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How much should you charge for your design services?
There are many things to take into consideration when you ask yourself that question. Such as what pricing strategy you want to use for your design business. But regardless of which approach you choose, be it charging by the hour, by the project, or based on value, you still need to figure out how much to charge for your services.
But where do you start?
How do you know if you should charge $20 an hour, $50 an hour or $100 an hour? For project-based pricing, do you charge $500, $5,000 or $50,000 for a website? Figuring out how much to charge can get confusing.
I'm going to share one way for you to look at things that may help you calculate what you should be charging as well as help you figure out what type of clients you should be going after.
Look for the sweet spot
The trick to figuring out how much you should be charging for your design services is to find that sweet spot between how much you charge your clients and how many clients you need to sustain the lifestyle you want to live.
The first step is to figure out how much money you want to make annually as a designer. You could pick a number at random and say you want to make $30,000 a year, or $80,000 or even $200,000. Or you can try calculating your business and personal expenses, including savings plus money for leisure things, and come up with an annual salary to cover that number.
Regardless of how you come up with the annual amount you want to make, once you know it, it’s time to look at your design rate versus your workload.
For example, let's say you want to make $48,000 per year. $48,000 per year is $4,000 per month or $1,000 per week (based on four weeks per month. The extra days are your vacation days). At a regular 40 hour per week 9-5 job, your wage would be $25 per hour to achieve this.
But as a home-based designer, you are not working a 40 hour per week 9-5 job. Chances are you are not working 40 billable hours per week either. You may be working 40 or more hours per week, but they are probably not all billable.
To figure out how much to charge your clients and how many clients you need to take on, we have to do some calculations. There are several ways for you to make $4,000 per month such as.
- 1 client that pays you $4000/month
- 2 clients that pay you $2000/month
- 4 clients that pay you $1000/month
- 8 clients that pay you $500/month
- 16 clients that pay you $250/month
- 20 clients that pay you $200/month
- 40 clients that pay you $100/month
Every one of these bullet points will earn you $4,000 per month. But if you imagine them like a bell curve, you will find a sweet spot somewhere in the middle that will be much easier to attain and maintain. That sweet spot is where you have the right number of clients paying you the right amount of money to earn your desired monthly income. While at the same time having a number of clients that is sustainable.
Let’s look at those numbers again.
One $4,000 client each month.
Finding one client every month that will pay you $4000 may prove difficult for some designers. It will take a lot of work to acquire and onboard a new $4000 client every month. Not to mention that $4000 clients will demand a lot of you which could be stressful for you.
Failing to sign a new client every month could leave you financially strapped.
Forty $100 clients each month.
At the other end of the scale, procuring forty $100 clients every month will also be very difficult and stress-inducing. You will need to spend a lot of your unbillable time trying to acquire 40 clients each month. Then, after onboarding all of these clients, you still need to find the time to produce 40 pieces of design work that month. That’s 2 completed design pieces per business day.
Not to mention, lower paying clients are usually the most demanding clients. Sounds like a nightmare to deal with, doesn’t it?
Your work will probably suffer because of the high workload, and there is a good chance of burnout on your part. You couldn’t sustain this for very long.
Finding the sweet spot.
Somewhere in the middle of this bell curve is the sweet spot where you get a good amount of money per client. The task of finding new clients isn’t as difficult, and managing your client list and completing the design projects is easily doable.
Looking again at the bullet points above, It will take a lot less effort to land eight $500 clients or ten $400 clients every month than it does to find one high paying client or forty low paying clients.
With eight to twelve clients you should have the time to properly interview them, do your discovery, come up with ideas and complete their design projects without overstressing yourself.
You’ll also be producing better quality design work because you will have the proper time to devote to each project. Which in turn will help grow your portfolio and attract even more clients.
Once you know what price range you want to go after, it’s just a matter of finding enough clients in that budget range.
How much should you charge?
Thinking again of that bell curve and the range of the right number of clients at the right budget, you can then calculate an hourly rate. I’ll use ten clients as an example because it’s a nice even number to do the math with.
If you have ten clients per month, each paying you $400, you will make $4,000 per month. That works out to two and a half clients per week bringing in a total of $1,000.
Figure out your billable hours
In order to find out how much to charge your clients, you need to know how many billable hours you would you like to work each week.
Let’s say you put in a 40 hour work week. Roughly 15 of those hours will be spent finding new clients and managing your business. Those 15 hours are not billable, leaving you with 25 billable hours per week. Those are the hours you actually spend designing.
25 billable hours per week, divided by 2.5 clients, gives you 10 hours per client per week. If each client is paying you $400 that works out to an hourly rate of $40. So if you charge $40 per hour for your design services, you need 10 clients per month, at 10 hours each in order to earn $48,000 per year.
Let’s be realistic. There’s no way you will ever have exactly 10 clients each month, each with a project that takes exactly 10 hours to complete. It would be great if life was that predictable but it isn’t. But it does give you a base to start with.
If you charge $40 per hour, you need to work 25 billable hours per week to make $48,000 per year. But what if you only want to make $30,000 per year? If that’s the case, you can still charge $40 per hour and drop your billable hours to roughly 15.5 per week. Or you can work 25 billable hours but only charge $25 per hour.
Do you see where I'm going with this?
The whole point of this exercise is to show you that there’s a correlation between what you charge your clients, how many clients you can manage, and how hard it will be to find those clients and sustain your business.
In reality, you need to average out these numbers over the course of a year. Some weeks you will work more hours and some weeks less. Some months you will have more clients and some you will have less. But if you use your own numbers and look at the bell curve, you should see that somewhere in there is that sweet spot. The spot where the number of clients you need to get each month is realistic and attainable and the average price you need to get from each one is also realistic and attainable.
Knowing this information you can now go out there and find the right design clients to fill your needs.
By doing these calculations, you can set a reachable goal for yourself. It gives you a good idea of how many clients you need to get each month and what you should be charging your clients to attain that goal. That sweet spot is where you should be aiming to achieve your goal.
Have you ever calculated how many clients or hours you need to sustain your business?
Let me know by leaving a comment for this episode.
Questions of the Week
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Resource of the week Elegant Themes Blog
I've mentioned before that I'm a big fan of Elegant Themes' Divi Theme. What I haven't shared before is the excellent blog that Elegant Themes puts out with articles covering not only Divi but all aspects of web design. Not only can you read about new Divi features, but you can find great tips and tricks from experts on how to do amazing things in Divi. You can also learn valuable information about WordPress and website design in general. If you haven't done so already, I highly suggest you check out the Elegant Themes Blog.
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Running a graphic design or web design business all by yourself isn't easy. If there are any struggles you face running your design business, please reach out to me. I'll do my best to help you by addressing your issues in a future blog post or podcast episode here at Resourceful Designer. You can reach me at firstname.lastname@example.org