A guide to assigning the right value to what you do.
You can learn a lot about the business end of design and illustration by trial and error and reading articles and books, but one thing that is seemingly impossible to get a grasp on is pricing. Whether you are a student, a young designer, or a seasoned pro, pricing jobs can be one of the most frustrating parts of the creative process. The cost of creative work is shrouded in mystery and very subjective. While it makes some people uncomfortable to talk about art and money together (as we all know creatives are really meant to suffer through life and die penniless), they are incredibly similar when you think about it. What is money other than dirty rectangles of pressed tree pulp? Because we all believe it has value it is valuable.
I know you’re all dying for me to get down to brass tacks and explain how to price for each and every design situation, but what follows won’t be anywhere close to a definitive guide, just some of my own opinions and words of wisdom on how to avoid screwing yourself and the rest of us over by doing too much work for too little pay. We’re in charge of assigning value to what we do.
1. Pricing hourly punishes efficiency.
So this is a pretty bold statement and it should be taken with a grain of salt. Hourly pricing can be incredibly advantageous in certain circumstances, like when you receive that first email from potential clients and, through their thousand-word introductory essay lousy with emoticons and unnecessarily capitalized words, they paint a clear picture that they are completely batshit insane. You know that there will be many rounds of revision in your future and that over the course of working together you’ll be as much a therapist as a designer. Totaling those 500 hours at whatever your hourly rate is will equal a pretty good pay day.
It’s more than just crazy people that can make hourly pricing worthwhile though--pricing any long term design project hourly can be advantageous, as long as you communicate clearly along the way what kind of hours you’re devoting to the project. If the first time your client sees your total hours is on the job-concluding invoice, a world of hurt awaits. It will be like being audited except somehow more unpleasant. Be prepared to forward them every approving email, to itemize every minute spent on the website / book / whatever.
Pricing hourly seems much easier than flat-rate pricing, but because you have to give clients a ballpark full-cost price upfront (the total hours you plan to work x hourly rate), you can end up in a very tough spot if you don’t have a firm grasp on how long it takes you to do things. You’re nearing the halfway point in the project and are already over the total hours you’re contractually committed to. What does this mean? It almost never means that you’re paid double your original fee. Even if you can eke out a little extra money from the client, your hourly rate will look more like the one you were earning at the Blue Comet Diner at age 16.
So once you have a grip on your work flow and become more and more efficient, hourly pricing makes perfect sense, right? You know how long it will take you to do something, you price for it, everyone is happy.
Unfortunately this is a half-truth. Sure you’re getting paid well enough and certainly making more hourly than you probably were at your old day job, but I’ll paint a picture as to why this is a flawed pricing model: Two designers are hired to produce posters for a music festival. Both have the same hourly rate of $100 per hour (a reasonable rate for someone who’s been in the biz for a few years and has a few accolades under their belt), but one designer works much faster than the other. Both are equally talented, but one is far more efficient. At the end of the job, the designers turn in their invoices--he worked on it for a total of 18 hours and she a total of seven hours. He is paid a respectable fee of $1,800 and she $700 for producing the same result. Your rational mind says “Well, he did work more hours than her...” but part of you knows that this isn’t completely fair. This becomes epically clear when working for big name clients.
Here’s another scenario: You’re hired to do a monogram for a giant international company. They’ll want to use this monogram on everything from price tags to billboards to TV spots and they want to use it forever (in perpetuity until the sun explodes). They have a pretty clear idea of what they want and you know that it will take about 10 hours total with the initial exploration, back and forth revisions, and finalizing. Even if your hourly rate is $250 / hour (a pretty high rate), the total you’re earning for that logo is $2,500. If you think that is a good price for a professional designer to earn crafting what is essentially a logo for a huge company, you are mistaken. So if you aren’t pricing hourly, how DO you price?
2. Licensing and Rights-Management
Most designers take into account the hours they’ll put into a project when coming up with a price, but the seasoned professionals use it as part of the way they quote a project, and not as the only defining factor. Once you feel comfortable with your hourly rate and can somewhat accurately predict how long it will take you to do something, you have to consider a few other things that will boost your prices and turn this design hobby of yours into an actual sustainable career.
As a designer, when you hear the term “rights-management,” you’re brought back to your intern days doing photo research, trying to find non-awful royalty-free images after your boss told you all the rights-managed photos were way too expensive. How does rights-management apply to a designer or illustrator? Photographers aren’t the only ones able to manage the rights of their work. You inherently own the rights to anything you create, this is why it’s incredibly important to read every contract for every job. Often times clients want more rights than what they are willing to pay for--the biggest red flag word being “work for hire.” This means that the client owns all the rights to anything you create for them. They essentially, legally, become the author of your work.
As a graphic designer, work for hire is a bit more acceptable in many situations since you’re not authoring new content as much as creating a beautiful context for other people’s content (speaking specifically about any sort of layout design). Where rights management usually comes into play is in the context of identity work, and this is why logos are priced the way they are. It’s understood that the clients will need the rights to the mark you create so that they can trademark it and use it on unlimited applications, so when pricing for a logo you should take that into account. In addition to a fair hourly rate, clients pay for the rights to use that logo in an unlimited capacity.
Aside from giving away all the rights to your work for an additional (hopefully ginormous) fee, you can give them away for limited periods of time or for limited applications by licensing work to clients. There are fewer ways to do this as a graphic designer, but licensing is an incredibly (incredibly!) important part of being an illustrator or letterer. Of the couple hundred client projects I’ve done over the past few years, very few of them have required a full buyout of all rights, and the ones that have required them paid my rent for the better part of a year. Here are some factors that go into pricing a job based on licensing:
How long does the client want to license the artwork for? One month? One year? Two years? Five years? In perpetuity?
In what context is the artwork going to be used? Do they have the rights to use it on anything? In print only? Web only? Broadcast? Tattooed on their faces?
If the job is reprinted, will there be an additional fee for a reprint?
Do they want an unlimited license or do they need to own the rights?
Are these rights transferrable if the company is sold?
What kind of company is it? Is it for a Mom-and-Pop business, a multi-billion dollar corporation or something in between?
By now your head must be spinning. This is some complicated stuff, right? Maybe, but this is how you can actually make a living doing illustration and design and maybe even eventually quit your but-they-give-me-health-insurance barista job. What follows is a fictional pricing example to show how powerful licensing can be. I’m going to write it in the context of lettering, which is priced essentially the same as illustration. Graphic designers should still pay attention though, because when I talk about buyout pricing, that’s essentially what you’re going to be thinking about when pricing logos. My price points will be higher than what a fresh-faced n00b can probably charge, but should at least illustrate how much of an impact licensing can have on the cost of artwork.
3. The Correspondence
Dear Ms. Hische,
I’m an art director at Awesome Agency Inc, working on a campaign for an international clothing brand (on par with The Gap) and am writing to gauge your interest in creating artwork for us. We need one five-word phrase illustrated in a script style. The artwork should be highly illustrative, attached are some examples of work you and others have done that are in the ballpark of what we want for the campaign. If this sounds appealing to you, please send us a quote by end of day tomorrow so that we can present your work, along with a few others we are gathering quotes from, to the client. Thanks so much and look forward to working with you!
They didn’t give me much to go on here aside from the actual work I’m creating. It sounds like a cool job, but I’m going to need to do some investigating before giving a proper quote. The biggest young designer mistake here would be to quote a flat fee without finding out what kind of usage rights they want.
Thanks so much for thinking of me Arthur! I’ll put together a quote this afternoon. Do you want me to price for every usage scenario or do you have some specific uses in mind?
All the best,
Usually here they’d write back with some very, very specific uses in mind, which makes it a bit easier to quote, but sometimes you’ll get a letter that looks something like this:
Great to hear back from you! We’re still in the exploratory stages of the project, so we can’t give specific usage situations yet. Please quote for creation of artwork for presentation only and for a few ballpark usages.
4. What We Know
This is for a big international clothing company.
They are gathering prices from a few different people. They’ll present several artists to the client, who will chose based on style or lowest price depending on what the client’s priority is.
They want a price for presentation only. This means you create the artwork and they only have the right to show it around in-house and to the client, NOT to use it in any way for their campaign.
They want a number of usage scenarios.This is on top of that initial creation / presentation fee.
5. Pricing for Presentation
If you’ve done any editorial illustration work (magazines and newspapers), you know that the rates are pretty standard across the board: $250 to $500 for a spot illustration, $500 to $750 for a half page, $1,000 to $1,500 for a full page, $2,000 to $3,000 for a full spread, $1,500 to $3,500 for a cover. These are all pretty normal prices and there are of course magazines that pay higher or lower. I tend to start with these prices in mind when thinking about pricing for “Presentation Only.”
They want a five-word phrase that is highly illustrative, which equates to “a full page illustration” or so. Because this is for advertising and not editorial, adjust your rates depending on the client. This is for a big company, so my presentation-only fee might be somewhere around the $5,000 to $7,000 mark depending on how complicated what they’re after actually is. If this were for a smaller company, the presentation-only fee might be closer to $2,500 or $3,500.
6. Sample Usage Scenarios
If a client doesn’t tell you specifically what usage rights they need, you should make sure there is a good range represented. In this situation, I’m definitely going to price based on the length of time they need it, plus some general examples of what context the artwork will be used in. When you send your quote, it should be broken down as clearly as possible so there is no confusion as to what the clients are paying for in each stage of rights licensing. This would be the quote I would send back:
Below are a few sample quotes for the project. As I did not have much info about what usage rights you needed, we would need to talk specifically about anything not mentioned below once the client has a clearer picture of what they need.
Presentation Only: $7,000
Two to three initial pencil sketches shown, one chosen to be created as final art. After final artwork is presented, the client may request up to two rounds of minor revision. Additional revisions after this point will be billed at $250/hour. If the client chooses to not move forward after pencils are presented, a kill fee of $3,500 will be paid for completion of sketches. If artwork is completed to final, the full fee will be paid.
Usage Scenario 1: +$5,000
The client may use the artwork in magazine and newspaper ads (domestic and international) for a period of one year.
Usage Scenario 2: +$7,500
The client may use the artwork in all print media (domestic and international) including but not limited to magazines, newspapers, point-of-purchase displays, posters, and billboards for a period of one year.
Usage Scenario 3: +$10,000
The client may use the artwork in all print and online media for a period of one year.
Usage Scenario 4: +$14,000
The client may use the artwork in all print media, all online media, and broadcast media for a period of one year.
The client may use the artwork in all media including print, online, and broadcast in perpetuity.
Thanks so much for thinking of me for the project, let me know how these numbers go over and if you need any clarification about the different usage points.
All the best
So this is a pretty basic breakdown, but it gives the agency/client a lot of price points to consider. If I wanted to break it down even further, I would price based on two-year and five-year use and give different prices for U.S. only, North America only, etc. Most importantly, note that all of the usage scenarios are on top of our original presentation only / artwork creation price. The prices are not cumulative in this example quote, so each +$ is only added to the presentation fee. The top price in this scenario is $32,000. These prices might seem completely outrageous to you, but they’re actually pretty reasonable when we take into effect who the clients are and what kind of rights they’ll probably need. If you’re an up-and-comer, your prices might be a bit lower but the percentage markup should remain about the same. Imagine if we had priced this hourly!
7. How do you know if you priced right?
If the clients write back immediately and say, “These numbers look great! We’ll send along a contract for you to go over in a few days!” It probably means your prices are too low. If they write back and try to negotiate you down a little bit, you were probably pretty spot on, and if they write back and say that this is well beyond their budget, you get to decide whether or not you want to figure out a way to work within their budget or whether you want to walk away and take one for the team. When you’re offered a very low budget by a very huge client, you can always feel good about turning it down knowing that you are helping to raise the standards of pricing for others.
8. Why doesn’t anyone ever talk about pricing?
There are a lot of reasons why designers and illustrators are reluctant to talk about pricing, the most obvious being that no one wants to shout their annual income to the masses. Once you start giving away your general prices, it’s not incredibly difficult to add things up and figure out a ballpark of what an individual or company makes in a year. A personal note: don’t assume that the pricing structure above means that I’m swimming in a pile of money. My half-retired dentist father still makes more than I do. The fake job I used as an example above is an advertising job, and I used it as an example because pricing for advertising is one of the darkest arts of all. There are wild differences in pricing from presentation to buyout, and a ton of factors that affect the price. It’s great to surround yourself with friends or more experienced designers that can help you price a job. You can always consult The GAG’s Ethical Guide for Pricing, but definitely use it for ballparking more than definitive numbers.
9. The Pricing Domino Effect
It’s incredibly important for even young designers to always quote respectable prices. It can be very tempting to create artwork for a “cool” company for very little pay and the promise of insane exposure/ an incredible portfolio piece. Every successful designer and illustrator has at one point succumbed to the siren song of the “cool” industries (there are a few “cool” companies that don’t try to take advantage of designers but they are the exception and not the norm). When you are starting your career as a freelancer, it will be incredibly tempting to take on any work that comes along, no matter how unfairly companies are trying to compensate you. Remember that you are talented and that your talent has value and that ultimately it is up to you to determine how much people value your talent. By helping keep pricing standards high, you not only help yourself by avoiding the title of “The Poor Man’s Marian Bantjes” (essentially the creative equivalent of a knock-off handbag), you also help every other young designer struggling to get paid out there, and help every designer that came before you to continue making a living doing what they love.