No is a lazy response

Lately we’ve been talking about value pricing. It’s a hot topic online – any opportunity to increase pricing 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. The 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 based on 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 costs are market-driven. And even if you are technologically skilled, there comes a stage you can’t work any smarter or faster. It’s the bottom rung of the design ladder.

Here’s the problem

Some creatives understand value pricing means increasing their rates. Doing the same work for more money.

They’ve taken value pricing to mean if a client’s budget doesn’t match their rate, they should just say no.
Stand firm.
No negotiating, just say no.

No is a lazy response

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

The aim of negotiating is a win: win situation. Compromise on the other hand, is often not.

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 half thrust each half into each girl’s hand, then walked away.  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.

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. My budget is $10K. Can you build me a website?

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

• Research and write strategy so we can work towards a rebuild in your next budget cycle
• Audit your existing site, identify problems and write strategy for your new site and leave enough budget to fix just what is well and truly broken
• Look at your entire business to identify where design might help increase revenue. Perhaps we could use this year’s budget in 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 there are many other ways design could benefit a business, even with a reduced budget.

Value pricing is not about saying no

It’s 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.

 

Want to discuss any of the above? Email Carol.

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Want more?

More information about adding value and estimating:

1. 1. 1. Talking money with clients
      2. Dealing with price-senstive clients
      3. Why saying no to a client is a lazy response

About Carol

After 30+ years running a design studio, I accumulated a pretty special network of fellow designers. One thing most have in common: a need for more information about the ‘business’ side of design. Most are impatient with any task competing for time spent doing what they love – designing so they wanted more info about how to work more efficiently and effectively.

Not me. I love that intersection between design and business. I built a career working with Ombudsman schemes, the Emergency Services sector and the Courts. My special power has always been an ability to use design to translate the difficult to understand or the unpalatable message.

I now use exactly the same skills with creative business owners. I translate the indigestible into bite-sized chunks of information. I share insights, introduce tools and embed processes to help others build confidence business decision-making skills. More confidence makes it easier to grasp opportunities. More confidence makes it easier to recognise a good client from the bad.

Outside DBC I have mentored with Womentor, AGDA and most recently with The Aunties.
And I’m a proud board member of Never Not Creative. Ask me about internships 

Always happy to chat, I can be contacted here.

Our second site is designbusinessschool.com.au – Australia’s only business school for designers