What you should charge as your hourly design rate is an often debated topic amongst designers. Everybody seems to have their own opinion as to how to calculate what you should charge. I guess I'm no different because on this episode of the Resourceful Designer podcast I do just that. I give you my opinion of how you may want to choose your hourly design rate.
One of the biggest issues I see is designers undercharging for their services. They're either not confident enough in their skills and abilities and are afraid to charge a high enough fee. Or they feel they can't charge higher fees because they're only designing part time.
Regardless of how long you've been designing or the amount of time you currently spend designing you're probably not charging enough for your services, but that's the topic for another day.
Today I want to share why you need an hourly design rate and ways to determine the rate that's best for you.
Even if you normally use project based or value based pricing you still need to know how much you are worth per hour. Even if it's just to know whether or not you are under or over charging on your projects.
You also need to know how much you're worth if someone asks you for your time. Perhaps as a design consultant. Without knowing your hourly rate how will you know what to charge for your time?
Your hourly design rate depends on many factors and differs for each designer. Where you live, what sort of clients you're going after, your experience, your skill all play factors in determining what you should charge.
Specializing in a niche can also play a factor. A designer who specializes in a certain industry should command higher prices than a designer not familiar with it.
All of these things should be taken into considering when determining what your hourly design rate will be.
Ok, here's the nitty gritty of it. Ways for you to determine exactly what you should charge per hour. You will need to decide which method, if any, is best suited to your situation.
It sounds crazy but guessing is actually a pretty popular method used by many designers. I'm not saying it's a good method, just that it's a popular one. Some designers simply pick a number out of thin air and use it as their hourly design rate. Most of the time the number they choose is much lower than they should be charging but guessing is a viable option for choosing.
Tried and true for generations, spying on your competition is an easy way to judge what the going market is for designers in your area. Simply call them up, or have a friend do it for you, and request quotes. Use those quotes to determine what they are charging and to set a baseline for your own pricing. Adjust as needed for experience and skill and then start hunting for clients.
There are many organizations that compile design salaries around the globe. The AIGA and RGD are great resources in North America. Research what designer in your area are making and base your hourly rate to match.
Probably the most accurate way to determine your hourly design rate is to calculate it yourself.
Add up all your expenses including general expenses and labour expenses, savings, etc.. Then estimate the number of billable hours you expect to work each week. Divide the first number by the second number to determine your hourly design rate.
For example:
Your monthly expenses including mortgage, utilities, car payment, fuel, groceries, medication, etc. = $4000/month
A spending allowance for things like movies, restaurants, treats, etc. = $400/month
Money you put aside in savings = $400/month
Total $4800/month
Billable hours you want to charge per month = 80 (20/week)
Remember that billable hours and working hours are two different things. You will only be able to bill for some of the hours you spend working each month.
Divide your monthly expenses by the number of billable hours to determine your hourly design rate.
$4800 ÷ 80 hours = $60 per hour.
In this example, the designer needs to charge $60 per hour and work a minimum of 20 billable hours per week in order to cover their expenses and savings.
Keep in mind that this is just a base and is intended to give you an idea of where to start. You do not need to use this number as your hourly design rate.
Your personal situation will also factor into this equation. If you're a student living with your parents you may not have as many expenses as someone renting or paying a mortgage.
I can't tell you which method is best for you. Only you can decide that. I can tell you that establishing an hourly design rate will help you regardless of whether or not you bill by the hour.
If you don't have one yet, I highly encourage you to determine your hourly rate as soon as possible.
Let me know your goals by leaving a comment for this episode.
Submit your question to be featured in a future episode of the podcast by visiting the feedback page.
This week’s question comes from Jonathan
I am looking to start a web design business while I am a full time employee. I've been doing a lot of research and wondering your thoughts on a sole proprietorship vs. llc. I feel like the business side of the business is preventing me from starting the business before it's even been made. I'm not completely sure its worth setting up an llc if I am starting a business on my free time. (ex: quarterly taxes) Any help you may have is greatly appreciated.
To find out what I told Jonathan you’ll have to listen to the podcast.
Resource of the week Screenflow
This week’s resource is something I've shared before, ScreenFlow screen recording software. It has helped me streamline my graphic design business so much that I have to share it again. Using ScreenFlow has saved me so much time and headaches. Instead of teaching clients how to use their new websites and then helping them again a month or so later when they’ve forgotten, now I just record a short instructions video showing them what to do. If they need a refresher or need to train someone new, they have access to the video and they don’t have to interrupt me for help. For that reason alone I highly recommend ScreenFlow.
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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 feedback@resourcefuldesigner.com