How 20 designers charge their clients – part 2
Following on from part one in the series, seven more top notch designers talk about how they manage their finances when dealing with clients.
Jeff Fisher, of LogoMotives
How do you normally charge clients?
With smaller identity clients I usually estimate projects at a flat fee rate. With large corporate clients my fees are most often based on an hourly rate – simply because the corporate approval process usually is much more time-consuming, involves many usually unnecessary meetings, and requires so many levels of approval. Basically, design-by-committee = higher project cost. Time is a limited and valuable commodity for me, and I want to make sure I am compensated for all expended on any job.
For years my project agreement has required a 35% project estimate deposit in advance prior to beginning work on a project. At the first of the year I will be raising that advance to 50%, simply due to clients seemingly getting slower and slower to pay project balances in these economic tough times.
Years ago I offered a 5% discount to clients for paying upon delivery of the completed project. I thought it would encourage smaller businesses to pay more quickly. Instead, the larger corporations – with much larger project invoices – would jump at the opportunity to save the money. I ceased the practice about ten years ago – it was costing me too much possible profit.
In the past I have had retainer agreements with long-term clients requiring a great deal of work on a regular basis. I now have only one client for which I execute design work on a monthly basis – and I just provide them an invoice every 45-60 days, depending on the amount of work done.
What methods of payment do you accept?
I’ve never accepted credit cards or PayPal, as I might get one or two requests a year. Most of my clients pay by bank cheque. With international clients, I have used bank wire transfers and international money orders.
Why would you recommend working this way?
My methods have worked for me and my clientele for 30 years now. If a number of future clients requested other options they might be considered. I would recommend that others make use of the methods most effective in resulting in efficient and timely payments to their own business.
Visit Jeff’s website here: LogoMotives.
Leslie Tane, of Leslie Tane Design
How do you normally charge clients?
For new clients / projects, I always charge by project (versus by the hour). I ask for either 1/2 up front and 1/2 at completion or or 1/3 up front, the second 1/3 at design approval and the final 1/3 at completion. I usually split the cost in thirds for projects over $5000, both for the client’s convenience and, since the larger projects usually span a longer amount of time until completion, so that I have a more steady stream of money coming in through the course of the project.
What methods of payment do you accept?
I accept cash, cheques and credit cards (through PayPal). The easier it is for clients to pay, the more quickly they tend to do it. I also always enclose a SASE (self-addressed stamped envelope) with my invoices for my client’s convenience.
Why would you recommend working this way?
Working this way has developed over time, and I definitely recommend it. I’ve found that charging by the project versus by the hour leaves much less room for confusion and misunderstandings. There is a clause in my contracts (which I ALWAYS use) stating that additional work not covered in the contract will be billed for separately and will not be commenced until the client gives approval. That way I don’t get stuck doing a lot of extra work that’s not billable. Charging by the hour seems counter-intuitive to me, since you make less money if you work quickly and efficiently.
I absolutely recommend getting the first payment up front. This really weeds out people who are not serious about the work. I used to start on projects as soon as I got the verbal go ahead, but I don’t do that anymore. Signing a contract and making an initial payment show that the client is committed to the project. It’s amazing how many clients disappear between the “go ahead” conversation and the submission of the contract and payment. I don’t think it’s in bad faith, exactly, but I do think that clients sometimes don’t realize how much prep work, research, and forethought go into the beginning of a project, so they don’t consider that you’re really “working” until they see some comps.
Visit Leslie’s website here: Leslie Tane Design.
Gino Orlandi, of You the Designer
How do you normally charge clients?
I usually charge a flat fee with a downpayment of half before I begin work. I also do not send final files until rest of payment has been sent.
What methods of payment do you accept?
I usually take payments via PayPal, because its fast.
Why would you recommend working this way?
PayPal allows me to being projects quicker and have access to funds faster, and the dowpayment and requiring the final payment before final files are sent ensure you do not get cheated.
Visit Gino’s website here: You the Designer.
Brian Yerkes, of Brian Joseph Studios
How do you normally charge clients?
I provide a full project estimate and present it to the client along with a proposal. I then charge the client 50% of the project total up front to be paid before the project commences. The final 50% is required once the project is completed.
My estimates are based on two factors:
- My hourly rate
- Competitor’s rates
Knowledge is power, and knowing what your competitors are charging is vital to ensure that you are able to place your company at the price point you want to be at, whether it is at the high end or the low end.
For smaller pieces of work, like a few updates to a website page and if it is less than $1,000, I require 100% up front.
What methods of payment do you accept?
We accept cheques and credit cards. I am slightly torn on whether or not to continue excepting credit cards as you obviously lose that 3% of each transaction. It is a good thing for your clients however, especially those with tight budgets. It allows them to pay for your services and put it on credit rather than having to have the money in available cash at that time.
For larger projects, we require that the client pays the initial 50% by cheque. This seems to ensure that the client at least has a decent amount of money at their disposal, and it gives us more of a secure feeling that we will receive the final 50% when the project has been completed.
One negative aspect of receiving cheques is that you have to wait to receive it in the post. If you have a client in another country, this process can take a few days. This is where bank transfers, and PayPal can help a lot.
Why would you recommend working this way?
I would recommend requiring 50% up front because it asks the client to put commitment into the project. At a certain point during the project, you are working over what the initial 50% will cover, so for the remainder of the project, you are then showing your commitment to the client, as you work towards the final payment. This keeps the playing field level for both of you and provides a nice basis for a working relationship.
Visit Brian’s website here: Brian Joseph Studios.
Anthony Zinni, of Positive Space Blog
How do you normally charge clients?
Normally I charge a flat fee for typical projects with 50% due upfront. However if a project is large this percentage may be as low as 25%. I will then periodically send an invoice when either milestones have been completed or a significant portion of the project has been completed.
Lately I have been working on a lot of large websites where the details are hard to cement upfront. In these cases I try to obtain as many details as possible and then provide an estimate with variance applied for the unknown areas. In this situation I take 33% – 25% of the lower end of the estimate.
About a two years back I had 3 clients that were on retainer. Ultimately I found this type of work to suck up too much of my time and kept me away from bigger more interesting projects. Even though I may have been billing only 2-3 hours a day to these clients all of the back and forth communication was sucking my billable hours. No I only consider retainer based work on a client by client basis, and when the client in very organized.
What methods of payment do you accept?
I have only ever needed to accept cheques, however bank transfer would be ok as well. I find that PayPal is only a necessity when the time line is extremely short. I choose to avoid these projects because I am more interested in projects that give me the opportunity to do my best work, so this has never been an issue.
Why would you recommend working this way?
I would recommend a pricing strategy similar to mine because the goal of it is to deliver work of the highest quality. After making sure to mitigate any potential risk, my billing processes are based on mutually beneficial relationships with clients. They allow me to deliver the highest possible quality and hopefully create some ROI for my clients.
Visit Tony’s website here: Positive Space Blog.
Jacob Cass, of Just Creative Design
How do you normally charge clients?
I always charge clients with a 50% deposit however from there it is different from each project… For a web design job I take another 25% before coding and then get the final 25% before delivery of files. For logo designs I charge 50% upfront then 50% before delivery of files.
What methods of payment do you accept?
PayPal only and the client pays for the fees – I include a 3.5% processing fee on all quotes & payments. For Australian payments I allow bank deposits.
Why would you recommend working this way?
I would recommend working this way as there is less risk for you and the client and I would recommend getting your clients to pay the PayPal fees as it sure does add up in the long run.
Visit Jacob’s website here: Just Creative Design.
Lauren Krause, of Creative Curio
How do you normally charge clients?
I collect a percentage up front and at major milestones (determined in advance, like delivery of initial creative, if it’s a website then delivery of first level pages, etc). Usually something like 30% up front, 30% at milestone 1, 30% at milestone 2, 10% upon completion. At each stage, I send a separate invoice. A proposal up front will break down the cost. I calculate the total price with my own “secret” hourly rate (in other words, the client never knows the hourly) and how many hours I think each step will take me. Always remember to include extra hours for meetings (including drive time), email, phone calls and unforeseen problems — I never seem to include enough for this! I created an interactive form / worksheet for Tara a while ago for calculating an appropriate hourly rate.
What methods of payment do you accept?
I don’t have any international clients, so I always ask for a cheque. It’s not been a problem so far and I haven’t had a need for any other kind of payment.
Why would you recommend working this way?
It’s always best to have an initial down payment; it shows that the client is serious and it gives you incentive to take the project seriously, too. The down payment and milestone payments also help offset your costs while working (you’ll probably have to pay rent or buy food before the project is finished!) and you get a reward for major accomplishments during the project.
Visit Lauren’s website here: Creative Curio.
Thanks again
Thank you once more to everyone who has contributed. I’m enjoying your financial insights, and I’m sure others are benefiting from your experience.
UPDATE: All parts now published.
How 20 designers charge their clients
- How 20 designers charge their clients — part 1
- How 20 designers charge their clients — part 2
- How 20 designers charge their clients — part 3
Related posts on David Airey dot com
16 appreciated comments on “How 20 designers charge their clients – part 2”
What are your thoughts?
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Thank you for writing this series, David. Now we have some data on what charging practices are ‘common’ among designers. That way it doesn’t seem like we are making it all up :)
Nice series. I am learning a lot about pricing methods I should pratice in future. Eagerly waiting for those resources you promised. :)
Great. It was very nice to read it.
In the third final part, if possible you could also add your personal experience.
David,
It seems pricing seems to be the talk of the town at the moment… I just published a guest article on Freelance Folder on on the Fast, Good, Cheap Pricing Method.
And another article to further onto this series:
PayPal Fees | Should you charge them?
Interesting to see how other designers charge; nice concept for an article.
Many thanks for the inclusion David, I have really enjoyed this mini-series – It’s always helpful to gain an insight into the daily routines of fellow designers.
Thanks for the comments, Richard, Chaitanya, Eivind. Oh, and I enjoyed your personal business cards, Eivind. Nice.
Meraj,
I hadn’t planned on including myself, as I partly address payment on my FAQ page. If you want me to provide any more details just let me know.
Jacob,
Have the comments on your PayPal fees post changed your way of thinking?
I use a great software called iBiz to take care of my timetracking and billing for my freelance work. Clients often call me and ask how much the work will cost. In a few minutes I can send them estimate directly out of iBiz as a pdf file which is generated to Mail. There they see the hours estimated and cost per hour. Usually the client sees that my hourly rate is quite similar to what they charge themselves, so this information it important to them.
There are some very interesting articles to be found about charging for freelancers and small studios online. To name a few, look at:
http://thegraphicmac.com/how-much-charge-design-work
http://thegraphicmac.com/designers-how-much-charge-how-get-paid
From there you can jump to other good articles.
Hope this was not too off topic.
Chris,
It has been helpful to me too, so thanks for taking the time to join in.
Sigurdur,
Not off-topic at all, buddy. Thanks for your insight and for those extra links. Good stuff.
Oh good. And thanks for your nice blog. Always a pleasure to visit here.
This topic is very interesting and great to see how willing people are to share their business – “secrets“.
David,
Thanks for replying. I had read the FAQ previously but seems just missed that question :) basically that answers almost all three of the questions which you asked the other designers.
David, this was a most ingenious topic for an article and thanks for hosting it! It’s great to get a variety of perspectives. I’m very glad to see most have not found a problem asking for payment up front and hopefully this means many potential and future clients of our (collectively as designers) are getting used to working this way.
I really like the way Brian Yerkes put it
That’s a good perspective to present to any resistant clients!
Sigurdur–letting everyone in on our secrets only helps our profession, eh? Then all designers are uniting and creating respectable business practices that clients will come to trust because they know what to expect. Seems to me it benefits everyone! Yay! Thanks for sharing yours too :)
I’d also like to remind everyone of these two great articles:
10 Ways to Convince A Buyer That Value-Based Fees Are Best (i.e. the “flat rate”)
and Pricing Your Consulting Services (it’s a little long, but some GREAT arguments for value-based pricing and fair pricing overall)
Thank you for the second part of of How designers charge their clients. It has certainly helped to enforce the importance of Working on a 50% deposit. It’s only fair that we get paid for the work that we do.
Hi David,
My view on PayPal fees still say the same however I am no longer going to be including PayPal Fees in the quotes / invoices but rather have them as a “hidden” included cost.
I suppose it is just a part of doing business but there was very different opinions amongst the community.
This has been hugely informative, as I am starting to freelance and I need to learn all I can about billing and invoicing, etc.
If I may ask though, what if a client decides halfway through the project that your work won’t do it for them? Do you refund the %50 or keep the money?
It’s not black and white, Marty.
If you promote yourself in a transparent way, your client should have a clear enough idea about what to expect, and shouldn’t have the need to ask for money back.