60 Seconds

In the Design Cafe, I provided this answer to the following question:

 > "... got an opportunity to design a newspaper and magazine for a 
 > non-profit organization. ... wanted to just up the print 10-15% 
 > and make commission off of the ads sold!
 > Basically, how do I price for this newspaper? 
 > How do I price for this -- full color, about 50 pages -- 
 > How much should I charge??

Pricing Creative Services…

This is a tough question… it’s always a tough question, and I really cannot provide the “canned” answer — mainly because it relies on a lot of conditions.

Having said that, I’ll share just a few bullet points that I’ve learned in my 35+ years of experience in the field…

What does it cost?
Many people price from the hip and really haven’t gotten a handle of what it’s actually costing them. Read my lips:
      You will never know how much to charge for your work, until you know how much it costs you to do the work!

Freelancing, like any other business, should have standard accounting practices applied. This helps you establish how much it costs you — leading to how much you should charge. It’s simple math.

Overhead costs:

Add together:
a) your ‘fixed’ overhead — a portion of rent, heat, electricity, internet connection, and phone, etc.
b) materials used / consumed;
c) an adjusted amount of “depreciation” on your equipment, vehicle, travel, maintenance, etc.

Time:

Now, decide how much your time is worth — or more simply put, how much you would like to make. Take an hourly amount, then multiply that times the number of hours you plan to work.

Now, divide your “overhead” by the number of hours, then add the ‘hourly’ wage and there’s the amount you charge per hour.

What’s your GPM? Now you ask, how much do you want to make? Your hourly charges above cover ‘real’ costs. You need to mark that number up in order to make a ‘profit’ … this is called your gross-profit-margin, or GPM
. This is the extra you squirrel away into your business to grow, expand, and take lavish island vacations.

The GPM is also where you can “play” with the quotes you give. For instance, some bigger jobs can cut back on the GPM. Small, one-shot jobs for deep-pocket clients, you can ratchet up that GPM.

(I started as a freelancer, and worked up to nine employees billing between a quarter and a half-million a year — in 1980s money. I followed a hard and fast rule from my advisors to mark everything up 30% in the “fixed overhead” and “consumables” categories. I calculated estimates on time and costs. The biggest profit center was brokering the printing, signs and advertising. I billed 2.9% times the wage I paid my employees to cover their overhead. We made money. Lots of money. And everyone got two paid vacation weeks, a week paid sick leave, and paid “birthday off” … we were happy!)

A typical forumula:

• how much it costs: (eg) $12 per hour
• take-home for you (eg) $30 per hour
• how much the biz needs to profit: (eg) 30%
• EQUALS: how much to charge. = $54 per hour

These days in time, it is not unusual to find $75 to $150 per hour fees. Some attorneys charge in excess of $500 per hour, and I know I’m as good at what I do as they are at being a lawyer. The NEXT bullet point would be:

What’s the Market?

Research other designers, freelancers and agencies including printers in the area and find out how much they charge. That’s a good yardstick. Then you have to factor in whether or not you want to do this nonprofit a favor — how much exposure you’ll get from the publications to bring in new clients.

One person asked the question… “Should we produce a magazine for a client based on ad revenue — as a sound business model?

This could be a good business model, HOWEVER NOT FOR A NEW PUBLICATION. If they have already established an ad base, with ongoing ad revenue, then working for ads will make a lot of money. But NOT at 15%. You need to get more like 30% to 50% of the ad revenue, depending on their ad rates — and who sells the ads. They used to say it costs YOU $125 per sales call to actually make the sales call. That was 15 years ago.

Also consider that if the magazine is going great guns in the ad department, why would they want to give that to someone else to produce the magazine?

In my opinion, you need to know a LOT more. You can also strike a ‘happy’ agreement to work with the client if there is some give and take. He has to understand you have to make a living.

How much for a page?
There’s also the “per page” rate that seems to make clients happy because they can see a tangible cost for product. Many good production shops use the per-page rate because they know they can do it and make money. You can’t do it yet because you don’t know how much it costs, how long it takes, to produce a finished page.

Best Practice:
Provide a flat rate for the “first” trial of the publication — say $500. (off the top of my head) That’s ten-bucks per page — providing THEY set up ALL the content, photos and edit/proofing. You can probably do five pages an hour = $50 bucks an hour for you.

However, have the understanding that the flat rate is for the “TRIAL” and you will reevaluate the costing after the first issue goes to press.

Once you’ve done it, you’ll get a much better idea of how much it costs, and what the client pitfalls are. I’ve seen many $50-buck jobs turn in to $300-buck jobs because of the famous “PIA” factor. (That’s when the client gives you a pain in the ____!)

I would invite you to chime in and contribute but the forums were closed down due to spam and break-ins, and LinkedIN seems to have deleted the thread. So comment below if you wish to add to the conversation!

Good luck, my friends.

Please also see :

• The Dark Art of Pricing by Jessica Hische
• The Art & Science of Pricing by Ilise Benun for HOW Magazine
  Download 1-rt_Science_of_Pricing_FINAL_copy.pdf (428.45 KB)
  Listen to this article read by the author here. Audio_Article-Art__Pricing.mp3
• Selling Your Value Instead of Your Hours by Tim Williams for Communication Arts Magazine…
• Pricing Models by Shel Perkins for the AIGA…
• Why You Don’t Publish Pricing by David C. Baker…
• Business margin
• Operating margin
• Profits
• Gross profit margin