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Getting Paid

Lesson 5 from: Design Fundamentals: Getting Started

Justin Seeley

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Lesson Info

5. Getting Paid

Lesson Info

Getting Paid

Let's talk about getting paid because, like I said, that's ultimately what everybody wants to do, right? Everybody wants to get paid. So how do we do that? Because the big question that a lot of people ask me all the time is, Well, I don't understand. Do I do an hourly rate, or do I do a flat fee like I just charge them one big thing up front? Or do I nickel and diamond to death with the hourly rate? And I think that's sort of a bad way to think about, Don't think, but its terms of nickel and dime, because that's not where you're doing. You're charging what you're worth, but when would you do one versus the other? Let's explore that for a second. So with hourly rates, we have a lot of different things that make up good points. For an hourly rate, for instance, you're getting paid for the actual hours that you work as opposed to just something that you deliver. So, for instance, let's say that you worked 150 hours on a project. Well, that could turn out to be a lot of money, depending o...

n what your hourly rate is whereas if you just charged a flat fee, you never know when you break that down in terms of 150 hours. If you divide it by whatever your flat fee is, you might not be getting paid what you're worth and that could be a problem. Also, the client knows that they're not gonna pay an inflated fee up front. Sometimes clients come to you and they're like, I need a logo and you could come up with a number like, Okay, that'll be $5000. Well, people are gonna look at that and be automatically scared off because that sounds like a lot of money. But if you said, well, okay, I charged $75 an hour that sounds a little bit more reasonable off the top of their head. Now they don't know how long that's gonna take. You could certainly estimate for them if you wanted to, but that doesn't necessarily mean that you'd be able to give them an accurate estimate because every logo job is different. But this ensures that the client is a little bit more comfortable because, like I said, there's no gigantic number written out before you even get started. And then finally, it makes it easier down the road if you're on an hourly system to update your work, because if you just do a set fee, I'm gonna charge you 500 bucks for this. When somebody comes back and they need revisions or an update or something like that, what do you do? Charge him another flat fee? No, chances are you're gonna build that by the hour, and that's what hourly billing is all about, making sure that you get to get paid for every time you spend on it. So that's why I like hourly a little bit better, because any time an update or revision comes up, you can charge for that. And it's within the scope of work. There are some drawbacks to hourly rates, however. There's no guarantee for the designer how much they're going to get paid. So if you take two hours to do something, you know when you're only charging 75 bucks an hour, well, it's only 100 bucks, not exactly enough to pay the rent. But if you had charged, let's say $500 for that, maybe that's a little bit better. So you have to decide in the grand scheme of things, what's better for you and how much money you need to make in order to make it. Also, your clients are gonna be unaware of the final cost until the bill comes. That can be somewhat problematic, even though they're not scared by the large number that they see up front. If you start building them for lots of stuff revisions time, you meet with them phone calls, all that kind of stuff that's going to start adding up after a while. And when they get that final bill, they might be even more scared than if they had just seen $5000 or whatever It was up front. So you got to be cognizant of that. And that's why I also when I'm working with clients, if it's an hourly job, I will actually give them billing updates along the way. Or I have my own system that I have on my website where clients can log in and they can actually see a current rundown of what their bill is at any given time. And so having a system in place like that is also very helpful again. Making sure the client is informed of everything you're doing is super important. And that's part of the customer service equation. You need to be willing to have sort of a transparent policy around what you're doing so that the client is never weirded out by anything that you do. Also, the amount of time that you spend on a project might not directly correlate to how much that project is worth. Let's say, for instance, that you do a logo and it's really simple, but the logo is very iconic and takes on a life of its own. That logo is gonna be a lot more valuable to your client, then maybe just two or three hours of work. So I think at the end of the day you need to decide how much your work is worth and whether or not you feel as though it would be better to charge hourly for that or a flat feet. I think that's going to be based on the project. So, for instance, in some cases I will charge a flat fee for logo designs or brand identity packages, whereas if I'm developing a website I'll do something like an hourly rate. It all depends on the final deliver, verbal and what I think that final delivery bull is worth now. Flat fees have their pros as well, and one of the top pros for a flat fee is that the client knows exactly how much they're paying up front. They don't have to worry about you charging them by the hour. They get one number, you stick to the number. That's the number. That's it. Now you're also entitled to a guaranteed payment with a flat fee. Meaning you know exactly what you're getting paid upfront as well, which makes it a little bit easier for you to financially plan out your life because you're gonna get X amount of dollars for X amount of work, and you're gonna be able to put that in the bank right Then you don't have to worry about how much time you build. It also ensures that you're charging what you think the project is worth, so you're not stuck behind the eight ball in terms of how long a project takes. You are in charge of how much it's worth, so if brand identities are more valuable to you or you think they're more valuable to the client. You can charge however much you want for that. The key that I tell people when pricing is that you should charge what you're worth, not what you think other people think you're worth, because that means that you're lowering your standards. You know how good you are. You know what you're good at? And you know how valuable that can be to whatever clients you served. If a client thinks that your too expensive, maybe that's not a client you wanna have. You want people that are coming to you for you. So you charge whatever you think you're worth, period. Now, as far as the cons that come along with doing this, there are a few for one, you run the risk of the job taking longer than you might have thought it should, and therefore you're going to run into the problem of Oh, well, I undercharged because I spent 300 hours on something and if I build hourly, I'd be a rich right now. But that's just something you have to think about. You also have to understand the clients can be turned off by that large number of front. And that's all according to what you think your services are worth. So, for instance, and I'll just give you fictitious example here. If I were to say, OK, I'm gonna charge you 10 grand for a logo, 10 grand for a logo or a brand identity package probably isn't that big of a deal to some larger companies. But if we're talking about a small mom and pop shop that's gonna be a big deal. They're gonna be automatically turned off by that. So I think the key here is to figure out what you think the project is worth and also what you think your target demographic of client is as well. If you're gonna target high end brands, big businesses, things like that, you could probably charge a little bit more because they're willing to spend that to get a great result. When we're talking about smaller businesses, small to medium size businesses, they generally don't want to pay a whole lot for the work that you create. It's just the fact I will live in a small town in Tennessee, and I can tell you that not a lot of people want to spend 10 grand on logo. So for the most part, I've been switching to an hourly based model for that stuff, and I've actually made sure that I keep my clients informed of that all the way through. I've tried flat fees a couple of times, but based on where I live now, it just doesn't work out as well as they used to when I lived in California. So those were also things you have to consider where you are and who you're working with. Also, edits and updates aren't usually factored into the overall price of a flat fee. So if you're charging five grand grand for a logo, how Maney edits Air built into that, that's gonna be up to you ultimately. But chances are you're not really thinking that far ahead, or at least not right now. You should because edits or something that are gonna happen all the time. The client's gonna come back. Everybody knows this one right. The client's gonna make the logo bigger. Make the type more type E. I mean, there's all kinds of weird stuff that clients ask you to do because they don't really understand ah, lot of times what it is that we do. So making sure you build in edits or you have an edit policy like an addendum to the contract that you signed with the client. That's very important. And so for me, anytime it's a flat fee that I'm charging for, whatever the project might be, I always have that flat fee up front. And then I have a section for updates and revisions in the contract that I create. The updates and revisions are generally an hourly based system. Unless I'm selling some sort of maintenance package, which I often do with content marketing and Web design projects, for instance, I'll say, Okay, I'm gonna set up this website for you. It'll be $ for the website, and then I will perform monthly maintenance, quarterly maintenance, whatever they want, and I'll do that for X amount of dollars per month, or X amount of dollars per year. It's almost like a retainer for a lawyer or something like that. They're paying you to retain your time and to get as many edits out of you as they can, and so that's something to consider as well you could also just charge per edit. If you want to. You can say, OK, every time you come back to me, it's 50 bucks right off the top. Any time I touch this thing, it's 50 bucks. I'm not saying that's gonna work unnecessarily, because I'm sure a lot of people will be turned off by, especially if you do it too high. But in some cases, that might work. It's all about figuring out the strategy and what you think works best for you and what your clients are gonna be happy with. I've been altered my pricing style based on the client that I'm talking to you because I understand their finances. So if you've worked with clients before, you have a lot of knowledge about the particular industry or person you're working with. Then you can kind of start moving your price targets around to better suit your needs. And there's variable pricing models or something that I think a lot of people are moving towards now, and I've been talking about those often on the flat end hourly rate built into one another. So flat fee for a site maintenance contract that's built hourly that kind of thing. And I think the variable pricing models are probably the best thing to do going forward just because there are so many things out there now that are eating into the graphic design world as a whole. You have a lot of these marketplaces and these, uh, websites that offer creative services for really low amounts of money. And people are flocking to those services, and they're really leaving a lot of the regular designers out in the cold. So having a variable pricing model makes it a little bit easier for you to be flexible in that regard so that you don't get undercut by a lot of these services. So I highly recommend kind of sitting down and plotting that out, and that's something that I do all the time. I always do what I call a revenue in pricing review. I do that almost on a quarterly basis, So I go back and I see how many jobs I've booked. I see how much revenue it generated, and I look at the terms of the contracts that I had. I see what worked, what didn't what gave me the best result in terms of R A y. And then I try to adjust my pricing models going forward, and for most of the time, that's for new clients that are coming in right? Don't I? Don't change the terms on existing clients, but if and when you do a pricing change that might seem beneficial to the client, right, you lower your hourly rate or you lower your flat fee or you rearrange the terms of the contract. You can present that to your existing clients as well, and that might make them a little bit more comfortable and more likely to do business with you. But the reason I constantly reconfigure how high price stuff out is to prospect new people. So I see. Okay, this worked really good for a plumbing company. Maybe if I target other plumbing companies in the Nashville area, I can change it up a little bit and make them a little bit more appealing. Something like that

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