Thursday, January 29th 2015 Thoughts
I started designing when I was eleven, and if anyone told me that
17 18 years later I’d be running a business from all of that late-night-not-sleeping-for-days work, I probably would have looked at you like you belonged in an asylum. I did it because I loved it, and so when it came to the point that I started charging my prices were really low. I didn’t really see the value in what I was doing, or the service that I was providing, but I wish someone had told me. The endless people who paid $40k+ tuitions to learn what I had taught myself, the people who go to work at 9-5 jobs (or for themselves) making a living doing… exactly what I was doing as a nerdy teenager in between gaming sessions with my sister and my dad. So when it came time for me to price myself… it wasn’t pretty.
I was doing something I loved, something I taught myself, not something I trained for, or went to school for – what was the real value in that?
In truth, even now, after I raised my prices at the beginning of the year – I’m still underpricing myself. In reality most designers who do the same thing I do charge upwards of $2k+ more. While I plan on slowly increasing my prices just a bit more so that it puts me in a more comfortable position with what I’m earning, there are a ton of things to keep in mind when I get around to doing so.
Main Things to Keep in Mind
For me, the biggest factor is that this isn’t a side job. Designing isn’t something that I do on the side in between time that I’m in school, or working another job. I get up in the morning, I eat breakfast, I check my email and I create a to-do list for the day. Then I spend the next 7+ hours consulting with clients, answering emails, and designing. So the prices that I charge have to be able to cover everything because there isn’t anything else that’s going to help do that. If you do have another job (or a roommate/spouse), then you can play a little bit more with your prices since your entire cost of living isn’t dependant just on your freelancing.
My second biggest concern is affordability. Working for myself means that I don’t have a lot of overhead, I don’t have employees, I don’t have an office building, and I also don’t have an addiction to coffee, so that’s good haha. The only thing I really have to cover is my computer, a good chair, Photoshop, my planner and pens and pencils – that’s really the extent of it. So, when I think about my prices I try to keep an idea of what my target audience/client can afford. Something that I’ve said time and time again, and that I continually stand by is that: There’s no use in charging something your client can’t afford. Sure, there are people who will save for months and dig around in their couch cushions – but I’d rather my clients not be in the hole after working with me. As I mentioned though, I do have bills, and so somewhere in the mix I have to be able to level affordability with the ability to pay my bills.
Along with bills and being affordable to your target market/client there are a handful of other things to keep in mind when pricing your services. Such as:
Cost of Living – This is the biggest thing and it ties into your bills. What is your Cost of Living? Do you have a rent? Electric bill? Water? How about a phone bill? Car? All of the things that you need to live your life as you’re accustomed to needs to be factored in. A great way to figure out the BASE of what you should be charging is to add all of these together. This will give you an idea of what you need, at an absolute, to slide by. For instance, say your monthly bills look like:
- Rent: $600
- Misc Bills (water, electricity, internet, etc): $400
- Car: $300
- Gas: $150 (or $10,000 if you have a truck that only gets fed diesel)
- Insurance: $200
- Groceries: $300
- Phone: $150
- Total = $2100 (and you know I’m forgetting SOMETHING)
That means yearly, you need to bring in AT LEAST $25,200 – and that’s not taking into consideration vacation time for the holidays (ie days you won’t be working), the weekends, travel expenses, or your taxes.
- Time – What is your time worth to you? How much time do you usually spend (average) on whatever it is you do? How many of those things can you realistically do a month? This will help you figure out what you need to charge at a base, per project, in order to accomplish your yearly financial goals.
- Experience – What experience do you have? Did you go to school, are you self-taught, etc? Generally, in my opinion – while school doesn’t make you better, traditionally taught people should charge a little more because you know… loans.
- Overhead – For freelancers this is generally pretty low considering you can build your own computer for around $900 (and is better than most factory stocked computers, and yes, even Apple products), and then you’re only replacing pieces every few years rather than the entire computer. Planners, external hard drives, office chairs and supplies. There’s not a ton but these need to be factored in.
My product has a higher value to the client, so I should charge more, right?
This is something that I’ve been seeing A LOT lately – people charging crazy prices just because of the value of the product to their client. I get that – you do a website for a wedding photographer and that wedding photographer charges $4k per shoot – you should probably up your price a little, right? (Same goes for like Lawyers or something, yeah?) The problem with this is that you don’t know what that wedding photographer’s bookings look like, you also don’t know what their living expenses are – just like you they have to be able to make a living and charging $4k for a website just because you can… isn’t really the way to go about it.
Generally when you have higher profile clients, and clients who are in the business of getting paid well, you do have a little bit of room to wiggle – and most of the time these are going to be the clients you can charge EXACTLY what you want to be paid. However, make sure that this in someway comes back around to what you need to live (or take that vacation to Ireland you’ve always wanted) and not some arbitrary number that you put out there because ‘hey, they can afford it.’ Remember your clients are people too, they have expenses, and they need to be able to live as well.
How underpricing and overpricing yourself hurts more than just you
Both of these points (underpricing and overpricing) is a lot of what I, and other people I know, are struggling with now.
When I see someone doing exactly what I do and charging $50 for it, it makes me want to rip out my hair slowly, and then continue to my fingernails. The effect that that has and why it bothers me is because upon seeing those prices, people are going to expect ALL designers to have prices like that – and when they see the prices I have (or other designers whose prices are even higher) it’s going to seem astronomically different to them. Why pay $800, when I can pay $50? And when it comes to that question there’s a lot of things to keep in mind, but the most important one is something we’ve already touched on:
- Experience – This is the biggie. While there are some amazingly talented aspiring designers out there, nothing can compensate for experience. When I was doing development I had been working with WordPress for ten years, and HTML/CSS for even longer – and in doing so I’ve run into the errors and mistakes that we often do over and over and over again. That means that IF that error pops up, I know how to solve it already – I know where the problem is, and I know how to get rid of it.
And while I understand not having experience, because we all start somewhere, and having an ample amount of time (I was once a teenager, I promise) what pricing yourself too low does is it undermines and undervalues those who have been doing this for so much longer, and do it as a main source of income. You also do the same thing to yourself, starting with no professional experience (we all did!) doesn’t mean you have to charge pennies – it means that everything you’ve learned you’ve put your sweat and tears into. I know those feelings, leaning your head down on your desk, with tears in the corner of your eyes because DAMN IT WHY ISN’T IT WORKING?!
When you charge higher prices, even as someone who is just starting out – as long as you know the basics of what you’re doing – you’re asking the client to pay for that frustration, and the time it took you to be able to deliver them an adequate (and hopefully better than adequate) product. You’re not saying “I have 30 years of experience, pay me!” – you’re saying “I worked really hard on this, my time is valuable, and I deserve to be adequately compensated for my work.” No, you shouldn’t be charging the same prices as someone with 10+ years of experience, but you also shouldn’t be charging the equivalent of what someone would get working 5 hours at McDonalds.
On the other hand, overpricing also creates an issue, because the phrase “You get what you pay for,” is still something that is prevalent in our world. People think that lower prices equal a lower product, and while we all know that’s not always true – it creates this really big gap for people who get stuck in between people who have the “Why pay more,” standpoint and the “You get what you pay for,” standpoint. For someone like myself, who highly values affordability to my client, I’m often faced with two options from people:
- Why pay your prices, when I can pay less?
- Well you don’t charge $4k like this other totally professional designer, so you must have a lesser quality product.
And I see people being faced with that issue SO often, and they get stuck in this runt where they can’t raise their prices because then people will just go to someone cheaper, and they can’t lower them because they’re already so low that they have trouble skating by. The other option is to start to market yourself to a different niche, but that’s not as simple as it may seem and is a whole other post.
Because I feel like this post has grown a mind of it’s own… If you’re a freelancer who is just starting out, you may still be learning, but you’re at a point where you get to charge people for that learning ability. Your time, and your effort is WORTH being paid adequately for – at the very, very, very least – make sure you’re paying yourself at least minimum wage. If you were a company trying to pay your employees the prices you’re paying yourself… you’d be in jail.
To established freelancers, remember there are people coming in after you, and your clients have lives they need to be able to live. They shouldn’t be paying for the building of your extravagant beach home in the Carolina’s, just because. Make sure you’re charging what you need to live, with your experience and time factored in, but be respectful of their business and their time like you expect them to be of yours.
To all of the freelancers ‘stuck’ in between, keep going. You’ll get there.