David Airey is an independent graphic designer working with companies of all sizes since 2005.

We could really do with £50k

The following story was written by John Scarrott of the London-based Design Business Association.

50 pound note
Photo by worldoflard

I was chatting to one of our ‘experts’ at the DBA Design Effectiveness Awards when he recounted the following story to me. I’ll tell it from the expert’s perspective.

“One of my clients, a small design agency of five people, was asked to quote on a piece of work. They’d not worked for this client before. They took the time to carefully cost the project, based on their normal charge-out rates, and the time and level of commitment required. The price came to £100k.

“At this point the agency experienced what I would describe as a ‘slight degree of nervousness.’ It seemed like a big number to them; a lot of money. It was. In fact as a project it would be one of the biggest they had undertaken. But, they took a deep breath and sent the proposal off.

“The client came back the next day with the following news: “We’ve only got £50k in the budget.” The agency rang me. Their first reaction was, “There’s £50k we could have.” Mine was a little different — we couldn’t accept a £100k project for £50K. They were initially hesitant to accept my advice to turn away £50k. I reminded them that we had carefully worked out a financial plan for the business based on sound principles and we should stick to it.

“They contacted the client via email, thanked them but said that they couldn’t do the work for the budget, concluding that it would be lovely if they could stay in touch. No counter-offer. The end.

“Actually not, as it turned out. Things did go quiet for a couple of days. But then the client picked up the phone and said they’d found some budget for the project and could pay £95k if that was acceptable to the agency. Which, of course it was.”

Listening to this story, it struck me that that the agency’s relationship with the expert was key, and they’d built a positive and trusted relationship together. So I asked our expert what the key issues and turning points were. What gave the agency the confidence to know what they were doing was right?

1. The size of the number, it felt big!

A perfectly valid thought. But not a fact. The important point was that there were sound business principles behind the calculation of the price. It had been worked out. It was a genuine figure. There was no smoke and mirrors, no figure added on as fat (see 5.). They knew they’d done their numbers properly and this gave them a mindset of certainty and confidence in what they’d suggested.

2. They have a financial plan that underpins the business.

Sitting beneath the studio is a financial plan. This involves delivering income to cover overheads and make a profit. They know they need to bill at £X per hour to be profitable at the end of the year. If they have that plan and someone says “I won’t pay that” and they take what they offer, they’ll never achieve their plan. The more times they do this the further away they get from achieving their plan. They may actually lose money. I’ve heard tales of serial acceptors of these offers, eventually folding as businesses. This happened to one of the best creatives, a household name with books on shelves. No one wants to go the same way.

3. Imagine the atmosphere in the studio if they’d taken this job for £50k!

How are they going to feel? How will the team feel? That they’re working “£100k hard” for a £50k reward. They can’t pull their effort back to £50k because the client’s expecting a £100k job. So they’d be stuck working their backsides off on a job that takes them further away from where they want to be. The effect on team moral is going to be bad, and they want to enjoy what they do, not suffer for it.

4. They’re consistent.

They have a plan and they keep to it. They could add on some fat to the bill to negotiate but they choose not to. This instills a sense of self-worth that is important to them as an agency. It allows them to stay in rapport with their clients by being clear about where they stand.

5. They don’t add margin only to cut it later.

What if they add some money on top, say 20% and then let that slide in the negotiation? How does the client know that they’re supposed to stop there? If they give 20% what’s to stop the client chipping further?

6. They’re confident in their ability.

They know their ability and they stand by it. They know that what the client is paying for is better than they could get elsewhere. They’ve created a niche of expertise for themselves. This is another foundation stone for their confidence.

7. They understood the myth of “We’ll just do this one.”

It’s always a tempting thought. Could £50k now be better than nothing? What about up-selling the client in the future? These things get questioned, but what stops them is the knowledge of what could happen. A better opportunity could come through which they can’t accept because they’re doing the £50k job. They know getting the client to pay more next time will be an uphill battle that in all likelihood they won’t win.

Of course if you try this the next time you’re asked to cut the price you might send the email and never hear from the client again.

It might be the best thing that never happened to you.

John Scarrott is membership director of the Design Business Association. Catch him on Twitter.

My second book on Amazon

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11 appreciated comments about “We could really do with £50k”

  1. Great Article! Stick to your guns! When we quote work at Center Mass Media we quote it on the time it would take to build them the best brand possible, not what we could do with a small budget, but what we would put in if it were ours!

    Go big, designers and businesses.

  2. Wonderful to read!

    I’m a small guy but just reading this account teaches me to stick to my pricing as I’ve done all the calculating needed to benefit me and my business. Stick to it!

    Design well, my friends… design well.

  3. I see this kind of argument around the web a lot — it’s pretty common Business 101 stuff, but is always worth hearing. I just don’t agree with this business approach.

    I come from a rural area, I work with clients of all varying degree of size and style. One thing I’ve learned is that not everyone can afford muti-thousand dollar design, a lot of people are priced out of it, and no one seems to be doing much about it.

    The notion you shouldn’t undercut yourself is fair, but it seems to me if you have a customer trying to buy something, you should help them make an informed decision and sell something.

    I wrote a little more here, if anyone’s interested: http://superpixel.co/how-to-save-money/

  4. Hi Justin, the principle’s the same whether it’s hundreds of pounds or thousands. Doing work for less than its value means lost money and lower moral, and no client gets good work from designers running themselves into the ground.

  5. Great read!
    If everyone would stick to their prices I think we would increase the value of our work and show people the difference between a 99designs project and a professional work.

  6. Great article, John, and so heartening to hear of a design agency with the confidence to do the right thing. Confidence is the key here for me. Confidence here seems to be the result of putting in the work to really understand their business, know their figures, believe in their goals and understand how it all fits together.

    But much of this kind of work doesn’t come naturally to designers who, like all creative beings (sweeping statement) are largely “intrinsically” motivated – we design for the love of designing. All too often “planning our future” quickly turns into “redesigning our website” because that’s how we think – (except we don’t really think, we feeeel) and the website never gets done. “We tried getting someone in to help us with the planning, but it didn’t really work out,” we cry, “But we’re going to update our website when it calms down a bit,” we assert – which, of course, it never does because we’re working flat out delivering work for half of what we should be charging for it.

    “Be ye confident!” won’t cut it, so my question is, “How can we codify this behaviour so others can do it too?”

  7. The reason so many clients expect to pay peanuts for creative work is because, all too often, someone will actually accept peanuts. Every time someone accepts a job for less than they should, they perpetuate the idea that design is easy and cheap. By all means help your client find a cheaper approach if they don’t have the budget, but that means cutting out elements they can do without, not slicing the price and absorbing the damage.

    The industry as a whole would benefit if more people could be persuaded to stick to their guns after they have worked out what they genuinely need to charge for a job. This doesn’t just protect your business, but helps to inform and educate your client base too.

  8. This is a sales process problem not a proposal issue. We used to suffer from the same “throw it over the fence” problem. Here are three steps that will hopefully keep you out of this position in the future:

    1. Talk about money in the first call AND the first meeting AND the second meeting etc. before writing a proposal.
    2. Present (in person or phone) an executive proposal that only discusses the scope, plan, and cost at a high level. (You want to see their smile or hear their jaw drop). If you are in alignment, great, if not, it’s easier for them to give feedback over a conversation than a seemingly permanent document.
    3. Write a formal proposal after you have aligned and are in agreement with your prospect over the conversation in step 2.

    Hope this helps!

    Cheers – Chris

  9. Better spending the time looking for another client rather than taking a project that will not be good for either party. It’s very difficult to cut the critical steps necessary to deliver a quality solution.
    Investing in a project could be offset by royalties only if there are guaranteed minimum payments, in case the project is dropped.
    Doing $100K of work for $50K will not be a successful business model for your company.

  10. Great article. As head of client services, this is one that hits close to home for me. While it is always hard to say no or turn away work, this issue of establishing value is one that every design firm struggles with as they grow and become established. Hold your ground. Not only for your sake, but for everyone in the industry. Do not allow yourself to be reduced to a commodity.

    There are a lot of excellent comments, but I’d like to add on to Chris’ comments in particular.

    Every design firm uses a “design process” to go from concept to solution, so don’t underestimate the value of applying a structured “sales process” to business opportunities. You do not (should not) respond to every opportunity. Not every client is right for you and you are not right for every client.

    At our firm we use a simple 3-stage sales process – Qualify, Advance, Close.

    Before you ever sit down and start writing a proposal, you first need to QUALIFY the opportunity and assess the fit. This can (will) save you countless hours not pursuing inappropriate jobs, allowing you to focus on higher yield prospects. The objective of the QUALIFY stage is to determine whether this opportunity is better than other opportunities that you should be pursuing. This is in both your and your client’s best interests.

    Basic qualification questions include:

    Why is the client approaching us?
    Were they referred or how did they get our name?
    Are we speaking to the buyer or a low-level manager who will need to sell the job internally?
    Is this competitive?
    How many bids are being solicited?
    Who else are you talking to? Why is it competitive?
    Is this job right for us?
    Is this type of work best suited for our talents?
    Is the client legit?
    Has the client written a formal brief outlining expectations, timing, objectives and desired deliverables?
    Are the objectives clear?
    Is the time frame realistic?
    Is the project funded? If not, then that is a big tell. Be careful. They may just be fishing and wasting your time. If yes, then what budget has been allocated? It’s a delicate question, but not an unreasonable ask.
    What is the buying process?
    How will a decision be made?
    Can we present our proposal to the decision maker(s)?
    Does the client have reasonable expectations?
    What happens if the project is not successful?
    How strategic is this project to the client’s business? etc.

    At the end of this qualification phase you should be in a better position to determine whether it’s worth your time to move forward. If you vote “thumbs up”, but they will not disclose budget, and you’re confident that you have a ballpark sense of what it will take to achieve their objectives, share your estimate to see if this fits their expectation. This will start a dialog and establish how aligned (or misaligned) you are, and how much additional clarity is needed.

    I recently had a client outline a “highly strategic” job for which he did not have a formal written brief. We discussed the scope and importance of the project and then I offered my assessment – based on what he told me and our experience with similar projects, this job feels like a $230K to $250K (USD) job. He responded that he had about $65K. This prompted a further discussion to uncover how out of alignment we were and uncovered additional background that allowed me to reassess my estimate and shift some task to his team. In the end, we arrived at a place where we both agreed that the job could be performed without compromising deliverables for around $125K. With that, we concluded the call and I told him that I’d start drafting a proposal AFTER I received a formal written project brief. To help him in writing that brief, I forwarded him a copy of my notes. The notes of course help both him and me as they were tailored to best position us for the job. It also positioned us in a higher consultative position. Based on this he eliminated the competitive bids and awarded us the job.

    In summary – the sales process ENDS when you send a proposal. Once submitted you have little influence on what happens next. Make sure you understand their requirements up front. Your time is too precious to spend responding to every ask, sending it into a black hole and hoping for a positive outcome. Be selective. Make sure the ask is for real. Convince them that you are best for the job before you even start writing the proposal. Be cautious of multi-bid RFPs. Don’t be afraid to decline the offer. Declining the offer could be the best thing for your brand versus compromising, stressing and leaving you feeling that you were taken advantage of.

  11. Hey, great, well written article. It can come down to the business plan of the agency as much as anything. If that’s your position, definitely stick to it.

    My own preference would have probably been to find out how we can effectively work within the budget (i.e. they pay less, they get less) and offer that as an alternative. I wouldn’t like to offer the lower price and the same deliverables but sometimes it’s worth just having that discussion with the client (in order to build that trusting relationship).

    Of course, I’d have missed out on £45k extra here, so you win some you lose some! ;)

Anything to add?

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