Flat Rate vs. Hourly: Fast work = lower pay?


Question

I'm new to designing graphics for clients, I normally did things just for myself or for friends when they needed something done and I had a free minute. I've also worked at a retail store that does "desktop publishing" and offered a 24 hr turnaround guarantee.

Because of this, I've become accustomed to working really fast. I still plan ideas and do research, but I usually go with my gut feelings on design direction (usually the second or so idea I have is the strongest in my opinion) and the clients I've worked for always love the work I do for them.

But my problem is, because I work so fast and can almost pump out the designs they need, how do I should I charge?

Charging by the hour would be a huge loss for me. But I don't know what to charge for a flat rate since I don't know what the "average" time for a design should take (if there is such a thing).

When doing research, everyone always just says "It depends on the designer." But I feel I could be making a lot more money for my skills, I just don't want to lie about my time.

Edit:

I have to ask several questions to this:

  1. Is this your only job?
  2. How are you measuring your designs as really fast?
  3. Do you know the normal calculations for design areas?
  4. Do you time your designs to measure them?
  1. No, I still work at that retail store I mentioned and I'm also a full time student.
  2. When I talk to other designers in person, they mention their average times and mine are significantly less time (about 20-40% less time) to completion.
  3. I don't know what the normal rates are for my area. But when reading up on it I found that an average estimate (and when I calculated my hourly rate for myself based on a formula given to me) as $40/hr
  4. Yes I do, I always take notice of my work time. It's a habit from working at my retail job.
1
9
9/13/2013 5:10:00 PM

Accepted Answer

Charge a higher hourly rate to compensate. If you work 25% faster than what most designers do, then charge 25% more.

Working fast with quick turnaround at a premium quality is something you can use to justify the higher hourly rates.

9
9/13/2013 2:59:00 PM

I feel this is exceptionally related if not an answer in itself: Which is a better design pricing model?

Your speed means nothing to anyone but you. I also work very, very fast. In many cases if I were to stick to a strict hourly rate I'd be homeless with just enough money to cover a Motel 6 room on Friday to shower. But being fast is a huge benefit to you and allows you much more freedom when pricing.

What I would do in your situation is:

  • Figure your hourly rate. See DA01's excellent (although oddly unaccepted) answer HERE on how to do that.
  • Ignore what "other designers" are doing.
  • Calculate your average time for general projects. You should know things like the items below, not factoring in minor revisions or client changes:
    • A tri-fold brochure generally takes me 6 hours to design
    • A business card takes me 2 hours to design
    • An identity takes me 40 hours
    • A Web site takes me 120 hours to design (and code if you do that)
    • A Landing page takes me 3 hours to design (and code if you do that)
    • and so on....

If you don't know the time needed for projects, you need to figure it out or at least come up with a "best guess". If guessing, I'd guess higher and always add 1 or 2 hours to whatever you think you may need. Really only experience can help you figure out how much time it takes you to do something. If you don't know this... how on earth do you know you are "fast" when completing something? What are you basing your perception of "fast" on? I'm sorry but you may not be "fast" at all if you have no idea how long it takes you to complete projects.

So from here you can easily determine your base cost for a project.

For example, a landing page: [hourly rate] x [time to complete] = [base fee]. This is the minimum you would charge. So, let's say the formula works out to this: $40 x 3hrs = $120.00. That's your starting point when biding/quoting a landing page.

From here pricing becomes more art than science.

If you know the local market or your client will average a fee of $350 for a landing page, you know that you have a great deal of room between your base price and the market. You could safely charge $120 for the job. You're covered. But you are priced well below the current market rates. So you may find you start getting much more work than you can handle. At this point you raise your prices in order to turn away some customers. In general, you do something like [base rate for project] + 20% = bid/quote. Work will start to go elsewhere. You keep doing this until you are at a rate which acquires enough customers to keep your workload where you like it. What that actual price is doesn't matter as long as it is above your base of $120 for the landing page. You may find that your optimum pricing is a steady number which falls into a formula like base rate + 50%. If that's the case, you may want to consider increasing your hourly rate rather than always adding 50% to base project fees. In fact, if this is the case you should increase your hourly rate to ensure clients demanding hourly billing are still paying the same general rates as other clients.

Now, imagine you are at the current market rate of about $350 for the landing page, but you still have way more work than you can handle. This is where you completely disregard the market rate and set your prices higher. Yes, you may be more costly than most other designers in your market, but there's a reason. If you are getting too much work at average rates, your rates need to be above average.

There's an old adage stating, "If you get hired for every job you bid, your prices are too low."

Using this basic structure you actually reward yourself for being faster and more proficient. Clients are happy because they are paying what they expect, and you're thrilled because you're making more money while working less hours.

I don't ever tell a client "This will take me X hours. And I bill $XXX per hour." I tell a client, "This will cost $xxx and I'll have a initial proofs for you on [Date]." If I'm directly asked what my hourly rate is, I don't lie or cover it up, I tell them. But I also explain that I don't bill hourly because it's unpleasant when they receive an invoice for more than what was expected. And explain that the per-project pricing ensures they know what the project will costs without any sticker shock. Clients appreciate that. If they strictly want to pay by the hour, then I'll invoice that way and ensure I track every single minute I'm working on that project. But I have yet to come across a client who prefers strict hourly billing.


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