No is a lazy response

Lately we’ve been talking about value pricing. It’s a hot topic online – any talk around how to increase rates is click bait. Problem is, some of the chatter misses the mark.

Value pricing is about adding value so you can increase your rate.

A studio’s base hourly rate is often used to bill transactional work and that’s OK because every studio needs some transactional work. It’s work you can do easily, efficiently, and cost-effectively.

Transactional work is part of a successful client and project mix. There’s no ‘perfect’ mix but we know from experience a breakdown like this builds a viable business:

• 30% transactional work. Fee for service tasks most likely to be costed on an hourly rate.
• 30% passion projects. This is work you love for a client sector you strongly support and feel the most empathy.
• 30% other. The ‘general’ work of a studio. It is most probably a mixture of targeted clients and client sectors, and referrals.
• 10% pro bono. Supporting endeavours and people who can’t afford your services.

It’s about spreading the risk, much like some do in their investment portfolio.

Value pricing is about adding value

Value pricing is the ability to charge more because of the value your skills add to a project. Problem is, you can’t value price if you are not adding value and it is very hard to add value doing transactional work.

Added to that, the transactional work arena is crowded — it’s the one area with the most competitors. Clients can easily price check transactional work, so prices are market-driven. And even if you are technologically skilled, there comes a stage you can’t work any smarter or faster.

Transactional work is the bottom rung of the design ladder.

Here’s the problem

Some creatives think value pricing means upping rates.
Billing more for the same work.
Saying NO if there’s insufficient budget.
No negotiating, standing firm.
Just saying no.
But no a lazy response..

Why no is a lazy response

Negotiating isn’t compromising. Negotiating is asking questions until the problem (in this case the budget) is scrutinized from all angles until there is clarity. That’s the real work in design – the talking to clients, the questioning, the being alert and responsive.

The aim of negotiating is a win: win situation. That result doesn’t always come from compromise, take this story as an example:

There were two sisters and just one orange. An argument started. Both wanted the orange: one to eat, the other to cook. Mum, tired of the noise, strode into the kitchen, cut the orange in two and thrust each half into each girl’s hand. One sister grated the peel from her half straight into her cake batter and threw away the insides. The other ate her half and threw away the peel. A compromise but not a win:win.

The moral is to say no, but …

What if a client, with whom you would love to work, approaches to say I love your work, I love everything you do, and I’d like to work with you. I have $10,000. Can you build me a website?

You could say: no, my minimum budget for a website is $25,000, and walk away OR you could say no but … let’s talk more. For that budget I could…

• Audit your existing site, identify problems and write strategy for a new site we can build in your next budget cycle. I’ll leave enough budget to fix just what is well and truly broken, or
• Research and write a complete online business strategy for your next budget cycle
• Look at your entire business to identify where design might help increase revenue. Perhaps we could use this year’s budget for tactics to increase sales/put more bums on seats/improve your online store; so next year we have the budget we need to overhaul the website.

(I’m sure many of you could think of much better solutions for using design to benefit a business, even with a reduced budget.)

So what?

Let’s get clear, value pricing is not about charging more for doing the same service.
Nor is value pricing about saying no to under-budgeted jobs.

Value pricing is about understanding and communicating where you can add value.
It’s about cutting the cloth to fit.
It’s about working with a client’s budget.
It’s not about reducing your rate. 
It’s about aiming for a win:win.

The client gets results within budget and you get the work you like, with a client you like, for the budget you need.

Carol Mackay
Co-founder Design Business Council.

We help designers build confidence in their business decision-making skills

Have you subscribed? Have you suggested your friends subscribe? Help share the love. We’re proud to say the Design Business Review is Australia’s only online design management magazine. It’s professional development information written specifically for Australian designers by Australian designers. Best of all, it’s free.

Want more?

These articles talk more about working in the creative industry:

1. Perfectionism and why it’s not a good thing
2. Identifying design traits
3. What’s a fair wage for a designer?

About Carol Mackay

After 30+ years running a graphic design firm, Carol pivoted from client-focused projects to consult to the design industry.

Carol’s special power has always been an ability to use design to translate difficult to understand or complex messages. She believes design brings clarity to complex issues. From clarity comes understanding, and understanding leads to knowledge.

As a designer she used those skills with clients like The Magistrates, County and Supreme Courts; Ombudsman schemes and Emergency Service agencies. At DBC she uses the same skills … she helps designers de-mystify the complexities of managing a small business.

Outside of DBC Carol mentors graduates and is a Board member at Never Not Creative, a community of creatives pushing for change in the creative industry.