financial progress.
When considering a project, it is important to accurately estimate the number of work hours needed. Many graphic artists say that multiplying this estimate by your hourly rate demonstrates whether the client’s fee for the project will at least cover costs. If it will not, negotiating with the client for more money, proposing a solution that will take less time, or searching with the client for another mutually agreeable alternative is recommended. Many large jobs, such as corporate design projects, require that the hours involved be used as a gauge to measure if the project is on budget.
Charging by the hour is an adequate method for relatively simple projects that require one or two services, have no additional costs such as materials, travel, etc., and no usage fees. If you prefer charging by the hour, you can charge your time at an hourly rate and list costs as additional line items for a total project cost. Avoid quoting projects—even simple ones—at an hourly rate until you’ve discussed all the parameters of the project.
One of the cons of charging by the hour cited by professionals is that clients do not want to be billed for activities they perceive as not being directly related to their project, such as preparing invoices, etc. This can be avoided by charging a high enough hourly rate that takes into account time spent on non-billable hours.
Another disadvantage of pricing only by the hour is that although you are being compensated for your time, you are not being compensated for the value you bring to the client. As you become more and more skilled and experienced at what you do, you will be able to do jobs faster, so in essence, if you are charging by the hour, you actually are losing potential revenue because it is taking you less time to do a job. You should be compensated for your expertise and the value you bring to the client. By pricing by the project, instead of the hour, you can charge what you are worth.
Sometimes graphic artists are hired on a per diem, or day-rate, basis. Surveys of graphic artists and clients have found this to be a perfectly acceptable work arrangement and method of compensation, provided that it accurately reflects the work required and is agreed to in advance by both graphic artist and buyer.
A day rate, coupled with an estimate of the number of days needed to complete the work, art direction, consultation, and/or travel, gives both parties a starting point from which to calculate a rough estimate. A word of caution: some jobs look deceptively simple, and even the most experienced graphic artists and clients sometimes find that greater expenditures of time are needed than were anticipated. When negotiating an estimate, both parties often address questions concerning complexity, degree of finish, delivery time, expenses, and general responsibilities, and they agree that an estimate is just that and is not assumed to be precise.
The downside of charging per diem is the same as charging hourly: you are not being compensated for the value you bring to the client.
By the project (value-based pricing)
When you quote a job by the cost of the entire project versus hourly or per diem, you can quote whatever price you want, within reason. You are not revealing your hourly or day rate or the specific number of hours for which you are charging. For this reason, you can charge what you feel your value is to the client, and that value is going to change by the client and the project. For example, your value is going to be different when designing a Facebook page for a small local restaurant that has no online presence, compared to designing an e-commerce website for an international retailer with the expectation that it will increase its online purchases by 100%. This is often referred to as value-based pricing.
The idea of value-based pricing is to anchor your pricing against the value that you bring to the client. Sometimes you can quantify the value in numbers, for example, increase an organization’s membership by 1,000 or increase sales revenue for a product by 50%; other times the benefits are intangible. If you can emphasize the value that you provide to the client (for example, “improve online presence which will increase sales,” etc.) in your proposal process, then you will begin to see your income grow as a result. Clients are happy to pay for your expertise because in most cases, they don’t know how to fix a problem or don’t have the expertise to arrive at a solution themselves.
To help determine what your value is to the client and what their budget is, start by asking what the client’s break-even point is for the project—in other words, when does the project pay for itself? If an organization with a budget of $12,000 for a website redesign says the project will pay for itself if they get 40 new members as a result of the redesign, then they will feel you are overcharging them if you price the project at $24,000. However, if you are confident that your redesign can bring them 80 new members, they are more likely to agree to the $24,000 because you are delivering twice what they are expecting—and the break-even point is the same.
If a client wants to see cost breakdowns in a proposal, you can break it down by project components (research, sketches, design, implementation, testing, training, etc.) instead of by time. Regardless of the size or type of project, if there are any materials, usage, or contracted services costs, they should be listed as separate line items.
While you should not charge clients more than the value they’ll get in return, the price you charge for any project, no matter how small, should at least cover your time multiplied by your hourly or day rate. You cannot afford to give your services away because a client is a small business or a not-for-profit organization. You need to make a living, just as they do. They have budgets for other expenses. If they say their budget is too small for what you quote, find less expensive ways to solve their problem, using less expensive materials, a simpler design, less features, fewer illustrations, etc., without giving anything away and without underselling your services.
Adapted excerpt from Graphic Artists Guild Handbook, 16th Edition by the Graphic Artists Guild. Copyright © 2021 by Graphic Artists Guild, Inc. All rights reserved.