Okay, so I say a lot about pricing, but I get a lot of emails (mainly from one person) that show that some people don’t understand it. (Okay, one person doesn’t get it.) So, here we go again.
Value based pricing
We’ve all heard something going around about “value based pricing.” Here, you look at how much it costs you to produce something, and how much something is worth to your client. You find the middle range between your costs and the value to the client, and negotiate within that range.
Value based pricing has been used as a strategy for everything from screenplays and logos to clearing up hazardous materials.
Because I don’t know what you want to price, but I do know that anyone who reads this page knows what a website looks like, I’ll give the web design example.
The web design example
If the website you are commissioned to design will help a medium sized corporation increase revenue by seven million pounds, and profits by one million, then they might be happy to invest 250,000 in your company’s work.
If, however, a local client only expects the website to bring in 10,000 in revenue and 2,000 in gross profit, then maybe they’d be better off going through a third party marketplace. They probably haven’t figured in the cost of hosting and an SSL certificate.
The larger company’s website will probably be more complex, of course. It will probably have more products to sell, might have multiple language and currency options, and could include all kinds of customer support tools that the small business website might not need.
So, small business websites tend to be designed in the 2,000 to six thousand range, (or the even lower “Wix and WordPress” template range) while large corporation websites cost millions.
When the web design example doesn’t work
This is great when you’re designing a logo for a profit-making company, but it doesn’t work so well with government entities, education and NGOs. Education is priceless, so is health.
What price do you put on peace, or human life? You don’t really. (Okay, some people do, but we don’t work for the insurance industry.) Instead people look at how much things will cost, and how much money they can raise.
In any case, to find the value-pricing range, artists need to figure out their expenses, or what I call the Eto expenses.
- How much does your equipment cost? How much use will you get out of it before it’s out of date or worn out? This varies enormously, a little cheat is looking for websites that lease the same thing.
- How much is your time worth on an hourly job? In most art jobs, about one half to seventy percent of what you do is “unbillable” work, stuff you can’t really time with the job. You’re often working on a job before you get it, trying out styles in your free time, even creating nearly an entire original work before you know who it is going to be for.
- Do you need a quiet place to concentrate? A separate phone line for clients? Faster broadband or more printer paper than you’d need if it was just for personal use? Do you need to pay for insurance, filing expenses, or anything else to legally operate a business? A van, or secure storage space for your equipment, if you don’t need an office?
- A lot of people overlook overheads because they are used to their boss supplying these.
Now, I think that time is the most difficult thing to enumerate. Think of it this way. If you get injured halfway through, who is going to complete the job? How much will they ask for? Can you pay their salary, and any interest if you have to borrow, on the amount you’re charging your client?
If this sounds complicated, we can help. Let us know your needs, and we can provide consultancy services to help you along the way.
Sometimes it just helps to talk to someone else.
We charge for our time, yes, but we can save you time in doing so.