How I created a simple pricing process that removed stress and boosted profits

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Pricing is super-hard. You’re thrilled that someone wants to hire you, and then you obsess over creating a proposal.

And before you even get to the panicky part about what the client will think about the final numbers, you have to actually determine what final number feels right to you.

For longer than I’d like to admit, I sort of just picked a number that sounded good to me without a ton of justification. Sure, I kind of did a half-hearted breakdown of design + project management, but if a client had really pressed about why X cost $Y, I wouldn’t have had a great answer. Heck, I wouldn’t have even had a good answer.

And negotiations…ugh. That process took forever because I wasn’t willing to negotiate on the fly (because I was doing so much guessing), so I needed a day or two to “go over the numbers” or risk being exposed by making nonsensical adjustments.

Sidenote: Once you finish, read how 4 freelancers built recurring revenue models that changed their business. You'll love it.

I knew I needed to make pricing a process.

Mix ‘n match pricing

There are tons of philosophies on how to price projects, and each one has its pros and cons. So I took the best elements (imho) of three major ones and tossed ’em in a blender.

One might say a graphic design blender? Heheh – sorry, bad joke.

Basically, I price per project based on a value-based hourly rate.

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What?

Yeah, I know. It sounds a bit silly.

Let’s break it down:

  • Project-based pricing keeps the focus off how many hours I’m working and on the value they’re getting for their money. (Read less stress over how long I’ve spent on <insert element here> or negotiating with questions like, “can’t you work faster so we can afford it?”)
  • Basing my project price on an hourly rate makes it so much easier to price out. I simply determine my value-based hourly rate (more on that next) and multiply by the number of hours I think the project will take…and I guesstimate the hours based on previous projects and the scope of the project.

Value-based hourly rate?

Okay, so I love the ease of an hourly rate, but I don’t want to limit my income to number of hours worked.

I also don’t want to try to convince a client on true value-based pricing…the idea that they should pay for the value of what the project should bring…because to be honest, that’s a tough sell (much tougher than value-based advice makes it sound). And a lot of my clients just don’t have that kind of money. And if another factor out of my control totally bombs the project after I’m done with it, I’ve lost a client at the least and have a very angry (and vocal) client at worst.

So I combined them, and a few other things.

Here’s how I determine my hourly rate (check out this ebook to figure out the details for yourself):

  • What I need to make
  • The value of my expertise, education, and experience
  • What the industry will bear / client’s budget
  • Project-management and/or client-management fees*

*Project management – setting up files, emailing proofs, writing quotes, yadda yadda – accounts for at least 30% of the project. So instead of itemizing this on the proposal, which I’ve found often becomes a haggling point, I just include it in my hourly rate.

To be clear, I increase my hourly rate, not increase my number of hours. I find that KISS (keep it simple, stupid) is better for me when writing a proposal, so I work that cost in ahead of time.

Added bonus

One of the best, most stress-free parts about this type of pricing is that you rarely have to deal with the dreaded price increase reveal to your clients because you’re always pricing by project rather than by hour (sure, it’s based on hours, but they don’t need to know that).

So you can raise your prices gradually – a buck or two per hour (up to $2000-$4000 per year!) – and unless you’re doing repeat projects like posters or something, your clients will almost never notice.

Simple enough?

Design hours * hourly rate = project price. (Of course, each project – and budget – may alter it a bit, but it’s a super-simple start.)

Questions? Suggestions? Advice? Share your thoughts in the comments.

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About April Greer

April is the Director of Projects at Reliable PSD, a design-to-code company for designers, by designers. She’s the glue keeping everything together, organized, and right on time, and giving everyone a fantastic experience while she does it.

 

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Comments

  1. great haha… that’s how I work too… I even wrote a price list for the many items clients come asking for and it works, I worked the priced based on a 4 hour projects for simple stuffs like flyers and little stuffs and sometimes takes less than the 4 hrs to be approved, so… you see the earnings with the hours you estimated to work but you didn’t because it was approved way before reaching the half time maybe.

    • Barney,

      Great minds think alike! Most of my “simple stuffs” are based on a 4-hour project time frame, too. I just count it as a bonus if I finish early.

      That’s yet another reason why this pricing method rocks – when you sign a new project, you know what the payout’s going to be and you can pretty well plan on getting at least that much (and a lot of time they ask for extras, so there’s some unexpected additional income). Very rarely does the scope of the project shrink.

      With an hourly pricing scheme, there’s no benefit to working faster, which isn’t good for either you or your client.

      Thanks for sharing!

  2. Alas, I typically end up underestimating the time it will take for any given project, especially with new clients. Fortunately, I caught the post about limiting revisions and charging hourly for subsequent changes. That’s helped a bit.

    Fortunately, my main client prefers straight hourly billing and doesn’t haggle me about the hours.

    • Joshua,

      Give yourself some more wiggle room with how long it takes to complete a project and you’ll start feeling like you’re getting paid fairly for the work you’re doing.

      I encourage you to keep client-hunting…when all your eggs are in one basket, it is devastating when they all break.

      Good luck!

      April

  3. Thank you, this confirms I’m doing something right too because this is exactly how I set my prices.

    For printed stuff it’s not hard at all. And for more complicated websites it’s not that easy to estimate No of hours that you’ll spend but it’s still possible to get quite close. But the real problem for me is Logo & corporate identity. The client says they want something really simple cause they want a low price so I give them a price estimated for 8 hours and then I very often end up working 28 hours.

    How do you go about this? It would be so interesting to hear cause I think pricing for logo & corporate identity is the hardest.

    • Anna,

      I find logo/identity projects some of the hardest to price, too. I think partially because we know it’s probably going to be a LOT of work during the design process — but it totally depends!, and then we have to explain why a logo/identity is so expensive to our clients.

      Here’s my method, which I think also needs some work, but in general protects me from working for a paltry sum:

      After the fact-finding mission where I find out the scope and objective of the project as well as getting a feel for their budget, I decide how long I think it’ll take for me to create the initial concepts (usually 3) as well as 3 rounds of revisions. If I’ve asked the right questions and they’ve been truthful, at least one concept should turn into the final logo. I quote that price (and anything else that’s part of the proposal), adding that extra revisions will be charged at an hourly rate of $.

      This protects me in the event that the client wants to try every color of the rainbow OR if they like it until they ask their grandma, who wants to see her beloved pet in the logo.

      NOTE: Sometimes the “how long I think…” is a work in progress. If you’re constantly lowballing yourself, start guessing higher until you feel fairly compensated for the work you’re doing.

      Does this answer your question? 🙂

      Thanks for sharing!

  4. Great post,

    I took too long to figure out how to price my projects, but after a while I also got this hourly rate, and, now I have some different hour bases according by the project or the client.

    • Nina,

      Agreed — location, project size, client size, and project reach (local, regional, national, international, global) all can be determining factors when pricing!

      Thanks for the tip!

      April

  5. Thanks for this post. This is very useful because I struggle with my pricing.

  6. “price per project based on a value-based hourly rate”

    Not at all silly. In fact, my company also charge client on this basis. I actually thought this is how majority of professionals charge in our industry.

    I believe this method is the best out there. If client says something like “You will take longer hour to finish this task” then show him a schedule. We usually do that. We create a schedule of task and when it will start how much time each phase in the process will take and when will be the deadline. At least, that’s how we roll.

    • Prestop,

      Maybe I’m more mainstream than I realized! 🙂

      I definitely believe in setting milestones, especially for larger/longer projects. This keeps you on track and not cramming like crazy (and not sleeping) at the end of a project, and it also keeps your client honest in the work they have to do. In many of my projects with soft deadlines, my client’s lack of responsiveness causes missed deadlines and delayed projects rather than anything on my end.

      Thanks for sharing!

      April

  7. Great post April and thank you. I’ve had a difficult time with pricing and usually estimated too low, especially when working with panel organizations during the proofing process. A few months ago, I signed up with Free Agent and can track everything I do with detail. I can pull an interim time card and detail it by date, task and time spent. It’s really helped a lot and made the client much more aware of time involved—especially edits and proofreading that could have been done before.

    Before this time tracking software, I had a few projects that almost felt like I should start paying my client.

    • Hi Lori,

      Sounds like you’ve found a great tool for both pricing and time management! You can see where in the process you need a lot of time, and which tasks are pretty simple. That goes a LONG way in feeling like you’ve been fairly compensated for a job well done.

      I’ll check it out — I’ve always found time tracking to be a detail I’m not terribly good at even though I’m fairly good at estimating overall project time.

      Thanks for sharing!

      April

  8. Great post April, thank you. I am an amateur designer, I mainly do stuff for friends and family and when it comes to ‘how much’ I kind of freeze! Is there a ball park hourly rate?,
    Graeme

    • Graeme,

      There are about 100 factors (if not more) that affect what you charge. I’d argue in the US, anything less than $25/hr is cheating yourself. When I worked a “real” job with crappy benefits, I made $17/hr, so $25/hr is like the very least to compensate for the benefits I’m not receiving anymore. Once you gain experience and confidence (and clients who can afford you), you definitely should raise your rates.

      Also a big factor is, being brutally honest here, how good you are. If you’re putting out stellar stuff, your rate should be on the high end. If you’re average, start lower and raise your rates as you improve. If your quality just isn’t there yet, that’s when you do personal/pro bono work to improve your skill set to a point that you can realistically charge someone for your work.

      I urge you to snag a copy of “How Much Should I Charge?” — it’ll help you determine what you need to charge to earn a profit. It’ll also help you with the intangibles…your location, your clients, your experience, how other pros charge, etc.

      Good luck!

      April

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  1. […] How I created a simple pricing process that removed stress and boosted profits – Pricing is super-hard. You’re thrilled that someone wants to hire you, and then you obsess over creating a proposal. And before you even get to the panicky part about what the client will think about the final numbers, you have to actually determine what final number feels right to you. […]

  2. […] I will quote a flat fee on a project but include language that explains that a certain additional hourly rate will be applied to work done outside the scope of the original project or beyond a certain number […]