Trainer, author, consultant and coach Ted Leonhardt offers essential advice on fees
I get this question as often as I get the question “How do I get more work?” When we’re new to the game, it’s hard to get work. Once we get it, it’s hard to feel confident about what to charge.
How much we charge is linked to how we charge and to what clients are accustomed to paying at the moment. There are several common fee structures in design: billing by project, by hour, by retainer and finally by salary. If you are an experienced web designer working solo or leading a firm, it’s best to bill based on project fees. You should know what it will take you to do the project and what it will cost.
Clients prefer project fees because they want to buy the services that will get them the results they want. In fact, when asked what your hourly rates are, you can say, “In my experience, clients want to buy results, not hours”.
There are several common fee structures in design: billing by project, by hour, by retainer and finally by salary
You’re probably thinking, “What if my client’s changes take more time than we’ve allowed in our estimate?” Always a good question. Change orders are the answer. Anything beyond the original scope of work is a change that you need to be compensated for in addition to the agreed-on project fee. And change orders can be very profitable because you can charge your full rates for them, where you may have had to discount your rates to win the project.
The good side of change orders is the extra fees. The drawback is they can feel punitive to your client, and you have to inform and get your client’s permission before incurring the costs of the extra work. If you don’t, an ugly situation over extra fees can ruin the relationship.
One solution to this problem is to include an iterative process fee in your initial pricing. At the outset of the project, tell the client that in addition to the project fees, you will be billing them at an hourly rate for work that is outside of the original scope and that in your experience, people are iterative – that once clients see something for the first time, they always see ways that it can be improved.
That’s why project quotes include three rounds of changes, and why three different design directions are included at the outset. In addition to those safety nets, the iterative process fee (billed hourly and capped at 20 per cent of the project fee), covers unpredictable changes. Let your client know that you’ll tell them in advance when you need to use that fee.
In terms of hourly billing, the only time I recommend it is when you have no idea what it will take to do the project. For instance, when you’re just starting out and haven’t completed a similar project or when you’re going to be working in-house on a variety of projects.
The upside of hourly is that you’re protected from estimating a project too low and having to stick to your bargain. The downside is you’ll never get the windfall of completing a project in record time and holding on to the whole fee.
UI/UX designers just entering the market from well-thought-of universities on the West Coast of the US are getting starting salaries of over $100,000 (£69,000)
And what about retainers? I’ve never liked retainers – set fees paid in advance for work to be specified later – because clients expect to get a bargain if they agree to pay a fixed fee every month. They quite naturally will want a benefit for providing you with guaranteed cash flow. But some people love the feeling of security. I understand that. I’d rather make a little more money and take the risk.
For most people and positions, salaries is the lowest rung of the fee ladder. They want you in-house so they can pay you less than they’d pay for freelance or project fees. UI/UX designers just entering the market from well-thought-of universities on the West Coast of the US are getting starting salaries of over $100,000 (£69,000). And I did just help a creative negotiate a $300,000 (£206,860) salary. So sometimes there is gold in those hills.
What are clients paying now? To find out current pricing, I do some basic research. I start with online searches looking for relevant pricing guides, industry associations, trade magazines and blogs, and news coverage of fees charged on public projects. Next I turn to friends and colleagues, my experience on past gigs and how much time and other costs will the assignment require. Currently, website design services are earning in these ranges: $4,000 (£2,750) to over $100,000 (£69,000) in project fees, $60 (£41) to $200 (£138) in hourly rates, $1,000 (£690) to $10,000 (£6,900) in monthly retainers and $80,000 (£55,163) to $300,000 (£206,860) in yearly salaries.These amounts are based on ranges that clients, who I’ve helped with various issues in the last few months, are charging.
Remember, take your time to decide the best pricing structure for you and to do your research on what clients are currently paying – then make the ask.