DETERMINING $$$S

How do you determine how much a given design project is worth?

Most designers start by determining a minimum level of engagement—the lowest amount that they can charge for a given project while still keeping the lights on and earning a profit. Chris Do from the Futur gives an excellent formula for calculating minimum engagement:

MINIMUM LEVEL OF ENGAGEMENT

  1. Add up all your overhead costs for a month (rent, equipment, software, etc.).
  2. Add in your own pay (how much you want to take home each month and then some). Look at the market to see how much other designers with similar experience are making.
  3. Add in money for taxes (probably more than you think).
  4. Add in a profit margin (how much leftover money you want).
  5. Multiply all of that by 12. That gives you how much revenue you need to bring in in a year. 
  6. Determine how many projects you can realistically complete in a year, and divide that number by your yearly revenue goal.
  7. That gives you the lowest amount that you should charge for any given project, your minimum level of engagement.

DON’T DISCUSS THE DETAILS

Once a minimum level of engagement has been calculated, those details can be kept private. When project invoices get broken down by hours or line items, negotiations can get bogged down by minute details instead of big-picture value. 

DO TAKE A VALUE-BASED APPROACH

This means that you determine the worth of a project based on the value it will bring to a client.

For instance, is a brand identity worth the same to a local shop as it is to a large corporation? When a local shop needs a logo, they need it on minimal deliverables and are probably looking to increase their revenue by somewhere in the thousands. When a large corporation needs a logo, they need it in numerous locations and are looking to increase their revenue by tens of thousands or millions. Even though it may take a designer the same amount of time to design both, it would be appropriate that the former could be worth $2,500 and the latter could be worth $15,000 purely based on what potential value that project has for the company. 

It can also be helpful to look at value-based pricing from the perspective of percentages. Let’s say a client’s identity design isn’t connecting with their target audience, and they’re hoping to grow their revenue by $25,000 in the next year. If they only want to spend $500 on a new identity design, that’s only 0.2% of the value they’re hoping the project will bring! 

One marketing executive said his company rarely invests in a project without expecting seven to ten times a return on that investment. Designers need to ask what outcomes are hoped for and consider that the project is worth at least a tenth of that. 

Value the client, not the workload.

$50 ≠ ROI of $25,000

One marketing executive said his company rarely invests in a project without expecting seven to ten times a return on that investment. Designers need to ask what outcomes are hoped for and consider that the project is worth at least a tenth of that. 

Value the client, not the workload.

DEFENDING DETERMINATIONS

When designers follow these tips, there will be no question about the bill.

TALK THE TALK

  • “Why are you giving us a call?”
  • “Why do you think you need this project?” 
  • “Anything else?”.
  • “How will we measure that these goals are being met?”
  • “How much increased revenue are you hoping this initiative will bring to the company?” 
  • “What percentage of this number are you thinking to invest?”

DON’T BE A RISK

  • Provide evidence of your credibility and past success
    • Social proof
    • Referrals
    • Case studies
    • Expertise
    • Credit history

ACT THE PART

  • Present as a professional
    • Command attention
    • Take charge
    • Be articulate

Still not convinced design is worth it? 

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