Thoughts on pricing
This post from Jolly Bureau ties in very nicely with what I wrote for The Pastry Box Project this month. So I thought I’d elaborate on:
About a year ago, I left day rates and job rates behind and started estimating, billing and working on projects on a weekly basis. A year on and I’m better organised, more productive and less stressed than ever before. Our accounts are in better shape and no one owes us money for longer than a week. It was one of the best business moves I’ve made.
Go back just over a year and I guess my situation was pretty similar to many, if not most freelancers or small business owner designers. I found some aspects of running my business very difficult. In particular:
“How much is it for a website?” is pretty much a cliche question, but often client enquiries lack the information or detail we need and digging into a client’s requirements deep enough to be able to provide an estimate for work can be extremely time consuming. I’m not talking about knocking up a quick quote for a straight forward task or small-scale project, I mean us spending hours or sometimes days trying to understand a complex problem or large-scale project in order to provide a detailed quotation. This is often time before we’re hired and the meter is running.
You could argue that the time we spend on estimates is just one of the costs of doing business. But when you’re a one-man-band or a very small company like mine and your time and energy is what keeps things going, that cost of doing business can be disproportional.
In the past, for larger or more complex projects, I guesstimated (as best I could) the days or weeks or months I’d need and I blocked that time in my calendar. This worked well up to a point, but a calendar can be a fragile thing and sometimes it does’t take much to break even the most carefully constructed schedule.
A client might be late delivering something. That something might not be right. They might change their mind or it might just take longer than we anticipated. Building in wiggle room, extra time between projects is good, but that wiggle time can all too easily get swallowed up.
When we get busy, projects can follow on one after another and often without a break between them. Worse still, projects can overlap and that’s when the late nights start and stress levels rise on all sides sides as we rush to get the job done. No one benefits from this. We, the client and the work all suffer.
Then there’s billing. Keeping on top of money can be a nightmare. There are so many variables.
How do we bill? Do we give our clients a fixed price or charge by the hour or on day rate? Is that the same for every activity?
Do we ask for money up-front? (We should.) Do we ask for a third, 50% or some other figure?
When is the final balance due? Is it when we hand over the deliverables or when the website goes live? Either way, unless we’re fortunate to work with people who pay their bills immediately, we’ll likely have to keep track of who owes us what and the fact that we’ll have different people owing us different amounts at different times all adds to the complexity of getting paid.(At Stuff and Nonsense we always pay our suppliers and contractors the same day we receive their invoice, sometimes within a few minutes if they send it electronically. There’s no reason anyone should wait longer than that for their money.)
About a year ago, I was asked to work on a redesign of ISO with my friend David Roessli. Their site’s so large and complex that to be honest I struggled with where to start scoping the estimate for redesigning it.
Then an industry friend told me about how his studio worked in fortnightly sprints on specific aspects of a project. I don’t want to get into the pros and cons of agile (mainly because I don’t know enough about it) but that conversation sparked an idea.
I suggested to ISO that we spend one week periods tackling specific design problems. They agreed, so we scheduled a week on news and PR, another on their catalogue pages, another on their standards and so on.
Because those weeks were scheduled in advance, everyone on ISO’s team knew precisely what we’d need to get started. You know that thing where you’re waiting for content from a client? Didn’t happen. Everything fell into place and because we’d set realistic expectations, everyone knew when we were finished. Which we did. On time, every week. It was a resounding success and I now take that same approach with every client project I take on.
Working weekly has undoubtably made estimating easier. Instead of attempting to figure out precisely how long a large and complex project might take and therefore how much to charge, I break down each project and estimate the parts in multiples of a week.
If a client introduces a delay (which happens once in a while), they change their mind about something or introduce a new feature (which the design process should allow them to do) it doesn’t cause a problem. They know that those changes can be rolled into a future week and they know the costs associated with that, so they can make an informed business decision about whether or not to proceed with it. Everything is transparent, everybody knows where they stand and everybody is better off.
Our scheduling has improved too. I know exactly what I’m working on and when. My clients know exactly when I’m starting so they know to have all the materials I’ll need ready before then. They know when I’m due to finish and when I’ll need their attention to sign things off.
I know when to tell new clients our next available week is. Things are busy these days — we’re booked solid until October — so new clients know to book time in advance and they pay in advance to reserve it too.
Instead of asking for a third or 50% deposit and then a balance on ‘completion’ as we used to do, we now ask our clients to pay weekly, one week in advance. This has dramatically improved cash-flow and it means that, unless there are extraordinary circumstances, no one owes us for longer than a week.
Better estimating, scheduling and billing are some benefits, but I’ve also never been more relaxed about work and more on top of things at the same time. I feel I’m more productive and making better work than I have in years. I’m convinced that’s down to less complexity, better organisation and therefore lower stress levels.
In the past, I felt like I should always be working, especially in evenings and at weekends, because I was worried about money. It’s common for freelancers’ to feel constantly hungry. I missed a great deal of time for myself, on personal projects or with my family. Now I look at a calendar that’s full as far as I want it to be. I know we’re never more than a week away from being paid up to date so I can finally relax about money. Not working all the evenings and weekends gives me balance. I’m sleeping better and doing things that aren’t work.
We’ve even got our weekends back for the first time in years.