“How do I price my services?”
As a business coach for creative freelancers and business owners, this is one of the most common questions I receive from folks who have hit a wall with their current pricing strategy and know that if they’re going to be more profitable and grow, something’s gotta change!
Why Is It So Hard To Price Creativity Anyway?
I understand this is such a ubiquitous problem. Pricing something as subjective as creativity is challenging for multiple reasons:
- The deliverables are very often intangible.
- There is no universal “rate sheet” or one-size-fits-all strategy.
- Pricing is just one component of your business model, yet we tackle it in isolation.
- Pricing is fluid, changing as you, your business, and the market change.
- Pricing your creative value taps right into fear and self-doubt.
- Pricing is driven by the way your client perceives value, which in turn influences their behavior.
Take the time I launched my first coaching program in 2010 – despite having run a successful creative management agency for more than a decade, coaching creative freelancers was completely new territory for me and the program I had created was untested. So, I invited a few creative folks who had told me how desperately they needed this kind of help to go through the program for free.
Win-win, right?
You’ll never guess what happened. The folks who were gifted the program didn’t follow through and stick with it. WTF! Was it the program? A mindset issue? A time constraint? Me?
I figured the only way to find out was to try something different and the price was the easiest factor to play with, so I charged $900 for the program. Still an incredibly low price for a 6-month program, but just enough skin in the game for folks to have to think about it before handing over the check. Guess what? They all showed up, did the work, and got results.
This is the psychology of money and pricing folks. It defies logic. Is it any wonder that pricing remains a confounding issue/stumbling block for so many professional creatives?
I’m on a mission to change that. With 20+ years of creative industry experience, 10+ of which were as a rep, writing proposals and negotiating fees for some of New York’s top-tier talent, and 10+ as a business owner myself, I’ve seen and tried many pricing strategies. This guide is the highlight reel of mastering the art of pricing creativity with confidence.
What Would It Look Like To Have A Clear Pricing Structure For Your Creative Services?
Imagine:
- Breaking free of the hourly rate trap
- Feeling confident sharing your rates (and ready to back them up if needed)
- Setting (and getting) rates that align with the value you deliver
- Working with clients who treat you like a creative partner, not a pair of hands/order taker
And how good would it feel to wave goodbye to:
- Self-doubt and confusion
- Reinventing the wheel with every proposal
- Accepting whatever hourly rate the client gives you
- Burnout because the only way to increase revenue is increase your hours
- Crappy clients
What To Expect From Pricing Creativity
Most pricing articles only focus on the 3 main pricing models: Hourly rates, project rates, and value-based pricing. While this is great information (and we will address it in step 3 of this guide), it doesn’t provide the insight, information, and context creative professionals need to truly understand (and get comfortable with) the nuanced world of pricing creativity.
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Money Mindset and Why It Matters In Pricing Your Creative Services
In the course of a two-decade career working with freelance creatives, I’ve come to learn that conversations about pricing are rarely about money. How we make, spend, and save money has everything to do with our upbringing, stories, dreams, and fears, and very little to do with our capacity to make and manage money.
We all have limiting beliefs (especially about money), most of which were given to us by someone who held a position of power in our lives. Carol S. Dweck, the author of Mindset: The Psychology of Success, states:
“The beliefs we hold as absolute truth have nothing to do with us and everything to do with the fear of the person who gave it to us.”
In its simplest form: Your mindset gives rise to your thoughts. Your thoughts give rise to your actions. Your actions dictate the trajectory of your life and work.
This is why meaningful and permanent change always starts with a shift in mindset. Without that shift, all the strategies and tools in the world won’t stick. You’ll always revert, albeit subconsciously, to your financial set point.
So, if you believe…
- Inconsistent or low income comes with freelance/entrepreneurial territory
- If you’re not working, you don’t deserve to be paid (an hours-for-dollars mentality)
- Financial insecurity is the price of creative autonomy and personal freedom
- You’re not good at business
- If you stay small you will avoid risk
- Making and managing money is hard
…you may have some limiting beliefs to bust. This is good news because once you know what skeletons are in your closets, you can do something about it!
I’ve taken this particular money mindset journey myself, and have gathered an arsenal of robust tools, prompts, and practices along the way. Step one is getting clear on your money “why”. Step two is creating a new money identity and story. Let’s dive into each of these in more detail.
1. Get clear on why more money matters to you
Where there is meaning there is the tenacity and courage to do the hard things you need to do. This is where you need to get reflective, ask some tough questions, challenge your assumptions, and identify possible solutions or next steps.
Action step: journal on the following prompts:
What are my 3 most disempowering beliefs about making a lot of money?
Who did I learn those from?
Was that person worth modeling in this area?
How are those beliefs ridiculous, even absurd?
What is it necessary for me to believe to succeed?
How will raising my rates support my vision for success?
2. Create a new money identity and story
We all have a money story we’re operating from, so you’re going to want to replace the old one with something that aligns with your desired financial reality. Here are a few examples to get you started:
I highly recommend you expand upon your new identity with as many details as you can (a story to go with the identity). What does it look and feel like? How is your life different? What about your relationships and emotional well-being? The more texture and richness you can bring to your new identity, the more real it will become.
Right size your pricing with your business model
If the words “business model” just freaked you out or made your eyes glaze over, don’t worry. The term may seem grandiose for a freelancer or small business owner but if you’re making money from your creative talent, you have a business model.
Most freelancers or early-stage business owners have a business model that kinda happened to them, rather than one that was intentionally built by them. As a result, they don’t know what’s going on under the hood of their creative business or freelance career. If something is successful, they’re not sure why (and therefore how to replicate it). If something isn’t working, they don’t know how to fix it or avoid doing it again.
Let’s briefly touch on a few creative business models.
Freelancing
This is a well-worn path for creative pros who are transitioning from in-house/agency roles, or who have simply decided working for the man isn’t their jam!
What it might look like:
The creative often goes by their name/trade e.g. Melissa Boggs, copywriter. They may have a speciality e.g. the fashion and beauty industry.
They often operate as a sole proprietor, engage in work-for-hire agreements for which they are paid an hourly or project rate.
Operationally, it’s pretty bare bones. A project comes their way, they send an estimate or proposal (and hopefully a term sheet….please send a term sheet!), and bill the job in one or two installments.
The Creative agency
The creative agency, which may also be called a boutique agency or creative studio, is somewhere between freelancers and medium/large advertising+design agencies.
What it might look like:
A small creative agency can be the next step for an established creative freelancer who has the chops, the desire, and the motivation to go after bigger projects.
They know they can’t compete with the big agencies, but there are a whole host of juicy projects between huge, national campaigns, and hourly gigs. Being a creative agency allows you to throw your hat into a bigger ring, which can be more intellectually and creatively fulfilling, as well as more profitable.
The value they offer is the ability to take on a bigger design or marketing challenge that their clients are experiencing. They likely charge by the project or retainer, with hourly rates being used to estimate and bill overages.
Operationally, they may be an LLC and operate under the founder’s name or a business name. They may have (or be on the road to building a more robust infrastructure, including standard operating procedures and a network of talent they bring in on projects. The founder is often operating in a more CD/CEO capacity (or that’s their goal – I’m often hired to help with that process!)
Consulting
Creatives who have a lot of experience, expertise, and credibility in their particular field may shift their business from a done-for-you model to a consulting model.
What it might look like
Where service-based design agencies use a client-centered, collaborative approach, consultants often use a more expert-led approach. For this to work, the consultant must have a proven track record, a clear process, and firm deliverables.
Operationally, this model can be very cost-effective and scalable because, once defined, the process is very clear and repeatable, can be done by anyone who is trained to conduct the process, it tends to stay on track, and can be billed at a premium.
Hybrid models
Creatives are a multi-talented bunch, so it makes sense that they will want to build a business model that allows for various expressions of their creativity. Enter the Hybrid model.
What it might look like
This might look like an illustrator who:
- Creates illustrations for brand campaigns
- Illustrates books
- Licenses their art
- Has a line of products e.g. greeting cards, prints, totes etc. for sale on their website or Etsy shop.
Operationally, the more complex the business model, the more dialed in every aspect of the business needs to be. This kind of business model will need a stronger tech stack and will need more people to ensure it runs smoothly.
When done well, hybrid models can create multiple streams of revenue and be creatively fulfilling and varied. I recommend creatives weigh up the benefits of creating products (which requires an upfront investment on their part), and the reality that they now must market, sell, and deliver those products. If your operations grow as your inventory does, it can be great! If not, what seems like a fun idea can quickly turn into boxes of unsold inventory in your apartment, standing in line at the Post Office, and dealing with customer support. Start small, test it out, and build from there.
Now you have a sense of the different kinds of business models out there, the question becomes:
What kind of business do you want?
A fulfilling business is a reflection of who you are and what you do, who you love to work with, and how you want to do it. Step one is to decide what kind of business you want VS the business someone else said you should have.
It’s worth noting that the right-for-you business is also based on where you are in your entrepreneurial journey. It can and will evolve, so don’t worry about getting it “wrong”.
For example, there was a time in my business when the common wisdom was that growth = scaling. That meant shifting the business model from one-to-one coaching to one-to-many coaching, (groups, online courses, etc.). I bought into it and guess what I learned after much trial and error? I, and the clients I serve, preferred the in-depth, custom nature of one-on-one engagements. That insight helped me align my pricing, services, time, marketing, messaging, and processes with the services I enjoyed offering most and divest from the consensus (no easy thing!)
Guess what? My business became way more profitable, my clients all got incredible results, I was working in my sweet spot, and I had more time.
Instead of measuring your success by someone else’s ideas, or chasing an arbitrary number and reverse engineering into a pricing model that supports it, I encourage you to get clear on the kind of business you want to build and run. Here are a few prompts:
- What do I want my business to do for me?
- What do I want my business to do for others?
- Is my business model high-touch/low-volume, or high-volume/low-touch?
- How many customers or clients do I want or need?
- How simple or complex do I want my business to be?
- Do I want to manage people or have a one-person shop?
- How much time am I willing to invest in my business?
- What do I want to spend the majority of my time doing?
- Do I want to work in my business or do I ultimately want it to run without me?
- How do I want to get/attract new customers or clients?
- What’s the end goal? Do I want to sell the business, or am I happy to close up shop when I’m done?
The answers to these questions will help you identify what kind of revenue you want and need to generate and the services and pricing that support that outcome.
Pricing Strategy For Design, Writing, Illustration, and Branding Services
This is where the rubber meets the road and we get down to the “how” of pricing. We’re going to cover three pricing strategies which you can mix and match based on the stage of business you’re at, the project, and the client.
Whatever strategy you choose, this handy diagram will help you think of ALL the factors you’ll want to consider.
Hourly Rates
Folks who tend to use this model: Freelancers who are in the early stages of their freelance career.
Positives:
This is the easiest, most accepted form of estimating services and being paid.
If you’re tracking your hours (for some of us, this is a big “if”), you’re getting paid for your time, offsetting the risk of scope creep and additional requests that can slip through the net on project-based fees.
When it makes sense:
When you’re figuring out how to work as an independent creative professional, an hourly rate is the easiest way to get started. It’s also pretty simple to figure out what the going rate is for someone of your experience. This can make things easier as you find your feet.
Drawbacks:
- When presented with hourly rate options, clients will usually go for the cheapest, most available option. This puts you, the freelancer, squarely in the “commodity” category.
- The client assumes the authority position in the relationship, relegating you to a pair of hands/order taker role.
- Because so many people price by the hour, there’s a limit to how high you can raise your rates without pricing yourself out of the job.
- The better you are at what you do, the faster you can do it. Less time = less money in this scenario. Fair? I don’t think so!
- Most folks are not estimating their hourly rate on the actual hours they have available to work on client projects (see “hourly rates that work better for freelancers” below).
If you’re looking to position yourself as a creative partner and problem solver, this set-up won’t serve you for long.
Hourly Rates that Work Better for Creative Freelancers
Did you know there’s a next level of billing by the hour? I call this your “true hourly rate” and what makes this a big step in the right direction is it’s based on your billable hours, not all the hours you have available in a day or week.
Folks who tend to use this model: Freelancers who have been around long enough to know that what initially sounded like a fine hourly rate won’t cut it unless you want to live in your parent’s basement forever.
Positives:
When you use an hourly rate based on your billable hours, plus a bit more to cover your non-billable time and activities, you have a benchmark of how many hours you need to work to cover your business operating expenses. It also puts you one step closer to thinking (and being paid like) a business owner!
Drawbacks:
Freelancers tend to underestimate how long the activities outside client work take.
When it’s your business, the hours spent on activities including new business development, marketing, sales, administrative work, and bookkeeping are non-billable. A freelancer or business owner might think they have 30-40 hours a week to work when they only have 20-25. Who’s paying for those unbillable hours? You are! Moreover, these activities tend not to be your unique brilliance, so they take you longer, and outsourcing them can be prohibitively expensive.
Not all hours are created equal.
Knowing what your billable hours are, i.e. the ones you can charge to a client or project and which are not billable will help you figure out the true price of an hour of your time.
While this pricing model gets closer to covering your actual business expenses, I don’t love that it still operates on the premise that the client is paying for an hour of your time, not the value you can create within that hour. Nor does it take into account all the money you spent/are spending to master your craft and build your business. The client benefits from all the continuing education, coaching, subscriptions, support, and programs you invest in, yet that is not built into the fee.
Project Rates for Creative Services
When I was a rep for high-level independent talent in NYC, this was the model we used the most. It can also be adapted to a retainer fee arrangement very easily.
Folks who tend to use this model: Established freelancers, small business owners, and agency owners.
Positives:
- You position yourself as a creative partner/consultant rather than a technician for hire. When you’re an expert, you can land bigger projects, and charge more for your services.
- When you deliver a proposal based on a project fee, you’re less open to the client picking and choosing what they think they need (which usually entails skipping big and necessary parts of the process!)
- When you write a project proposal you break it down into several parts, the objective, deliverables, scope, phases, timeline, fees, and terms. The clarity, expectations, and boundaries communicated in this document allow clients to ask their questions and raise any objections before the project has started. Trust me when I say it’s better to have these conversations before any money has changed hands or work has started.
- It’s better for the client too! With an hourly rate, they have no idea how long it will take that particular freelancer to complete the project. What seems like a good deal initially could run on and on. With a project fee, agreed objectives, scope, deliverables, refinements, and terms, they know exactly what they’re getting and paying for so they manage their budgets more efficiently and more easily get buy-in from other stakeholders.
Drawbacks:
- Less experienced creatives may not know what they need to include in a project-based proposal to ensure expectations are met (on both sides). As a junior agent, I still remember my first attempt at writing a proposal and my boss taking a red pen to it. It was demoralizing, but I realize now that it didn’t cut it because I simply didn’t know what I didn’t know. I was still too inexperienced.
As a more seasoned rep, and a proposal writer, I realized that if a project didn’t work on paper, it was highly likely it wouldn’t work in reality when the stakes were a lot higher.
Once you’ve got a few projects under your belt and have learned what’s involved, maybe even getting burned a couple of times (trust me, I’ve been there too), you’re going to write much more accurate proposals.
- Scope creep is real and it can take some courage to stand up to a client who’s insisting it’s “just a small thing”. This is something a more experienced creative will see coming and feel comfortable handling in a graceful way.
- You must have a solid timeline and project management skills to keep the project on track. Every day lost to delayed feedback, scope creep, or any other such nonsense is money that’s coming out of your pocket.
Retainer Agreements for Creative Services
In my experience, retainer agreements are usually an evolution of an ongoing project-by-project arrangement. For example, a copywriter I used to represent delivered so many projects for a brand they concluded that (a) he was an integral part of all of their marketing efforts (b) they were spending a lot of time requesting estimates, negotiating timelines, and processing invoices and ( c) it would be much more efficient to have him “on call” for a certain amount of time each month. Typically, the client will get a little “break” on the rate.
Folks who tend to use this model:
This arrangement is usually built upon an existing relationship where trust has been established.
Positives:
Creatives love retainers because it’s a guaranteed amount of money coming in each month. Clients love retainers because they have priority access to the talent and don’t have to deal with multiple project requests, estimates, and invoices.
Drawbacks:
Retainer agreements need to be very clear. Based upon the client’s estimated needs for, say the next 6 months, the creative will offer a certain number of hours each month for a monthly retainer fee. Some months the client will use fewer hours, some months they’ll use more. In my experience, there’s a level of good faith involved that if it was estimated correctly, that variation will all come out in the wash. As long as both parties are in agreement that (a) they’re cool with that variability and (b) if the original estimate was off-based, the agreement can be re-negotiated, it can be a beautiful arrangement.
Value-Based Pricing for Creative Services
This is considered by many as the holy grail of pricing creativity because it’s based on the value of the results and transformation you deliver, not just your time. It’s also the most subjective because estimating the value or ROI a customer or client will gain from your service is open to interpretation, so there’s going to be some negotiation involved.
Folks who tend to use this model:
Creative professionals and agency owners who have the benefit of experience and multiple perspectives. Maybe they worked in-house or at an agency before going out on their own, so they have the benefit of seeing how things are done and priced in those settings. In their work, they may have a broader sample size of clients to identify what works, what doesn’t, and where they can reliably deliver tangible results. They’ve also negotiated enough project fees to feel fairly comfortable with navigating different agendas.
How it’s used:
For creative services, value-based pricing is typically used for projects, packages, or retainers. It’s less likely to be used for an hourly rate because the number will likely come out a lot higher than your competitors so you price yourself out of a job.
Common fears around trying this method out:
- How do I arrive at a price?
- If I price too high, I’ll price myself out of jobs.
- My target audience will NEVER pay those prices.
- How can I charge that much for something that comes so easily to me?
- It (I) am not worth that much. Who do I think I am?
Since value-based pricing can feel less clear-cut than an hourly rate (part of the latter’s appeal), I’m going to break it down into parts that can help you arrive at a number you can (a) feel good about and (b) justify in a negotiation.
The things you need to consider when pricing on value:
Time
How much time do you estimate spending on the project, including revisions? This is where having your true hourly rate is helpful, even if you’re not planning on quoting/billing hourly. Think of it as a safety net to ensure you don’t estimate too low.
Complexity
How often have you heard a client tell you a project is “quick” or “simple” when, clearly it’s not? Sometimes this is due to them not understanding the process or what’s involved, sometimes it’s gaslighting. Either way, we’re not falling for that old chestnut!
If you can solve a complex problem in a way the client (or other creatives) has not, the value you deliver is greater.
Higher Value = Higher Compensation
Value/Return on Investment
Once you and the client have identified the problem and its complexity, the 64 million dollar question is: what is it worth to this client (in terms of revenue potential, money saved, time saved, or efficiency/usability being increased) to solve this problem?
Now, how the heck can you get them to tell you that?!
Ask better questions, get better answers.
Questions you might ask:
- How long have they been trying to solve this problem?
- What have they already tried?
- What would resolving this problem free them up to do?
- How would reaching this goal position them differently in the marketplace?
Every question gets you and the client closer to clarifying exactly what a successful outcome looks like and what it would mean to them.
Once you have this information, you may say “If this project has the potential to increase revenue by X, does 10% of that increase sound like a fair price to pay?”
Of course, this example is extremely simplified, but you get the picture.
Team
The gig economy is growing exponentially, which means creative entrepreneurs are bringing in collaborators e.g. copywriters, developers, strategists, etc. to deliver a full-service solution. In this case, you are assuming a role and responsibility previously handled in-house. That additional work, assembling and managing the team and project is time-consuming, challenging, and adds value to the client. Even if the client pays the contractors directly, it’s perfectly acceptable to have a project management fee built into your proposal.
Usage or Licensing Fees
When you work for someone else your agreement is usually a “work for hire” which means every idea you share is owned by the client, whether they use it or not.
When you are an independent contractor, you get to define – along with the client – what usage rights they want and will pay for. You can charge usage fees as a separate line item or include agreed-upon usage rights in the fee with additional usage clearly defined in both your proposal and contract, along with the costs associated with that additional usage.
As a creative freelancer, the way you price your services is a reflection of your experience, your skill set, and the way that you want your business to work for you.
Pricing creativity may feel tricky, but as you can see, there’s no one “right “ way to price creativity – you can’t get it wrong or break anything.
If you need help with pricing your services, or would rather avoid a lot of trial and error, here’s how I can support you.
- A One-Day Pricing Intensive where we will review your offers, clients, and capacity, and create a pricing structure that supports your goals.
- A six-month coaching program where we will identify what kind of business you want to have, build the foundational elements of that business, and develop an actionable plan to create the messaging, services, systems, strategies, team, and actions you need to grow.
Curious about how coaching support could save you time, money, and help you build the business of your dreams? Let’s hop on an introductory call and talk about your goals, challenges, and talk about possible solutions!
Click here to chat!