How to Set Your Rate as a Designer

How to Set Your Rate as a Designer

Here’s to a new year in the wonderful world of design! To start it off right, maybe now’s the time to figure out one question once and for all: How the heck do you charge for your work?

It Hurts to Not Have Good Pricing in Place

Whether you’re an independent contractor or a new firm, setting your price can be filled with uncertainty. If you charge too much—even if you clarify that you’re open to negotiate—you could lose work that you need. If you don’t charge enough… well, lots of things can go wrong. For example:

You could set yourself up to be undervalued. This is an intangible side effect, but it could manifest itself in making your design process harder. Your input can be questioned more and your expertise valued less. A client who works with you at a low rate could refer you to other potential clients who expect the same rate. You’ll probably resent every snag that comes up because you aren’t getting paid enough.

Whether you end up bidding out a flat fee or charging by the hour, landing on an hourly rate is the first major step in setting a price.

You’ve Got to Figure Out Your Hourly Rate

An analog clock on a wall
Image courtesy of Gynti.

More goes into it than how much you think a client will pay—though this is admittedly something to consider, especially for beginners needing to build their portfolios.

One way to determine your hourly rate—a very logical and methodical way (and one I most certainly did not use when I stumbled into freelancing)—is to look at what your expenses will be. These include but are not limited to:

  • Salary
  • Insurance (liability, health)
  • Other employee benefits
  • Employer taxes (freelancers, remember you pay more in taxes since you don’t have an employer covering these)
  • Office rent
  • Utilities, phone, Internet
  • Office supplies
  • Advertising and marketing expenses
  • Business travel and entertaining clients
  • Legal and accounting services
  • Business taxes and licenses

It’s a long list, huh?

From there, you can estimate how many billable hours you can manage in a year and divide your total costs by that number.

Factor in What Others are Charging and How Much Experience You Have

The approach many freelancers use to set their prices is to try to be competitive with other freelancers in their field are charging in their region. (It’s also a good idea to still check your prices against others’ if you did find your number using the logical approach described above.)

If you have friends in the industry, compare notes. Note that we did say “friends,” not “acquaintances.” Not everyone is comfortable talking about money.

Don’t forget to factor in your experience. You can’t be overly impressed with your work and expect people to pay exorbitant prices if you don’t have the experience to back it up. Are you two years out of school? Don’t expect to charge much more than the average designer. To earn more money, you’ll have to earn your stripes first.

Remember that you can adjust your rate if what you’re charging right now is no longer a fit for your business. If you get a referral after you’ve upped your price and you’re worried they’ll compare notes, just say, “My new price… ” or “My rates increased this year to… ” This strategy works well with return clients you haven’t seen in a while.

Is it Time to Move on to a Flat Rate?

a receipt for bike repairs taped to the frame
Image courtesy of Jason Finch

After spending lots of time in the industry, you’ll have a pretty good idea of how many hours, say, a website will take, especially once you’ve had an in-depth conversation with a potential client to define the scope of the project. Simply multiply the number of projected hours by your rate.

There are a couple of benefits to setting a flat rate. For one, invoicing is a cinch. Another is that a potential client knows exactly what they’re signing up for. The only caveat with this is that you must must MUST clearly outline the scope of the project. For example, if outside costs, like stock photography or hosting, are not included, make that clear.

Of course, you could end up eating a lot of hours this way. If things go really badly, you could lose out on a flat fee. You have to keep a good reputation, and, hey, you’re a nice person. So if the client is super unhappy, you’ll do what you can to make things better. But this can occasionally take a bite out of your hours.

Track ALL of Your Time

Even if it feels too depressing to figure out what you’re making per hour on a project that you underbid just so you could land it, track your time. And don’t undercut yourself by saying, “I’ll just throw this in for free.”

No. Write it down. Even if you decide to discount the amount later, track it now!

Why? Because you need to know how many hours you’ve put in on your work. That way, the next time you try to estimate how much time a project will take, you’ll have a better grasp of what you’ll actually need.

In the end, pricing is a lot like design—it’s subjective. Decide on a number you feel comfortable saying out loud, say it with confidence, and continue to adjust as necessary.

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