Question

Topic: Career/Training

Pricing In Open Market For Graphic/visual Services

Posted by pghpromo on 5/27/2006 at 2:31 AM ET 500 Points
PRICING QUESTIONS: Suddenly lost anchor client, now find myself in open market and struggling with how best to establish AND APPLY new pricing without underselling myself. Here are details:
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For several years I have been conducting graphic design/layout and production work for various clients. My anchor client was a realty broker who arranged for me to offer in-house marketing services to 100+ agents who would hire me individually as needed. This was my single largest client base as an independent contractor. Most of their needs related to customized business cards, brochures, mailer campaigns, property fliers, newsletters, and photography. Accordingly, with such a "closed" customer base, my in-house pricing was below open market value (Well, I'm assuming it was.)
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This brokerage relationship recently (and suddenly) became no more, and so now I find myself ramping up business with non-realty clients whose needs are a bit more diverse and broad.
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My dilemma is this: for the past few years, all my non-broker pricing was based as a percentage of my broker pricing, say 150% above the in-house rate. Now these new potential customers want estimates for this, that, and the other--yet I have no clue how much to charge for anything on the open market. I do not want to keep basing prices on my old structure.
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While I'm aware I can calculate costs + hourly level-of-effort, it seems there should also be some $$ attached to the value of services provided. (I'm reminded of the story of a farmer who charges $5K for fixing a stalled tractor with nothing more than the tap of a hammer; his invoice read, "Analysis of problem = $5, Knowing where to tap = $4995.)
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What I intend to do now is position myself as a project manager-for-hire, with expertise in managing promotional efforts for small businesses who lack personnel to stay on top of such matters. But in the meantime, I'm getting "ad hoc" requests for bids for graphic work, brochure development, photography, and photo-video projects (e.g., looping 30-minute trade show presentation) that I struggle to price properly. I've decided an hourly base rate based on some input from former ad agency connections, but I never know when to APPLY IT. Should it be every time I consult about a project? Every time I'm designing a custom layout? Every hour I am conducting research? Every time I'm using the camera? Every time I'm editing photos? Should it really be hourly at all? Should I weigh my time differently depending on the specific task I would be doing (e.g., 5 hours of design vs. 5 hours consultation vs. 5 hours perusing stock photos for just the right image vs. 5 hours dickering price with a print-house.)
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Without confidence in my pricing structure--without knowing I'm applying my hourly rate properly, and whether the hourly approach is even appropriate--I'm afraid I am limiting my family's income out of my sheer ignorance.
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RESPONSES

  • Posted by Frank Hurtte on 5/28/2006 at 4:56 PM Accepted
    Whenever the scope of work is defined bid on a per job basis.. it shouldn't matter if you charge 100 or 1000 per hour as long as you finish the job. You make money and the client is happy. If the scope is not defined, then you need to set up charges that are by the hour until some definition can be complete. Example.. I will work at 200 per hour to help you figure out what you want. Then, I will give you a flat price. The 200 per hour produces a description that can be bid to others.

    By the way... in Iowa here is a listing of per hour rates... laborer with shovel - 23.00/hr. bicycle mechanic 59.00/ hr. Car Mechanic 88.00/hr.. copy machine fixit guy.. 105.00/hr Lawyer 175/hr. Business Coach 200/hr.
  • Posted on 5/31/2006 at 11:10 PM Accepted
    Figure out how much time it will take you to complete the project, multiply by your own hourly rate (project managers in this area get upwards of $125 per hour), add in any expected overhead and finally muliply the result by 1.5...this will give you a profit margin and enough to pay Uncle Sam! You might want to take into consideration how many projects you will be doing in any given week and how much effort it takes to win a client contract.

    Good Luck,
    Debi Brady
    Writing & Marketing Consultant
  • Posted by pghpromo on 6/6/2006 at 12:45 AM Author
    Been away from my laptop for over a week. THANK YOU for your answers and patience re: feedback.
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    Frank Hurtte, I particularly appreciate your differentiation between pricing for consulting vs. design/production. This area has been one of my big hang-ups, but to distinguish the difference in every bid/proposal (depending on what is revealed in discovery with a potential client) makes great sense.
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    From there it is a matter of rates, and several of you have provided some rough formulas or tips on where to find pricing data. Some of these I've seen before, some are new to me.
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    Will be doing some follow-up research and will make my "acceptance" decision(s) shortly.
  • Posted by steven.alker on 6/9/2006 at 10:48 PM Accepted
    There really are only three pricing models which people in your field follow.

    Cost Plus
    Comparable (Local) Market Rates
    What you want to get paid

    Cost plus has been covered and it is related in part to the other two, except that it involves your costs times a multiplier plus (usually) a rate from the lowest quartile of the Market Rates.

    Comparable rates are available, but no one has commented on how you should position yourself as to the value you can offer. I can do Graphic Design and the people who run our local voluntary parish magazine think I’m great. I’m also free! I know that I’m useless at it though when I watch one of my graphic design contractors come up with an idea which is streets better than anything I could create and execute it in about 10th of the time it takes me.

    Where you have a company which does its own in-house work, but which does not employ a professional graphics bod, ask them just how long their marketing manager slaved over their latest mess for. That can quickly put a cost on their amateur efforts and assist you in establishing value.

    What you want to get paid is presumably somewhere within the list of comparative rates. You can work backwards from the yearly sum you want to earn and then forecast just how many jobs you need to carry out to achieve it. Then from your estimate of closing deals, you can work out how many pitches you will need to make to win that number of contracts. If the time taken to win contracts plus the time taken to execute them is greater than the time you have in a year, then you have an invalid plan. Trialling the plan with differing rates and differing close rates will show you some figures which are capable of working for you.

    If you take on board one of the suggestions to study how to get paid highly for what you do and other suggestions to keep your close rate high, then you can achieve your goals on a smaller number of pitches for a smaller number of actual contracts. If that leaves you with time to spare, the beach, the golf course or some other activity will be a useful reward! Or you could do more of the same and just settle for becoming richer than you intended.

    My approach is a little different to others because I tend to work from numbers and then work on technique to optimise the outcome. My CRM and Marketing consultancy rates started off at just £350 / day and I was astonished at the number of jobs I lost because my fees lacked professional credibility. When I worked the numbers I came up with a figure of £750 a day and securing 100 paid days a year (I derive an additional income from support and training and from my other related companies as well as an over-ride from the CRM business) It takes me 50 days of presentations to qualified prospects to win the 100 paid-for days and the balance in the year I take up with other business activities, some voluntary work and some hobbies.

    My suggestion boils down to working the numbers!

    Steve Alker
    Unimax Solutions
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