“When you undervalue what you do, the world will undervalue who you are.”
Money. Even writing the word seems like the antithesis of being a creative. In an ideal world, others should just understand the tremendous value you bring to the marketplace and be willing to pay you some solid money to have the privilege to purchase your work.
But money is a fact of life. Even if you are used to living on Top Ramen and think adding a meat substitute is a splurge, you still need supplies and a place to express your creativity. Sadly, there’s no magic website you can go to where you can enter a description of what you’re working on and out will pop a price that a customer will jump at the chance to pay.
It’s worse for newcomers. Anxious to get work, any work, they typically go right to the bottom of the scale, figuring that a client will jump at the low price, not knowing that the market usually understands all too well that in the end, you get what you pay for.
So the experimentation begins. Your pricing is all over the place as you try to find the sweet spot, only to find that there is no sweet spot. You may have initially tried to go with a per-hour price, only to find that your customer balked at it because they didn’t know the total price upfront. So you try the fixed cost route, only to find that the client is sucking the life out of your profit margin with endless changes and additions.
In some creative pursuits, it’s tough to figure out what your talent is worth. If you’re a painter or sculptor, how can you figure out what price a piece is worth? First, you’re probably way too close to it to set an objective price, and second, it’s pretty hard to figure out a profit on something that may have taken a year or more to create.
Then there’s the in-between, where the market dictates pricing. This is particularly true on gig worker sites where individuals or small businesses pitch their services while simultaneously lowering their bids because some newbie arrives, offering a rock bottom price that no one in their right mind would charge. Worse, some offer to do the work for free, using a project to build their credibility and resume. How can anyone compete with FREE?
Still, there are some ways to set prices. Some of it is driven by the market itself. Some creative sectors have specific pricing, such as working on a film crew where unions and industry norms may dictate fees. Others are the Wild West, with pricing strategies all over the board.
In this lesson, we will focus on setting pricing as a business would. After all, that’s what this Creative Academy is all about – harnessing all the skill, talent and creativity to build a sustainable business model that places market value on your creativity and brings business and money through the door.
Introduction: Are You Ready?
1. Thinking Like a Business
2. Business Structures
3. Access to Capital
4. Creating Revenue Streams
6. Finding Customers
8. Creating a Winning Pitch
9. Effective Negotiation
10. Intellectual Property
11. Managing Your Money
12. Going Global
First, let’s note that this lesson is pretty generalized since there are hundreds of creative pursuits, all of which have different pricing strategies, standards and traditions. For example, asking for an hourly rate as a busker with a hat at their feet probably isn’t realistic, any more than a ballerina with the Pacific Northwest Ballet will appreciate coins being tossed on stage as she dances.
We’ll try to cover a lot of ground, but most of this applies to gig workers, small creative firms, event and film production companies, gamer and app designers, musicians, writers, artists and anyone else who works per project or creates a work that has a market and audience that is willing to pay them for their talent.
With this in mind, we’ll start with some of the basics, things like charging per hour vs. per project. Then we’ll move into some other pricing strategies and ways to ensure that you actually get paid for your work, getting a premium price for it as you gain stature and build clientele.
Per hour is a dead end
Your plumber may charge you by the hour but working by the hour as a creative isn’t the way you build a business or operate as one. This is what freelancers do when they are doing a side gig. It is not a smart pricing strategy.
The reason this doesn’t work is that it’s tough to factor in all the expenses you have as a company without your hourly rate spiraling off into absurdity. If your client is making $60 an hour in her job, why would she ever pay you $125 an hour to write a brochure or $300 an hour to consult with her company?
The problem with going this route is two-fold. First, the client never truly knows what the final bill will be. On the other hand, your competitors may be offering a fixed-cost price, which automatically puts them at a competitive advantage. The second problem was noted earlier. At some point, your hourly rate begins to affect the client’s mindset as they try to resolve the conflict between what they make an hour and what you make an hour. At what point is your time more valuable than your client’s?
As a business, you end up painting yourself into a corner, at least if you’re honest about the hours you spend working on a client’s project. Let’s say, for instance, that you charge $85 an hour to design a website. The project your client asked you to work on took four hours, because you’re crazy good at WordPress. The total bill is $340, which is not what anyone in their right mind would charge for a website, even a basic one.
So two things happen. Though they love the site, the client devalues your skill and talent because it didn’t cost enough. They had expected to pay the $3,500 their friend just paid for their site. Sure, they may think they got a great deal, but that carries the additional risk that they will recommend you to everyone in their professional network, and you’re swamped with requests to do similar work at that same rock-bottom price.
The short version: Unless you are employed by someone else or work in a trade, never go hourly! There are far better ways to think about pricing for your business. Hourly is a rookie mistake that many creatives make, but it will never lead you to a better life and worse, you may not be taken seriously.
Going the per-project route
A better way to think about your business pricing is to go with a per-project model. This is based on a simple fact. Clients and customers don’t like surprises. They want to make predictable expenditures. You want a predictable income. In the end, your client cares about one thing – that what you deliver to them is what they had in mind, that it solved a problem they had – that your work of art matched their décor or that their kid really liked the carnival that showed up in their backyard.
Clients don’t care if you spend 20 minutes or 20 hours to complete the job they hired you to do. They want the job done well, delivered on time and for the price they expected to pay.
This creates some challenges, of course. There is a general tendency in society to place less value on creative pursuits. Everyone thinks they can write, so how can a writing project cost so much? They have no idea of the time that goes into a project, from the ideation and research to the time spent making sure everything is as perfect as it can be because the end result isn’t just a paycheck; it is part of us. It is something we created that more than likely existed before. It has your DNA in it, literally if you are a sculptor or potter.
As such, only you can understand its true value in the marketplace. The challenge then is to convince someone else that they are getting a real bargain when they hire you to do some work.
Let’s look at the website project again. You’ve taken some time to research the market and what your competitors are charging for similar projects. In speaking with the client, you understand that they want a relatively simple site, and it will probably only take you 15 hours to build. In speaking with your client, you come to find that they have a budget somewhere between $2,500 and $4,000.
So you go to work on your pitch. You start by pointing out that you stand behind all your work and that you won’t be happy until the client is happy. This will instantly resonate with your client since, ultimately, they don’t want to have to worry about a website as they have 20 other things on their plate. In essence, your proposal is selling peace of mind as much as it is an effective website.
If you’ve been in business a while and have a lot of work to show, you could pitch at a higher level if you can add value to the proposal (more on this later). If your portfolio of previous work is a little thin, you could start out at the lower end of their comfort level. You can still offer some additional bells and whistles for additional money, but starting on the lower end may get you shortlisted for the project if they are looking at other companies as well.
Pricing by project allows you the freedom to make more money and work less on a particular project. The clock isn’t running all the time, so if you get in a groove and crank things out faster than you thought, you don’t have to fudge the hours or report the actual ones and take less for the job.
Going on retainer
If you work in specific creative fields such as graphic design, writing, programming, web design, etc., you could consider going the retainer route. Rather than the client paying for every project you do for them, you set up a monthly retainer. Retainers are paid in advance each month. Any overages in terms of work ordered that is beyond the time covered in the retainer are itemized and billed the following month.
This has two distinct benefits. First, your creative business gets a steady flow of predictable income, which helps even out the amount of cash coming into your bank account. Plus, it’s paid in advance, not after the fact, so you always know you’re going to get paid. The benefit to the client is that there is more flexibility in the type of projects that the retainer fee can cover, and any overages that will appear in the following month can be agreed to before the work begins.