Some brief thoughts on pricing design

How should we value our work in a fair exchange?

Nov 19, 2023

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Recently I’ve been having some discussions with people looking to start their own design businesses.

One topic that is always of interest is pricing, which I’ve done quite a fair bit of research, thinking, and practice on over the past few years.

So I wanted to capture a few high-level thoughts on how I’ve come to think about pricing design work, which is arguably the most important skill in running a successful design business.

Pricing is everything

In many ways, the health of your design business comes down to the price you put in front of a client.

A lot of designers seem to pick prices out of thin air, or simply based on a quick survey of what their friends are charging. But think about it for more than a few minutes and you’ll realize that pricing your design work appropriately is the key to a successful and fulfilling business.

If you price yourself too low, you’ll quickly end up underpaid and overworked. Your design business becomes an endless treadmill of selling and delivering projects, which you are probably too busy and stressed to do well, just to keep the lights on.

If you price too high, by which I don’t mean according to any standardized scale but rather higher than your experience, positioning, and marketing commands, you risk losing potential clients and back in the same boat.

Price yourself right and you’ll have a steady pipeline of good clients that are happy to pay for your craft, and enough breathing room to feel like you are giving each project the attention it requires for a great outcome.

Pricing is highly subjective

Why do some people pay several dollars apiece to stock bottled water in their fridge when the same quality, or in many cases even higher quality, water comes out of their tap for free?

Why is a small popcorn $10 at a movie theater, when you can buy a larger quantity of microwave popcorn for $1?

Simple.

The value of goods and services is not intrinsic and is highly malleable.

There are many factors that go into the what would be considered a good price for something, from the context in which you are purchasing it, the perceived quality of the item, the subjective value of its component parts, the convenience with which you can access it, and how you feel about the brand behind the product or service.

This applies to design services too.

There is no inherently fair price for a design project.

The right price is the one that the client is happy to pay.

The right price is good for everyone

A lot of my thoughts on pricing come from reading Ron Baker, a CPA who has written many excellent books on the subject.

One thing Baker often says is, “in a good transaction, both the buyer and the seller profit”.

This was a huge reframe for me when I heard it.

So often when selling something, it can feel like you are taking something from your customer. This is especially true for a design business, which usually comes with the baggage of creative work being consistently diminished and not fairly valued by business people.

But if you are serving your client well, they are going to profit from your work. Whatever design you create for them will go on to help them sell more products and gain happy customers of their own.

And if you agree on a price that allows you to focus on the job and make a healthy profit, you will be able to better guarantee that outcome and continue serving your client on future projects.

The right price in a transaction is always mutually beneficial.

To put it another way, if you under price yourself you are actually doing a disservice to both you and your client.

Pricing is not about you

A lot of designers take a very internal view of pricing their work.

Meaning they primarily consider factors internal to their business. Like how much money they want to make, how much time they think it will take them, and their self-perceived quality of work.

But to a client, the price of a design project has almost nothing to do with you, the designer. It has everything to do with how much value they think they will be able to get out of the work you produce, and how much of that they are willing to give to you in the form of your fee.

I believe internal factors like how long you think a project will take and what a minimum baseline of profit you want to make are useful as a check and balance against the price you propose, but these factors should be subservient to the price and value of a design project from the external customer’s point of view.

Hourly pricing makes no sense

An hourly rate is a standard way of pricing services because its simple.

Services are often intangible, so we try to peg it to something tangible like hours of work.

But if you think about it, hourly pricing for design work has absolutely no basis in reality.

If you were on a factory line assembling widgets, hourly pricing might make sense. The more hours you spend on the line, the more widgets you make and the more value you produce for the factory.

But the value of an intangible output like a design has very little relation to how much time was spent creating it.

A design that took 100 hours to create can help a small startup get hundreds of sales with their small Kickstarter campaign. A similar design that took 100 hours could deliver millions of dollars in profit to a large corporation. Should these projects be priced the same? If you subscribe to hourly pricing, then the answer is yes. Which to me, makes no sense.

At best, hourly pricing is a way of approximating the value of a design project by assigning an arbitrary hourly rate and then hoping the amount of time you spent times that rate is a fair amount for the work.

At worst, hourly pricing introduces misaligned incentives where the more efficient the designer is the less profit they make, creates an antagonistic dynamic of mistrust where the client feels the need to question hours spent and the designer feels the need to defend it, and adds the dreaded activity of hours tracking, a practice that is often inaccurate, takes up precious time, and creates no value for either party.

By generally avoiding pricing hourly, I’m able to focus on delivering value and outcomes for my clients, creating efficiency in my process, and I remove an entire layer of pointless administrative work.

I understand hourly pricing may be useful earlier in your career before you can sell full projects, but if you are serious about running a design business beyond being a task-based freelancer, get away from hourly ASAP.

I think that about captures the main tenets that go into my pricing strategy these days. How to price design work definitely wasn’t something they taught me in design school, and yet learning how to do it well has enabled me to forge a successful path as an independent designer.

Let me know if you have any questions or thoughts of your own around how to price design work!

Design Things by Anson Cheung

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