During my time owning a business and serving clients, I have been fascinated by the topic of pricing and rates. So much so, I wrote a book about it!
Historically, creative people struggle with pricing their services and work; with female-identifying people and minorities perpetuating the pay gap. I have been single-handedly telling creatives to charge more for their services for more than 10 years!
As a client, it is also important for you to understand whether the way your project is being billed, in order to get the best value for your budget.
Hourly rates: great for both the service provider and the client – sometimes.
Hourly rates are a flat fee charged for every hour or fraction spent on your project. If you’re an early-career creative, the jump to use hourly rates comes from comparing your side gig or new freelance business to the income you used to earn as a full- or part-time employee or contractor.
If you have selected to charge hourly rates, I have some news for you. Eventually, you will become faster at doing the work you do for clients, and you will start losing money if you’re charging by the hour. Because a task that used to take 3 hours, now takes 2; you’re now financially penalized for becoming better at your job.
If you’re a client looking to hire a contractor on a per-hour basis, you will know you’re only paying for the time the contractor is reportedly working on your project. If you have a really good idea of the work product you’re looking for and the deadline to use it: “we need to create one landing page by next Wednesday to promote next month’s event,” you will get great value from an hourly rate.
If you can’t place parameters on the completed project: “we need to update 10 case studies, but we don’t have a timeline and we might want to write some new ones too,” hourly pricing can make your project extremely expensive since it is very hard to predict what updating each of those case studies will entail, and exactly how many new ones you need.
Project rates: a balanced way to pay for creative work.
Project rates are a flat fee charged based on a document called the scope of work, that outlines exactly what deliverables you will receive, the timeframe to receive them, and how any unexpected elements will be handled.
Project rates require a little more sophistication from the service provider. You should have performed a number of these in order to be able to estimate how long everything will take, the kinds of issues that arise with the kind of project and how long they take to resolve, as well as be able to predict the average amount of time the project will take to complete. That information is usually compiled into a project timeline with milestones tied to completion rates that you can share with your client at the proposal stage.
If you’re a client looking to hire a contractor for a project, you will know exactly how the budget will be utilized and have a clear expectation of when the project will be completed; as well as an idea of the steps it will take to get from beginning to end. A great sample of a project rate project is a website redesign. It has clear stages: design, development, quality assurance, launch.
If you’re a client looking to hire for a project without a clear completion rate, or without a clear scope of work you might receive better value from a retainer relationship with a client. If your project includes different things like “social media management, paid ads on Instagram and email marketing” that don’t necessarily have a beginning-middle-end process or function more like a periodical activity, you’re better off looking at a retainer relationship.
Retainers: a level-up for the designer, and the best long-term value for a client.
Retainer fees are a flat fee paid to a service provider periodically in exchange for a predetermined scope of work or amount of time.
Retainer rates are great for service providers. If you own your own business, and are trying to grow or maybe hire some employees, retainer rates are the foundation of monthly recurring revenue for your business. A retainer contract means you have guaranteed income for the length of the contract, and you are able to plan your time because you know either the exact list of services OR the amount of time you have contracted out to your client ahead of time; which allows you to plan for things like outsourcing work, selling to other clients, vacations, etc.
If you’re a client looking to hire a contractor, a retainer will usually offer some savings compared to hourly work. Service providers will usually build a price reduction in the cost of their time based on you purchasing in bulk and paying in advance. On the plus side, a retainer can also allow you to outsource an established list of tasks to an outside vendor effectively removing them from your (probably) overloaded plate. You pay in advance for the benefit of the retainer, and at the end of the month you receive a progress report with how all the tasks performed.
If you’re a client who has seasonal needs, you shouldn’t consider a retainer project unless you can guarantee at least 3 months of work to that service provider. As I explained above, service providers count on retainers to make the bulk of their income and plan ahead in time. While it is “technically allowed” to purchase a retainer for only a month or two, I would consider reverting to a project-based pricing if you find you won’t need someone in the long term.
Hopefully, this primer has been helpful in your planning. If you want to discuss a specific project, or a potential retainer, please feel free to reach out to me and schedule a call. I’d love to chat.