Graphic Designers have asked this question in every forum and every meeting I have ever attended and the answer is surprisingly simple … Designers should bill the rate that their market considers fare and that they, as professionals are comfortable accepting.
That’s pretty simple eh? Well, it’s not really and I know that you’re looking for a specific rate so here it goes.
There are three methods I suggest for calculating your rate. Take a look at all three and then decide which is right for you.
Method 1 – Costs and Pay
Figure out your costs. This is everything from you heat and hydro to office rental, computers, insurance etc … everything that the business costs you to run.
Say your annual office costs are $20,000 which includes $800 a month for overhead (heat, hydro, rent etc), and the balance is on software, hardware, insurance and maintenance.
Decide what you want to earn in a given year as a paycheque. I think self employed designers are worth 50% more than full time employees, so the rate is 50% higher than the average for your market. This covers the cost savings to a company for hiring a designers, as well as the costs of doing business.
Let’s say a designer of your level is worth $50,000 as an employee, so you’re worth $75,000 as a consultant. The reason you’re worth more is because you have to incur health costs, computer hardware, desk space, vacation time etc.
Determine your annual hours of work. There are 52 weeks in a year, 40 standard hours in each. So you can bill 2080 hours per year.
Be realistic, on top of billable time, there are pitch’s and downtime so assume that you’ll actually work 20 hours a week and you want at least two weeks off for good behaviour, so let’s call it 1,000 hours per year.
Now, there’s a simple math formula … (A + B) / C or (Costs + Profit) / Hours to calculate your actual time working.
In the example above, it’s (20,000 + 75,000) / 1000 or $95 per hour.
Method 2 – Costs, Pay and Profits
Another very good way to look at it is this,
A (costs) + (B (salary*2) + C (profit per seat) * D (# of designers)
T (time) * D
In this case, A is the same as above but B is the salary you would expect to pay an employee plus their overhead, plus the percentage you want to make in profit. Keep in mind that an employees actual cost is twice his/her salary. So if you have three designers …
20000 + ((70000 + 15000) * 3)
1000 * 3
or $91 per designer, per hour.
Method 3 – Perceived Value
A third method called value pricing and possibly the easiest for most startup designers (this is my personal favorite) is to do this:
S (scale) = ((L (lawyers fee per hour) – M (mechanics fee per hour)))/3
Now, you have a number which is one third the difference between a local lawyer and a local mechanics, I choose these professions because I believe a good designer is worth more than a mechanic but less than a lawyer but more importantly, my local market agrees.
S = ((100 – 35) /3
S = 21.67
Now you have a scale to work with and the rates go like this …
Junior Designer = M – S
Intermediate Designer = M
Senior Designer = M + S
Junior Art Director = M + (2S)
Senior Art Director = M + (3S)
Junior Designer = 21/hr freelance
Intermediate Designer = 52/hr freelance
Senior Designer = 73/hr freelance
Junior Art Director = 95/hr freelance
Senior Art Director = 116/hr freelance